welcome to "street signs." >> these are your headlines from london >> it's the end of the line for gavin patterson. the ceo is set to leave if group later this year. >> shares in both deutsch bank and commerce bank see red after news that the chairman is looking for a tieup. i stall yan bonds yields drive higher the two-year is on track for the

biggest weekly jump since 2012 while bank stockses struggle in early trade. and confrontation in quebec. twitter provides a preview as french president macron and donald trump trade online barbs about tariffs. and our top story for today is of course about bt. gavin patterson is stepping down after almost five years in charge of the british tell comes giant. the chairman says while the board was supportive of the strategy, it was time for a new leader bt added the search for a new ceo was already under way. >> patterson came under severe pressure last month after

announcing 30,000 job cuts this after they missed the revenue target and projected no profit for several years last night, we asked gavin patterson how he was handling the group's largest challenge, the accounting scandal >> we have checked the controls, changed the management we're transforming the business and putting it back on its feet. so, you foe, i think it's behind us as with any of these situations, the regulatory followup and legal challenges afterwards. in terms of the operation, we're getting on with the business we have to focus on the right customers, multinational customers. we're transforming the business. we have looked at controls checked the strong -- where we have found weaknesses, we have

strengthened them. >> that's around seven months ago. these expertss are with us in the studio it seems like they're saying, strategy, good, leader bad is that a fair assessment? >> i think it is nonetheless, if i reflect on the way it's been announced and the timing, it seems like a rather disorderly transition. it comes as no surprise that mr. patterson is under severe pressure you have to look at the share price to discern that. he's the architect he's hired new people. appointing others. made some changes. i think the timing of this seems to be very puzzling, given that the board had an ample opportunity to do this in line with annual numbers and forward

looking guidance >> they only recently unveiled a strategy a couple of months ago, a month ago. what we have seen is that the stock has had no luck whatsoever the stock is down 26% year to date on a year where ftse is trading up investors are not buying into the strategy what is the problem here there's little belief that the strategy may pay off as new competition comes to the market and they continue to face head winds not only from the regulation side but also in terms of putting forth and implementing plans they have in place, like open reach >> there's a 12 to 18-month outlook and then a longer outlook. roughly 70% of the operating cash flow are segments that contribute to -- face some severe structural head winds

the reasons the shares haven't moved or are unlikely to is because there was an erosion of free cash flow an erosion of returns. and the b 2 b segment is under stress there are structural issues they're trying to fix. longer term, they have an opportunity to return money back to shareholders at an accelerating pace. >> what challenges, you talked about cost restructuring they're spending money to save in the long term when does that end up? >> first, the order of magnitude. this 1.5 billion euro cost consolidation program will offer a 2% aggregate lift. the company has to run hard just

to stand still, effectively. this is probably a little too late but it's an absolute prerequisite for the company to head off the head winds i described. >> a couple of questions i wanted to ask you. one, they announced a flat dividend policy for the next couple of years. to you think if they changed that, they would insent vise people to buy the stock? sort of like a sweetener they have a massive pension fund deficit. this is a huge elephant in the room i'm curious of your view about what investors think of that we have had two very high-profile cases of funds going into administrative. >> the deficit recovery contributions signed up for in

the next fiscal year and beyond will impact the company's ability to remunerate shareholders i think the dividend policy, as announced, implies that the company is kicking the can down the road you're right, a new ceo might open up this can of worms again. i do think they'll react positively big question mark. >> i want to ask you about the stocks across europe in terms of 5g, all of them have to spend huge amounts to make it work do you think that is a challenge for cap x, looking forward, looking at those stocks in particular in that sector? >> i may not quite be qualified to answer that accurately. it's been a very, very unloved sector for most of the year. only banks are down more on a year to date basis

i think it does scream, quite cheap. it flashes up as something where you would expect to see rotation and we haven't i think that probable answers your question. the expectation of deflation if revenue versus inflation of cost is probably keeping people away. i imagine 5g is a big part of that >> jimmy, stay with us we're moving on. thank you very much for joining the show this morning to discuss all things bt. that was dhanjay before we move on, let's take a quick look at markets. the handover from overnight has been messy, a little gloomy to say the least. the picture in europe is mostly one of red this morning. the aggregate index is trading down as we head into the all-important g-7 summit where there are lots of concerns about the rhetoric fired back and forth between u.s., canada,

