welcome to "street signs." i'm joumanna bercetche these are your headlines a sea of red across the italian market banks bear the brunt of the selling as bond yields spike on concerns over the new budget. the italian government claims a victory on spending amid reports that the president urged the finance minister not to resign and ahead of a potential collision with brussels over deficit levels. advertisers take a hit in early trade after manhattan

prosecutors reportedly open an investigation into media buying practices. and tesla's ceo. elon musk, calls fraud charges against him unjustified. welcome to "street signs." happy friday there's a lot to get through today. i want to talk about some activity in u.s. markets all three major indexes ended up in the green asian markets, the one theme was the nikkei back at 27-year highs for the japanese index, helped by the weaker yen and some performance of exporters europe, the number one story is that of the italian budget proposal coming out at 2.4% and

sending jitters through the european market. the stoxx 600 down 0.6% one hour into trading let's get into the individual indices. let's start off straight away with ftse mib down 2.5 percentage points, 540 points already into this. you can see the market is getting somewhat concerned with the language that has come out of italy with the proposals putting them directly at odds with the european commission there were expectations that this number would be less than 2%, 2.4% sends a strong message. we have cac 40 leading some of the -- well, joining along on performance. down half a percentage point finally ftse 100 is about 10 points weaker on the session i should tell you in terms of macro, watch out for inflation

numbers coming out let's not forget while everything is going on in italy, we have macro numbers to look at as well in the shape of inflation print at 10:00 a.m let's look at how fixed income is performing. you can see clearly ten-year u.s. has rallied back from the 3.10 level ten-year bunds at 3.50 the big underperformer in this market, ten-year italy, trading at around 3.15 we were trading close to 2.80, 2.90 towards the end of last week as the market priced in the best case scenario that has not transpired this morning. we've seen ten-year italy off about 20 basis points already what is not shown is two-year italian yields are also lower. bond yields not reacting well. italian stocks are also lower on concerns over the country's new budget the italian government agreed to

hike public spending targeting a deficit of 2.4%, this figure is higher than the economy minister was hoping to achieve. the new spending plan could put rome on a collision course with brussels, but it is said not to be in the eu's interest to trigger a crisis with rome, urging italy to cut its explosive debt willem has the latest. you can see the markets reaction has been quite vigorous already. we've seen a big selloff in banking stocks, some are down as much as 5% 20 basis selloff in yields people are not taking this well. >> no, but it could have been so much worse some reports in italian newspapers this morning talking about the idea that geovanni tria, when he found out he would not be able to keep the ratio below 2%, threatening to resign. i've been trying to speak to his

people he's been sequestered in meetings i got off the phone with the presidential palace, they called tria and said he should not resign it could have been significantly worse in terms of the market reaction if he had resigned. maybe by resigning he could trigger a greater broadening of that spread, a selloff in italian equities, so he was better off swallowing this 2.4 number pushed on him by luigi dimaio and mr. salvini that's where we ended up this morning. in terms of what the european reaction will be from this, we hear from the commissioner for european economic and financial affairs, he's seemingly going to wait to see the details in the budget people i've been speaking to this morning, including some political economist s saying the

will wait. listen to what was said last night on facebook. >> look, i'm not worried about the market reaction, we have plans to invest so much money that the economy will grow we have kept the budget deficit below 3%, so we've been credible we will make investments, we will keep our election promises. for the first time italy has a government keeps his promises. >> what mr. dimaio said as well last night is that he expects 10 billion euros to be set aside to pay for the universeal basic income, something that is important for the five-star balcony. last night he was waving

joyfully as people were standing here waving flags back to him. there are issues that have struggled under austerity issues since the financial crisis, he is keen to make sure there's tax deductions for self-employed workers. perhaps 1 million of them seeing a reduction in taxes for the next fiscal year some of those details we'll have to wait and see over the next few weeks whether that ends up in the final draft budget that is sent to brussels. >> this is what i wanted to ask you. we know october 15th is the deadline for that budget to go to the european commission they already said this morning they won't make public comments before that date, october 15th if the market continues to punish italian bond yields and some banking stocks, more and more pressure, it will be put on them do you think there's any room for them to modify what's been released overnight or is it just

