. welcome to "street signs." i'm karen tso. unilever scraps a plan to move its headquarters to the netherlands admitting the proposal has not received support from a significant group of uk shareholders. a report claims that amazon web services and apple have allegedly been infiltrated by chinese surveillance chips. luigi dimaio takes a shot at fellow deputy pms saying he prefers the italian people to

the bond spread. and sterling spikes to a three-month high versus the euro on reports that a brexit deal may be on the horizon. ♪ good morning thank you for joining the program. market action early morning in europe, we've been trading for about an hour. it's a weaker session playing out for the stoxx 600. you can see on the heat map, the amount of ret ink on the boardo, the core losing a fair amount of ground in the session. the ftse and the dax down by an even amount. half of a percent coming off both of those boards the italian market is shedding triple digit points, 134 to the down side or just over 0 by

about 0.65%. let's push on to the sectors you can see what's at play we had a yield story globally marching to the agenda for investors as many watched the yield move higher in the states and in europe. the sectors where you are seeing pain today, basic resources, autos, more cyclical areas of the market real estate bouncing back at about a tenth. it was some of those bond proxies yesterday that were hit in the session so slightly more even responses coming back into the market today. on a down beat day you have cyclicals under pressure unilever has withdrawn a proposal to move its headquarters to the netherlands. the british dutch firm admitted the plan had not received enough

support from uk shareholders back in july the ceo told cnbc that most investors were in favor of the proposal. >> broadly our investor base understands what we're doing and broadly are supportive unfortunately there are index investors in the uk in the ftse, the ftse, an independent body itself, has decided that though we are traded in the uk, you can continue to buy our shares, we're not in the ftse. so you'll get undoubtedly some dissatisfaction from these index buyers >> julianna has more on this unfolding story. we're talking about a handful of shareholders to a shareholder revolt this week and ultimately a change of course from the board. talk us through what's happened. >> this is not just a group of shareholders, this is a group of influential uk shareholders, a lot of whom have been committed to unilever as a company over

the years. pressure from these shareholders had been mounting in recent weeks and days with more and more speaking out against the move now today we heard from unilever that they have abandoned the plan and listened to the shareholders who were really pushing for this this morning so far we have heard from a couple shareholders, very pleased with the move the mayor of london also weighing in via tweet saying he's pleased that unilever decided to stay and keep their headquarters here and it represents how strong london is as a base. on the flip side, though, the share price is reacting negatively after popping at the open that's largely because unilever faces the challenge now of satisfying shorter term shareholders who are not able or wanting to stick around and wait for their long-term plans to come to fruition it's unclear where unilever goes from here. >> what does it mean for paul

pullman, who was seen on his way out any way. it leaves a bad tone for his final stretch as the head of this company, does it not? >> his simplification plan overall has been broadly supported by shareholders. they reiterated that this morning. in terms of his awareness and pressures facing the company, that's been well received. it's this move to the netherlands that is the sticking point. unilever along with peers are under competitive pressure from the rise of small players in this consumer goods space. >> it also raises points on whether this company is a takeover target and is it too good at moving towards its targets. it's hard to argue the case when there's such a rough time in household goods. it has brought sustainability into the business, and you think about the changing mandates,

they want clean and green and a sustainable company, and unilever ticks some of those boxes. >> that's the debate at hand long-term shareholders want one thing, and shorter-term shareholders want another thing. it's a difficult balance to find one thing that stands out as a result of this abandonment of the move is it reduces the portfolio optionality to a degree it would have been easier to buy and sell assets should they have consolidated into one legal entity so now they're more limited in what they can do. >> thank you very much for bringing us this story italian deputy prime minister luigi dimaio says he doesn't understand why the eu would reject the country's budget he added he prefers the italian people to the bond spread. this after several italian media outlets reported that mario draghi has met with italian president sergio mattarella and warned him about the risks of the market reaction to the