france everyone wading into the discussion that's been reflected in the way asian equities are trading. also european markets this morning. let's switch to individual european markets the picture is red across the board. we have xetra dax down let's look at how yields are doing. it's another ugly day as far as yields are concerned the yields are rising. they're selling off and ten-year yields are set for their biggest weekry rise since 2015 while the two-rear is on track to log the largest jump. the two year b 2rks p has been under skrucrutiny. we'll probably be there at the end of the day by how quickly things are selling off we were talking about ftse

overall. you can see the key blue chip banks are trading heavily down as well today. we have ubi banca down the total for the past three months to over $10 billion the figure represents the most significant redemptions in any three-month period going back to 2008 jimmy, citi -- these numbers are absolutely staggering. is big move as far as markets are concerned. seems as though people are actively withdrawing cash away from europe now. >> yes it's one of the more supportive arguments of european equities europe is now empirically under

positioned financials i think the first ever month, may, you have seen $1 billion flow out you have the financial sector, while it's still plagued with problems the btp issue we saw this morning for example. positioning is much cleaner than it's been. >> reading between the lines, does that make you more constructive is it a buying opportunity >> i think tactically into the ecb. there's an opportunity the last time we met, you were asking if there was enough risk premium in the italian election. we said we didn't think so medium term, we still have concerns about what happens if we hit the 3.5% threshold that

the rate stretching team are concerned about in italy technically, into next wednesday, there's an opportunity. >> i don't know the italian phrase for i told you so, but it sounds like that's what they're telling us we saw numbers bounce back last tuesday. would you park money there anytime soon >> again, it's a question of tactically, we have seen large moves. but they're set against a backdrop of something that structurally we think has room to go lower down the btp market for the most, i think -- we prefer a slightly more liquid sector plate and as i said, into a clear calculus we got from etb >> you don't sound too positive about the situation. what about the knockon effect in terms of credit across europe from this?

>> i think it's distinctly bearish. we're seeing repeated small accidents where likdty -- secondary market liquiddy is becoming a problem we saw big moves in brazil last night. i think credit is one of the areas where, again, the secondary market liquidity is going to become an issue think etps are a clear catalyst in realizing some of those risks. >> so the play from the investor community for the big part of 2017 last year was actually selling quality. that came back to bite big the comp zit index is there a change this year? are people more concerned about hedging downsides versus vying volatilit volatility >> it's been mixed as soon as the italian issue

surfaced, you saw a strong in sku. people buying more puts than calls. making sure they were properly hedged with regards to vol selling in the s&p, people have come back into the strategy. something we're not sure is entirely prudent if you look at rates vol, fx vol, those are all moving higher as more and more of these accidents occur, we're seeing more and more pockets of secondary liquidity create issues we don't think that is a great environment to be involved in. >> are you seeing movement from cyclicals into defensive we have growth ticking at around 2.5% the fundamentals are there you have all of these other things going on as well. i wonder whether the comp zigs has shifted some what?

>> it has. i mean -- and it's very dynamic. as you say, on an underlying basis, the growth is still there. as a house, pro cyclical because of the good gdp movement the four risks are not at a level where they want to move away there that call the risks are growing. as i said, it's a very dynamic market one where we prefer to be nimble >> jimmy, thank you so much for joining us jimmy conway head of strategy at citi if you have views on anything jimmy said or anything you heard so far, don't feel any heation of getting in kuch on twitter. you can tweet us coming up on the show, we'll speak to first property group c erk o after the real estate fund

manager calls for a rise in full-year profit

welcome back to "street signs. g 7 divisions were on display ahead of today's leaders' summit in quebec. speaking in ottawa alongside justin trudeau, macron suggested the u.s. may one day be shut out of future trading. >> translator: the six other countries of a g 7represent a larger market than the american market let's face it there is no world hedge m hegemony it's the law of the fittist. it's the end of the rule of law. it's the end of the promise we make to our citizens that we'll protect, according to values we have stood up for, and written into these agreements. maybe the american president doesn't care about being isolated today but we don't care about being

