welcome to "street signs." these are your headlines air france stock jumps after the airline beats second quarter profit estimates shrugging off strike action concerns which dominated the period investors brush aside higher shareholder returns from rio tinto as the miner bumps up its dividend and unveils a share buyback but first half earnings miss expectations. bnp beats expectations as

strength in the french lender's financial services business offsets weakness in its financial services bank. >> the only thing you have to take into account is negative impact of 4x >> apple beats expectations as sales of its more expensive handsets outweigh disappointing iphone shipments good morning welcome to the program let's start out and look at some data just crossing here for the eurozone it's the latest for the july final manufacturing pmi numbers, crossing at 55.1 the same as the flash number just to give you a sense of the slight recovery that's been

playing out, this is higher than the june posting of 54.9 so the numbers improving on that level. when it comes to the final manufacturing output level, 54.4, that's a tad above the flash levels and when it comes to manufacturing future outputs, slightly forward looking numbers, 62.4, an improvement on 6 i 62.3 it exceeds the june level. so it tells us about the eurozone economy heading in the right direction. coming back to apple climbing to a record high in after-hours trade as firmer selling prices of the iphone x push the tech giant's results ahead of expectations revenue rose 20% supported by demand for the pricey iphone x, but sales growth actually missed forecasts.

james gottfried joins us and arjun is also here the numbers coming out of apple, there was a huge focus on the tech swoon in recent sessions, but it's the old story of price over volume when it came to iphone sales, james. >> absolutely. unit sales were flat year on year there was a slight reduction in the inventory. if you exclude that effect, apple talked about mid single digit growth so it is growing what's a standout this year has been the 20% price increase. the x proved to be the most popular iphone, still the most popular iphone and has driven up numbers this year. >> quite an upsell to consumers. when you consider 20% growth in the average selling price that the x has helped the company achieve. is there a story behind the x and what this says about future

devices? >> they have shown there's a market for ultra premium devices. there were a lot of concerns going in when the x was released that the $1,000 price tag would put off people while it may not have been a kind of huge volume seller, it certainly did a huge deal for the average selling price of the device, for the revenues we saw 1% uptick in unit sales, 20% revenue. that's important we can't forget the continued growth of the iphone also the services division that grew again at 31% for the second quarter in a row. that's becoming ever more crucial for apple to try and wean itself off sole reliance on the iphone, especially as smartphone markets continue to slow down. >> apple ticked many boxes in their results, even when it came to the ipad. we saw numbers crossing for that device, where there might have been concerns around greater china performance and the quarter was weak

higher year on year, but the quarter was weak add in that a trade war, the fact that china's phones are moving faster. what does that mean for apple? >> i think for emerging markets, apple has a tougher battle they are masters at selling the $1,000 phone to wealthy consumers in the u.s. and europe in china and india, the wealthy citizens have already bought those phones the growth is further down the income classes so apple needs to adjust it finds difficult competitors, and there's a wrath of other challenging phones out there it's much more competitive all the data is at the high end, apple has incredible retention rates and doing very well.

>> i wanted to get a question in on how you look at the apple stock story. a lot of people said this is a hardware company, but now what we're seeing is that recurring revenue model start to gather steam. when you look at where apple is valued in terms of forward pe, it's 14 times. google has the recurring ad business that's somewhere like 27 times do we see on the back of this continued success in services and the stability of iphone sales a re-rating of apple's valuation higher >> i thinkover time you could see that i think the services business is contributing perhaps as much as a third of the profits now it's a meaningful contributor. what we have to remember is it's all tied to iphone sales apple doesn't get the services revenues if it doesn't sell the iphones. at its heart, the multiple is tied to the services is a great growing profitable business. if does change the outlook for

apple and it will help the re-rating. i only expect a marginal help. at its core it still has to cell phones >> what about the capital side we got a move after hours on the stock. the capital allocation, 100 billion share repurchase program announced back in may. the company returned about $25 billion to investors in this quarter. not a bad payout for someone looking for cash back from the company. >> it's going to be a reliable source for that. the net cash balance peaked at 1 1$170 billion what we now have from apple is a commitment not to just pay out all of that cash flow in buyouts and dividends, but to reduce that net cash balance to a neutral position year over year, that balance has dropped by about $30 billion. that will really support the income investors to an extent.