italian budget the ecb declined to comment on the reports. italy has lowered its growth forecast for the year to 1.2%, down from a previous estimate of 1.5% the government also set its debt to gdp target at 131% this year, and 130% in 2019 joining us now is george seravelis from deutsche bank welcome to the program >> good morning. >> it's been quite a big week for italy. now more noise in the equation the ecb is right to warn italy about the market risks of this budget proposal. >> there's been a lot of noise around italy the key question to focus on is not the rounding around the budget numbers that they're predicting or forecasting, but more the perception of whether the relationship with europe is cooperative or whether it's disruptive the key issue for the market is, again, not a basis point here or

there on the budget, but this perception that the eurozone is held together by backstops by the ecb, the esm that's why italy needs to get along with the european commission and other institutions that's the key issue >> what about contagion? comments were out yesterday about salvini and whether the government would change its policy if he saw a market run of 400 basis points break out between bunds and the ten-year italian bond he said we would not change course under that scenario what do you make of an event like that if it were to transfire and what transfi transpire? >> if you look at what's going on in italy and compare the spanish spread, you can barely see an impact. i think if you were to see contagion that would be much more disruptive, require an ecb reaction but at the moment the market

perceives the risks as being italian specific i think so long as we have an absence of capital fight from italy, additional banking stress, all you need is for things to stabilize. >> couple of questions around what dimaio and salvini would need to do to try to create a bridge with europe there already have been rumors around the longer term budget numbers, which they want to be higher is that not enough to prove they are trying to mend ways with europe >> the main thing that needs to happen is they need to sit down on the same table and have a discussion there needs to be a perception from the market that there is an engaging discussion taking place rather than the confrontation. domestically you may see there confrontational language in the background you need convergence. the growth forecast is still too

optimistic in terms of what can be achieved, and the debt profile is not looking like it's heading downwards. we could be talking about that for the next five years on the debt profile let's talk about what's just crossing the wires salvini now says people like junck juncker have ruined europe and italy. so this is again a confrontation. but again we've seen a lot of negative language where it's their fault, not our fault why is this anything more than a verbal fight why does it have ramifications for italy? >> i think we need to see the action rather than the talk. the action at the end of the day is about the numbers if they sit around the table, so we did see they're revising forward looking budget numbers lower. i think the european commission, the rest of europe will avoid this verbal escalation, will try to keep the rhetoric fairly quiet, and just try and engage

in terms of the numbers, which is what they care about. >> can we touch on tria, the economy minister he's had an incredible role to play in this scenario. he tried to bring both sides of the party together to a number that was below 2% on the budget to gdp the deficit to gdp what he did was got 2.4%, he got nowhere near the 1.9 he tried to give the market there's been all sorts of questions about whether he's as influential as he could be and suggestions on whether he could stay in the role how important is it having tria to the market perception >> it's all about perception and confidence in the market there was quite a large degree of rebuilding of confidence given tria's statements in the run up to the budget announcement unfortunately what we saw was the influence the finance ministry had was much lower than

expected as a result tria from a market perspective has lost credibility, not from a personal perspective, but from his ability to influence the numbers. i would say he's less relevant that what he would have been a few weeks ago. >> george, thank you very much for that we'll talk more about markets in a bit. before we head to break, a different story for you. dmroor florida is going bananas over the birth of a baby gorilla. the baby was born last week and weigh ed just under five pounds. the western lowland gorilla is said to be deaf in both ears, and staff say that can prevent her from detecting when the baby is in stress you can follow us more on

twitter at @streetsignscnbc. ahead, brazil heads to the polls this weekend in the final round of presidential elections. we'll discuss the issues after the break. do you hear that?