the six of us together if need be they represent ah values, and market that benefits from history and has strength on the international stage today. >> mr. macron doubled down on twitter. he warn that isolation is bad for the american people. u.s. leader not so surprisingly, replied and accused both canada and france of charging the u.s. massive tariffs and creating nonmonetary barriers to trade. he said he was nonetheless looking forward to seeing both macron and trudeau >> tend of a bromance is always sad. teresa may arrived in canada officials say she won't hold a formal bilateral meeting with

president trump while she's there. she urged the eu to have strength in banking anies, deutsch bank has told us that there is to reason to actively raise the issue of a tieup talks with commerce bank chairman paul aklightener is talking. annette is in frankfurt. how likely is the tieup given that both are german domestically focused banks >> well, actually, a tieup of both institutes is imminently not very likely. perhaps at the end of a very long development process we could see one day the tieup of those two lenders because, of course, what you're alluding to is that perhaps competition law would not allow

that but having said that, i don't think that would be a problem because we have such a large savings bank and other public banking sector having said that but where do we stand? the report is saying they are sounding out investors and pal tigss in berlin, where there's the tieup in their interest. i think it's highly questionable that he's doing that obviously, that would make the rounds twit fast if he was quizzing lawmakers in berlin about such a tieup what we might see is that of course they talk together. they have done that in the past. it's like a renewed chapter of that story having said that, for now, deutschbank has its on problems

and a lot on their plate and commerzbank doesn't have a wide interest. germany has a 15% stake in commerzbank. they could possibly trigger such a tieup. >> thank you so much for that. first property has reported better full-year profit before tax citing a stronger euro ben habib joins us this morning. thank you so much for being here how much have you benefitted from the euro's strength >> we made 400,000 pounds net profit it wasn't as marked a movement as it was in the previous year when we had the referendum for brexit and then we saw the collapse in japan. >> i have to ask back in march, you said brexit

should be a spur we're a couple of weeks away from the next eu leaders' summit the plan has been to resolve outstanding issues by then to make sure things are wrapped in a nice bow by october how confident are you? >> i'm not confident think the government has handled our brexit negotiations really badly. one thing strikingly absent from the rhetoric from the government is what our domestic policy is going to be post brexit. what kind of country is the united kingdom going to be a low-tax financial services, singapore-style economy? or are we gives a brace to the manufacturing base it's an unanswered question. >> moving away from brexit

i know it's difficult. you also have exposure to eastern europe you have property port foal yas in romania and poland. with the latest discussions about eu budget and diverting money away from other companies, will it impact tangibly your portfol portfolio? >> 2021 will be an interesting time for the last bujd, poland received 100 billion euros commitment it's very good at drawing down funds. a 98% rate, i think. in 2021, we'll have less money going into the european coffers from great britain there's pressure to move mown away from poland and to other countries particularly the southern rim, that need more

investment i think the pressure will be on poland the economy is strong. clearly there's a question mark over what happens to the economy post 2021. >> i want to ask you something specific there's been a lot of discussion about the commercial area. the changing lease terms as far as the landlords are concerned and whether or not you're seeing that as a head wind to your ability to generate profitable returns and yields in the future given that the lease terms are getting shorter and the people renting are gaining in terms of bargaining power >> i don't mind at all lease terms getting shorter. think sthat a healthy development in the mark. it allows people to readjust rents as and when they need to be adjusted without having pro longed periods of overrenting or

reversionary leases. i think it's wrong that people can walk away. the bpf is up in arms about the latest cbas taking place if you enter into a contract, you should be obliged to fulfill the terms of the contract. >> thank you very much for being with us this morning coming up, the lords eu select commit tree called on the uk government to hold a fruitful and lasting relation with the eu after brexit we'll speak to lord michael that'sings jay aerhibrk.ft ts ea d white smile? dinner date...meeting his parents dinner date. so i used crest. crest 3d white removes... ...95% of surface stains in just 3 days... ...for a whiter smile... that will win them over. crest. healthy, beautiful smiles for life.

