it's 5:00 a.m. at cnbc global headquarters and here is your five at 5 blasting theresa may's brexit plan as he visits the uk the justice department will appeal at&t merger with time warner and a missouri jury ordering johnson & johnson to pay a record $4.7 billion over allegations its baby powder causes cancer. wes bush is stepping down and mcdonald's pulling salad from the menu after reports of people

getting sick we have the full details ahead it is friday the 13th and worldwide exchange begins right now. good morning, welcome to "worldwide exchange. don't be afraid of friday the 13th we're here and we have you covered. a quick check on the markets a slightly higher open right now. dow jones industrial average higher than ten points and slightly higher on the nasdaq. higher by 11.5 at least at this point in the early going in asia it was mostly higher overnight. the shanghai composite down 10% and shrugging off any trade wars going on take a quick look at europe. europe, of course, higher today and that continues what we saw

yesterday. right now the ftse 100 is the leader higher by more than 1% as president trump continues his visit to the uk. >> in today's top corporate story appealing at&t takeover of time warner. the doj now arguing that the company combined would decrease competition and raise prices for consumers. what does it mean for the prospect of this deal? let's bring in corporate finance correspondent at the "financial times" you've done so much reporting on this deal what do you make of this specific announcement from the doj? >> well, as if we needed more fireworks in the media and telecom space. an extraordinary development overnight. the u.s. government taking the decision to appeal its loss case in the courts a month ago that would allow the at&t time warner merger to close and they brought the case 30 days later and after

the judge in that case ruled that he saw the court argument to be so bad didn't even merit it an appeal most people are shocked by the reaction if you remember the start of the week, there was news reports of about discussions inside time warner's camp at hbo where executives were executing a business plan for hbo and communicate what they expected of the company going forward and now looks like they're going back to court. that's where we are. >> at the same time, i believe the uk takeover panel is deciding on the fair value after they raised the bid for fox last month. when do we expect that decision to come forth? >> it's a bit tricky unclear if the panel is going to rule if you remember earlier this week comcast came in the evening with 14 pounds 75 and it's really unclear now what that means for whether or not the takeover panel needs to say

anything it's quite a complicated set of events but, basically, the argument goes among certain shareholders that because disney raised its offer for fox by 35% they expected to see a linear application of that raise to fox's plans to buy the 61% sky did not already own. because of where we are and the fact that comcast has a superior offer right now it is unclear what it means for the takeover i do believe that we will see comcast offer document release which will provide further insight into its plans we are keeping an eye out for that >> if you are a sky shareholder are you laughing all the way to the bank remember the first buyout offers came the stock was about half of where it was right now >> it's incredible it's absolutely incredible for the hedge funds that piled

into this stock, seth carmine and a few other big names, they are either the luckiest or the smartest it's hard to tell which is which. sometimes it it doesn't matter they are sitting very pretty on huge gains in short time and fundament aal scarcity not the fair value this is an asset that gives you 23 million consumers across europe it gives you a chance to take on netfl netflex with a broader over the top and shows you disney and comca comcast. >> does that help or complicate the prospect of this deal? >> as i've learned covering the space no shortage of ego among the top media executives so to put them in a room together where they're all bidding against each other and i'm sure it's a lot of fun right now. >> beautiful environment good place to do some deals.

let's see what happens thanks for breaking it down for us we're going to hear much more about all of this coming up on cnbc. at&t ceo randall stevenson is at that allen and company media conference he'll sit down with reaction to the justice appeal make sure not to miss that one president trump making some major headlines on his first official visit to the uk blasting theresa may brexit plan saying it could threaten a u.s. trade truce. let's get right to wilfred frost in london. >> hey, seema, yes, indeed, the interview that the president gave to "sun" newspaper the awkward and embarrassing headlines started to hit

may has wrecked brexit u.s. deal was off. that trade deal was meant to be the win that the prime minister could secure from the president's visit. instead, this is what he had to say about her negotiating tactics with the eu. >> when you use the term hard brexit, i assume that's what you mean the people voted to break it up. so, i would imagine that's what they'll do but maybe taking a little bit of a different route. i don't know if that's what they voted for. i just want the people to be happy. they are great people and i'm sure there will be protests because there are always protest. >> the president very much undermining the prime minister just at her most vulnerable moment of the "sun" interview the spokesperson said it will be dealt with and a joint conference to come at 8:45 a.m. eastern time now, the president also had strong words for the mayor of london saying, quote, he was