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presidential elections the vote follows several years of plitt olitical instable afte impeachment of dilma rousseff. we have jair bosonaro leading the race with around 30% of votes. he describes himself as an admirer of president trump and expresses support for loser gun laws and stronger police repression he is trailed by the left wing, fernando haddad who replaced da silva as a candidate for the workers party. he is campaigning on an anti-austerity platform and promises to boost public spending they are followed by several candidates unlikely to catch up

at this stage. among them are far-left cira gomes, gerald do a alckmin and silva. our guest now joins us carlos, on the likely scenario at the end of this weekend, we have a far-right candidate verses a leftist what is the most likely outcome in your view >> at this stage it's clear that the two main contenders will be, as you mentioned, jair bosonaro from the far right and fernando haddad from the far left for the pro business pro market, the indication is now it will be difficult for ciro gomes or

alckmin to make up the gap and get in so the main scenario is a confrontation between the far right and the left in the second round, and that is exactly the main source of uncertainty in brazil in terms of policy direction. the main issue here is that there is no clarity about how to tackle the huge fiscal deficit, the pension system which is in total tatters, and the public debt is growing fast there is a significant risk of growing instability on the macro economic front affecting brazilian bonds, the currency, et cetera. so totally uncertainty even in the second round because there's no clarity on policy direction from any of the candidates >> just want to jump in and ask about this unusual run up to the voting window where you had the

far-right candidate not doing as much as he would have done he's not involved in a key debate said he was not up to it after being stabbed on the campaign trail. how much has that weighed in on the popularity of this candidate? >> one advantage of bosonaro is because he has been in hospital unable to speak up it has helped him because he has not been taken to task by the other candidates also he has used social media effectively despite the fact he doesn't have much air time on tv and radio. he has been a key factor the other factor is the brazilian people are fed up with two issues, one is huge increase in crime and the high level of corruption and bolsonaro campaigned on

those issues, and many believe he is the man to fix this. >> i was reading a couple months ago, this is almost a social revolution taking place after all the corruption in the country. what do you make of the likely scenarios over the weekend and how this could move markets? >> the focus will really be on what the new government's policy will be on fiscal policy that's where the market perceives the large risk for the currency and the bond market you're seeing very large markel mo market movements on the back of hints of policy direction from the two main candidates. as soon as we get through the elections, focus will be on the structural problems brazil has >> i want to test that theory of bolsonaro being the market friendly candidate this is a man who has been condemned about a lot of moderates in the country they're concerned about a move away from democracy, is that a key risk if he becomes the next

head of the country? >> there's a significant element of wishful thinking of the market looking at bolsonaro as a pro business candidate it's too early to tell that. also the markets are afraidof haddad and the pt because the macro economic mess of brazil is due to the second pt government of rousseff. the far anti-pt candidate is growing and that looks good for the market but bolsonaro is an enknown eun entity he admitted himself he doesn't know anything about the economy. he has appointed a very well known economist as a main adviser, but at the same time it's not clear whether he will listen to him. at the moment it's still early

days, and i don't think the market should take face value this idea that he is definitely an upper market candidate. >> thank you very much for joining us today, carlos we'll closely watch this scenario head to cnbc.com for a full explanation of the brazilian elections and find out why they are important for market events. donald tusk urged britain to compromise in brexit negotiations ahead of this month's crunch eu summit he also suggested the bloc was able to offer a canada plus plus plus deal which combines free trade in combination with security and policy. the comments were seized on by hard brexiteers who called the offer a superb way forward

l tusk also criticized comments made by jeremy hunt comparing the eu to the soviet union >> comparing the eu union to the soviet union it is unwise as it is insulting the soviet union was about prisons and boarders and walls, violence against citizens and neighbors. the european union is about freedom and human rights, prosperity and peace, life without fear, it is about democracy and pluralism. a continent without internal border the and walls >> sterling is trading higher after eu negotiators reportedly told national diplomats in brussels yesterday that a brexit divorce deal was very close. that does throw up all sorts of scenarios for the currency and it's also confusin

chequers is how we started out the week and now we're close to a deal what will that deal look like? >> will look like a fudge. the future arrangement will have a tremendous lack of detail, which will allow the prime minister to try and push it through parliament what is increasingly happening is focus away from the deal, it will only be about withdrawal from the eu in name only and future issues, for instance, will the teal evdeal even pass parliament and what will happen in 2020? we won't have answers to these questions. >> it's quite common to say it might be a fudge, and i think most people who watched europe in the negotiations over the years think that is the way we will proceed with brexit where does that leave hard