welcome back to "street signs. >> these are your headline this is morning >> the end of the line for gavin patterson. the ceo is set to leave the group later this year. >> shares in both deutsch bank and commerzbank see red after a

report of a tieup being eyed and confrontation in quebec. the g 7 leaders arrive in canada for tough talks. but twitter provides a preview as french president macron and president trump trade online barbs about tariffs. the italian yields jump. bank stocks struggle in early trade. a bit of a soggy session as for as equities are concerned in the handover from asia overnight. it looks as though u.s. futures are not looking that much better as far as the open is concerned. dow is seen opening up 120 points lower nasdaq, 60 points low ir the dow is very close to breaking back down through the 25,000 mark we were all hailing

yesterday. that can change the psychological level. let look at european markets as well the picture is quite grim, as for as trading is concerned. xetra dax is down. ftse mib is down 1.5 percentage points in training as italian fears come back to the forefront. it's being expressed in equities and bond deals let's look at foreign exchange, as well. today, a strength. the euro dollar is on the back foot again cable hanging in around the 1.34 level. so much going on in the political backdrop dollar crosses versus emerging markets. we had a big shakeout in the brazilian real yesterday

it will be very important ahead of the g7 summit as ongoing discussions on the trade side continue between the u.s. and various counterparts >> the british foreign secretary boris johnson is in hot water. he was recorded at a private meeting wednesday night saying the treasury was quote at the heart of the main. it was leaked to buzz feed he is a staunch euro supporter teresa may urged people to back her suggestions. this morning, we're joined by lord michael hastings jay. i want to ask you, based on

those comments from mr. johnson, base tonight behavior of mr. davis yesterday, would you say that cabinet disagreements, cabinet egos, differing viewpoints in the british cap net are standing in the way of these negotiations >> it's clearly a divided cabinet at the moment. the prime minister has quite a job to do in keeping it all together and keeping the show on the road i think myself, and that's what our report that we just produced focuses on, is that there has been too much emphasis on the day-to-day title tatele and not enough on the long-term relationship between the eu and uk after we leave, assuming we do in march of next year that seems to ask now to be the issue we need to focus on. what is our relationship going to be? what is the trading relationship going to be? what is the foreign security

policy going to be that will matter for the next five, ten, 15, 20 years, not just what is happening in parliament today and next week important though, as that clearly is >> the report out this morning says now is the time for both sides on brexit to change mind set, identify areas of mutual interest to compromise. why is that a point that still needs made 15 months into the process? >> of course, these -- the negotiations should have take an very different, in my view, a different pitch. we should have focused on the longer term issues from the beginning. if we're going to leave in march of next year, on both sides, the uk and eu side, there needs to be a recognition that we need to stop the short-term politicking and make the kinds of compromises necessary to reach an agreement the uk has god to do that.

there are important issues to resolve compromises. the eu, as well, has got to move away from saying this is our redline. we can't move here and say, look, we need to reach agreement with the uk on trading issues, on security issues, on foreign policy issues. let's get round the table and work out what that will be we feel the emphasis should be on that right now. >> i want to pick up on some other comments from the foreign secretary last night he said it's beyond belief, quote, that northern ireland has become an obstacle in the talks. and concerns about the irish border are pure millennium bug stuff. are any of those comments helpful? the second thing is, in your report, somewhat your proposed solution for the irish border? >> i don't -- i disagree with

what boris johnson was saying about the irish border i thought from the beginning and continue to think now that the irish border is one of the most difficult issues arising from brexit and -- there has to be -- in my view, teresa may is right that there has to be a maintenance of the border it's difficult to see how you do that if you leave the customs union. that's why she's come up with a compromise proposal. i hope the eu takes it seriously. >> lord jay, you're known as a cross bent -- you're not tied to any specific political party you sit in up thor chamber adds a form of diplomat i'm sorry to go on and on about this, but one european diplomat quaeted yesterday saying the outcome when it cam to david davis is the latest storm in a teacup, was a fudge that

satisfied teresa may's cabinet but a fudge that is practically irrelevant to the reality. are they acting in good faith? are they, in fact, facing up to reality? >> no, i don't i think some of them are not all of them. i think the prime minister is. i think she has a clear view of where she needs to get to. it's extremely difficult to get there at the moment. i think the compromise reached yesterday, i mean, it was a good compromise in that it maintains the prime minister's view. there's a bit of language that helps david davis. i don't think it's a huge advantage to him i think she probably won that battle >> sir, we have this big vote coming up next tuesday, as well. a huge vote. the huge debate going on behind the scenes how crucial is it for this government for that bill to go