a situation of wait and see until october 15th and see what the european commission come back with? >> well, over the last few months we heard from mateo salvini that he does look at the spread, it concerns him. luigi dimaio last night saying he's not concerned about what investors think or he's not concerned about what brussels thinks, he's not concerned about the market reaction. in terms of what these details look like, there's the draft proposal that goes to brussels, that will come back the end of november it's not until the end of the year the italian parliament will vote through this budget there's a lot of jockeying for position, for prioritizing certain issues that could happen between now and then >> willem, thank you for bringing us the latest on this crucial day for the markets. i'm happy to bring in federico santine. were you surprised at this 2.4%

number that came out >> i was to some extent. this is an interesting experiment this is the first time an outright populist comes to government in a major euro country, and in italy of all places which is seen as a weak link in the eurozone at a time when economic conditions are becoming less supportive both parties in the coalition dropped their earlier demands for leaving the euro, they campaigned on a major increase in the deficit which they are now starting to implement. >> what can the european commission do to stop them apart from a gentle slap on the wrist? >> not much directly, i'm afraid i think the european commission will have to rely on market pressure and market discipline will force the government to back down and scale down to some extent the fiscal stimulus they're looking to introduce

>> is there some credence to the argument that perhaps the european commission would see this number, 2.4%, they've gone for it they're putting themselves at odds with us why don't we just not say anything and let market forces do the work for us >> i think there's some element of that. there's no willingness on the part of the commission to cause a crisis with rome, punish rome, make an example out of the government, however i think 2.4 is a number the commission cannot accept outright it will probably prevent italy from reducing its debt, from what is currently projected. we'll have to see some push back from the commission over the next few weeks >> again, i'm interested in that point. i wonder how far the commission can go and whether they would go down the route, the potentially nuclear route of applying sanctions in this case

especially given the fact that italy is too big to fail sanctions are the last step of a fairly lengthy process already i think opening this on the back of the budget or rejecting the budget outright would be a strong statement on the part of the commission i think that's a worst case scenario we expect a compromise to emerge but again, it would probably take a bit more pressure from the u.n. and the market. the question is how much of this pressure do we have to see and how much damage will it do to the italian economy in the interim. >> you're sthinking the economy minister, geovanni tria, will stay >> the latest information is that he will stay. he reportedly wanted to resign, but the president convinced him not to

markets are still focused on his fate he lost a lot of his credibility. it's been undermined by this decision >> let's talk about the political ramifications of this. willem was pointing out that luigi dimaio was pleased with the announcement they came out with because he was the person pushing so hard for the citizenship income they announced that in the budget proposal. he has gone back to his base and said i have delivered on my promises of the manifesto. how much of this is political posturing given that he looks at the other deputy prime minister, salvini, who has been charging ahead in the polls and has felt pressure to do something on his side and deliver to the base >> ironically the league is considered the more maverick, the more extreme party of the two. in fact, around the budget it is proving quite reasonable they have stronger ties with the business sector, particularly northern regions i think they're more aware of

the constraints they're working under, more aware of market pressure they've been doing well in the polls. so they were content with the compromise that's emerged. five-star has come under pressure they're more on the defensive and more under pressure to deliver on their campaign pledge at this point they have fostered significant expectations on the part of their electorate and that's why we expect more turbulence in the coming weeks >> thank you very much head to cnbc.com to find out why the italian budget matters so much to brussels now, wine aged in the waters of the adriatic sea off croatia is drawing attention the winemaker first put the bottles around 65 feet below sea level to protect them from sunlight the constant temperature of 59 degrees fahrenheit, the winemaker calls the environment ideal giving the taste a smoother and more rounded taste.