more of it i expect to go into buybacks i think this will help the company generate what should be around double digit earnings growth half of that comes from business half from the buybacks >> james, thank you for spelling that out for us. new analysis shows huawei passed upapple as the number tw iphonemaker in the world you can read more about that head to our website, cnbc.com. and enel has reported a 11.2 higher debt. they hope to counter that with 1.5 billion worth of asset sales in the second half the utility reported a 3.2% rise

in first half earnings the ceo joins us now to talk about that francesco, let's talk about the ebita number just give us a sense of how the euro is playing out for you so far. >> so far we have had quite an adverse scenario on rates. these have impacted the first semester we've had at least 280 million impact on fx during these six months that has basically held back the numbers in the first semester. notwithstanding this, we have had an increase in the six months ebita when compared to that year, but this would have been bigger if we didn't have this fx impact we think the end of the year

will show a better result. we did confirm ebita at the end of 2018. >> i want to come to some of your plans net debt has gone up by 11%. your program has been extensive to build out the business in south america. many people think of your company as an italian one. but your growth plans are fairly aggressive in brazil with acquisitions, 1.5 billion majority stake in a power company, also plans to spend 2.3 billion to buy a latin american fiber company. tell us about the asset plans you have in that part of the world. >> we have a presence in networks in the very large metropolis areas we are the distributor in lima, in san paolo, buenos aires so our focus is on the large and

growing metropolitan areas where you see a concentration of growth, a concentration of wealth, where you see the new middle class emerging in latin america. where you see development and where you also see need for additional services like fiber that's the focus we're having, the focus on networks in this very large metropolitan area, so that would be the focus of our activity and the engine of growth in the continent. >> the messages have been mixed to investors, where you have a builder program, that strategy, but now also tackling debt with asset sales. have you been spooked by the move in the italian bond market this year on the back of the italian crisis where we saw a jump in that ten-year yield on italian bonds and we still have not come back, we're still trading close to that 3% handle. has that spooked you a bit and forced you to look at balance sheet repair >> there's a bit of an effect

that is in our favor when you look at this on the short-term if this spread remains, we would have a positive impact on the tariffs. they are built on the italian system we would have a jump in the tariff system if this remains long enough. that said, over the medium and long-term, of course it's negative i think what we need to do, we did basically. we secured bonds and -- bond issuance a couple of days earlier than in jack up in the bond -- the italian system for the next two, three years we are isolated from this, if we need money, we have already security to respond and like i

said, what we could do we've done we think this spread over the medium and short-term is improving our tariffs on the regulated assets we have in the country. and as far as the capital needs, we are basically fine for the next two, three years. >> timing is everything on markets sometimes. >> and luck. >> i flow yknow you don't want l about politics in italy, but can you elude to the business environment under the current coalition, whether it's been impacted at all, whether you see any changes whether positive or negative >> as far as energy policy is concerned, the program that is with the government was fully in line with our strategy it was about digitizing, it was about rates, it was about making

italy a more efficient system, which is exactly what we're doing. so we don't expect a lot of change rather we think we should have an acceleration in those regulatory frameworks that push in that direction. we are relatively optimistic in that sense the general climate is a bit of a wait and see approach to see whether the -- whether the eu and other related issues are in line with what the investment climate expects for accounts like italy so anything that has to do with debate about getting in and out of europe is bad, it's wrong for the business it shouldn't be in the agenda. i don't think this will be the case going forward i think the minister of economy has been clear on that our prime minister has been very clear on that. so i think after the initial phase of, you know, finding the

right tune, these comments will probably not do that kind of mistakes or the wrong directional views. i think it's more an issue of trying to strike the right balance and restart the reform path that was previously interrupted. >> appreciate the comments today. thank you very much for joining us coming up on "street signs," we'll speak to rio tinto's ceo after the miner missed on its first half profit expectations, but the cash payout to shareholders improved. that's after the break - 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.

