. welcome to "street signs." i'm willem marx. these are your headlines fashion fail europe's luxury giants take a tumble on the catwalk after morgan stanley cuts the sector to underweight and lvmh's third quarter sales figures fail to convince investors. italian banks trade lower as salvini says europe's institutions are ganging up against his country. and the global bond selloff cools as treasury yields retreat from multi-year highs after

president trump blames the fed for moving too fast. >> i like to see low interest rates, the fed is doing what they think is necessary, but i don't like what they're doing. sterling rises on hopes of a brexit break through as british minister dominic raab says it is time for the eu to match britain's pragmatism >> we should stay resolute and focused and i feel confident we will reach a deal this autumn. there's been a bit of soft start to today's trading the stoxx 600 is down more than a tenth of a percent as you can see, if we look at the individual markets behind the numbers, the major indices in europe reflect that the ftse 100 down. the xetra dax in germany is down a quarter percent. in paris, the cac 40 down 0.4%

the minute minute is down 0.10 telecoms performing quite well up 1.5%. oil and gas up 1%. tem cal chemicals, technology and household goods down more than 1% the luxury sector is trading lower across the board after morgan stanley downgraded it to underweight. analysts at the investment bank warned it looked stretched citing performance, valuations and positions. there is also a slowdown in chinese consumption trends in the second half, this as lvmh matched forecasts for a 10% rise in revenue the revenues were more than 11 billion euros for the three-month period sales were a big factor as they beat expectations, charlotte,

you can see the stock is trading down more than 3%. why do we think that is? >> we've seen that in the second quarter. results meeting expectations and hit by selloff that seems to be the situation here again overall the result just meets expectations with sales up 10% when you look at the divisions, because they don't break geographically, but they break it by divisions, the money making division of lvmh, the leather and fashion beat expectations, up 14% the other three divisions have been softer in the second quarter. all the divisions have gone softer than in the first quarter. so there is a trend there where demand seems to be slightly slowing down still up around 10%, but it seems to be slowing down investors are nervous about a trade war impact and the chinese consumer demand.

a third of all luxury sales are by chinese consumers and a weakening of the yuan has an impact on those purchases. so all these elements are making the market and investors extremely nervous about the luxury sector. it is highly valued. a p ratio of 23 times. for all these reasons, this morning the market is having a selloff. >> thank you very much for running us through that. the italian deputy prime minister, mateo salvini has criticized fim institutinancial institutions that he claims are ganging up on italy. salvini has insisted the coalition government will not change its budgetary plans despite the selloff in italian assets reuters reported that the eu banking supervisors are closely monitoring liquidity levels, but

one source told the news agency there is no cause for alarm. i'm happy to say to talk about this, we are joined by our guest. i am intrigued to get your view on this. banking supervisors saying they're not concerned about liquidity levels what could higher borrowing costs mean for not just italian banks but the italian economy? >> yeah. it's a fragile situation liquidity starting point is healthy. so we're in good standing in terms of where we begin to face these challenges but make no mistake, these yield levels do become problematic for all of the maps around sustainability of debt i don't think we're in an equilibrium at this stage.

does it concern you when a country's central bank, when its fiscal watchdog inside the parliament, when clearly a lot of market participants investing in that country seem to be openly criticizing the government's budgetary plans in terms of spending and borrowing, yet the country's leaders, men like mateo salvini and luigi dimaio are saying we are not changing anything. >> i think the strategy is becoming more clear now, they have their sights on a bigger prize, more of a europe-wide campaign his meeting with le pen is indicative of this they are trying to change the rules from the european side rather than backing down what they're asking for on their end. doesn't seem like this will lead them to succeed on that front. well before may of next year when we have the european parliamentary elections, the market may discipline them to

the point where they don't survive that far any way >> is that disciplining in your view made possible by the reality we've seen where with these yield spikes in italian bonds that have occurred throughout the last few months we've not seen that spill over into other eurozone countries. does that make it easier for bond vigilantes to say, well listen to us, italy. >> it does it actually also helps the ecb to navigate through this as well they will be most concerned about contagion. so at this stage it has not spilled over, but it's a fragile situation. it could easily lead to spread widening across other peripheral economies. i think the situation needs to be extremely closely watched, but in reality the politics are negotiating with the market, not negotiating with the european