brexiteers like boris johnson who have been calling for more radical plans. >> if the deal is a fudge in terms of future relationship f we don't have detail that preserves the optionality. it may be a strategy for the government to allow the withdrawal agreement pass through parliament one line of thinking is if we don't know what will happen with the future arrangement, we can always change it that's the strategy i think the government will use to try to pass this withdrawal agreement through parliament which deals with a narrow range of issues. >> if your scenario plays out what does that mean for the pound. where do you think we are perched on sterling based on your scenario? >> initially i think you will see moderate sterling strength as we are seeing now the markets starting to price a deal in the withdrawal agreement i think it will be limited we'll focus again on whether it can be passed through paraphernaliament, any political instability that might result

out of that and then the fundamental issue that in 2020 this withdrawal agreement will state that the uk is fully out of the euwithout clarity on th future arrangement it's not clear uncertainty will be resolved for a long time. >> do you expect to be some certainty around ireland the issue of a hard border seems to be a stumbling block for moving forward >> there are three elements where we will get certainty on the irish backstop, citizens rights and money, the payments to the eu. the future relationship will get very, very little. >> about 50 seconds left let's get off brexit and talk more broadly about the markets it's been quite an eventful week much higher yields globally. what do you make in the change of mood music for investors who are seeing reaction in the bond market >> you're seeing a large move in rates, but it's driven by real yields instead of inflation

expectations what is interesting from a global perspective is all of the yields are moving. the first move in yields at the start of the year was driven by the u.s., again, it is the u.s. leading, but you're also seeing repiesi i repricing elsewhere. for that reason the dollar is becoming less responsive that will be the key them going into next year. divergence priced. policy die verbvergence and we t think about tightening elsewhere. >> thank you very much plenty coming up china reportedly used a tiny chip to spy on u.s. companies such as apple and amazon they categorically deny it, though more on this story next. today is the day you're going to get motivated...

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support from a significant group of uk shareholders. european chipmakers follow chinese rivals lower on a report that claims amazon web services and apple have been infiltrated by chinese surveillance chips. mateo salvini takes aim at the european establishment saying some have ruined europe while luigi dimaio says he doesn't understand why the eu would reject their budget. and elon musk mocks the s.e.c. taking to twitter to brand them the short sellers enrichment commission, days after settling his fraud charges. european markets had been trading weaker from the outset as we catch up with the trade now you can see it, they

extended the selloff the dax down 0.8% roughly, 0.6% down for the ftse. the french market is trying to withstand some of the storm that's happening here for the friday session a lot of different noise around thely. comme italy a big risk event later on in the states in the form of the jobs report after the services sector flashed up more strength in the u.s. economy many investors are on high alert. as a result, let's see how we're trading on fx. we had a commentator suggesting we may be done on some of dollar strength the morning session, you can see, the dollar just a fractionally weaker to the yen that's where we are seeing movement this week euro/dollar, 1.1491. we are back at 130 on sterling

and the dollar is gaining to the swiss this morning that's the most movement on the charts, up by 0.23%. u.s. futures, let's see the day ahead on wall street shaping up for a slightly weaker day. risk events that we have coming up yesterday the dow was down 200 points so giving up some report levels after four straight days of gains it has been a challenging start today for wall street. asian tech stocks have been royale e roiled by a report that chinese chips have been found in some devices used by companies like apple and amazon this brings to the foreth that alongside the trade war is a cold war within tech super micro says it is not aware

of any investigation and has not been in contact with any government agency on the issue raised a chinese foreign ministry statement reiterated beijing as a defender of cybersecurity and a victim of tech supply chain concerns but the story, despite the denials, doing the rounds across european chipmakers. they are all trading weaker on the back of the news and underperforming the rest of the market dialogue semiconductor down 3.3. st micro is the one hit the most arjun has been delving into the comments and is bringing us the latest what stands out about this story, it was a hardware attack, not a software attack. so more of a physical presence, which is much harder to achieve and effectively there's a second chip put on to the hardware that wasdetected, according to the reports which have been denied >> there was an infiltration at