doing a terrible job and unwelcome. the president was made to feel unwelcome in london. i asked the mayor moments ago whether he regretted that the president did, indeed, feel unwelcome. >> hard for me to comment on what president trump feels or what his feelings are or if his feelings are hurt. what he would see in a city that is omfortable in its diversity and we want an environment where people are hopeful and people understand the betterness of unity than division. rather than be scared of diversity, he should see it as a strength many americans want to see people responding to some of the things president trump has said and done and i think one of the great things about having a best friend as we do with america is we can call you out when we think we are wrong but also our expectations much

higher than they would be from another ally our expectations is this high, why? and that means calling it each other out. >> not as bad as some of the bad leaders, he's much closer to the likes of may or yourself, but he's a friend. you would like more from him. >> america is a country that we love and adore but the expectations from the president of america are here. the expectations from the prime ministers and other presidents are here that means we stand with each other when we need each other, but we call each other out when we're wrong. i don't think we should be afraid of doing so one thing people are looking out for and calling out from our prime minister is to show some more vigor and more confidence when it comes to discussions with president trump as the mayor of london and continue to be someone who articulates some of the values. >> now, we're here at city hall in london and, in fact, marine one did fly over the top just in the middle of that interview

the president now is at the military academy he will be going to chequers to meet with the prime minister this bombshell interview coming out in between to be a fly on the wall in that particular meeting i think we now have a cut from the interview last night commenting on the prime minister's negotiating tactics. >> i told her how to do it, that will be up to her to say but i told her how to do it. she wanted to go a different route. i deal that she's striking is not what the people voted. much different deal than what the people voted on. it was not the deal that was in the referendum >> he lso, of course, famously said this has been reported widely that he felt boris johnson would be a great prime minister he, of course, resigned from theresa may's government earlier this week. i can't stress how expectant the nation is for that join press

conference coming up here 8:45 eastern time the president very much undermining his host at her most vulnerable moment. guys >> extraordinary couple days. >> the two leaders have publicly disagreed on a number of issues prior to this meeting. trade, the travel ban, the iranian nuclear deal, moving the u.s. embassy to jerusalem. given that the two leaders haven't been able to see eye to eye on a range of issues, i mean, is the objective of this meeting simply to check a diplomatic check box >> no. definitely not the main agenda item for the uk was to see if they could get some kind of verbal commitment from the president that a future trade deal, once the uk left the eu could be possible that would have been a big win for the prime minister yes, seema, absolutely right they agreed on things like steel and aluminum tariffs which the uk falls under, as well. that doesn't really come as a

surprise i'd say rel fv ative to other western democracy leaders theresa may warmed to president trump and tried to more than other leaders and we saw that last night we saw it very clearly in my interview yesterday with the foreign secretary jeremy hunt. the government itself, regardless of the protest that might take place in london and regardless of the message that might come from the mayor of london the government itself was trying to warm to him and trying to impress him so that they could get that free trade deal overnight. any good will, surely, be turned on its head and we'll see the response from the prime minister in a couple hour's time. >> wilfred tens of thousands of people will march through central london and converge on the trafalgar square the balloon depicting the

president. switching focus to corporate news a jury ordering johnson & johnson to pay a record $4.7 billion over allegations its iconic baby powder causes cancer landon >> the jury in st. louis awarding damages to 22 women and their families who claim that j&j failed to warn that it raised the risk of ovarian cancer six of the playoffs in the case have died. the jury awarded $550 million and added more than $4.1 billion in punitive danimages. this is the biggest verdict in such a case so far although punitive damages are reversed on appeal j&j say it's deeply disappoint would the verdict and plans to appeal it's been fighting more than 9,000 talcum powder lawsuit and

said its powder has been free and safe from asbestos including a case in los angeles just last year where the plaintiff was awarded damages. johnson & johnson's lead attorney will be on "squawk box" at 8:00 a.m. eastern courtney, back over to you individual stocks right now include mcdonald's speaking of some trouble there health officials in iowa and illinois are investigating more than 100 cases of a foodborne illness which may be linked to mcdonald's salads. mcdonald's is cooperating with the investigation and stopped selling salads at the restaurants until it can switch to another supplier. wes bush will step down at the end of the year replaced by coo cathy warden bush has led the company since

