welcome to "street signs." i'm julianna tatelbaum >> i'm willem marx the u.s. moves higher. president trump cancels his trip to the world economic forum in davos, he might miss an opportunity to discuss trade with china >> u.k. home builders jumped after bank of america, merrill lynch upgrades the sector from neutral to under perform >> chinese automaker tells cnbc it's not sold any shares in germany's daimler after a report the company had cut its stake by more than half

>> federal reserve chairman jerome powell affirms the central bank's patient stance, but warns about the growing level of u.s. debt >> the the long run fiscal nonsustainability of the u.s. federal government isn't really something that plays into the next, you know, the sort of medium term that is relevant for our policy decisions >> european markets have been open now for just over an hour and it is shaping up to be a positive start to trade for the final day of the week. the euro stoxx 600 is up about 30 basis points right now. this follows a fairly mixed day yesterday in terms of the different regions, but we did see the stoxx 600 manage to close marginally higher yesterday. this, of course, follows another decent day stateside wall street managed to shake off a wobbly start to end higher yet again. we have seen that oil price rally continue it is up again today brent and wti on hopes that

saudi will continue to cut this year we have also got the same narratives overhanging the market that we have heard all week u.s./china trade still at the fore of investors' minds u.s. government shutdown did he fore as well of course, brexit with uncertainty looming large ahead of next week's vote. let's get into the markets and see how the regions are fairing today on an individual basis it is a bright picture across the board all four of the major indices in europe are trading higher. the best of the bun etch, ftse 100 up 80 basis points as i said, investors seem to be buying into the u.k. market. let's get into the sectors this week those trade sensitive sectors sharply in focus we saw some big moves on the back of confirmation that trade talks went relatively well now this morning we are seeing basic resources outperforming, up about 90 basis points, but perhaps more interestingly is what's happening at the bottom of the leaderboard today

autos and technology under performing the big, big lagger today, auto is down. about 60 basis points. this sector has been facing a slew of negative headlines aside from u.s./china trade talks, yesterday news from jaguar, land rover and ford, they'll be cutting jobs in europe and another warning from one of the auto suppliers around weakness in demand from the chinese. so plenty of head winds around the auto sector coming through in trade today willem >> thanks. in the u.s., the partial government shutdown has hit its 21st day and is on track to be the longest in history president donald trump has so far failed to win funds from congress to build the border wall that he long insisted mexico would underwrite. yesterday he visited a town on the u.s./mexican border and once again threatened to use emergency presidential powers to start construction without the need for congressional approval. >> this is a common sense argument now, if for any reason we don't get this going and they're not going to act responsibly and

they don't mind death and crime and all of the problems that they cause by not having a barrier, then you will see what happens with national emergency, which i can do very easily and there's no question it holds up. and it was approved by congress because the act itself was approved by congress >> nbc news reports that officials have briefed president trump on a plan that would use army core of engineer funds to pay for the wall's construction. under this plan, he could declare a national emergency and divert money previously set aside for projects in hurricane damaged regions of puerto rico and as the shutdown continues, federal workers launch protests in washington ahead of their first pay day without pay. the u.s. labor department reports that more than 4700 federal employees filed unemployment claims in the last week of december that compared to 929 such claims the previous week. there is no comparable data yet for the first week of january, but individual states have

reported an uptick in benefit claimants among federal employees. >> president trump says he will miss this year's world economic forum in davos due to the shutdown in a tweet trump blamed, quote, the intransjensen of democratic lawmakers for the cancellation and senior trump administration officials now say u.s. treasury secretary steven mnuchin is likely to lead a smaller than expected u.s. delegation to davos. in a news conference mnuchin did not confirm if he would be attending, but he said conversations about his own davos travel plans are going -- are ongoing. >> i will be discussing with the white house whether we'll continue that trip my guess is if we do continue it, it will be in a scaled back version. >> now, i want to bring into the conversation the global head of debt and rate strategy from ing. firstly, on the u.s. government shutdown over the last 24 hours, we have seen a few investment banks cutting their economic growth forecast for the u.s. for q1 as a result of the shutdown

what are you expecting in terms of the economic impact of this >> yes, so far it's all politics it's showing how polarized the u.s. political set up is at the moment it is unfortunate for the people not getting paid from a u.s. micro poerspective it's a negative. there are far more serious issues out there in terms of the bigger picture, and we are expecting the u.s. economy to slow, but this is an element but not the major element. the major elements are bigger factors outside. china, the fact the euro zone is struggling, the fact that the fiscal stimulus has -- will, offer the course of 2019 >> we're going to into some of the other factors you described momentarily. ow, meanwhile fed chairman jerome powell said the central bank in coming months will be, quote, watching and waiting. he stressed under control and