the super micro level which goes into motherboards. the motherboards are like the beating heart of the server. that's what we're seeing, a new style of attack here, where they've physically been able to attack that brings out questions about the integrity of the supply chain and what happens to companies like apple and amazon who are looking at their global complex supply chains, that's why you're seeing this knee jerk reaction a lot of the suppliers down, they don't supply chips for the apple service, but they supply slips for things like the iphone the iphone was not affected at all, but this might affect how apple looks at its supply chain, does it look at other suppliers, or put more burden on those suppliers. >> take it from the outset there is a story that the traffic

detected that there was something else going on in some of these motherboards. amazon, apple came up with some issues apparently told u.s. intelligence services, and they then also jumped to attention because they used the same systems. there was the sale of certain assets by apple and amazon on the back of it you question whether any of this scenario took place. why are you still on the side where you don't believe the story? >> it's difficult to look at it. the sourcing, there were a dozen sources in the story it's very, very responsible and well researched. then the other side is you got the te denials >> could they be denials based on national security concerns? >> they may well you can never believe a story unless you see a server that has this motherboard with the chip on it. that's the ultimate evidence very hard to come by i'm not disputing the report

there is clearly something going on in the background >> even if it's deemed not to be true, it could be used to argue why some of these products should be made on home soil. >> i did not see president trump come out yesterday with a tweet saying this is why i said all along that everything should be made in the u.s. we know that's an extremely difficult task i already spoke about the complexities of the supply chain. you look at apple, taiwan semiconductor getting components from other sources that's not something you can pick up and put in the united states that's why it's an unlikely scenario not to mention what this costs for the consumer plus the margin compression that would come with a product like the iphone. i think it will make companies look closer at what is happening

and where those components are coming from. >> i love one of the reports questioning why put a second chip if you're doing this, just alter the original chip in there perhaps that's too obvious to detect if you believethe reports. >> the pentagon has reportedly described china as a significant and growing risk for the american defense industry in a report seen by reuters u.s. officials claim beijing could disrupt the supply of materials deemed vital for the military the report also urged washington to make investments in critical areas. sam shung sung is guiding te third quarter profit will rise to record levels they will release full earnings later this month samsung cites increased data demand for the positive guidance but warns chip prices continue to feel downward pressure. samsung shares edged up on the news in the trading session.

republican lawmakers are moving ahead with plans to confirm president trump's supreme court nominee brett kavanaugh. the confirmation now faces two crucial votes in the senate this weekend after lawmakers received a report on a last-minute fbi probe into sexual misconduct allegations against the judge. kavanaugh wrote in the "wall street journal" that he was independent and a partial judge. he also apologized for his fiery comments during a senate testimony last week saying "i said a few things shy not hai st have said. tracie potts has more. what is next in this nomination process? >> reporter: the process starts this morning with a test vote and then 30 hours of debate. we could see a final vote on this nomination as early as tomorrow afternoon there are a few things affecting that mainly the four undecided senators, three republicans and one democrat, but two of the republicans seem to be leaning

towards kavanaugh after seeing the fbi's interviews, after seeing their reports susan collins said it was thorough and senator flake said it was reassuring and did not corroborate the allegations seen in the hearing so that could leave things up to one republican and one democrat, and one other republican who may be absent if this vote happens on saturday because his daughter is getting married on saturday a spokesperson says he will not miss walking her down the aisle. a number of things happening here in the next 48 hours that could determine this you mentioned judge kavanaugh in this "wall street journal" op-ed speaking out in defense of his nomination he said that he admitted he got emotional maybe too emotional bay of the wrongful allegations against him. >> thank you very much for that. joining us now to talk more about the kavanaugh process is

dr. jay sobcob parakilis from cm house. let's talk more about the emotional plea we heard in the "wall street journal" as kavanaugh tried to offset his fiery testimony. the fact it was necessary to prove he has the right temperament as a u.s. judge. this has been an eventful process. >> it has. i don't think the criticism of kavanaugh from the democratic party and from women's groups is focused on temperament, it's more if he told the truth. >> just a layer on top, isn't it >> it is it's something he can apologize for without exposing himself to the charge that he perjured himself. he can show contrition again, put a sort of layer on top of all these other issues and hopefully for him and his backers distract enough attention to get through this vote >> those who have been concerned about the allegations and who might be on the me too page and