2010 and shares of northrop grumman just down 10%. work with its suppliers on renewable projects that could power close to 1 million homes in the country apple produces most of its products in china and apple shares are higher by about a quarter of a percent you and i are just getting started. on deck, a 2018 tug of war that is how one is defining the market action this year. where we go from here, after the break. later, it's croatia versus france the cnbc way. pitting the two rival countries against each uther fother for t biggest economic match of the year we'll be right back. (cheers) what's it worth to talk to your mom?

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and lets you control your network with the xfi app. it's the ultimate wifi experience. xfinity xfi, simple, easy, awesome. a big day for the market yesterday with the dow gaining over 200 points. the nasdaq closing at a record high slightly higher in premarket joining us now steve portfolio manager at federated what a week for global affairs >> it's been full. >> nato, defense, we have the meet coming up with president trump and prime minister may >> the start of our earning season we start off with the big banks today. we certainly pay attention to the headlines and they're all over the place i think if you were trying to buy or sell the news over the last year or so that was a losing strategy. if you look at the earning strength we're going to kick off

a heck of a season starting today. >> speaking of earnings, we pay attention for what they are recording for the quarter. but with always one eye ahead. the full-year estimates moving higher at the sharpest pace in over 20 years. do you think that can hold with the trade deadlines going on and with so much uncertainty in the back half of the year. >> this is a debate we have in the firm anden with en wiand o companies willing to be as aggressive with all the stuff going on around trade. everyone is thinking that way. i think in the first quarter you had to beat your earning's number and raise your guidance it may be good enough this time around to maintain your earnings guidance everyone is worried it may fall. we'll look at how the stocks react to this earning season what it does look like we'll get another season of 20% earnings growth every day the market is flat and earnings growing 20% and at some point that has to shine through.

>> yesterday's price action was interesting. a record high on the nasdaq. s&p 500 now at its highest level since february of this year. but inflation data came out. six-year high and the market shrugged it off, why is that >> i think we're still dealing with low levels of inflation wage inflation is still below three and historically you have to get wage inflation closer to 3% and close to 2.5% before it starts to engage the fed we just had a wage number a week ago today that was a little bit soft so, yeah, little signs of inflation here and there but there isn't some massive trend that you can point to that is overwhelming >> any sectors, in particular, that you feel quite bullish about going into the second half of the year? >> yeah, i think there's two sectors sniffing around, which will sound crazy because they've done poorly. industrials and financials

i know that sounds kind of out of favor, but these are two sectors that have real good earnings growth. particularly energy you can add to that list, as well, and haven't gotten rewarded for it at some point that will happen >> we will discuss banks later in the show. thanks for joining us. still to come, financials are in focus first round of bank earnings kicking off. what you need to know when those numbers hit the bank. the world cup. we're breaking down the big money facts about croatia and france ahead of this weekend's icrld cup finals stk around, you're watching "worldwide exchange" right here on cnbc.

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welcome back you're watching "worldwide exchange." the big world cup final kicking off this sunday. we decided to compare the economics of both nations fighting for this title. i'm going to tell you a little bit about croatia. its gdp $40.87 billion and population relatively small 4.2 million and unemployment is a bit high at 11.7% and main stock index so far this year hasn't done too well. down about 2% year to date >> you got to do croatia because the other day you said you were rooting for the underdog i sort of love france. let's take a look at france. much larger gdp. $2.4 trillion for france and much larger population and a big

geographic population at 6.8 million. tomorrow is a big day for france, actually bastille day, like their fourth of july. it marks a big turning point in the french revolution. a big export for france, we don't have it on the wall, but wine, particular lly rose in the southern region of france. a lot to like. >> you know what's interesting travel to these countries have both been growing, but travel to croatia has been growing at a faster pace in the last two years. has become kind of a party, summer destination for a lot of folks. >> beautiful >> paris still popular travel destination, but croatia hsia t has seen a faster pace >> if they win the world cup, will that inspire more people to travel there >> seem like friendly folks, they kissed the photographer and