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they also introduced a dividend of $1.27 per shape jean-sebastian jacques joins us, the ceo of rio tinto the market has been hard to please big cash payout to shareholders, yet a miss on some of the numbers. aluminum contracts have been cited as a key issue >> yeah, good morning. first, i'm delighted to report a strong set of results today. we just announced in total cash return of 7$7.2 billion including, as you just said, a dividend of 2$2.2 billion, whic is higher than in the previous history of this company. very strong returns to the shareholders we are committed to cash returns long-term. last year for the full year we returned nearly 10 billion to shareholders we have the momentum

we're moving well. we just keep pushing regarding your question on the earnings miss, yes, we have some l legacy contracts which were put in place in 2003 to 2006 there was a significant difference between the spot and the contract per se. i'm not sure all the analysts cite that in the model the second aspect is despite all our communication, we did pay 1$1.2 billion of taxes to the u.s. and other tax authorities in the first half of this year, which relates to some factoring in this model and others did not. the only commitment that matters is to our shareholders we committed to cash returns in the short and long-term.

and this comes on top of the nearly $10 billion we declareded last year. >> i think it's fair to say investors have been pleased by the payouts which have come back into the sector, which rio tinto has been leading the charge on but questions are being raised about diversification which is ironic because the community loved your stock because you were a sole play into iron ore, now many are asking whether you would diversify away to more copper what's on the radar for you? do you see a copper acquisition at some point? >> we believe in diversification. there's no doubt however we will not diversify for the sake of it we fully acknowledge that today our iron ore business is strong. let's step back. you have one business which has leveraged more than 50% ebita for the last 20 years. i don't think you have lots of

business or industries which have delivered more than 50% of ebita. so there's nothing wrong with the iron ore business. quite the opposite it's a world class business and we're proud of it. if we can diversify in the next ten years, we will do it for us, it's all about value creation for shareholders. if there's good options in copper, in aluminum, then we will pursue them for us, it's all about creating value. once again, a good example of it is the 7$7.2 billion of cash returns we've disclosed. >> no one wants you to repeat history with a large acquisition going perhaps into a downtown which impacted the company last time around. let's ask about the outlook. already prices have come off are you concerned that there is a turn down coming, whether triggered by central banks or by a trade war being waged by u.s. president donald trump >> are two key driver's for the mining business. one is gdp growth, one is world

trade. for us, we see the outlook for g gdp growth is strong in the u.s., china, canada. on the trade, i think it's important to separate the facts from the noise if we look at the other books in china or in the u.s. or in canada, i do not have any issue whatsoever so the demand for product whether it's copper, aluminum, it's strong. so we have not seen any impact so far about trade now what is important from our perspective is to work on what we can control today it is to make sure we maintain cost position, we maintain quality of project, we maintain relationships with customers, and whatever market conditions we can deliver against commitments, which is to generate superior value for shareholders the 7.2 billion declared today

is a good example of it. >> good to hear the latest come and join us in studio at any time the update from jean-sebastian jacques. let's get to generale which has upped net asset disposals to more than 1.5 billion euros. let's go out to willem for more in milan tell us the latest >> net operating result was up to 2.5 billion euros in terms of the net profit, that was up to 1.329 euros, again for the first half of this year. that's up significantly, almost 9% compared to last year you mentioned asset disposals there. one of the biggest companies they sold was generali labor, the life insurance business in germany. traditional life insurance business across europe has been

struggling they've been promising investments to the customers, and then are struggling to match those with the low interest rate environment we've seen i asked the ceo about the ecb and whether he will be watching that closely >> i've been living five years in japan, so i'm used to low interest rates i'm no longer watching every day. our company la been phas been po cope with low interest rates for a long time. we can absorb shocks thanks to our capital position and we can leave with low interest rates for a long period of time. >> one final question, your share price has not done so well so far this year some analysts have suggested that's down to per sooefediperc are the italian economy.