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insurance third quarter result the company said the disappointing quarter was affected by weather-related costs, particularly in the uk. they booked a 70 million pound loss in the british market and the international business proved profitable. plans were well under way to improve the uk performance according to the ceo shares in vivendi, wpp and publicis are lower after manhattan prosecutors opened a probe into media buying practices. havas is one company being investigated prosecutors are examining nontransparent ad buying practices. it follows a 2016 study that found pervasive practices in the u.s. media buying industry so the advertising sector taking a hit today. the u.s. economy does not face an increased risk of recession in the next two years.

this is despite the prospect of an inverted yield curve according to jerome powell the fed chairman told an audience that the central bank's model suggests the economy will keep on growing. his comments come after the fed raised interest rates for a third time this year, also removing its accommodative stance an inverted yield curve when short-term rates on u.s. treasuries rise above long-term levels is often seen as signaling an economic downturn and justin trudeau has hit back at president trump's criticism of nafta talks saying discussions are slower because canada is a tough negotiator on wednesday trump hit out at the pace of talks and threatened to impose auto tariffs on ottawa, however trudeau appeare optimistic says a deal is still possible i'm happy to say with me to discuss is bill denning from

waverton investment management let's start off by talking about the trade wars and the never-ending discussions on the part of nafta. but from an investor standpoint, do you feel even though the talks are dragging on, eventually we'll get to some form of a solution and it's not as pressing as some headlines would suggest? >> i think in the case of nafta it would be disappointing if the u.s. and canada couldn't come to an agreement that's true. i think more broadly the actual tariff there'ss that have been d on china in and of themselves are not enough to derail brogroh in the u.s. or china but this overthrowing the orthodoxy since world war ii that you don't raise tariffs, that uncertainty will carry on, particularly if it leads to china responding in a way that is not just tariffs

there's talk about them selling their treasury holdings, which we don't think will happen but it's more of this ongoing turbulence that could be a problem. at the moment we hope there will be solutions found >> something i always come back to is that the u.s. stock market is doing so well yesterday we had confirmation that third quarter gdp was growing at 4 -- sorry, second quarter gdp was growing at 4.2%. strong numbers in some sense the u.s. has decoupled away from the rest of the world whachlworld. what derails this momentum >> i think the u.s. momentum will keep going. we're optimistic about the growth outlook the fed is raising interest rates, they're withdrawing from quantitative easing. so they're doing quantitative tightening though the levels of interest rates are still low relative to inflation, this is a shift in policy in fact, if you look at globally what's happening to interest rates, there is a tightening

one concern would be that in some way that starts to be disruptive in a way that currently policymakers like the fed chairman overnight are quite sanguine about it. that is something we need to keep an eye on at the moment i think momentum in the u.s. economy is very strong small business confidence, consumer confidence buoyant. >> this time around what's interesting is the ten-year yield is back at 3.10, equities have brushed it off. what happened to the whole argument a few months ago that higher yields would be bad for equity markets we're not seeing that. >> no. higher yields responding to the fact that the economy is strong and growing well without a big inflationary problem, that's okay for the equity market obviously if the curve inverts, if the two-year yield goes above the ten, that will be wore rig there's a lot of other cyclical indicators that are suggesting the economy will be all right. i think the direction of travel

in bond yields barring some accident around tariffs or trade wars, the direction of bond yelleds is probably still upward >> let's go from u.s. bond yield market to european bond yield market we sold off about 20 basis points in the italian bond market is there any level from the outside in and you look and say actually i want to start dipping my toes in there things are looking relatively cheap. >> that's a good question. we've been thinking about that the end of august the bond yield was 3.20, 3.25 that would be the first starting point. you have to look at the spread to the german bund i think with all the uncertainty in italy, something back beyond that level in august might be interesting for the italian government bond market but there are plenty of other ways to access euro yields with a 3 handle without taking the noise and risk that's going on

around in italy at the moment. it would be too early for us to look at the italian bond market here, but everything has a price. if it carries on selling off it might get interesting, certainly above the august level >> how are you playing europe here italy has been an elephant in the room, a big elephant in the room for a long time but things are coming to a head now in the last 24 hours it all depends on how the european commission are going to respond. ultimately with the new development overnight are you concerned this will severely derail the european momentum and the brief growth trajectory we've seen this year we're finally seeing 2% growth in europe. >> yeah. i'm not sure i think if the european project depended upon italian political stability, it would have died a long time ago. i also thank you it's curious again we're seeing a government elected on a fairly populous platform and the market is astonished it's coming up with a budget consistent with its

