welcome to "street signs" i'm juliana tattlebaum disappointment from the fed sends the stock to the lowest level in two years >> many participants had expected economic positions would likely call for three more rate increases in 2019 we have brought that down a bit and think it is more likely that the economy will grow in a way that will call for two interest

rate hikes >> monetary policy needs to proceed cautiously rus rusal shares jumps, slapping fresh sanctions on russia over election meddling. and shares crumble crawling to a 15 year low as the the uk construction company sees its fundraising flop despite a heavy d discount. russian president vladimir putin is taking questions from journalists, holding his end of year press conference in moscow. we'll bring you any headlines

from that as the morning progresses i want to take you to european markets which have been open for one hour it is shaping up to be a very negative day as you can see behind me, almost exclusively red. now, this comes on the back of a weekday stateside yesterday, a weak session overnight, and as you see behind me, european markets are proving to be no different. all of this comes on the back of yesterday's federal reserve meeting. the fed did indeed strike a dubbish tone but not dubbish enough, and that is sending this ripple effect of negativity through markets. the stock 600 is down about 1.25% this morning it was down even more sharply earlier on reaching its lowest point since december 2016. very negative sentiment in europe take a look at how the different regions are faring this morning. pretty similar losses being seen across the board, hovering between the 1, 1.5%. the ftse mib is trading down

about 1.6%, the key underperformer yesterday, italy got a nice boost between the italian government and european commission now we are seeing some of the shine come out, in part because moody's has come out it is a red picture overall. let's see how the different sectors are faring, presumely the -- presumably the most trade sensitive are suffering the worst, nearly 3% quite steep losses oil and gas down about 2%, and the oil price has resumed its decline this morning, a combination of oversupply concerns anddemand concerns weighing on the oil price and that is filtering into the oil and gas stocks no green, household goods,

utilities, are outperforming, but no green sector this morning. let's have a look at european banks. italian banks were in focus on the back of the budget breakthrough yesterday in the u.s., u.s. banks in focus. we saw a selloff there of course in response to the fed, we saw reaction in the bond market, a flattening of the yield curve resume and that is weighing on u.s. banks here in europe, we are also seeing european banks down quite significantly. the worst performer, deutsch bank, the second worst performer, commerce bank the u.s. federal reserve has raised interest rates for the 4th time this year, an expected change but flew in the face of criticism from the wall street and the white house. the central bank's key fed funds target range standing between 2.25 to 2.5% the number of expectations had lowered but hinted this outlook could be revised. >> many expected the economic

conditions would likely call for three more rate increasing in 2019 we have brought that down a bit and think it is more likely it will call for two rate increases in the course of next year we always emphasize there are policy decisions not on a preset course and will change if the incoming data materially changes the output. >> powell insisted the fed will stick to the 2019 economic projections despite a recently slow down in global growth. >> growth in other economies around the world has moderated over the course of 2018, albeit, still solid levels at the same time, financial mark volatility has increased over the past couple of months and financial conditions have tightened, that is they have become less support i have of growth in our view, these developments have not fundamentally affected the outlook. >> i'm pleased to be join by

karyn watt kikin. it was a dubbish hike. they did dial back rate expectations is the market justified? >> the market was looking for the fed to provide confident last night, and they didn't feel they did that enough the key take away was some of the language around any future rate hikes and being data dependent. to me it's clear that actually now this path to more normal interest rates is looking more uncertain. and i would say, you know, it's not just the feds with that uncertainty. you think about the bank of england trying to normalize rates under the shadow f of br s brexit and really for markets and i think last night was testament to this, we can no longer rely

on central banks to step in and help calm the markets down you know, for the last few years, they have really been there as that back stock, where we have seen turbulent markets, they have been able to step in with forward guidance or whatever it takes. going forward, actually, i think central banks will be one of the key sources of volatility in 2019, rather than helping to calm. >> real paradigm shift if you think about the world central banks as you outlined. one of the reactions is the shape of the u.s. yield curve. we saw some of that flattening resume history tells us that an inverted yield curve means a recession is coming. did does it mean lower equity markets are coming >> i think the question of recession is important as well, and the timing of that i think we have seen the sharp selloff in markets and, you know, potentially investors saying we're at the end of the cycle. actually, i think there are some