what do you think? >> i think the perceived risk is overweighted by the market and analysts we're in italy, great country with a great institution and the economy matters much more than politics in italy. and when you look at the basics of the italian economy, they are good i'm definitely not concerned about this i'm not worried. maybe at some point this unfair discount will disappear. >> so, as you can hear, the ceo of generali bullish on the italian economy. he has just lost his second cfo in 18 months they announced a management reorganization so they're trying to change the way the business is structured to deal with this plan the big question now is how they will spend that money. he was coy on whether that would include non-organic growth and targeted acquisitions. >> willem, thank you very much

it's interesting just having to spoke to enel, they are confident that the worst of the crisis is behind them. did you get that from a sense of the company as well? good times ahead >> i certainly didn't want to address that directly when i asked about the coalition government, as you heard in that little clip we played you. it seems he thinks the institutions of italy are strong enough we heard this again and again over the last year from businesses in italy that they're not that focused with the politics, so long as the general environment is strong enough to pursue businesses. generali has a lot of business outside of italy, but he seems optimistic that the politics won't play a part in the economy here >> which tells you about the amount of turmoil italy has had to live with coming up, bnp paribas beats estimates. gjoumanna will have more live

from paris welcome to "stree"

these are your headlines

air france shares soar after th airline beats second quarter profit estimates shrugging off strike action concerns which dominated the period investors brush aside higher shareholder returns from rio tinto as the miner bumps up its dividend and unveils a share buyback but first half earnings miss expectations. bnp paribas second quarter net profit beats expectations as strength in the french lender's financial services business offsets weakness at its investment bank. >> the only thing you have to look at when looking at the results for the second quart ser taking into account negative impact of 4x and sluggish environment when comparing the previous quarter for cib in europe >> apple beats expectations as sales of its more expensive handsets and rising services revenue outweigh disappointing iphone shipments

let me take you to manufacturing numbers coming out of the uk on the eve or the cusp of potentially a rate hike from the bank of england. another coolingoff from factories losing momentum in the month of july. we saw some downbeat numbers 54 is the level in the manufacturing pmi for the month of july, versus june's downwardly revised 54.3. so the numbers somewhat underwhelming, also missing a reuters poll the levels on output the lowest since march 2017 new orders the lowest since june 2017 it is a retreat we're seeing confidence at a 21 month low and you have also seen reports around the steepest rise in selling prices since february. some of this around pound softness no doubt. so 1.3114.

a conundrum for the central bank this week as they decide whether to hike interest rates as they see patches of weakness still in the uk let's take to you fx markets euro/dollar, 1.1688. most of the pairs are rallying to the japanese yen, also to the pound. it is a dollar strong story this morning. as markets focus on trade fears, we've seen positive reaction on some of the markets on hopes that we were seeing further negotiations in the back drop between the americans and chinese, and we wake up this morning and there are concerns that a tariff of 10% on 2$200 billion of chinese goods could be ratcheted up to 25% on the duty front so investors concerned that we're not seeing improvement in the trade talks. in markets we are seeing some caution prevail.