platform i'm not sure about that. i think we would be more concerned about some cyclical indicators though the german economy looks like it's good, you look at things like german pmi indices, you look at the export order component of that. gemm german export orders have been slowing. >> i will put you on the spot very quickly euro, the currency by year end, up or down >> against the down, i think it could go up. >> thanks. quick answer then. excellent. thank you very much for joining me on "street signs. bill denning from waverton investment management. the institute of international finance told cnbc a nafta deal will not happen without canada to find out why, head to cnbc.com

easyjet says the bottom line will benefit from the misfortune of other airlines. the carrier forecasts full-year profits will top original expectations as it benefits from monarch and air berlin's financial woes easyjet warned revpar will decrease in the first half of next year. coming up on the show, never a dull moment. boris johnson ratchets up the pressure on theresa may. reft this break. man: are unpredictable crohn's symptoms following you everywhere? it's time to take back control with stelara®. for adults with moderately to severely active

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fixodent and forget it. welcome to "street signs." i'm joumanna bercetche these are your headlines a sea of red across the italian market banks bear the brunt of the selling as bond yields spike on concerns over the new budget. the coalition government hails a victory on spending, but the economy minister is urged not to resign over fears of collision course with brussels over deficit levels.

advertisers take a hit in early trade after manhattan prosecutors reportedly open an investigation into media buying practices. and tesla's ceo, elon musk, calls fraud charges against him unjustified. this after the s.e.c. sues him over his claims about taking the carmaker private we are just getting a slew of uk data right now so let's just look at the q2 gdp numbers which is what everyone has been watching out for. the final q2 gdp print came up 0.4% quarter on quarter, that's unchanged from the provisional 1.2% year-on-year revised down from 1.3%. so slightly lower revision to the q2 print for uk gdp. cable trading a bit on the back foot, down a quarter percentage

point after that number came out. that's the main headline we also had business investment numbers two down as well uk household spending has been revised up one bright spot there, up 0.4%, revised up from 0.3% slightly stronger on the household spending, but a weaker overall figure that's the picture for uk gdp. a bit of a move in the currency. let's move on and look at the broader picture in markets today. starting with european markets ftse 100 trading flat. all of that activity has been in the italian market ftse mib down 2.5% down almost 550 points, one of the worst sessions in a while that i can remember. this is on the back of this budget proposal that's come out of italy overnight 2.4%, much higher than the market anticipated we have other indices, germany

and france moving down as well xetra dax is down 0.7% other stories on the corporate side driving some of the under-performance. but the number one story today is that of italy switching to foreign exchange, i was remarking on this earlier, i was surprised on a day where you have seen such big moves in bond yields, the currency is only 0.2% weaker on the session still trading above 1.16. you would think on a day like this euro would be trading drawing also your attention to cable. talking about weaker numbers on the q2 print cable is 1.3050, trading at a ten-day low. lots of truckratifluctuation th. a lot dealing with the political

back drop and the europe and uk. and the yen trading lower as well switching to u.s. fight chorechu futures, we had a somewhat negative session yesterday today dow seen opening higher. nasdaq is looking flat the august pce numbers come out today. inflation indicators that the fed watch closely. also personal income and spending reports as well as the chicago pmi and university of michigan consumer sentiment reports. a lot to watch in the u.s. session later today. speculation has been swirling about consolidation in europe's banking sector, but the head of germany's banking union would not be drawn on between a tie up of commerzbank and deutsche bank. i sat down with the ceo at the

european banking summit in brussels and asked for his take on consolidation in the sector >> i think what's needed in order to enable cross-border mergers is for policy mmakers t take initiatives and integrate european banking markets the way the regulatory environment is set up, the fragmentation we have, i find the economic rational for large-scale cross banking mergers is limited we all need to work in order to create an environment, regulatory environment that allows banks to benefit being market leader and of being operational in more than a couple of eu countries we are not there yet >> what about domestically do you see room for consolidation in germany >> i find there is a lot of consolidation going on in germany. the consolidation i would focus

on is not talking about the large banks, there are still a couple thousand small institutions there's a lot of consolidation going on between small and medium-sized banks that's good. this consolidation that we're seeing is necessary. >> our next guest says a light-footed investment bank will emerge amid the rise of an army of fintech led retail banks. ken costa joins me on the show >> good morning. >> talk to me about your plans from what i understand you are launching a merchant bank for millennials. >> so alvarium, which means beehive, is an existing group of people which has been a partnership dealing with family offices, investing in real estate, liquid assets with about 11 billion of advised funds.