through? and what do you think the implications are if the government loses >> it's very important that the bill goes through. i can't say what they'll do. there are some very important amendments that the house of lords has proposed including joining the ea the customs union. there is going to have to be a proper debate and very difficult votes in the house of commons. if some of those go through. some of the lords' amendments are adopt bid the commons, it needn't affect the bill. if some of them are adopted, it will affect the bill that could complicate the position of the government and prime minister we'll have to wait until wednesday morning to know if that is the case >> a lot to watch out for there. lord jay thank you very much for joining our show this morning. that was lord michael hastings

jay. elsewhere, president trump dangled the prospect of a white house visit for north korean leader kim jong-un, only if next week's summit in singapore is successful trump stuck a cautious tone. he insisted he was prepared the walk away from the meeting if necessary. meanwhile, u.s. secretary of state mike pompeo said kim jong-un has personally admitted to him he's willing to denuclearize >> you can be sure that president trump will not stand for bad deal united states has been clear time and time again that complete, verifiable, and irreversible denuclearization of the korean peninsula is the only result acceptable. he made it clear there is a

brirgt path for north korea and its people we envision a strong, prosperous north korea integrated into the yinty of fashions. >> imports beat expectations for china, grows 26% beijing's overall trade service at $24.92 billion for the month. below forecast zte has secured a deal with the trump administration to avoid crippling sanctions. they have agreed to overall the banking structure. the ban had been imposed on the company after it was found guilty of trading with iran to hide the trading from the u.s. wilbur ross said it was the strictest and largest -- his words, that the u.s. has ever

imposed. and it would send a strong message to other companies >> enforcement is about two things punishing people for bad acts in the past and giving them and other parties a disincentive to go forward with bad acts in the future we think this settlement, which brought the company a $17 billion company to its knees, more or less put them out of business, now, they're accepting having this compliance team in, whole new management, whole new board. should serve as a very strong deterrent not only for them but other potential bad actor. staying with the subject of chinese telecom companies they have written a litter to alphabet and twitter questioning

data sharing with a company. the google parent company said it does not provide special access to google user data twitter refused to comment the senator behind the questioning has raised questions. argentine lifeline we'll bring you details as argentina agrees to a financing deal with the imf. - i love my grandma. - anncr: as you grow older, your brain naturally begins to change which may cause trouble with recall. - learning from him is great... when i can keep up! - anncr: thankfully, prevagen helps your brain and improves memory. - dad's got all the answers. - anncr: prevagen is now the number-one-selling brain health supplement in drug stores nationwide. - she outsmarts me every single time. - checkmate! you wanna play again? - anncr: prevagen. healthier brain. better life.

welcome back to "street signs. divisions between the leaders of g-7 countries over tariffs and trades revealed themselves on thursday as presidents macron and trump had vails statements for each other macron opened up the idea of the other six countries opening up their own deals. >> translator: the six other countries represent a larger

market than the american market. let face it, there's no world hegemony if we find way to organize ourselves it's the end of the rule of law. tend of the promise we make to our citizens that we'll protect according to values we have stood up for and written into the agreements maybe the american president doesn't care about being isolated today but we don't care about being the six of es together either, if need be there are values that benefit from the strength of history and have strength on the international stage today. >> strong words from president macron huh doubled down on social media warning president trump that isolation is bad for the american people. and shortly after, the u.s. president replied, accusing canada and france of charging the u.s. massive tariffs and

creating nonmonetary barriers. he said he was looking forward to meeting both leaders. the summit kicks off in quebec later today. jay gray is there. the last time we spoke, we were talking about a joyous occasion, the royal wedding. today, more like a family feud and a g-6 plus one type situation where the u.s. is looking increasingly isolated. what more can you tell us? >> absolutely. you know, this -- there will be no wedding gifts here. for sure very tense situation coming into this meeting in fact, some have said this g7 summit may be a tougher go than his meeting afterward with kim jong-un in cig posingapore. the tariffs at the top of the agenda

the allies, for the first time, publicly, have said, we're glad to go at it six plus one if that's the desired effect and they won't be, if their words, bullied by the american pet president. he comes into town later today and will straight away have talks with macron and trudeau. it will be interesting to see how the talks work out >> jay, thank you for that and for bringing us the latest all eyes will be watching how these events unfold over the next couple of days. that is jay gray from mbc news zachary is here to talk to us as well taking a step back i think most economists would agree that trade wars are not