commission >> on that front, you end up with them being able to -- the italian leaders blame the market as we heard from mateo salvini there. is it constructive when he says this is banks ganging up on italy. >> it's not constructive, but it's not unexpected. >> is it untrue? >> well, no. i think the market is very sensitive to a trajectory of debt which is not sustainable. that's perfectly legitimate. i think, though, what we may end up seeing is that europeans will be unwilling or will not want to push to the limit of forcing an actual crisis. so we may see italy enter the excessive deficit procedure and for them to protest, but not force an outright confrontation. >> let's leave it there. we'll come back for a further

conversation about a different subject. just to bring viewers the latest that giovanni tria in italy has been beginning his testimony in parliament on the government's budget plan this is part of the typical process in italy that's about a week behind schedule around the government presenting parliament and various committees within parliament its plans for spending and borrowing that will have to be approved by the parliament before the end of this year. one of the crunch moments is getting approval from the commission feel free to get in touch with us on twitter if you have views about italy's economy, its budget plans, its spending, its deficit. there's a lot to talk about. we're on twitter at @streetsignscnbc. coming up, we'relive from

the imf meeting in bali after they warn of risks of a new financial crisis better, faster"

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welcome back to "street signs. the imf warned that trade tensions and emerging market pressures could cause another financial crisis in its latest stability report they said debt levels are also too high but they praised regulators for strengthening financial stability over the past decade. cnbc spoke to the director an he said inflationary pressures in the u.s. are rising. >> inflation at some point might surprise to the upside, in particular in the u.s. what we've seen so far is a very gradual decline in the unemployment rate to levels that are as low as we have seen since 1960s. of course inflationary pressures might be building at some point.

and that might lead to a faster than expected tightening of monetary policy at some point in the future >> that was the imf. he also said current trade tensions do pose a risk for markets. >> the second risk factor is a further escalation of trade tensions we have not yet seen a sharp impact on those trade negotiations on global financial conditions but we do see for the moment when we look across sectors, those sectors that are particularly exposed to trade have underperformed relative to the broad average. >> my colleague, geoff cutmore, is in bali at that imf meeting and joins us live from there now. a lot of interesting conversations going on there >> yeah. what the imf have done is crystalized the fears of a lot of economists who have been

looking at the state of the global economy and have begun to wonder exactly what replaces u.s./china trade if, indeed, this spat worsens. and what the consequences increasingly are going to be of higher dollar funding costs if, indeed, we get the inflation that was talked about there and ultimately we get a federal reserve response, which means we get higher interest rates, which means we see even further pressure on emerging markets, which means we see more capital outflow and more pressure. what's surprising is how down beat the imf sounded at a time when growth in the global economy seems relatively strong, plus 3%. the fact that they have so quickly changed the forecast they gave back in june from 3.9%

to 3.7%, and then talked about broader financial risks in the stability report, it does suggest that those in the know are beginning to become concerned about the consequences of this trade spat there are many other things going on here as well, as is always the case as the imf and the world bank try to find the key touch points for the global economy. one thing i will be involved in is a fintech discussion. it's one of the major plenary sessions here. we open the event tomorrow morning. christine lagarde will be on that panel we will also do a one-on-one interview with the managing director of the imf. we will talk with gjim yong kim

and we will find out how disruptive fintech currently is to the banking system and the financial system more broadly and, two, what is the opportunity and how can it be capitalized on without introducing issues like data theft concerns and fraud and so on and so forth. so we'll talk with those two principles in the panel and in separate interviews. then we have a slew of interviews with the others here at the imf event over the next three days or so really i think our goal here is to try to get closer to some of these key issues that have been flagged up in these two major imf and world bank reports back to you. >> geoff, glad to hear we're keeping you so busy over there in bali. the south african rand is higher against a basket of