what is exciting is looking at the way in which the tech sector -- and we just announced a cooperation with leap partners, an advisory group in the technology, digital, media sector, that's going to be of great interest to the next generation of major families and institutions and sovereign wealth funds >> do you find millennials tend to spend or invest differently from older generations >> yeah. one has to define millennials. when we talk about a merchant bank for millennials, we're talking about those creative people who are creating new businesses, investing in them, bringing the money together to work with them finding the ways in which liquidity events are needed how to get to the markets effectively. and how to then invest the liquidity has results. so when we talk about millennials, we are actually talking about a generation into

this whole new fintech and tech market that they want to be exposed to they want to buy -- or take my money, buy this stock, sell that stock. i want to be involved in a business we want to come alongside them, help create the businesses, match capital and technical expertise for a generation that's changing. >> how much opportunity exists in that space within the uk? traditionally the traditional tech husbab has been silicon valley uk is many years behind. >> that's the perception but not reality. we've seen over the last three years more tech ipos in europe, we need to take yooueurope as a whole than in the u.s. this year we have already got nearly 15 billion of new money raised for tech in europe. so i think it's a misnomer to think everything is happening

there, not here. this is a piece of the market that looks interesting when you look at universities, ip coming out of universities, the way new businesses are started and young people want to get involved in creating these new businesses for the next generation. >> will the uk continue to be a hub post-brexit? >> yeah. >> are you seeing that the investors are getting concerned about the potential of the tech environment in the uk once it does formally actually leave the european union >> brexit is going to be a great concern, and the way in which it's done to every business person no doubt about that. but in the fintech and the tech sector, digital technology, in med tech, the hubs of excellence that exist in the universities here, amongst entrepreneurs and the cooperation that exists across europe will be continuing whether there is hard, soft,

medium, plus plus brexit or whatever it is >> would you think a potential change of government with labour coming in and raising corporate taxation rates will do to the sector >> you want to reward entrepreneurial activity, reward risk taking, encourage a generation to be involved in the businesses in which they are active in. we do not want to discourage post-brexit, we want to be drawing into the uk some of this capital that can match the extraordinary intellectual expertise and creative instincts of people in the businesses, increasing taxation on that is going to kill it off >> i have just got some flashes from the deputy prime minister, dimaio let me just read them out and we'll pick up on that conversation so dimaio said that the new italy budget does include 15 billion euros worth of

investments. he said he is not worried by the market reaction and the spreads, but he will be sitting with investors soon, meeting investors soon to discuss. which is interesting because, of course, we have seen a huge falling out of bond yields today in the italian market. one of the worst days in a while. ten-year btp 22 basis higher front end. yet dimaio is insisting that the budget will be growth aidtiddit and not negative to the markets. coming back it our conversation about banking, the big question is given that you have seen a need or a gap in the market for this type of venture, what is the role of traditional investment banks in the future do you see them becoming smaller and smaller and losing -- losing an increasing amount of

competitive share versus challenger banks and banks like yourself who identify these niche opportunities that invest. banks are not plugging into? >> we've seen massive changes. we saw big bang, the way that brought about change we've been watching the growth of outstanding boutiques giving good, quality advice to major corporations as a challenge to the major banks. but the major banks will still be there, the resources they can deploy in pursuit of their clients wh s whachl clients. what is needed is a nimbleness that enables the capital to be drawn together in specific situations and specific companies, that's quite difficult to do in large banks that's the opportunity we identified right now >> absolutely. sounds exciting. ken, thank you very much for joining us on the show >> thank you

ken costa, ceo of alvarium boris johnson has called on theresa may to ditch her checkers plan. he urged the prime minister to change course on brexit saying there had been a collective failure of government. he also slammed what he called an appalling and inexplicable delay on setting out a brexit vision as he laid out his own six-point plan the intervention ramps up the pressure on may days before the conservative party conference. tune in to our coverage of that conference on monday and what could be a critical moment for theresa may and her government steve sedgwick will be there and covering it. volkswagen is reportedly expected to terminate the contract of audi ceo rupert stadler as soon as today that's according to the "wall street journal." stadler has been in jail for