this allowed the fed to be patient in terms of its monetary policy our u.s. colleague steve weissmann has filed this report. >> in his third public appearance in the past manuel bojorquez fed chairman jerome powell sat down with a chat and tried to ease market concern over the rate outlook. powell suggested the fed is in no hurry to raise interest rates. >> i think we're actually in a good place i think where that leaves us, particularly with inflation low and under control, is we have the ability to be patient and watch patiently and carefully as we see the economy evolve. >> the fed chairman repeated he sees the u.s. economy as strong and expects momentum from 2018 to carry over into 2019. his biggest concerns, weaker global growth, trade tensions and an extended government shutdown but markets sold off during powless comments those several factors were in play including a soft 30 year bond auction and a tweet from president trump announcing he would not be going to the davos world economic forum this year because of the shutdown.

but some pointed to powell's comments saying the balance he will be substantially smaller than it is now >> we wanted to have the balance sheet return to a more normal level, which is a level no larger than it needs to be for us to conduct monetary policy. don't know the exact level that will depend on really the public's appetite for our liability, specifically currency to us that's a liability and the public has a large appetite for currency and also reserves and other liability. so it will be substantially smaller than it is now >> investors are watching what the fed does with its balance sheet because of its potential to raise interest rates. the average market expectation is for the balance sheet to decline to around 3 1/2 trillion dollars from the current level of 4 trillion. investors, though, will have to wait until the next public appearance or press conference by powell to find out what substantially smaller means. steve liesman, cnbc, business news >> powell also expressed his concerns about the size of the u.s. debt.

>> i am very worried about it, but from the fed standpoint, you know, we're really looking at a business cycle kind of length. that's our frame of reference. and the long-run fiscal nonsustainability of the u.s. federal government isn't really something that plays into the next, you know, the sort of medium term that is relevant for our policy decisions it's the long run issues we need to face and ultimately have no choice but to face >> powell is one of several federal reserve members to have spoken publicly this week. most of them have echoed powell's calls for patience. the st. louis fed president said the central bank has been too hawkish and he called for an end to more interest rate hikes. meanwhile fed vice chair richard clarita meanwhile insisted monetary policy is not on a pre-set course coming back to the u.s. markets, yesterday we saw bond yields dip slightly as investors

digested these fresh comments from the fed chair and vice chair around reiterating patience and saying that inflation is under control what do you make of his latest comments and the reaction that we saw in bond markets >> well, it's very clear he's changed course over the past quarter, but i think he's done it for good reason financial markets don't sell off for no reason. they are a good forward looking indicator for where the u.s. economy sergio garcia go to go the next months and quarter. what we saw to the end of last year is a capitulation of sell off of assets. the markets essentially questioning whether the fed was on the right path. so what the fed has done since is, okay, they delivered the hike, which they were kind of obligate today do. they had to because trump was telling them not to, so they had to deliver the hike. but now they can pause and what he's done is very sensible he's listened to the markets he hasn't said that the fed is done and we're actually not convinced the fed is done.

we do think the fed pauses and what's happening right now is risk assets are rallying. if that continues over the next six to eight weeks, it's a very different environment, especially if we get a decent payroll number, for example, if the data remains positive. i think what he's done so far is quite sensible and it gives him some breathing space and they can just do some data watching for a few weeks. >> and on the balance sheet, this is something that really rattled markets back in december his comments being in auto pilot mode he since calmed markets last friday when he spoke, but yesterday he said that he does see the need for the balance sheet to be substantially smaller than it is now do you think the market can take this more substantial quantitative tightening right now in terms of liquidity? >> yes, it's very interesting. i read the minutes and there was a very large section about qt. lots of discussion about what

should we do and i would say going forward, there is a reasonable possibility that they slow down in terms of their reinvests. i will be surprised if they did it very soon, but certainly if we go into q2 and there has n't been a pickup, and the market is still struggling, it's something that -- the most likely scenario is what they do is they could do one of two things. they could either slow down the monthly reinvests or they could move the reinvests shorter on the curve. partly in an effort to steep enthe curve. they didn't say that's why they would do that, but i can see that's the rationale huge discussion. the balance sheet was 4.5 trillion the target is 2 trillion it really only started this year -- i mean last year it began -- sorry, last year it really started i think we're about a third of the way through. so we've got two or three more years of this to happen.