currencies the president has named a new finance minister, he's familiar to investors because he was previously governor of the south african reserve bank for ten years. his predecessor was forced to quit aftered admitting to meeti with members of the gupta family who were part of a scandal and the current governor welcomed this move in a conversation with cnbc he said that. take a listen. >> we have a new minister of finance, who must be given the time and space to familiarize himself with the task at hand. he is not completely new he's been involved in the design of the economy if given the space to think through this i'm sure he will be able to get on top of things president trump has expressed his dissatisfaction with the federal reserve's rate

hike policy. trump said the fed is raising too fast in raising rates in response to a question asked by cnbc at the white house yesterday. he also said the u.s. economy does not have an inflation problem. >> we're normalizing money that's good. i think we don't have to go as fast i want to pay off debt also, and very importantly, the numbers that we're producing are record setting i don't want to slow it down even a little bit, especially when you don't have the problem of inflation >> fortunately for us, steve liesman has take an closer look at the fed's haven't decisions and the logic that underpins them >> interest rates are rising and the question wall street wants to know if they're rising for the right reasons or the wrong ones are rates going up because growth is going up or because of inflation without the growth jpmorgan declaring in a report rising u.s. bond yields are a symptom of u.s. strength and should not be feared the trouble for stock investors

is that until now they've been able to have their cake and eat it, too. that is better growth and higher earnings while interest rates stayed unusually low in fact the treasury markets almost ignored the fed's increases in short-term rates, that is until now. >> it's not just fed policy. it's a generally strong consumer confidence that we see at this point in time. the economy has looked strong for years. and especially since trump took presidency, and i think we're just in an exuberant time. people find the rate increases as normal given the economic conditions >> the list of what's pushing up rates is long. there's better growth and lower unemployment core inflation, excluding food and energy is solidly above 2% the fed is pushing up rates. sometime next year other central banks may increase rates there are tariffs pushing up prices there's also a growing deficit

which also usually means higher interest rates those higher rates could put a crimp in growth affecting sectors like housing and autos but not expected to derail it. >> we will see the return to normal term premium, the extra yield people demand for holding long-term paper. in this case it's a relatively good sign. it means there is confidence the economy is coming back >> one modest upside is that higher rates will help the fed slow to a more manageable growth rate if so the central bank could be done raising rates sooner rather than later adding just another 1 percentage point from here. that's if rates are rising for the right reason, that is growth, and not the wrong one which is inflation steve liesman, cnbc, business news our guest is still with us and is eager to talk about the fed, i have no doubt leaving aside the appropriateness of a u.s. president criticizing the central bank, does he have a

point? >> well, i think the fed is doing the right thing in the sense of being very gradual. this is the slowest rate hiking cycle we've seen it's appropriate given the health of the economy. we think that the underpinnings of growth have broadened they're more resilient i know a lot of people associate this growth to a sugar high from a fiscal side. there's been positive contribution from the fiscal side companies are investing again. they're investing in productive technology and this enables growth to be self sustaining and happening in a way where potential growth rates are rising, which is also another reason why it's appropriate to continue to gradually raise. >> how important do you think the reputation for reliability the fed is in terms of the eyes of market participants when it comes to stabilizing inflation around their target?

>> so this is absolutely critical inflation expectations to me is the most important thing that will really anchor where yields will end up. yields have risen to year-to-date highs they may continue to rise from here but we don't see a spiral in yields ahead that's because of this anchoring. the fed has been on the curve, not behind it. and that is not something that will change. it's going to need an unhinging of inflation, coupled with the market deciding that the fed is not going to respond to it for it to continue to spiral beyond. >> something else, economists, analysts, investors, they often try to predict where the global economy is, where the specific economy is in terms of its cycle that helps them predict when a downturn may come, when they may need to retrench how are you analyzing where the current world economy is in terms of this cycle? >> yes so we've been in a nonconsensus

position for some time we've been saying we think we're more mid cycle rather than late cycle. a couple things that are contributing to that the global output gap has only just closed now. it's more aligned with, you know, an economy that has healed, but it is by no means overstretched. and we don't really see signs of tightening to the point that you will see problematic inflation it's a sign of health, a sign of pricing power, but not problematic level. so we see that as being the current conditions but looking ahead we see potential for a sustained improvement in productivity. that, to me, is the key thing that the market is missing now, what's going in the pipe in terms of what inflation is going to actually materialize. and we see a lot of