months in connection with the diesel emissions scandal the announcement is expected to come after a meeting of vw directors later today. tesla shares plummeted in after-hours trading after the s.e.c. announced it is suing ceo elon musk for fraud. the s.e.c. alleges that musk made false and misleading statements about taking the electric carmaker private in august the regulators are also looking to remove musk as chief executive. the tesla ceo rejected the claims and stressed the facts will show his integrity. the s.e.c. outlined why it found him to be reckless, particularly in referencing a specific price the company would be valued at >> we allege that musk had arrived at the price of $420 by assuming a 20% premium over tesla's then existing share price and rounding up to $420 because of the significance of that number in marijuana culture

and his belief that his girlfriend would be amused by it >> it's entertaining and bizarre that that has come up in an s.e.c. statement arjun kharpal joins me with more the stakes are extremely high for elon musk here >> yeah, very high the path that could be followed now will take a few months there's a couple of solutions here first, you could see tesla potentially settle this behind closed doors with the s.e.c. the s.e.c. has actually already given tesla a settlement offer, which they have rejected but this could be by bringing this public this could be a way for them to get a bigger bargaining chip. another solution is that this goes to court, any number of possibilities there. fines for elon musk, he could be barred from running a public company as well in the future. it's not just the s.e.c. that is looking into elon musk and tesla, you have the u.s. department of justice which opened reportedly a criminal

probe into tesla that's potentially bigger because that could mean jail time as well as further fines. a lot of different legal aspects to what's going on with elon musk and tesla that's why you saw that huge dip in the share price after hours in the u.s. for tesla shares >> no wonder the implications and the stakes are so high. i wonder what signal this sends to other ceos, other influencers or leaders of companies vis-a-vis using social media to send messages across clearly he crossed the line. it wasn't vetted you typically have legal counsel for this sort of thing he tweeted on a whim, and the repercussions are serious. >> soeshlg necial media, of cou relatively new way for company ceos to talk to the markets. it's not something that has been used in the past

they either usually go through a sto stock exchange announcement or other ways they need to be more responsible if they are using those platforms. >> arjun, thank you for spelling this out for us. we have more flashes from deputy prime minister dimaio. earlier he said he wasn't worried about the market reaction and that he will meet with investors soon. he said the italian budget includes 15 billion worth of investments and that the eu's concerns are legitimate but italy wants to convince that growth will allow italy to repay debt dimaio says he is confident that italy's debt will fall unfortunately even though he's confident of the numbers moving in the right direction, everything, all of the analysts material has shown a deficit above 2% or 2.1%, 2.2%, will set

the debt trajectory on a higher path that's not the path the european commission would be looking for and is the reason they set that target at 2% or below in the first place. those are the comments coming out of dimaio. coming up, president trump praises brett kavanaugh and calls for him to be confirmed for the supreme court following hours of questioning over sexual assault claims stay with us (john foley) i was there in chicago when bob barnett made the first commercial wireless phone call in 1983. yes, this is bob barnett in chicago. (john) we were both working on that first network that would eventually become verizon's. back then, the idea of a nationwide wireless network was completely unreasonable. but think about how important that first call was to our lives. it opened the door to the billions of mobile calls that we've all made in the last 34 years.

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welcome back to "street signs. a fierce he said she said battle took place in washington, d.c. yesterday as one of the women accusing u.s. supreme court nominee brett kavanaugh of sexual assault gave evidence before the senate judiciary committee. both dr. christine blasey ford and kavanaugh testified under oath describing an incident at a high school party in 1982. kavanaugh said you will never get me to quit, never. elsewhere, oil prices are trading higher as u.s. sanctions