>> and in terms of playing this in the market, what's your view on duration at the moment? >> so, we had a massive rally in december the ten year got down practically to 2.5%, which, by the way, is flat to the fed fund ceiling. and typically when you get to the end of a rate hike cycle, market rates go through fed funds. so we nearly got there but if you look at the last two rate hike cycles, when market rates touched fed funds for the first time in the cycle, the fed funds rate subsequently still got height and market rates hit new highs. so our view on duration from here is to be short duration we think there is an up side move to rates here they certainly carry from being in long -- but right now we've been risk on in the risk space just to see how things pan out over the next several weeks and moderate in terms of fed treasuries, adding risk in

emerging market and high yields. >> i want to broaden this. do you think investors are being overly focused on the potential fall j fallout from this continued trade war perhaps more so than they should have been on the continued relatively strong data we've seen recorded in the u.s.? >> yeah, the trade war story has been with us for quite sometime. and you could argue that the trade war narrative has, in fact, improved over the past few months i mean, the stand off between the u.s. and china has been put on hold, and there have been very useful discussions between the u.s. and the europeans donald trump is playing the long game here. he has an agenda to change the rules of engagement and has been successful so far. the trade war narrative is one of many issues out there i wouldn't say it's a dominant one but certainly not a positive one. it could turn positive, however. it looks like the chinese/u.s. story could turn positive. if it did turn positive, it would support the narrative i

cited, long risk assets. >> in terms of the resolution, if it doesn't lead to major reforms in the way that the chinese do business, does that matter from an investor perspective, do you think? if it ends up being just a relatively quick fix >> well, there is a massive potential positive for renewed inward investment into china if the rules of engagement have changed. if you look at the past --the trading relationship between externals into china over the past couple of decades has been frustrated by the fact that you've got to change the way you do business if you want to operate in china if that changed, that will be massive. it would certainly be positive from a growth perspective globally and would really open up china >> all right we'll leave it at that thank you so much for joining us this morning, global head of debt and rate strategy from i.n.g. >> fed chair jerome powell says the central bank will ultimately have no choice but to face up to the ballooning levels of u.s. debt for more on powell's comments

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welcome back to "street signs. we just had some comments from the president of the european commission talking, as you might imagine, about brexit. i want to bring those to you he is saying he still hopes there will be a brexit deal, and he also says that no deal would be a disaster, something we've heard repeatedly from both sides of the english channel in recent weeks. and just to pick up on that, of course, britain's foreign second jeremy hunt saying this morning there is a possibility of no brexit, but he's also told the bbc radio that if the government did not deliver on brexit, that would represent, quote, a fundamental breach of trust. hunt went on to say that parliament was committed to stopping a no-deal scenario and he's reiterated his support for prime minister theresa may's brexit withdrawal agreement. now, honda says it will close its u.k. plant for six

days in april to mitigate any logistical problems caused by brexit a spokesman for the japanese car maker said the closure would help recover potential production losses, especially if the u.k. leaves the e.u. without a deal and car parts become subject to customs checks. earlier this year, bmw said it was moving the annual shutdown period to april to coincide with brexit separately, ford and jaguar landrover confirmed they will slash thousands of jobs across europe amid weakening demand for diesel vehicles and a slow down concern. jlr has announced 4500 jobs will be axed in the u.k.. the ceo blames multiple geopolitical disruptions for the slow down in recent quarters >> and in other auto news, china's g.i.l.i. heely which isy billionaire lee, cut its 9.7%

stake in the german car maker by half daimler did not immediately respond to a request for comment. and tokyo prosecutors have indicted nissan chairman carlos ghosn on two new charges of financial misconduct ghosn, who has been in detention in japan since november, faces a maximum penalty of 15 years in prison he's denied the charges and his lawyers have asked for his release. meanwhile, nissan itself has also filed a criminal complaint against ghosn. now, to help us make sense of this rafrt of news in the auto sector this week, i want to bring in arnt from ever core thank you for coming in this morning. the auto sector, one of the most unloved in europe, structural and cyclical head winds abound i could spend quite a while naming them. in over the last couple of days, as willem just highlighted, we've had particular news around brexit impacting jaguar, land rover, also ford how much of a surprise are these warnings from auto companies,