disinflationary forces that will diffuse these cost pressures down the line which helps to extend the life of the cycle further. >> one final question on inflationary pressures a lot of the data around the world, especially in the developed economies, quite tight labor markets. we have not seen significant wage growth anywhere so i'm wondering, given that the knock-on effect that can have on inflation, do you think this phenomenon of tight labor markets is something that should concern investors? >> we don't. there's two main reasons first, it's really interesting to look at historically you find that periods where wages are rising, you actually see profit margins rising not falling. it's a misperception that they cause margins to get squeezed. this wage growth doesn't happen

in a vacuum. it happens in an environment where growth is healthy, slack has been removed as long as that's the case, corporates will feel confident that they have the profits to be able to invest the second element is what i mentioned about productivity because of the potential for productivity to rise -- it is typically when labor markets are tight that firms begin to invest that leads to a procyclical rise in productivity, reduces unit labor costs, and enables them to generate same kind of margins and earnings growth, maintain them, andnot lead to a problem where earnings start to roll over so we still see several years ahead for this cycle to continue >> we'll leave it there. i want to keep you around for a conversation on the british economy as well. just briefly the italian

economy, giovanni tria has been talking to parliamentary committee about budget plans he said the budget deficit increase in 2019 will be 22 billion euros. he says he thinks the government thinks it's appropriate to confirm multi-year budget forecasts. he says the government cannot and must not base its forecast on downside risks. we've seen some reaction in italian bonds. we'll leave it there on that subject for now. coming p, a key trump appointee has resigned from her post, and a goldman sachs who previously served in the trump administration is among those linked to the vacant role. and there's another surprising name also in the mix for that job more on that when we come back

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morgan stanley cuts the sector to underweight and lvmh's third quarter sales figures fail to convince investors. >> giovanni tria says the government should not base forecasts on downside risks, while salvini says europe's financial institutions are ganging up against his country and the global bond selloff cools as treasury yields retreat from multi-year highs after president trump blames the fed for moving too fast. >> i like to see low interest rates, the fed is doing what they think is necessary, but i don't like what they're doing. sterling rises on hopes of a brexit break through as british minister dominic raab says it is time for the eu to match britain's pragmatism >> we should stay resolute and focused and i feel confident we will reach a deal this autumn.

. we have the print for the uk august gdp numbers, it's 1.5% year on year, that's against the poll of 1.6. this is a very weak monthly reading. i'm happy to see that our guest is still here with me and he can give his views on why it's so weak >> i think we have to be careful about the numbers that we see in the next month or two because of distortions likely from the weather effects. we had a hot summer. we had the world cup so there's some short-term distortions that can come out here this is a weaker number but not totally unexpected given the strength we saw in july. but the year-to-date number is still healthy.

so i'd say that the uk economy is still relatively resilient given everything that's been going on, all the uncertainty. and it's been a case of very fortunate timing that this two-year negotiation period came at a time when the global economy was actually accelerating, helping to offset this uncertainty but a resolution of brexit is going to be much needed at the right time because there are clear signs that this domestic economy is running out of steam. >> you mentioned there the wonderful weather we had in the early part of the summer in the uk and england's surprising performance at the world cup as a reason why gdp was strong in july, and we have weaker numbers in august. i don't imagine that had a massive bearing on construction output, that's down 0.7% and manufacturing output down 0.2% industrial output is up

slightly, higher than predicted at 0.2%. those are not anything to do with weather patterns. these are fundamental challenges in the growth story in britain >> i would agree with that i would say, though, the only other -- there's some other factors to bear in mind. on the manufacturing side, it's also a case that there was some front-loading of autos production because of the new regulations that came in as well that could be partly explained by timing on that front. but, yes, the surveys were weak. total orders, output, dribtiexpt orders were indicating weakness there. i would say the august number itself may be partly explained by short-term distortions, but employment and the potential for