reasons we need to remain hopeful. economic growth is slowing but it's coming down off high levels we are seeing very strong labor markets. we are finally seeing wage growth come through, you know, which is supporting consumer demand so i wonlt necessarily say, look, we're heading into a re -- i wouldn't necessarily say, look, we're heading into a recession in 2019. for the stock markets, you have seen some of that negative sentiment come through, and it's about trying to leverage those opportunities. >> being in a position where you can look at a variety of assets, as we head into 2019 uncertainty remains incredibly high, even though the data remains robust how are you positioned into 2019 in terms of different asset classes? >> we've got more defensive into year end than we were in the year the difference in the selloff we're seeing this time around versus the correction we saw

back in february is that you have seen far more cross alternate pressures so it's not just the equity markets that have sold off. we have clearly seen big downturn in commodity, and we have also finally seen some cracks in high yield and leverage loans from our perspective it's tonight more defensive and balancing that to see where we can find those opportunities one of those areas has been adding back into emerging markets. it's one of the areas which has been hardest hit this year, and actually we think there's more potential in that area as we go into 2019. >> i'll come back to your emerging market point in a moment on your preference for more defensive sectors, are you not attempted by the valuation change we have seen in the cyclical space, when you look at european autos where valuations are tempting to say they have bottomed out, and what's stopping you from trying to bottom pick at this point?

>> well, i think calling the bottom of the market is always difficult. you never want to catch that falling knife. it's been one of the big differences in the sell off in the end of the year. cyclical versus defensive. you're right, absolutely we're looking for some of those opportunities, and particularly as we see signs of stabilization, we think there will be cyclicals into next year. >> and one big topic on investors minds is trying to predict how china unfolding in 2019 from a european point of view, i'm curious how you see the china story affecting growth particularly from germany and france, germany dependent on china for export is the european story dependent on the china story for 2019. >> it's clearly been one of the big themes for this year, and into next, is the whole impact of the trade wars, and a lot of

it is made between the u.s. and china. you're absolutely right. actually europe is a more open economy, it's actually kind of far more susceptible to the trade tariffs. that is going to be a big part of the story next year. >> has the recent data been alarming to you or were you expecting this disappointment, when i think about pmis for your area, germany, france, the business climate index for germany coming through retail data coming through on the weak side. is this all expect sed >> we have seen a sharper decline than we were expecting at the beginning of the year a big part of that has been the impact of trade tariffs. we have also seen obviously european specific issues, whether that's italy or, you know, the potential impact from brexit so it's about navigating those different challenges as we go into 2019. >> just picking up on your point on brexit, it's hard not to have a discussion on europe and not

mention brexit we are seeing valuationins in te uk down. investor sentiment seems to be poor and getting worse compensate for the risk of brexit >> in the uk market, you can look for those opportunities where perhaps you have the more multinational companies. i think those are more focussed on domestic growth are going to be challenged going into 2019. >> thank you very much that's karen watkin, portfolio manager at alliance and bernstein. i want to take you to central banks. sweden's central bank raised sending the crown higher, and stressed that monitored policy was expansion narrary. it briefly jumped against the dollar

the central bank says it's forecasted two hike starting next year. the boj has kemt ratpt rates ond the central bank kept its stimulus settings unchanged and reiterated its dubbish outlook, saying it will keel the extremely low rates for an extended period of time. governor koroda flagged global risks including protection imsaying the trade tensions will have -- including protections saying the trade tensions will have a global impact the central bank is expected to leave interest rates on hold on brexit up certain-- uncertainty as i mentioned earlier, in russia, president putin is set to kick off his annual news conference russian president vladimir putin is taking questions from

journalists at his annual end of year press conference in moscow. >> 2018 passed by, national projects, decreased going to take immense sums of money as is the plan that some experts and this is something you mentioned previously, fear that it is impractical or impossible to implement these national projects how well have the criteria been thought through, the head of the accoun accounts chamber says it is impossible to assess the efficiency of such projects. do you have any objections to this criticism >> translator: you compel me to say what about the expediency of