given how well known these head winds are? >> i think the market's been expecting them you look at the valuation of car stocks it's the cheapest asset in equities they're all trading at, you know, low -- recession low multiples, so i don't think they come as a surprise you know, we pointed out in our outlook statement there is going to be another very, very tough year macro is just extremely tough these days, plus we have cycle peak volumes in the u.s., in europe china is wobbly at the moment, so it's probably the last one you wanted to have running a car company. >> one of the head winds car manufacturers were facing in 2018 was the change in emissions standards in europe. as we look to the next earning season, are the production troubles that caused a lot of the issuesfully behind us, particularly in the oems and auto supply chain or will that

continue to impact earnings? >> it will continue to impact earnings you're referring to wltp emission standards being implemented in europe. it's another big european head wind you can say europe is regulating itself out of the auto business these days the u.s. is loosening emission standards. china has a pretty clear mandate where they want to head to that's one of the reasons why more and more companies are exiting the european market really >> when we talk about emissions, one of the reasons that a company like jaguar/land rover has favored diesel is because it allows them to build these big powerful cars and stick to standards that have been pre-set. and we've seen consumers, especially in theu.k., move away from diesel recently. do you think that jlr was too slow to respond to that change in consumer taste? >> i think so. i mean, jlr has invested a lot of money into their own powertrain technologies very late in the powertrain cycle

instead obviously they should have invested into electrified powertrains, what volvo is doing, the germans are doing that's really backfiring right now. >> do you think this investment we are now seeing in electrification from this firm is a too little too late >> i think it's too little too late i point out in the report end of last year that powertrain technologies should really be outsourced to suppliers or bundled between car makers because the internal combustion engine itself is just not going to be a differentiating factor in the future any more >> one other question about this when you look at the chinese market for jlr, it's been massive and very profitable. we're seeing it slow down. how much of this do you ascribe to the loss of consumer confidence in china? and how much of this is about difficulties that jlr has faced with its sales network there >> well, it's purely self-inflicted it's homemade, because we don't see any weakness in high-end

premium suv product in china from any of the germans. so, you know, it can only be driven by mismanagement. >> now, looking at your 2019 outlook note, your title grabbed my attention, waiting for the final cut. how will we know when we've seen the final cut to earnings for european autos >> well, we never know, but we're going to detroit next week where we get a couple of company updates. i think it will take until q2, really, to see how the year plays out, how 2020 plays out. there are fears that we're heading into u.s. recession tail end 2020, post elections so i think we can still really see production cuts, earnings cuts, guidance cuts well into the year >> really appreciate you coming in today and covering so much ground for us. that was arnt elling horse from ever core isi talking about the impact of brexit, head winds for

jlr specifically in china caused by, he says, mismanagement coming up next on the program, the u.k. will release its gdp figures for november we will, of course, be bringing you that data as it breaks across the wires do stay with us.

welcome back to "street signs. i'm willem marx. >> i'm julia tatelbaum and these are your headlines >> europe moves higher as the u.s. government shutdown drags on and president trump cancels his trip to the world economic forum in davos, raising concerns he might miss an opportunity to discuss trade with china >> u.k. home builders jump after bank of america merrill lynch upgrades the sector from neutral to under perform >> and chinese automaker geely says it's not sold any shares in germany's daimler after a report the company had cut its stake by more than half >> and federal reserve chairman jerome powell affirms the central bank's patient stance, but warns about the growing level of u.s. debt >> the long-run fiscal nonsustainability of the u.s.

federal government isn't really something that plays into the next, you know, the sort of medium term that is relevant for our policy decisions >> welcome back to the program we are just waiting for some u.k. gdp numbers to come out any second now noting that the cable, if you look at it there, it is down now to 1.27. we are seeing those numbers at this point we've got the u.k. november gdp. it's come in at .2% month on month. that's against a 1.1%. three month numbers .3%. that is against october's number of .4% and very much in line with expectation you can see there that the pound is trading around a 5th of a percent weaker against the u.s. dollar, and it's worth pointing out that we are now joined by the chief u.k. senior global