ftse is trading down, off about 0.8% the french market is trying to stretch that into positive territory. some of that on the back of earnings you can see very much in opposition to what the other core markets are doing lloyds has posted a 23% jump in first half pretax profit, that's in line with expectations the british bank announced a dividend of 1.7 pounds per share, but there was also a provision for ppi selling, a scandal that cost the bank over 18billi billion pounds so far. bnp paribas reported a modest decrease in second quarter earnings but it was sill a beat invest banking revenues fell almost 7% on the back of weakness and fixed income trading strength in financial services and consumer lending business helped offset the under-performance. let's go out to joumanna

bercetche in paris not exactly a crime these days to underperform in fixed income given how hard it has been in that sector. >> that's exactly it it's interesting because earlier the shares were called to open up 2% to 3% higher they were briefly traded positive when i checked a few minutes ago, they were fractionally negative i think what happened is at first blush, people saw the numbers, they saw the top and bottom line, they saw a beat versus consensus and thought a beat is a beat, as nancy would say. drilling down into the numbers, a few things become apparent one is that the investment banking unit, the cib unit continues to struggle. so posted 7% decline on the year-on-year basis that's alarming. the other item that was alarming for investors is that of costs let's not forget we're in an environment where investors are awarding banks sticking to this

cost cutting regime. bnp have their own transformation plan as well. their 2020 transformation drive. that goes hand in hand with improving their technological offering and reducing costs. what we see is that the operating expenses are up 4% year on year so i sat down with the cfo yesterday and i asked him about those two points what is going on on the cost side of things, why are they going up and not down? and the second, should we be worried about the investment banking business >> two reasons, indeed, we are doing this transformation. we're having already this half year, a half billion of investments which will probably ramp up to 1 billion those costs should be ending next year. you have to look through this. we should take that out. costs are showing two different trends there's one trend in the businesses which are impacted by the low interest rates and the

like where you have the costs coming down. on the businesses which are focused on the growth, like specialized business that i talked about, we have cost evolutions so, yes, we're doing investment for transforming the bank. we are accompanying growth where it is, and for the rest we contain costs. so we remain on trajectory for the 2020 cost income improvement. >> let's talk more about the business it's one of the weak spots of this quarter, and then digging deeper into the numbers there. four corporate banking was down 14% almost year-on-year. where is the weakness coming from do you think it's a function of the environment or is it a function of the capabilities >> yeah. if you look at it, don't forget corporate and institutional banking of bnp paribas consists of several activities. if you look at cash management,

trade, security services, those businesses, their top line is more than 4% we have other activities in there. a top rated brokerage house. those are doing well then there is indeed, when you look at fixed income in particular, which has, compared to a year ago, an environment which is less supportive, particularly for europe. this is compensated by the improvements that we see in equities and prime services. but that's what we see when you look at corporate banking, one has to look at the numbers, you have to look at the 4x impact and the fact that a year ago there were some very material capital gains if you look through those, you see the top line evolves by minus 1.7% why is that minus 1.7% on corporate banking? when you look at europe, there's

been less major deals because some were not possible like on ipos this is somewhat compensated by the u.s. and by asia pacific and if you look at the credit evolution, they're up 4% so that bodes well going forward. >> would you say the pop line is positive on a forward looking basis? >> yeah. if you look at the credits, they are basically 4% we see some elements that have been delayed normally looking forward that should be -- that bodes well >> karen, just picking up on a couple of those points with respect to costs, it's interesting to note where they are investing, where the costs are going up is the biggest area growing. so revenues were up 9% expenses were up 7%. so at least from an operating standpoint their revenue was growing faster than the expenses are growing. so that's a good point on the investment banking, i think it's interesting because

this is the first of the french banks earnings that are coming out. french banks are known for their equities business. that equities business did post some strength. this is in direct contrast to what we saw out of the american banks. could be a function of environment, the lack of turnover, the lack of trading, and european central banks are keeping rates low. that's really impacted trading in that part of the world. on the corporate banking front, the activity was down, he also said a lot of that is on back of the macro environment. ipos have been delayed business decisions have been postponed. looking to the second half of the year, they're positive that side of the business will pick up so a lot of moving parts here. generally speaking, pretty much in line with expectations on top and bottom line, but a few question marks on the investment banking business, as we saw with the swiss banks earlier this week >> perhaps blue skies ahead, like the back drk drockbackdrop.