what you have mentioned. some question whether we need the projects at all. we need a breakthrough we have to leap into new technological, without that the country has no future, and this is a question of principle importance and we have to understand that how can we achieve that. we've got to concentrate the resources we've got. we have to find them and pull them together and throw them behind the priority avenues of development. how can we do that, just find money and give them to someone no we've got to formulate the tasks to find the resources, something we were doing during 2017. the administration, the government, we're working on that so laboriously. people say there are not many changes in the government but these are mostly people who had been working on the development program for the country. they've got to be responsible for what they planned.

>> translator: how shall we override our efforts, which is the budget for the national projects so 6.5 more for separate bank. all these investments. >> that was president putin giving his annual news conference we'll be checking in throughout the morning for more. i want to take you to oil where we are seeing a significant pull back yet again. both wti, and brent resuming their declines, reversing all of yesterday's gains. this is on the back of increased concerns around oversupply paired with increasing concerns around global demand we'll be back shortly. (client's voice) remember that degree you got in taxation? (danny) of course you don't because you didn't! your job isn't understanding tax code... it's understanding why that... will get him a body like that... move! ...that. your job isn't doing hard work... here.

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valid acceptance despite the heavily discounted sale. this comes as the sector has come under pressure following the collapse of fellow builder corilian and japan's ms and and d insurance company, has invested into the swiss book business this move comes as swiss re-eyes a possible ipo of the closed book business. moving on to societe generale it will improve the rh owe by 8 basis points the transaction will have a negative impact of 108 million euros on fourth quarter earnings saudi finance minister says he

is comfortable about the impact of lower prices on the country's spending plan for next year. in an interview with reuters, al jajon says the government hopes to change the budget deficit by 2023 but added the target is not set in stone earlier this week, that includes that 7% jump let's have a quick check with oil brent is trading down over 3%, giving back all of the gains we saw yesterday. and this is on the back of a combination of heightened oversupply concerns, paired with global growth concerns on the back of yesterday's fed meeting that sent a ripple across markets on the negative side now falling oil and jet fuel prices may have been a tail wind for the aerospace industry it's been a turbulent year for the sector

cobalt and and premera were two that were a bust that's according to aviation consu consulta consulta consultant i was struck by the comparison you offered. the u.s. has 47 scheduled airlines compared to europe with 227. is it fair to say that if we don't see further consolidation in europe, we are bound to see more failures? >> i think it's inevitable this has been going on for 20 years, and there's no coincidence that the most profitable parts of the airline industry is in the united states and north america. we have a very fragmented european aviation industry very small airlines, they can't achieve critical mass. they struggle, they get supported by state aid on some occasions. we have reached a point this can't go on. >> when you think about the

consolidation that will happen in europe, what form is it likely to take will it continue to be long haul incumbent players, or might we see a different trend? >> one of the trends is certainly going to be around the large airlines like iag looking to acquire smaller regional traffic which can connect feeder revenues at quite low cost we're also beginning to see these intercontinental equity relationships, so, you know, there are airlines that are from china that are investing in the united states. u.s. airlines are investing in china, and latin america as well it's at both ends of the spectrum that we're going to see these investment cases being made. >> and in terms of the business models, the low cost carriers have really introduced this emphasis on ancillary services that was never there before. are we likely to see the incumbents take on this business model and how is that going to

transform the way they account for their finances. >> they already are. we joke anecdotely like airlines like british airways, they are competing for the same passenger on the same seat on the same route, so ancillary revenue is going to become increasingly important and more importantly, we won't be able to measure the yield per passenger. it will be the revenue per passenger. airlines are going to become retail outlets. >> that's quite a prediction i want to shift gears to the air craft space. just this week, we saw that boeing secured terms with the brazili brazilian jet maker. they have agreed the terms to it we have seen air bus embark on a partnership with a canadian airline. what should we make of these strategic moves? what's behind them >> that gives them the full suite of product from the ultra long hold aircraft through to the shorter regional jets.