economist at unicredit, also joined by padhraic garvey from ing. this is much in line with your view for the number 3.3% why should we be looking at this number in any detail, if we should be? >> it tells us the u.k. economy is slowing it comes after fairly strong summer period where retail sales were buoyed by the world cup effect, the good feel effect from that. and also much better weather, which buoyed retail sales. we are now seeing the hang over from that and also we've got, of course, heightened brexit related uncertainty. and a world economy that is slowing down 0.3% q on q doesn't look too bad relative to what's happening in europe at the moment >> it's really hard to ask you this question and to get an answer that's fair to what is going on in a very complex environment, but how much does this uncertainty about brexit, if we're looking back now a

couple of months essentially, how much does that impact a figure like this, do you think >> it's impacting it a lot today's number, the rns calculates it based on the output promotion to gdp. so investment is not directly in there, but it will use the expenditure approach when it comes up in a fourth quarter estimate next month. and if you look at the whole year, you can really see the hit to investment over that year it's quite striking, and particularly relative to what's going on in the rest of the world. >> gdp is arguably a backward-looking figure, whereas pmi s are more forward looking when we got the latest pmi s from the u.k., there was evidence of stockpiling. can we really get a clear picture of the u.k. economy when we see businesses reacting like this, stock piling, building up inventories ahead of brexit? >> right, today's gdp figure is like looking in the rearview mirror

it is only to the three months of november. the pmi s are a good indicator of what's going on now we saw from the manufacturing pmi it rose because of stock piling that is a very short-term effect it will probably continue in the first quarter, but that will unwind and right now it depends on brexit for the u.k. economy. >> i'm looking at some other numbers that have been released. we have november's industrial output, it's down .4% month on month. that's against a expected increase of .2%. it's down 1.5% for the year. manufacturing output also down .3% month on month against an expectation of .3 increase. what is your thinking about sterling the next couple weeks as we buckle up for the vote on tuesday night and the inevitably complex, no doubt, messy aftermath? >> yeah, so, first of all, the production numbers are very volatile so you're going to get

these outliers if you look at the year on year numbers, they're negative. they've been negative for sometime this is a very weak macro economy. if you look at a spectrum of developed growth rates, the u.k. is at the bottom of that list. down there with japan. it's worse than the euro zone. and, you know, 0.3% times 4 is 1.2. 1% growth economy. u.k. is not a 1% growth economy if the u.s. is growing at 2 or 3% for sterling that's a negative, but i have to say -- by the way, the problem here for the b.o.e. is that two by two-year forward inflation is 3.7%. so they're looking to hike rates at potentially against a backdrop where the economy is strong we don't think they will because of brexit. and no question about sterling can be answered without brexit it's all about brexit. if we get no deal, we can go to paris in a flash against the dollar we won't stay there, but we can go there if we get a deal, we can have an

up side move sterling is undervalued. fair value is 150, 160 versus the dollar it's 125, 130 is far too low now, there's been a lot of talk about the deal we're going to get next week if we get a deal or no deal as far as we're concerned, we just need certainty. it's as simple as that even if it's bad certainty, at least we know. and that will support sterling if we don't have certainty, sterling will have problems. >> when you talk about certainty, we may have certainty sooner rather than later on the withdrawal agreement but even if we get agreement on that, there's still such a long road to go and so much uncertainty when it comes to the u.k.'s trading relationship with the european union so what is certainty in your view >> so, certainty would be a withdrawal agreement if you gave me withdrawal agreements, let's say theresa may's plan, that would be enough because at that point economic agents can make decisions.

whether they're good decisions or bad decisions, at least they can decide that would be enough for me for certainty -- >> one question for you, daniel. political analysts talk a lot about the prime minister potentially trying to run out the clock and force m.p.s to confront no deal square in the face and, therefore, swing behind her proposal. what does this mean for the bank of england's timetable on rate hikes if they do push it through to the end of march? and what are we seeing from currency traders in terms of positioning around the possibility of an extension of article 50 >> from the bank of england we don't expect them to move until at least the second quarter of this year, and that's assuming that there is a ratification of the brexit deal on the table or something similar in orderto avoid the risk after that a lot depends on the global economy we think it's weakening, and the risk is the bank of england has already reached the peak of its hiking cycle