fully support the movement want to see justice done and questions asked of kavanaugh before he's appointed to this position have been alarmed by the fbi investigation, about the length of time, how many people were brought in and questioned what do you make of how that investigation transpired >> it's clearly been circumscribed in some ways background checks don't have a time limit the fbi is let free to pull on threads they uncover during the course of the investigation. it is unusual and dictated by the intense political scrutiny and pressure from both sides the problem is the report itself will not be released to the public so democratic senators are going to read it and have come out and said this doesn't actually answer the questions we have republicans are saying this answer the questions we have that puts us at an impasse it gives us a fig leaf for two

of them to vote for kavanaugh but not allay the concerns raised about him >> can we get into the names, because many stepping back looking at how this transpires think there is a sway that republican also carry the vote >> flake has cast himself as a critic of the president. he's not running for re-election. there's limited influence that the president or senate majority leader mcconnell can exercise over him at this stage that, in theory, frees him up to vote his conscious he's also come out and said i'm a conservative, kavanaugh is a conservative, i would like to see him on the court if he believes the report is sufficient, he will probably follow his ideological instincts. with murkowski and collins you have different issues. both are pro choice, though they both voted for justices who may

vote to overturnreroe. >> if the senate votes against kavanaugh, the president will have to put forward another nominee. a number of people are short listed and they could be put forward in a short amount of time >> what would the reaction be? >> it's hard to say. this close to an election, it might make democrat activists feel like they had a win and give them a gust of wind at their sails or make republican activists feel like they need to redouble their control of the senate >> the most likely outcome is that kavanaugh does achieve the

position that he has been running for all along, what happens then there is clearly a me too movement that looked at this case and doesn't believe that due process has happened with the fbi investigation. that justice has not been carried here for a judicial position what does that do for the other side >> the real question is what does it to to the supreme court. the court's legitimacy comes from a broadly phrased section of the constitution. it's essentially the supreme court relies on the very broad constitutional mandate and then the acceptance of the congress and the people and if the supreme court loses the sense from the public that it's an impartial arbitrator of law you might see a move to reconstitute it that was tried before in the '30s under roosevelt t didn'tant

didn't two anywhere. so there may be negotiation over the powers of the supreme court. >> so damage could be done for decades to come. >> i think there could be damage, there could be a reconstitution of what the supreme court means. >> thank you very much for your commentary today the doj indicted seven russian intelligence officers for attempting to hack energy firm westinghouse. the charges are part of a coordinated effort with the uk and dutch authorities that have accused russia of a widespread hacking campaign against the west prosecutors claim one of the officers tried to steal data from the nuclear energy company and sports federations, anti-doping agencies there's plenty more coming up on "street signs. you can get in touch on twitt ,

twitter, @streetsignscnbc. ahead on the show, with the rise in inflation, investors will be watching the u.s. jobs report more closely. find out what to expect next u g, your brain naturally begins to change which may cause trouble with recall. - learning from him is great... when i can keep up! - anncr: thankfully, prevagen helps your brain and improves memory. - dad's got all the answers. - anncr: prevagen is now the number-one-selling brain health supplement in drug stores nationwide. - she outsmarts me every single time. - checkmate! you wanna play again? - anncr: prevagen. healthier brain. better life.