hugged him a great game to watch. let's check in this morning on this morning's other headlines. hello, philip. >> hey, seema, courtney. loving all the soccer talk north korean officials were a no show for a meeting with the u.s. at the dmz on thursday they were scheduled to discuss returning remains which kim jong-un agreed to last month the north has offered to reschedule that meeting for sunday authorities in ohio dropped the charges against stormy daniels just hours after she was arrested for allegedly touching and fondling patrons during a performance at a columbus strip club in case you have forgotten, daniels made headlines after claiming she had an affair with donald trump in 2006 which the white house denies dani dani frightening scene when a brand-new mall in mexico gives way.

part of a luxury shopping center which opened four months ago comes tumbling down in a giant cloud of dust. amazingly, officials say, no one was hurt back to you. >> amazing wow, pretty incredible pictures and video there. still to come here on "worldwide exchange. out of this world plan to get tourists into space. we'll tell you how much he wants to charge customers coming up next. plus, a big build-a-bear bust the latest one-day sale was so successfult fa iiled we'll explain.

a big trade warning. what president trump said about the current brexit deal that is getting the world attention today. deal drama appealing at&t $85 billion merger with time warner. the full details coming up. the one carmaker tied to james bond could be setting his eye on an ipo. an exclusive look inside aston martin as "worldwide exchange" rolls on happy friday, everyone you're watching "worldwide exchange" ladies edition >> no bad luck here on friday 13th brian sullivan is off today. let's get right to landon dowdy.

>> here's what's leading, president trump's first official visit to the uk is under way trump blasting uk prime minister theresa may brexit deal saying it could jeopardize agreements between the u.s. and uk. we're monitoring the president's visit and bring you any new headlines as we get them meanwhile, the justice department is appealing the $85 billion takeover of time warner. the blockbuster deal won court approval back in june. the doj now arguing that with the combined company could decrease competition and raise prices for consumers we'll hear much more about this coming up on cnbc with randall stephenson that interview gets under way at 8:00 a.m. eastern. a jury ordering johnson & johnson to pay a record $4.7 billion over allegations its iconic baby powder causes cancer 22 women and their families being awarded damages after claiming j&j failed to warn that talcumpowder

it has been fighting more than 9,000 talcum powder lawsuits and said its product has always been safe and free. let's get a check of today's market action because the nasdaq that got a lot of attention yesterday. rising to, yes, another all-time high amazon and facebook both hitting record highs, as well. gaining 1.4% slightly higher this morning and the dow seeing the opposite today. down by 17 although it did gain 225 points in yesterday's trade check out the bond market. what is the treasury market telling investors? the ten-year note right now yielding 2.83% slightly higher right now. let's take a look what happened overseas. asia mostly higher shanghai down 2.10% and we're seeing strength from the services sector, textiles those were two of the leading sectors

and also fast retailing. that is the company that owns a number of other brands that was up almost 7% on the strong earnings report south korea kospi also higher by more than 1% a lot of focus as president trump continues his uk visit and the ftse 100 is among the strongest and higher by almost 0 .5% at this point. >> china striking a tone wion trade with the united states what's going on in the currency market you'll see the dollar which, of course, will be a key focal point for investors as earning seasons kick off with the big banks. the u.s. dollar at $1.12 against the japanese yen holding on and against the pound, 1.31.