there is huge demand in europe and emerging markets for these single aisle, 100, 130 seat aircraft and boeing and air bus have moved beyond that therefore it was a space the easiest way to get into the space and these aircraft are popular amongst airlines and users is to acquire someone, become a partnership. >> more partnerships, more deals in the pipeline. >> absolutely. >> and in terms of air bus specifically, they've got a new management team, the share price has been under pressure for the last six months or so. will the new management team reset expectations >> it's going to be very hard. the real challenge for aircraft manufacturers is their delivery schedules are seven and eight years out, so one of the big challenges for airbus as hauhass been delivery. they can't deliver to schedule which is ironic in an airline

industry that means the management have got to find a way to boost production rapidly in the short-term, two to three years, and building production facilities and getting things through processes takes time >> and in boeing, we have just seen, has decided not to invest in production capacity, not to invest in its own business but in fact has had to boost its dividend by 20%, and its buy back program is this the best use of cash for boeing >> it probably is. they're in a strong position at the moment strategically for them as a corporation, it probably makes great sense and they are delivering to schedule they have a full suite of autobus through 2025, 7,000 aircraft on order. most businesses would love to have an order book like that at this time of year. >> thank you very much, john grant, partner at midas aviation for joining us today now, ahost of flights remain grounded at london's

gatwick airport with officials saying the delay is caused by drone activity i've seen some of the photos from that. it looks miserable i'm feeling lucky right now i'm not at gatwick i want to leave you with a quick look at how european stocks are trading this morning continues to be a negative day across the board the french and italian industries are seeing the worst losses we'll be back shortly.

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welcome back to "street signs" i'm juliana tatelbaum and these are your headlines. european shares opened lower that's after a selloff stateside sparks global declines. >> many participants had expected that economic conditions would likely call for about three more rate increases in 2019. we have brought that down a bit and now think it is more likely that the economy will grow in a way that will call for two interest rate increases. sending the crown higher

as -- rousseau shares jump as the u.s. lifts restrictions but slaps fresh sanctions on russia over election meddling as president putin gives his annual press conference in moscow. and kie shares crumble falling to a 15 year low as the uk construction company sees its fundraising effort flop with 38% of the rights issue taken up despite a heavy discount now, we are just getting uk retail sales data in now remember this comes after a week where retail has taken center stage earlier on we had asos profit warning on monday drive some concerns through the market not only in the uk but also across broader europe now we are seeing the november sales number come in, 3.6% year on year growth versus october at

2.4% year on year, so an acceleration also significantly beating expectations the reuters poll was looking for 1.9% year on year growth so a nice acceleration there and ahead of consensus. retail sales excludeing fuel, 3.8% year on year, oolt acceleration versus october and again beating expectations -- on the acceleration versus october and again beating expects. we have seen sterling rally, that is a nice bounce on the back of the retail sales data. as i said, expectations have become a lot more muted, certainly whisper expectations after the groloomy retail numbes from asos and the business climate index in germany earlier in week. all together, expectations were pretty low coming into today, and that is probably why we are seeing in positive snap reaction in sterling. now i want to take you to the

broader european markets and see how stocks are continuing to trade this morning not much has changed since we last had a look. stock 600 down about 1.2% this morning. this is just joining the selloff we saw in asia, which is of course kicked off by the steep losses we saw in the u.s. yesterday. all of this has come on the back of the federal reserve meeting where the fed chair did deed strike a dovish tone, not quite dovish enough given expectations into yesterday's conference. let's have a look at european markets and see how the regions are faring, particularly the ftse 100 trading .9% lower. the worst performer of the day, the ftse mib, italian stocks had outperformed on the back of news we had seen a budget breakthrough between italy and the government and theeu now today some of the shine is

being taken off. moodies is concerned about the italian economy next year. let's see if we can expect a rebound in u.s. futures. it looks as though the losses will continue. all three major indices, the dow looking to open 25 pianos lower, s&p 12 points lower, and the nasdaq opening 25 points lower facebook in focus, we'll come into that in more detail later on today. an event we have been watching all morning it kicked off just a little while ago, president putin's annual news conference the russian president is taking questions from journalists at his annual end-of-year press conference with the event expected to last several hours the questions so far have focussed on the economy, with the president saying he believes inflation is at an acceptable level. we'll breing you updates as we