paris turned on a spectacular day for you. >> it's very hot as well >> enjoy the sunshine. airfrance-klm shares are taking off as strong shaal sales offset labor pains the airline reported a 41% fall in quarterly operating profit as strikes wiped out 335 million euros from earnings in the first half volkswagen has posted a 23% rise in underlying second quarter operating profit, that was a beat of expectations the german carmaker maintained its full-year guidance, but the ceo warned that challenges lie ahead, particularly in meeting standards for new anti-pollution tests. arcelormittal's quarter profit has surged by 45% beating

street forecasts the company expects favorable market conditions to continue with global steel production to rise faster than originally anticipated, driven by a more positive outlook in china. the stock up 1.5%. thyssenkrupp shares are under pressure after the engineering group cut its guidance citing cost overruns and sluggish orders. thyssenkrupp said they now expect adjusted ebita of 1.8 billion euros, compared to 1.8 to 2 billion euros the profit warning comes ahead of earnings out next week. proposal to increase tariffs on 2$200 billion of chinese good to 25% are being considered by the trump administration according to reports tariffs of 10% have already been proposed by the white house as the u.s. seeks to put pressure on china to renegotiate trade deals. food products, chemicals, steel, aluminum and consumer goods

would face potential tariffs speaking in florida, president trump hailed his trade strategy so far >> thanks to our powerful trade policies, the trade deficit is falling and falling and falling and, boy, did it fall this quarter. the days of plundering american jobs and american wealth, those days are over. they're over america first. america first. >> july pmi figures from china show the maefri inmanufacturingr growing at its slowest rate in eight months key to the slower rate in the market pmi figures was a slow down in export orders which came in at 48.4, the worst since june 2016, and crucially below the 50

level that marks contraction or expansi expansion. ex. coming up on the program, what lies ahead for the fed. we'll have the results from the cnbc fed survey coming your way after the break. and make sure you tune in to a new episode of "the edge" tonight at 11:00 p.m. cet as joumanna explores the home of the future >> this conceptual home was created by video marketing company andrule to show businesses how they can use different technologies to engage with consumers in their homes. here, everything is connected and is supposed to make our lives easier, from smart mirrors to an intelligent coffee machine. >> so this is the bedroom. we have here the nokia sleeping pad, which goes under your pat tres mattress when you wake up, it automatically starts the coffee.

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welcome back to "street signs. i want to take you to the market action we saw in july. it seemed like there was a lot of noise around trade talk, that destroyed some of the confidence out there. would you believe the stock market was still gaining during this time? it wasn't a bad month for wall street the s&p 500 saw a spike of 3.6%, accelerating throughout the course of the month as investors continued to push up stocks. some earnings driving the numbers. 2.1816 on the index to close out the month. the dow is where a lot of the action was at on the u.s. markets. higher going into the close of trade for july the nasdaq, you heard about the tech swing that impacted the last few trading sessions for the tech heavy index.

not a lot of action in the trade yesterday. but the market underwhelming versus that reaction on the dow. the central bank's huge focus this week and the fed is expected to hold interest rates steady at the end of its two-day meeting today. debate will center on when the central bank will reach the natural end point of its rate hiking cycle wall street is raising its consensus on four rate hikes this year, but continues to debate the policy path for next year steve liesman reports on results of the cnbc fed survey as the fed holds its two-day meetings, here are the results of the fed survey. 100% not looking for a rate hike this week. but 90% say one is coming in september. and four rate hikes as in two more from now. one in september, one in december, dialed in.