on iran squeeze the country's crude exports, despite other countries increasing supply to offset the shortfall cnbc learned that saudi arabia is expected to add extra barrels to the market to make up that deficit. herman wang now joins any me to discuss this more. we just came out of an opec meeting where they said they're not planning on increasing production, but in the last 24 hours, the saudis have changed their tone saying they could put up another 550,000 barrels back on the market. >> it's a bit of a show-me situation in the market. the market and u.s. president trump is saying to opec and saudi arabia show me the barrels. and saudi arabia and opec have kind of turned around and said show me the demand it's a murky situation in the market now where you have got, as you mentioned, u.s. sanctions on iran set to go in effect in november, it seems as we get closer to that november 5th deadline, that the estimates of

hoi how much iranian crude will come off the market are increasing. it is estimated 1.7 barrels a day of iranian crude supplies will go off the market with those sanctions. so the market could get tight and the market is looking to opec to increase barrels that's maybe why you saw some of that messages from saudi arabia. >> it was interesting the drop-off already in iranian production is much faster than the market anticipated we are already seeing 650,000 barrels come off, which is faster than what the market anticipated. >> you're seeing some countries shying away from buying iranian crude so they don't run afoul of u.s. sanctions some of that has to do with shipments that takes six weeks, orders are coming in ahead of the deadline, the cutting off orders are coming in ahead of the deadline so saudi arabia is saying well right now the market is in an

okay situation, but they signaled they will increase production in months ahead to make up for some of this tightness whether it's enough, that's what the market is looking at to see what the saudi intentions are >> do these countries have the extra capacity are they just waving that out as a potential? yes, we could increase production, but we don't have the means to increase production >> that's the question saudi arabia hold most of the world's spare capacity they say they have 1.5 million barrels per day of spare capacity they could add to the market if needed this has never been tested before saudi arabia, they produce 10.4 million barrels a day last month. they never produced higher than 10.7 in a month. so they're talking about being able to pump an extra 1.5 million barrels a day. we've never seen that before that will test their capabilities, whether they can sustain that and how long they're willing to sustain that and the more they produce the

less spare capacity they have to offset other disruptions in the market libya is an unstable situation we're not out of hurricane season yet there's a lot of supply risk in the market >> they would say they're keeping supply and demand in check. the two force are balanced at what point or where does oil need to get to for them to come together and be like okay, now we have a mismanagement of supply and demand. up until now they've been defending what they've been doing in the interest of keeping stability in the market if prices keep going upwards, they don't have much leverage >> it was interesting some of the talk coming out of algiers they were saying a lot of focus is on 2019 yes, you have these iran sanctions set to come back in november the market will get tight. we could see price rises, but 2019 forecasts are showing the demand growth leveling off a bit. a lot of non-opec supply from the u.s. coming online and so

there could be some market weakness in 2019 what they don't want to do is open up the floodgates, oversupply the market in the months ahead and be left with oil and inventories going into 2019 when they suspect that maybe the market might be weak so they're playing a longer term game, the market is looking more short-term >> all right herman, we have to leave it there. all eyes on oil over the next couple of months we are were just talking about dimaio comments that came out. we heard from the other deputy prime minister in italy that is salvini. he said that the resignation of the economy minister, tria, was never in question. there was some reports overnight that the economy minister would be looking to resign after this blowout budget salvini said that was never in question and he said when asked about the eu possibly rejecting the budget, he says we will press

ahead. so defiant comments coming out of one of the deputy prime ministers this morning with respect to how they're planning to proceed with this budget. you can see we've had some very big moves in italian bond yields today, also big moves in italian bank stocks as well. and we can look at some of those key names there. you can see intesa is one of the big underperformer unicredit down 6%. that is the picture for europe a quick picture of the u.s looks like things will open up higher dow about 30 points higher nasdaq 5 points higher that's it for today's show i'm joumanna bercetche "worldwide exchange" is coming up next. tfor your brain.mething with an ingredient originally discovered in jellyfish, prevagen has been shown in clinical trials to improve short-term memory. prevagen. healthier brain. better life.

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it is 5:00 a.m. here in cnbc, 2:00 in california the s.e.c. suing elon musk, tesla stock tumbling we have the latest on this major developing story. it is decision day for brett kavanaugh. a senate committee holding a key vote on the supreme court nominee today. technology under fire. google's ceo meeting with lawmakers today. pump prices taking a big leap higher. find out how much it will cost to fill up your tank and it is the final trading day of the month and the quarter so we'll break out our quarte