slightly lower let's go dive into the marks at bit more. with us michael. thank you for joining us a lot of action to get to around the world. uk and the u.s. in prime focus and also earning season issic c kicking off and trade fears and uncertainty or a focus back on the fundamentals and the strength of corporate earnings what are you looking at this friday as the market is sort of in a holding pattern unit ilwe sta get some of these numbers? >> i don't know if that range with an slight upward bias is going to change very much. but i would say this if for the markets to stay in fresh highs and then make more fresh highs, you need more and more stars to line-up just right here you need very strong earnings growth there but you also need a very constructive backdrop. a pe contraction is one of the

big themes this year how much are we going to get against the background earnings growth, i think, is almost a given that it has to be strong this year so much of that has been expected and price under to the 2017 rally there so, to really keep this machine going forward, you know, you are going to have to at the very least exceed, you know, keep this trajectory of longer term sustainable growth there >> but what's interesting is the stock story in 2018 has been mostly a tech story. narrow leadership with a subset of five to six large cap tech names. is that the end of a bull market >> i don't think so. i would suggest not. look, the tech rally has been really defined the post-2009 equity rally here. the earnings coming out of big tech has been phenomenal and it's also economically,

relatively economically insensitive earnings growth. several stories here that is less sensitive to what the federal reserve is doing and less sensitive to how much inflation is coming in from the late cycle inflation story there. these are game-changing companies and, so, it makes sense. now, the fact that the leadership is that narrow, of course, doesn't make you feel and i continue to be overweight tech regardless of, you know, how much this rotation in value is like, you know, talked about. to me, you stick with tech here. it's where the quality of the earnings is really coming from >> what do you need to see this earning's season to feel confident that this market will continue to move higher? >> certainly on the tech side, you want to see continued earnings for the tech starts to stumble here i think that will be a big problem. i think, you know, when you look across the other sectors, you're

going to want to see, look, the bank stocks have been, the price action of banks have been poor here and very interesting to see how that is going. across the board the other value sectors you want to see things like how are they really embracing tax cuts and this fiscal stimulus and how are they, you know, looking into the future there that's going to be very important. >> a lot of attention on the yield curve and what's happening there. is it going to be inverted and if that happens, can we really avoid a recession? have there been instances where that has not happened? >> i have done a lot of work on this recently and, look, every yield curve inversion preceded a recession. the yield curve right now melts like an ice cube in august and to see an inversion happening soon is a very real prospect there is some very different this time. and the way i look at it is what the yield curve is reflecting

right now is the relative pace of various fasets of fed normalization more so than it does sort of late cycle indicator of a recession there a lot of distortions between the backing of the curve still bogged down by the ecp the term premium associated with a fe a ten-year is negative despite the tax deal and despite the qt. you would think it's normally positive minus 40 or 50 basis points. if you were to say on a normalized basis that should be positive basis points, the yield curve is not 25 or 30 basis points maybe 200 basis points more of a mid-cycle yield curve. i think you have to think about the yield curve first in the context of, where is the fed and other central banks and on the trajectory of normalization away from the extraordinary measures put in place over the last nine

years. >> you'll watch it closely and we will, too thanks for being here. michael purves time for this morning's top trending stories >> if you're looking for an out of this world vacation, amazon founder jeff bezos has the answer begin selling tickets for space trips starting next year passengers will ride the new space capsule 62 miles above earth where they will experience a few minutes of weightlessness. quarter million of a dollar per ticket if it was cheap, wouldn't you be suspect? >> you're right. >> what's going on up there? >> i need a lot of people doing that first and i need a good safety record. kind of afraid of helicopters. i'm not sure i'm getting in a spaceship any time soon. also trending, a build-a-bear promotion backfiring with unbearably long

lines. pay your age promotion and the response was so overwhelming that the company had to turn people away. they handed out vouchers to customers to return at a later date i don't know if you saw any of these interviews, these people were waiting five hours, eight hours. they could be up to 60 bucks >> a 2-year-old, only 2 bucks. i wonder if the voucher -- >> it's only $15 >> what does the voucher get you later? >> i didn't realize it is still a thing. >> it really is. >> and that's experience retail, too. it's in person you can't build a bear on amazon.com. if you had to guess how much blockbusters would you say are still running in the united states well, after this weekend, the answer is just one currently there are three. but the two remaining stores in

alaska have their last day of rentals this sunday and then liquidate their remaining videos and the last blockbuster standing is guess where, seema >> where >> oregon. this is your home state. and reports that they have no plans to close any time soon >> oregon, bend is like maybe five hours away from portland, which is where i'm from. it's in the outskirts. very beautiful where the mountains are. >> but they still get to go to blockbuster to get their vhs >> we need to introduce netflix to them. >> thanks, landon. still ahead, getting behind the wheel could aston martin hit the gas on an ipo? phil lebeau is getting ready to interview him live hey, phil. >> a pretty lackluster year to

say the year for auto stocks, but plenty of investors interested in a potential ipo for aston martin what is behind that excitement that story when "worldwide exchange" continues. plaque psoriasis can be relentless. your plaques are always there at the worst times. constantly interrupting you with itching, burning and stinging. being this uncomfortable is unacceptable. i'm ready. tremfya® works differently for adults with moderate to severe plaque psoriasis.