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tess will foundla founder ek mocked the s.e.c. administration after a settlement that allowed musk to remain chief executive musk and the s.e.c. reached an agreement last week fining him $20 million for a tweet suggesting he had the funding to take tesla private under the deal he can stay in his position as ceo but stepped aside from the chairmanship for three years. the "wall street journal" revealed it was a 15-minute phone call from billionaire investor mark cuban that helped settle the impasse between musk and the s.e.c. musk had initially walked away from the agreement but one of his lawyers reportedly asked cuban, who has previously been charged with insider trading by the s.e.c., to intervene

the u.s. labor department will release its non-farm payroll numbers for september later today. the unemployment rate is forecast to tick down 1% to 3.8% as interest rates rise investors will pay close attention to the average hourly earnings number which is expected to show a 0.3% monthly game let's go back to jack mcintyre who is with us it feels like it's shaping up to be a big day on markets. we've had so much movement on bond yields this week. how does today look as an event risk scenario? >> it's not a big event risk given the movement in treasuries i think it will come in around ek expectations, but roughly 70% of the time the september payroll

numbers disappoint and come in below expectations you would say are treasuries going to rally on that probably not because the market might say that might have been the impact from hurricane florence and sentiment has shifted and become more negative in treasury. so more upside in yields on a stronger report than down side on yields if the report comes in lower than expected. >> the wage component has always been incredibly important. the market saying we have a strong economy powell pointing to the strength of the economy will wages show an element of strength >> i don't think so. they'll see a bit of an uptick a year ago we were dropping off 0.5. the year over year number should decline in terms of average hourly wages wages are on a glide path higher, but the question is when will wages show up in inflation. we have not seen that yet. the bond market and treasury market is sniffing it out.

ffrnlg >> if we look at the 30-year, there's been a flattening curve most of this year. big bond players like gundlach are saying if you get a break above that 3.25% for a couple moves in a row, that's it, you have had the lows on the market. we've had that this week what do you make of the 30-year and how that's moving higher >> there's been a lot of leverage money that made money this year in terms of the flattening of the yield curve. so you're seeing profit taking, unwinding of that position just putting upward pressure on yields in the long end so, you know, i think we've seen the low in yields, but i'm not in the camp that thinks this will be yhuge bond bear market. yields might drift higher there will be wealth destruction because of a lot of money invested in bonds, with yields this low you don't have that coupon to act as a cushion there will be a negative feedback based on that you are seeing pressure in the housing market via higher

mortgage rates i don't think it will be off to the races in terms of yields moving steadily higher >> what does this signal about inflation expectations that's been a missing link we spoke to charles evans earlier in the week, ceahe's san we don't have to battle inflation expectations like in the past if you lift you can stay there longer and potentially hold out. in the past when you got into tightened territory you almost had to reverse course because of market expectations on inflation moved into the equation. >> why are inflation expectations anchored? we've had a decade of low expectations if the fed was to back off and let the u.s. economy run hot, i don't think they'll do that, then you would see inflation

expectations move higher >> what do you make of the junk territory part of the market the spread was noted yesterday, you saw a fairly tight spread nachlt was happ and that was happening >> why are u.s. equities high? because nominal growth is doing well nominal growth does well, that means earnings do well companies do well. that means high yield is going to do well investment grade corporate will do well. when the market starts to sniff out the negative impact from higher energy prices, higher interest rates, growth maybe has peaked which we can talk about, because of the impact of tax reform, then you will start to see a bit of a stress in high yield market >> tell me about what we should be seeing on positioning and what should investors do when it comes to the bond market and the u.s. dollar. >> this will be a little contrarian and challenging i'm not saying jump in with both feet, but we can look at the whole where there's value, there's not value in european

bonds, there's not value in u.s. tresh you a treasuries where is the value in the emerging space. july was good, august lousy, september good october setting up to be lousy if you're an investor, i think em, you're supposed to fight the crowd. you know, nibble at some of those em positions take a die versus fiversified ah i think the u.s. dollar is not off to the races that actually will help em bonds outperform >> it's an important comment thank you very much for that, jack we are setting up for a big event risk on the u.s. non-farm payrolls i'm karen tso. that's all for today

it's 5:00 a.m., here's your five at 5:00 stocks slide wall street pointing to another lower open as a selloff in the bond market continues. tech tumbles the f.a.n.g. stocks holding in the red this morning we'll find out what's driving that tech wreck. also tesla shares, they are moving lower after elon musk mocks the s.e.c. in a tweet. also the supreme court nominee, brett kavanaugh, sounding off in an op-ed as lawmakers move ahead with a key vote. and we're counting down to