have them. and we'll bring you to the press conference. >> translator: i'm going to look into that. as is usually the case, the problem is usually more complex when we might guess at first sight. but again, i would like to highlight that it has always been our pride and if flex production is crucial from a country, we need to keep that and i'm going to look into that. as for industrial growth, at 3%, and manufacturing 3.2% growth. those are some good numbers. as for light industry, it's been developing even more rapidly food production has grown over ten months for 13%, which is

also testimony to the fact that consumer rate is growing >> now rousseusal shares have o hire, one of many companies partially owned by russian oligarch, who was targeted by the united states for quote malign activities in the wake of russian annexation of crimea adding it will return the firm toll regular working conditions. meanwhile the united states has introduced new sanctions in response to russian meddling in the 2016 election, blacklisting 16 members of the military intelligence service it comes on the back of an executive order that ensures individuals and companies who interfere in u.s. elections will be punished. switching gears back to the finance sector it's been almost a year since

the introduction of mifid two, aimed another increasing market transparency our next guest says the law was too much too soon. i'm joined by mike horn, director and head of securities at pershing. i want to start with that. the impact of mifid ii on the research industry, means that for the first time ever, clients are being asked to pay separately for research and sales, advisory and execution. in the lead up to this, we are seeing estimates anywhere from 30 or more consumption cuts. one year in what have we seen? >> exactly that. i think it's moreacute around the hedge fund side of the business we have seen cuts 30 to 40%. if you look at the buy side, wealth managers, maybe around 20%, and there's multiple reasons for that

for the first time, we have to pay for this explicitly. the buy side had a choice. they asked their investors to pay for it or pay for it themselves unsurprisingly, most of the market decided to pay for themselves all of a sudden, you're paying for research, putting a lot of value on the research. lo and behold, everything has gone into the passage stocks, the bp, microsoft and so forth the less liquid stocks are being affected because the sell side aren't writing notes on those particular stocks. the buy side aren't buying them. it's simple economics. as a result, liquidity has suffered in the small caps stocks more pronounced in the uk than anywhere else. now, that's a fracture what i'm concerned about is that fracture becoming a break because the further up the chain you go in terms of analysts, as i said earlier, setting up research boutiques, you have

some of the small cap broken community that are takeover targets. whether they go it alone, merge, change their business or just accept being taken over remains to be seen it's about what is the biggest effect there's a huge piece of regulation, definitely research unbundling and that will continue to go on. your point about reduced coverage for those less liquid stocks, if we look down the line and we see an industry that does less to understand these companies, do the regulators see that as a problem that investors are potentially going to be investing in companies they know less about >> that remains to be seen i wouldn't be surprised if the european commission took a deeper look into the research market one for the reason you've just said, secondly because we're hearing that a lot of houses in the banks, where as previously they were offering menus for global research between a hundred and a million pound per

year, the price is going down. is it an inducement. the research market will be looked at as a whole in particular, the effect on the small caps stocks. i don't think investors are going to use less information, and they simply want to invest in them. we mentioned the exodus, but it's the ipo market that hasn't looked great over the last year in particular. i don't think particularly in the uk, if you look at ipos, nothing looks promising on the horizon, so they're definitely going to be looked at next year is research amongst other things. >> one other element that's related to research, corporate access the part of research and sales where banks historically would connect companies to investors and there was benefit to be had by all investors got access to the companies, companies were guided as to what investors might be interested in and banks got an opportunity to converse with companies and clients, but in a

post mifid world, who pace for that >> i think when we see cuts in research, it's across the board, whether it's a note, electronically delivered research and whether it's corporate access the ride toward passive investments. i don't think clients want to look at research as much as before so across the board, corporate access or not, clients simply aren't spending as much because nay don't need to. >> when i look ahead, once we have seen the full impact of mifid come into effect, who's going to end up being the biggest win skpeners and losers? you mentioned small boutique firms could be attractive takeout targets for the big banks, who's going to end up >> unfortunately i think it's a case of power moving from the hands of the many into the hands of the few, and you can say that whether it's buy side or sell side on the investment banks because operating in the mifid