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welcome back to "worldwide exchange" on this friday 13th. futures are indicating the markets open now the dow jones industrial

average lower by 27 points and the s&p and nasdaq lower ahead of big earnings that we are beginning to get as the morning goes on. a lot of attention paid to the yield curve. right now the ten-year treasury which is that key number that we watch, 2.838 little change from what we saw in the action yesterday and earlier this morning switching gears to autos luxury car maker aston martin making headlines as it weighs the possibility of going public. all comes as the company makes a big push into the suv market phil lebeau joins us with more of that story from aston martin headquarters phil >> this is a great place to be especially if you love performance automobiles. they can build up to 7,000 here on this line in england. right now this is a db 11 and other models coming off the

line when you look at what they're doing, it is a renaissance because last year deliveries for the first time since 2008 topped 5,000 models a total of 5,117 were sold revenue a record high. first time ever topping $1 billion. but it's the road ahead that interest investors they have seven new models over the next seven years and expanding production footprint including producing their first suv ever and the subject of a potential ipo. and when you look at a potential ipo, people say take a look at ferrari. look what it has done since it's gone public. in the last year, while the rest of the auto stocks have done basically nothing, ferrari has had a wonderful performance. we'll be speaking with andy palmer coming up on squawk box at 6:30 a.m. we'll talk about a potential ipo and what's going on with brexit, as well as the trade talks between the u.s. and europe and

how that might impact the aston martin sales in the u.s. a lot of topics to talk about with andy palmer as he is the person leading the renaissance back to you. >> what has been driving the results for aston martin why is it so strong as of late >> couple things they refreshed the lineup and expanded the lineup and you have a market where people are saying, look, if i buy a vehicle for $145,000 and $300,000, there are limited offerings. when you bring out new models and that's the blue print that andy palmer has laid out with the heritage and the track record that you have with aston martin, that market is looking for, you know, those special vehicles those people who are looking for ultraluxury vehicles that's why aston martin is very specialized in that niche. >> i want to get your thoughts on the v8, such a tiny car but

with ridiculous horsepower 0 to 60 miles per hour in four seconds. how is that safe >> well, how is it safe? well, there are vehicles that go 0 to 60 far faster than that look, when you're talking about 0 to 60 times some people will look at that and say, do you really ever need to go 0 to 60 for 99.9% of us, no, we don't. that's the heritage you get with an aston martin special performance cars people want that horsepower which is why whether it's an 8 cylinder model or a v-12, people are willing to pay up for it >> beautiful cars there, phil. looking forward to that interview. thank you for giving us a preview of what's to come. still to come here on "worldwide exchange" -- >> a bunch of big banks reporting quarterly results. we'll be back with those numbers. numbers. don't go away.

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welcome back to "worldwide exchange" you don't want to miss the eighth delivering alpha conference high-profile speakers include larry kudlow, billionaire investor mark lasry. now, a slew of big bank earnings on deck this morning. citigroup, jpmorgan chase all reporting before the opening bell here to discuss what to watch when those numbers come out is chairman at global investors what do investors need to watch for? >> the first thing you have to remember that earnings are now different from last year in other words, asset returns are all up 300 to 400 basis points because of the tax cut, right. it's an inflection point in the data you want to watch for how fast interest expense is rising the fed gave banks a gift for

the last five or six years by suppressing interest rates for us market rates resetting very fast at the end of last year going up on 55% annual rate of change interest earnings only going up 8% those two lines will converge and net interest margin will start going down this is the fed. the fed has essentially capped asset returns and they have to let interest rates go up at one point, the whole industry only cost $11 billion to fund back in 2012 today it's about 25. it is going to keep doubling you watch that number because that's why the earnings have been so easy for the banks no growth, really. you know, the only bank with any appreciatable estimates from the street is jp wells is flat. citi is okay >> what about trading revenue? in the first quarter of the year, high volatility and the second quarter 2018 market volatility and trading volume