unemployment to creep higher is definitely there that's what i was saying i think some clarity with regards to where we end up with brexit negotiations is needed >> just to pick up on that i'm imagining you will say that some of this weakness we're seeing does relate to uncertainty around brexit. >> absolutely. ed medium term trends we've been seeing, there's a declining trend. going from a fast economy and slowing to that extent is only explained by brexit uncertainty. >> we'll leave it there. thank you very much for coming in this morning and giving us a good portion of your morning >> the uk and the eu are edging closer to a deal according to itv news negotiators have now made

progress on the contentious irish border issue, specifically saying that the eu is close to agreeing that the back stop would aemplpply to the whole ofe uk and not just northern ireland. dominic raab told parliament yesterday that he was confident britain could reach a deal with the eu before a march deadline >> the october council next week will be an important milestone we expect that to be a moment where we make progress these negotiations are always bound to be tough in the final stretch. that's all the more reason why we should hold our nerve, stay resolute and focused and i remain confident we will reach a deal this autumn >> it's not just italian bonds reacting to those comments in rome it looks like the ftse mib has taken a bit of a bounce. it is slightly above the flat line remember it was down about a tenth of a percent a half hour ago. separately the ftse 100, xetra

dax and cac 40 in paris are in the red with the paris exchange down almost 0.60%. let's look at currencies on the back of those gdp numbers in the uk interesting to watch what's happening with sterling despite that weaker growth story in some sectors. we're seeing a strengthening there against the u.s. dollar. it's stronger by a tenth of a percent. the euro trading flat against the dollar the dollar itself is slightly stronger against the yen and also the swiss franc ahead of that u.s. open, worth checking in with the opening calls there. s&p 500 being called slightly down similar story on the nasdaq. the dow jones looks to open very, very slightly higher sticking with the u.s., america's ambassador to the united nations, nikki haley, announced her resignation. she gave no reason for the departure but says she will stay in her post until the end of the year and will help select a successor. president trump said goldman

sac sachs' dina powell is potentially a candidate. >> dina is under consideration we have many names nikki has been great she'll work along with us and help us with the choice. i've heard a lot of names. i've heard ivanka. i heard how good would ivanka be the people that know -- there's nothing to do with nepotism, but i want to tell you the people that know know that ivanka would be dynamite. i would then be accused of nepotism if you can believe it >> tracie potts jones me live from washington. the minute that announcement was made by nikki haley, d.c.'s favorite parlor game became to guess what she's doing next. >> right, what she's doing next and who will replace her

it's the big question that will be consuming washington for the next several weeks the president says he will make an announcement in two or three weeks about her replacement. you heard what he said about his daughter, ivanka at the announcement she was also mentioned. nikki haley talked about ivanka trump and her husband jared and the contributions that they made you heard the president talk about dina powell. he said several people have expressed interest we'll start to hear more of those names in the next couple of weeks as for nikki haley and what she's doing next, she dent say she says she does not plan to run for office in 2020 that she will support president trump, and that she was leaving because it's simply time she was ready. that it's time for a turnover and some new energy to come in and continue the work she's done notably she has broken with the trump administration on some key issues from time to time like

russia even last week amid the kavanaugh hearings where she spoke out about listening to accusers like dr. ford, whereas the administration and president trump eventually was much more critical, even mocking dr. ford's testimony so there was certainly time when there was tension between nikki haley and the white house, however it was quite cordial she didn't get dropped by tweet as we've seen before with the secretary of state this seemed to be cordial. notably also her resignation letter, the date on that lert was la letter was last wednesday, in the middle of the kavanaugh hearings >> tracie potts, thank you very much a second summit between donald trump and north korea's kim jong-un will be held after the u.s. midterm elections next month. that's according to president trump. he said the two countries had made incredible progress and that north korea wanted to reach

a denuclearization agreement so it could attract foreign investment president trump said the meeting was in the process of being set up >> it is happening we're setting that up now. that's part of the reason that mike was going over to meet. they are setting up the meeting, they will be announcing that probably at a different location singapore was fantastic. but we'll probably do a different location >> mar-a-lago? >> he would probably like that i'd like that, too but we'll see. we're talking three or four different locations. oil prices have slipped on the back of the imf downgrading its global growth forecast brent trading lower by 0.39. same story with wti. prices remain under threat because of hurricane michael in the u.s. nearly 40% of crude output is in the gulf of mexico, it's been shut down as the hurricane