good but one of the reasons the u.s. engaged in the first place was to protect local industries. reading your notes, you see net job losses losses of 70,000 in the u.s. on the back of these new tariffs. so he's not helping to protect local industries in terms of your research. >> i think that's right. the protectionist policy can be negative to the instigator of a patrol si. the net effect is a net job loss of 70,000. yes, there might be gains of about 10,000 for the steel producing sector most of the economy consumes steel and aluminum in the united states so the net job loss would be quite significant. >> how does that go if you end up with retaliation, escalation, things like autos. >> there could be quite big job losses if we were to be in a situation where the europeans would retaliate, vis a vis the

tariffs. the job losses could be about ho 0,000 if there were to be tariffed imposed on the automotive sector. that would mean in terms of gdp growth, about 0.4% that is quite large. >> do we end up in a situation where president trump can turn around and say, we're getting close to the job numbers i promised, stop criticizing me. >> i think that's part of what is playing we have a good economy in the u.s. wage growth is continuing. spending is continuing there may be some in that that is spurring the president to be more risky >> just to read in between the lines, saying about the impacts. the likely impacts of steel,

aluminum, and potentially auto, if nay continue along this path, could it lead the u.s. to the next recession is that what yoer saying >> potentially yesterday, we had ben bernanke talking about the wile e., coyote of the u.s. running off the cliff in 2020. we have a larger fiscal deficit, protectionism, that is not a great growth mix in 2019, i think the rirvegs of a recession are increasing and the buffers to counteract external shock is diminishing. >> a lot to chew on there. going back to the g6 plus one summit, what do you think the likelihood is of the g6 releasing their own statement without the u.s. here. that's unprecedented >> it is but it's something macron has

been pushing for this morning, he had a very strong statement saying if the u.s. doesn't want to play this game of reducing trade tensions and agreeing to some form of pullback in terms of the iran deal, they would actually act as a group of six but really, you need the u.s. in these types of agreements. you need the u.s. at the table when it comes to trade in particular >> forgive me if i get philosophical. as an economist, you focus on numbers and data is this not the big man theory of history where one individual will is bending the world to his desires and making things happen on his own? >> potentially think what we have seen in the last few days is the rest of the world saying, enough is enough we're sick and tired of seeing the trade tantrums play out. uncertainty is affecting businesses we're seeing it in the u.s businesses are more and more

feeling the stress of higher input costs and unsurnty as to how they can plan for the next few years given the potential tariffs that might or might not be coming into play. i think domestically, we're seeing tensions within the republican party and people within the republican party opposing the president's views pip think that is very important. as you know, we're nearing midterm elections. this is going to be a key election for the republicans you're going see more and more opposition that, i think, is very important in terms of the future of trade relations globally >> can i ask your view on what it means if neighbor countries specifically canada, mexico. looks as though nafta negotiations will not be terminated anytime soon. it might push toward next year and mexico have now announced retaliatory tariffs gepts the united states. have you done any work on what that means for those economies, specifically mexico, in the next

12 months. >> trade negotiations cake motae months, if not years there's no agreement on principle. there are big risks of trade tensions between these big trading partners two-thirds of the mexican and canadian exports go to the u.s >> greg, thank you for joining us now the international monetary fund has agreed to lend argentina up to $50 billion over the next three years they have committed to tackle inflation and reduce public spunding the peso lost almost a fifth of its value over the course of two weeks. the new agreement is subject to approval the brazilian real has dropped to a two-year low after concerns of the physical outlook led to a widespread selloff. the currency tumbled three%.

the brazilian president stried to stem losses, saying there is no risk of currency losses in the country. the central bank chief pledged to maintain its intervention let's take a quick look at u.s. futures the dow is opening 100% lower. nasdaq, 60 points lower. yesterday was some what of a mixed session. it doesn't appear it will be a good session >> that is it for today's show >> worldwide exchange is coming up next. thanks for watching.

it is 5:00 am at goebl head quarter. the top five at fife president trump lashing out at our closest allies, all ahead of today's and this weekend's g7 summit facebook says as many as 14 million users may have been hit with yet another privacy setting error. the imf bailing out one of the biggest economies. is there life on mars? there might be we're not kidding. a story you have to hear to believe. and congratulations, capitals celebrations under way in our nation's capital washington win