decreased year over year so, that's probably going to be a head wind for the banks, right? >> we'll slowly get a market dynamic back when it comes to trading. the reason is the central banks own $10 trillion worth of securities they don't trade those securities, they don't hedge them i as more and more debt gets back in the private hands, more normal behavior. those customers will need to trade. you know, the fed has made a terrible mistake because they think they can manage this normalization process with but they can't they need to be selling ten-year futures. they need to be selling swaps and they're not doing that >> beyond the earnings we have to look at the yield curve and what that means. >> people think trade is affecting financials, no staring at a flat yield curve. the reality is leverage players whether you're a fund or a bank as that curve flattens it gets

tougher and tougher to make money. this is what i was saying before watch the cost of funds in the industry the end of the third quarter, we could be going up at a 75% annual rate. it is accelerating that rate of change gets to the point of say 100%. you're going to see them flatten out. how will people react to that? >> let's get specific and your thoughts on goldman sachs and morgan stanley respond to the stress test performances on their post-earnings calls. >> yes, this whole stress test process is a bit absurd. they shouldn't be doing this publicly they should have these conversations as part of the supervisory process. what they were basically saying about goldmine and morgan stanley is the qualitative stress tests were not satisfactory and they have to change some things same thing, by the way, with wells. wells has had a lot of internal controls problems and same thing

with deutsche. we already knew that there was a supervisory process under way. so, all of these banks got smacked, but is it significant no going to affect payouts? no >> why do you think it is private conversation >> certain things in the public disclosure world and there are certain things that are part of the supervisory process. i think the brillian was to have have the stress test and get everybody comfortable with banks. they were not willing to trade after that, though, turning this into an institutional exercise where each bank has different inputs and the output is not comparable why are we doing it? i don't find any value here. the fed are good economists but they don't understand when you're stressing a bank, all you care about is loss absurption and income capital doesn't prevent a bank from failing profitability protects a bank. their ability to plow through the snow and pay off their

losses and keep going. which is what the industry did in 2009 we charged off $60 billion worth of stock and the industry kept on going because they had strong income that, to me, the stress tests are just barely constructive >> top pick? >> my favorite of all of them, bank of the ozarks take a look. they have a national real estate and a national business so you watch them because they're very small. only $20 billion bank but they're very, very aggressive. if they don't like the market, then you know it's time to pull back >> chris whalen, thank you for breaking it down for us. >> my pleasure, have a great day. futures yesterday. a big rebound. dow up 225 points and nasdaq hitting a record high and the russell 200 and we're lower right now with the dow down 24 points in premarket. a lot of focus on what will happen overseas and in the uk with president trump and theresa may and what will happen at that

conference at 8:45 a.m. eastern ti time we have randall stephenson among other things thanks for joining us. "squawk box" is next ♪ ♪ and prove that the real world beats a post. ♪ ♪ ambitions live everywhere. synchrony helps make them happen with customized rewards and financing available at over 350,000 locations. synchrony. what are you working forward to?

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good morning we're saying this. theresa may caught between trump and a hard brexit. the embattled prime minister will give a crucial news conference that is being described as a no-win scenario take you live to london straight ahead. deal appeal. the doj challenging at&t $85 billion merger with time warner. i thought it was already done. anyway, we'll see. we'll talk to at&t ceo randall stephenson in the 8:00 hour. earning season has arrived we'll kick off things in about

45 minutes with the second quarter report followed by citigroup and wells fargo. so, don't make any plans this morning. seriously. it's friday 13th "squawk box" begins right now. live from new york where business never sleeps, this is "squawk box. good morning, welcome to "squawk box" we're live in times square i'm melissa lee becky and andrew are off today our guest host for the hour cnbc guy. >> i'm here. >> i know you are. i want to cast dispersions. >> who is on at 7:00 >> and then joe teranova >> what is that telling you, joe? >> i'm just