strengthens towards the florida panhandle. hurricane michael has been now upgraded to a category 4 hurricane saying it has intensified into an extremely dangerous storm. gabe gutierrez filed this report from florida >> time is running out before a rapidly intensifying hurricane michael slams into the florida panhandle. >> hurricane michael is a monstrous storm, and the forecast keeps getting more dangerous, and if you don't follow warnings from officials, this storm could kill you. >> reporter: 35 counties in florida and all of alabama under a state of emergency michael already drenching cuba a royal caribbean cruise passenger shot this video on the storm's edge. >> hurricane michael's going to be a devastating storm that's a part of florida that has not seen a storm of this magnitude in quite some time. >> reporter: today, a last-minute rush on supplies, bare shelves, long lines, frayed nerves

paul potts is boarding up but staying put. >> this is one to watch. i'm usually not too concerned with the hurricanes in florida, but this one bears watching. >> reporter: at least 120,000 people are under mandatory evacuation orders, including parts of coastal communities like port st. joe. tell me, how worried are you about this storm >> well, gabe, i'm very worried, because this is something we've never faced! i mean, we don't know exactly what to expect >> reporter: more than 2,000 national guard members and hundreds of state troopers are on alert rescue teams just back from hurricane florence in the carolinas are now deploying to florida, as michael takes aim. gabe gutierrez, nbc news, port st. joe, florida coming up, coffee talk whitbread is preparing to approve the sale of costa coffee helped put a roof over the heads

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welcome back to "street signs. i'm at willem marx i'm at my most caffeinated point of the morning so it makes sense to talk about coffee starbucks shares have jumped higher after pershing's ackman

has revealed a holding in the company at about 9$900 million i current prices he sees starbucks shares doubling in the coming years separately whitbread shareholders will meet later today to discuss the sale of a key unit to coca-cola. julianna tatelbaum is here to run us through what to expect. >> yes today whitbread is holding a general meeting at 2:00 p.m. at that meeting they will look to approve the proposed sale of costa coffee to coca-cola for 3.9 billion pounds the market expects this deal to go through no problem given the unanimous support from shareholders, it serves as an interesting reminder to a key trend in the consumer space, that's one of consolidation in product categories and distribution channels in the

beverage space looking back at some deals we've seen over the last year, pepsico buying soda stream, nestle buying starbucks lavaza teaming up with mars, and jab holdings doing a deal with illy so what is driving this? trying to get outside regular channels and adapting flavors to consumer taste we have got activists swirling around this sector we've had them around for a while. even if companies don't have an activist on their shareholder list, the threat of activism is playing a significant role that's part of what drove

pepsico, nestle and now whitbread to make these decisions. on coffee specifically, this bonanza in the coffee space, coffee is one of the few segments within the beverage industry that is growing willem, back to you. >> thank you very much separately in the united states, google has unveiled its new generation of flagship smartphones. the pixel 3 and pixel 3xl are priced at $800 and $900 for the basic models in what has become an increasingly crowded marketplace. the phones will go on sale on october 18th and s.a.p. signed a 5$500 million deal with amazon for its cloud services the seattle-based firm has secured a similar deal with s n

symantex michael santoli looks at whether concerns of a selloff are justified. >> if interest rates are rising for positive reasons shouldn't the stock market celebrate rather than selloff? over time it's true, stocks can do well as the federal reserve lifts rates. in fact, the ten-year treasury yield has doubled from 1.6 pfrs pfrs to 3.2%. at this stage each fresh high in bond yields is a test for stock market valuations that are down from january but remain near the upper end of the long-term range. the stock market's price to earnings market multiple is as high to bond yields as in 2008 stocks were more expensive compared to bonds for most of the decade before the financial