>> daniel, thank you so much that was the chief u.k. and senior global economist. our thanks also to padhraic garvey, global head of debt and rate strategy at ing now, china is planning to lower its 2019 growth target according to a reuters report. this comes as the world's second largest economy faces head winds with a trade spat with the u.s. we talk about a lot as well as slowing domestic demand. according to reuters, beijing forecasts growth from 6 to 6.5%, down from last year's target around 6.5%. and china's vice premiere expected to travel to the u.s. for trade talks later in january. that is according to treasury secretary steve mnuchin. the development comes after chinese vice premiere made a surprise appearance at negotiations between the u.s. and china in beijing this week speaking to reporters in washington, mnuchin said trade talked between both sides will continue >> the current intent is that the vice premiere will most

likely come and visit us later in the month, and i would expect that the government shutdown would have no impact we will continue with those meetings, just as we sent a delegation to china. >> at the same briefing, the u.s. treasury secretary defended the administration's decision to suspend sanctions on companies linked to russian billionaire oleg deripaska house speaker nancy pelosi called the briefing a waste of time mnuchin said the companies are being restructured to reduce deripaska's control. >> we are trying to de-link these companies so they will not be under the influence and control of a sanctioned oligarch that's our objective >> shares in em plus and rusal are sharply higher in moscow following the decision >> meanwhile, shares in fly b have tanked after a virgin atlantic led consortium led a deal to buy the original carrier for 2.2 million pounds the correspond soar shum

includes british infrastructure firm as well as cyrus capital partners the offer values fly beat one pence per share. that is a discount to the company's thursday close shares in iliad are higher after the french magazine reported executives from the two telecom firms were seen together having lunch. this has ignited talk of a possible merger. he declined to comment on that report to cnbc and some other corporate news, richemont is in line with estimates. the swiss luxury group said sales grew in all regions except in middle east and europe where protests in france led to store closures however, sales in main land china grew in the double dij its. >> and u.k. home builders have opened higher after bank of america/merrill lynch raised the sector from under perform to neutral. as you can see behind me, we are seeing this have an impact on the u.k. house builders.

persimmon up 3.3%. taylor wimpy up 3.7% and barrett up 1.7%. having an impact there interesting call as, of course, brexit comes sharply into focus and investors decide what to do with domestic u.k. stocks like these. let's check in on european markets and see how things are shaping up now they have been open for over 1 1/2 hours, and those gains we saw early on are being held pretty firmly. the ftse up 20 basis points, the cac and the dax up as well the best performer of the day ftse 100 up 80 basis points. no doubt house builders contributing to those gains as we saw pretty decent moves there. brexit, the big event, of course, next week. let's get into fx markets. we just had a look at sterling earlier in the back of that u.k. gdp data we brought you. it is trading slightly weaker versus the dollar around 1.27. continues to be range bound as uncertainty looms large. the euro strengthening slightly

versus the dollar, about 1.15. dollar weakness has been a huge topic since last friday when federal chair jerome powell eased market concerns around further rate hiekds, and that dollar weakness is continuing into today lastly let's have a look at u.s. futures and see how those markets are shaping up yesterday another decent day for wall street, albeit it started a little bit obbly we saw all three major indices trade higher this morning it looks like a fairly muted start yesterday, again, a muted start. some choppy trade early on we're looking at a slight dip for the s&p 500. about 10 points higher in the dow. and the nasdaq about 6 points lower. but no major moves there now, coming up on the show, is it game, set match for andy murray we'll have more on that story after the break. unpredictable crohn's symptoms following you? for adults with moderately to severely active

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♪ ♪ welcome back to the program. google's parent company alphabet faces two shareholder lawsuits demand the board pay compensation and change the company's governance structure

to prevent future issues around conduct in the workplace alphabet shareholders say the board covered up sexual misconduct claims made against two former executives. "the new york times" is reported in october google either shielded top executives accused of conductor offered pay out packages and amazon released a streaming service. it launched in the u.s. on thursday it is viewed as a collection of free to scrview movies and tv ss which is a long time subsidiary of amazon. the company is already an established player in streaming through prime video, the new free service could see it challenge facebook and google in the digital advertising market >> u.s. earnings season kicks off next week with the big american financials among the first companies to announce their results. citi will kick offer this round for wall street on monday, while j.p. morgan is due to release numbers on tuesday

however, expectations have been dialed back following december's market slump and an array of high profile profit and revenue warnings from apple, fedex and lennar to help us understand what we can expect this earnings season, we have kevin kelly, managing partner of the benchmark investments on the line. what is going to be different about this earnings season, if anything? >> i think there's going to be a significant difference this earnings season compared to last earnings season. one of the reasons why i think is going to be the guidance that companies are going to give. i think they could for the first time actually use the government shutdown as a way to sort of blame unclear visibility into the rest of the year, especially because we're not going to get a lot of data and reporting coming out from some of the agencies we need and we've seen that actually play out through lennar, right they didn't even want to give guidance and i think what that could do