as for next year, 2.5. two is baked in. there's a debate on whether there's a third. 53% say the fed will go above neutral in its rate hikes. the outlook is more bullish. the forecast for the s&p 500 has come down repeatedly through the year the last couple of surveys it's ticked back up modest gains expected for the recent close still gains nonetheless. it comes amid higher interest rated, or expected higher interest rates, from 3% to 3.2 at the end of this year and 3.5 for the ten-year benchmark treasury note. a big controversy here was should president trump be talking about the federal reserve? 83% of our respondents, they include economists, fund managers, strategists, they say it's inappropriate for trump to comment on monetary policy

15% say it's acceptable. does it have an effect on the federal reserve? 78% say the federal reserve will not be influenced by comments from the president the expectation is that the federal reserve will maintain the independence of its monetary policy richard kelly has joined me in the studio. tell us how the fed is likely to get us set up for that september rate hike? do we still need hand holding to get to another interest rate hike >> at this point no. the markets are 95% priced there's nothing the fed needs to say. there's not been that many shocks in the statement it's sort of all ready to go forward. they tweak a little thing. show the economy is on track, do nothing, that seems to what we're set up for tonight >> it's all about the balanguag that wording, whether we're

getting closer to the end of the road and that neutral level. what do you think? does the fed think we're there >> there is a wide universe in terms of where that opinion is within the fed this is where everyone tries to tease the dots and see where everything is. most of the fed thinks the neutral rate is 3% but we've also seen as they keep hiking, the conundrum is we're hiking, but not getting inflation and wage growth as we thought. so that neutral number must be higher what's more interesting then, are we at neutral? the market seems to have an impression when you get to neutral you stop if you go through the dots and tease out where the voters are and the participants are with the fed, almost every one of them assumes an overshoot to the rate it does matter but most see the economy growing stronger than it should and they will have to hike past that >> what is in front of the fed is a growth rate of more than 4% it's hard to find a lot of

market participants who believe that's a sustainable level what is in front of the fed now could be different six months from now what do you make of the growth story and how confident the fed could be >> if you think of the fundamentals that are sitting there, we are in a labor market -- like on friday, i think you will see the unemployment rate fall, it has been putting upward pressure on wages. continues to do that we look at fed and say a number of participants at the last fed meeting suggested they saw upside risk from inflation i think you're right that 4.1 for gdp for the second quarter, when you look through those details, 4% of it was consumer spending. outside of that nothing happened that's the negative way to look at that. enyou lo it was effectively zero growth i think the fed sees it as a

risk, but you don't step in front or change policy from the base case of what's going on for a risk that's going on that's the problem the fed has there are some that are wary, it's not just something you can do much aboutyet >> the inflation mystery also seems to be disappearing if the trade war kicks into full gear and we have had the threat of a 25% tariff on 2$200 billion of chinese goods, not 10%. that was bad enough this would be a full trade war with effects going through to the consumer level. this would have a change for inflation surely and that would cause the central bank to perhaps act. >> it's a stagflation shock. the fed sees it that way in some ways it's almost similar to some of the debates the bank of england has had to have around brexit. the questioning that the fed will have, it may be inflationary, it may lower growth, is that a lower growth because of a lower amount of supply in which case the fed

still has to tighten they don't want to lose that anchor to inflation. we may be sitting there saying protectionism is bad, it may be stagflationary, that doesn't mean the fed won't hike. >> do you want to give us a quick line on the best trade around the central banks >> i think we're still looking at the boj coming through, it's a mild buying dollar bias in fx. >> richard kelly, thank you very much for joining us. coming up to the market open shortly, we'll futures. gubit mer vonervous for the staf aust "worldwide exchange" is up next.

it is 5:00 a.m. in washington here's the five most important things you need to know. breaking trade news. the white house reportedly considering upping the tariff on chinese imports to 25% china vowing to retaliate. apple getting closer to being a $1 trillion company as investors love its results ceo tim cook sounding off about the quarter, china and president trump. we're on fed watch how high are interest rates going to go? we may find out later today. oil under pressure again this morning after handing in its biggest monthly drop in two years. france did something in the classroom that every parent out there is either going to lov