world is an incredibly expensive business to be in. costs have gone up revenue compression from our clients. unfortunately, whether it's right or wrong, the big plans with the deepest pockets will succeed. >> thank you very much it sounds like still a long road for banks and clients alike. that is mike horn, director and head of securities at pershing on mifid ii. i want to take you back to the oil markets. the opec secretary general has commended saudi for going beyond the output deal to cut oil production from 10.2 million barrels per day from january that is according to a document seen by reuters. now, of course this has been a huge topic over the last several weeks, the opec meeting took place first week of december, and we saw some disappointment on the back of that in terms of the production cuts agreed we are hearing opec secretary general commending saudi for cutting more from january, and having a look at how oil is

reacting, present is down about 2.9%, pairing back steeper losses that we saw earlier in the day. but still in negative territory. we'll be coming back and following that story more as the morning progresses remember, follow us on twitter at street signs cnbc, and tweet me directly if you have any comments on cnbc juliana. facebook under fire, shares tumble as the company is hit by fresh data sharing allegations find out more next ♪ oh, there's no place like home ♪

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the maker of marlboro cigarettes altria, deal would value firm at $38 billion. first reports in the "wall street journal," sources say altria will pay $12.8 billion for the stake. shares in canadian cannabis

company tilray surged after a venture with inbev the jv will be limited to canada for now, and the companies will decide about commercialization in the future. this news comes after tilray announced a second agreement with novartis. facebook shares sank over 7% after the company admitted it allowed certain companies access to private user information under special partnerships and compounding the misery wednesday, washington, d.c.'s attorney general announced he was suing the social giant over the cambridge analytica data breach to help us make sense of what this means for the company, i'm joined by elizabeth schultze

facebook under fire again. it feels like there's more negative news around this company. what is their defense in terms of data sharing? >> rough day for facebook yesterday, shares sinking 7%, down 25% this year the reason for this started with the report by "the new york times" saying facebook gave special access to some of its user data to about 150 companies. a lot of what that data was given by consent, but it included private messages, contact details, things that consumers probably don't think facebook actually did have access to. we heard about the lawsuit from the d.c. attorney general. that's also a data protection concern and that was over how it handled the cambridge scandal, exposing the data of 87 million customers. it's been an ongoing issue for facebook the question that is weighing on the stock here, and facebook's defense is that it is continuing to do what it can to address it.

it made mistakes in the past a lot of what it has done has been with user permission. there's a lot of questions around how much users know is out there. facebook not giving us a ton of information to go on regulators saying we need to step up regulation of this company in the u.s., possibly here in europe we need to be more transparent, and we need more general oversight. >> is that really realistic. i mean, we just saw another tech company, google, their testimony to congress last week and it was more pronounced than ever, this gap in understanding between lawmakers, regulators and the tech companies, so to say that it's in the privacy protection clauses, is that a really realistic defense that they can offer? >> there's certainly momentum at the moment for more data protection, regulation in the u.s., and there's calls, even from some of the tech companies themselves apple has been particularly outspoken about this to say we need a comprehensive data flaw, just like europe has already in place with the general data protection regulation. so far it doesn't look like there's a lot of actual momentum

in congress for the law to pass. that's possibly why we're hearing about some of the individual lawsuits from the district or from state legislatures about their own losses they are trying to pass locally because they are saying hey my constituents are fed up. >> the state is taking a little more control. >> it's a general theme we have seen in america. >> yes thank you so much for joining us and flushing it out. elizabeth schultze, our tech corresponde correspondent. the federal reserve has raised interest rates for the fourth time this year, an expected change that flew in criticism from the wall street and the white house. the key target range stands between 2.25 to 2 a.5%. u.s. stocks and bond yields fell sharply after the decision steve fleischman filed the report. >> it seemed like the market wanted the fed to back off entirely from plans to raise rates next year, instead it got