crisis but so far this economic expansion the market refused to restore that premium to stocks higher yields act as a head wind to earnings. corporate bond yields are at a 2 1/2-year high which pinches indebted companies and smaller firms. with government bonds now exceeding 3% they appear more attractive to investors relative to ten-year stock returns which many strategists argue could be in the mid to single digits from here all of this helps to explain why the stock market stalled out as investors try to make their peace for a hire cost of money and look for reassurance that rising rates won hasten a slowdown in a economy that's already seeing a deceleration heading into the new year. nick ford is a u.s. fund manager at mitan and he joins us here the point mike was making there is an interesting one, because

treasury yields are looking so attractive people might be thinking about moving out of the equity space in significant numbers. are you concerned about that or does it depend on where you made your picks >> we are more concerned about our picks within the market. i think the key issue for us is the technology sector which has some of the most highly valued stocks in the s&p 500 and the market as a whole. and the tech sector has done well partly because bond yields have been falling quite sharply over the last five, ten years. that's the reason why people have been prepared to pay high valuations if you think about the ten-year treasury bond yield at 3.2%, ten year treasury bond yields are a key component in dividend discount models. if that yield spikes above a certain level, people start to reassess price targets for stocks we've seen it with highly

valued, high-flying software companies within the s&p 500 and outside. one name i'm intrigued by is a company called plural site, a recent ipo within the technology sector it came available at $15 and is currently at $30 at the last few weeks with the rise in bond yields, the shares went from 30 to $25, despite no change in the company's outlook. >> in terms of trade tariffs, do you think concerns about those have been overblown when it comes to why we're not seeing the concerns expressed repeatedly by a lot of people, we're not seeing those in u.s. share prices we're not seeing those in the tech sector despite the fact that, of course, they do have exposure >> that's a good point the key thing we're looking for is going to be over the next few

weeks we have a slew of corporate earnings coming out in the u.s. and the thing we'll be watching very carefully is corporate guidance we've now had a few months of the tariff issues and trade war impact the question is are companies cutting guidance for the rest of the year based on what's going on over the last few months. that's important for investor sentiment. >> you look at ceos like tim cook he's been in close contact with president trump about trade. yet i wonder given the concerns they must have about the supply chain, does apple have bigger problems to worry about? >> yes for us the main issue with apple is growing competition and i think your predecessor talked about that. we are concerned about the fact that there's been a proliferation in competition google is there. other companies are launching it you still have intense

competition from europe and other places so for us apple is a brilliant company. but we're concerned about the fact that if apple sells x million iphones one year to show growth in the iphones they have to find another x million customers and another 5% to 10% to show growth we prefer business models that are more stable. companies with recurring revenues usually because of long-term contracts with customers. we focus on less glamorous industries rather than many of the high-flying technology companies. >> you mentioned google as one of those companies are they likely to face increasing pressure from advertisers? a big segment of their business is that. trying to deliver customers to platforms given their dominance of online advertising along with facebook do they have the leverage to push back against that pressure? >> i'm not sure.

the key issue for us with google is this if we're getting towards the end of an economic cycle, we may or may not be, let's say we are towards the end of a cycle and near recession, the first thing companies do going into a downturn when they see the top line shrinking, they look at ways to cut costs. that can happen two ways first, by reducing spending on i.t. and secondly on advertising. so we have not yet seen how the google and the facebook models are going to sort of shake up when we get to a downturn in the economic cycle >> we'll leave it there. nick ford, thank you for joining us a quick look at the u.s. futures ahead of the open. coming up later this morning, a special interview with the ceo of bp, bob dudley. your insuranct replace it outright because of depreciation. if your insurance won't replace your car, what good is it? you'd be better off just taking your money and throwing it right into the harbor.

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it is 5:00 a.m. on cnbc. here is your top five at 5:00. hurricane michael now ballooning in size overnight. it is now a category 4 hurricane. oil prices are moving as it takes aim at the florida gulf coast. president trump slamming the federal reserve yet again. we'll tell you what he's saying about jerome powell and company. and steve mnuchin out with a warning for china and their currency sears reportedly moving one step closer to filing for bankruptcy and we've got an activist triple play to talk about. why starbucks,