only a partial backing off at best here's federal reserve chairman jerome powell explaining the change from forecasting three rate hikes next year to now forecasting two quarter point rate hikes. >> many participants had expected that economic conditions would likely acall fr three more rate increases in 2019 we have brought that down a bit, and now think it is likely the economy will grow in a way that will call for two rate increases over the course of next year we always emphasize that our policy decisions are not on a preset course and will change if incoming data materially change the outlook. >> here's a look at what the market wanted and what it got. the market had wanted one or no rate hike forecasts for next year instead it got two hikes down from the previously forecast three. the market wanted flexibility on the fed's plans to reduce the balance sheet by $600 billion next year. fed chairman said we're going to go ahead with reducing the balance sheet. they want more concern about the

economy, instead the fed put a line saying it is monitoring developments but not necessarily acting on anything yet as far as the market concern there may have been a little bit more dovishness in the federal reserve chairman's statements than the market gave it credit for. here's him talking about how the data does with the fed next year. >> from this point forward, we're going to be letting the data speak to us and inform the outlook, and inform our understanding of what would be appropriate policy, so there's a fairly high degree of uncertainty about both the path and the ultimate destination of any further increases. >> and maybe one of the biggest disappointments for the markets is that they wanted the phrase removed from the statement saying that further gradual increases were going to be needed the fed did not remove that. but it said some further gradual increases. so a market thatme wanted a completely dovish, got more

dovish but on path to raise rates. steve leishman, cnbc business news i want to bring in jim bianco good morning, jim. >> the market was expecting a more dovish tone from the fed, which they delivered but it has come up short of expectations. they were also looking for more on the balance sheet reduction in terms of more commentary from the federal reserve chair, but they didn't get it why didn't jerome powell spend more time talking about this topic? >> the fed institution that is kind of slow to move, so while they gave the market a little bit more of a dovish bend, they went from hiking rates three times in 2019 to two, the balance sheet we've got the typical boilerplate that we have heard from the fed for many years, that the word is auto pilot, that they will continue

to run it off. the problem is the market looks at the balance sheet reduction as another form of rate hike where the fed doesn't really think it's much of a rate hike, and so therefore the markets looking at the two rate hikes they promised, plus the balance sheet reduction, and they're worried that the federal reserve will go too far. the u.s. economy's natural state is to expand recessions are curbed because something breaks it. the leading cause of breaking the economy is a federal reserve that hikes rates too much and that's what the market is worried about. we have seen this before they're going to hike rates too much and they're going to cause a recession. that's what the problem is and it really comes down to not addressing what the balance sheet means when the market thinks it means several rate hikes for 2019. >> if i read between the lines in terms of what you just said, it sounds like the fed is its own worst enemy heading into 2019 >> that's usually the case with

the fed most of the time is that they are their own worst enemy they try not to react to the market at times and kind of ping-pong simp ping-pong back forth with what the market wants but there are times they go tone deaf and don't address what the market wants and this is one of those times when they were slow to address the balance sheet, just kind of just pushing aside those questions saying, oh, it's on auto pilot it will continue to decline. we have said this for years when the market said i know you've said this for years but now we'd like you to address it and they didn't. >> now a lot of the headlines that have come out on the back of the fed meeting are around a defiant jerome powell, a jerome powell who stood up to president trump. how much of an effect do you think president trump's criticism had on him potentially, you know, is there a chance that his plan actually backfired and jerome powell went ahead with a slightly less dovish tone than he might have

otherwise because he wanted to give the impression he was standing up to the president. >> jerome powell said it had no effect, and i do believe him that it will have no effect. it's not new that presidents kr criticize the federal reserve. george h.w. bush has always blamed allen green span for losing the 1992 election nothing new there. the difference with trump is he's just a little more bombastic about the way he does it. >> a little more bombastic i have to cut you off there. thank you so much for joining us, jim bianco, president of bianco research. thank you for joining us that's it for today. i'm julia tatelbaum. "worldwi "worldwide exchange" is up next.

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