is actually hamper valuations, right? so i think market multiples could stay suppressed for the first quarter because of that. >> in terms of guidance, what is the incentive, if any, for companies to be bullish on their outlooks given the plethora of head winds they can cite in terms of what to expect for the rest of the year >> yeah, i don't think we're going to see any real bullish guidance come through on a majority of the companies. and one of the reasons why is because they sort of have this triumphant of head winds coming their way, right they have rising input costs, vis-a-vis labor, right, we saw the wages go up in the december jobs report. then we also see rising costs via financing. and then the other issue that we've seen, and it played out yesterday mostly through the retailers, is that the margins are coming down because they're having to reinvest in their businesses, right? so costs are going up for them

to try to gain market share. and so i think that's going to be the main focus, is operating margins. so even though target did well on a comparable sales number and metric, it all is focusing on how can they get more e-commerce sales and they have to reinvest in their business to do that >> now, when i think about investor positioning given your comments around guidance and the expectation that companies will be overall down beat if they do give guidance of any kind at this point in the year, isn't there a strong risk of short covering if companies do surprise positively? and how do investors navigate that in terms of positioning around results >> yeah, it's pretty interesting to see the short covering narrative being played out because i think that had to do with a tina market in tina market there is no alternative. that was where stocks were the only game in town.

now we're in a market where you can do a two-year treasury and get 2.5% on your money, and there is other alternatives other than the stock market. so i think the short covering situation was, hey, listen, bad news was good news for the stock market good news was good news for the stock market we're no longer in that mind-set i think we're back in the mind-set where we can be getting returns similar to the 20-year average, right if we look over the past 20 years, the market has returned about 5.5% annually. that's not -- that's not a good market to be in, right especially because if you're going to be collecting, you know, 1.8% in dividends, and then just a little bit of a capital appreciation so i don't think there's really much concern when it comes t short covering >> now, reading between the lines, am i right in thinking your advice would be to play the defensives this earnings season? >> yeah, i think that's probably the best way to go because you

want to get into defensive companies with stable cash flows. and so we saw it play out yesterday in a market where we saw real estate do exceptionally well there are two areas of real estate that have secular tail wind if you get exposure to the sectors, but play the growth of those sectors with the security of real estate and one of them is industrial real estate, right and so that's the growth in e-commerce and so if we look at a name like pro logis, they're paying over 3% dividend and they are the warehouse and distribution centers that a target, a macy's, a walmart have to invest in to get people a day or less you have to reach 90% of the population in a day or less. we know e-commerce sales are going up 16% annually. these are the distribution centers that accomplish that >> really helpful comments thank you for sharing your views. kevin kelly, managing partner of benchmark investments. ♪ ♪

>> the three-time tennis grand slam champion andy murray has held a rather tearful news conference ahead of the australian open to announce he will retire after this summer's wimbledon tournament he said the pain in his hip is so severe he may not even make it through the tournament in melbourne, and our sports reporter ann marie joins us to discuss this upsetting news for murray fans. >> absolutely, willem. tremendously sad three-time grand slam champion, could have been so many more, so many near misses for andy murray in grand slam finals quite poignantly in the australian open, on a day against novak djokovic he is such a well respected figure in the sport. he has done a lot in the sport and i think it is testament to what he's done with his body the fact he's taken it to these

limits, that he has reached a point now where he can't real i go on. and it was -- he said that he was going to be playing wimbledon. he's been drawn against a tricky first round opponent that is due to start next week, the 22nd seed murray will not start favorite for that despite being clearly, if on the day a better player with more ability. but he gave this news conference in melbourne earlier today where, well, he said his body can't do it any more >> i can still play to a level, not a level that i'm happy playing at but also, you know, it's not just that. the pain is, you know, is too much really. and, yeah, it's not something that i want to -- you know, i don't want to continue playing that way i said to my team, look, i can

kind of get through this until, until wimbledon. that is where i would like to -- that's where i would like to stop, stop playing and -- but i'm also not certain i'm able to do that. i'm not sure i'm able to play through the pain, you know, for another four or five months. >> i read a guardian article this morning that called watching that tape, witnessing a warrior laying down his shield they say, suppose is quite emblematic of how murray was viewed throughout his career would you agree? >> he's definitely given everything on the court.

we saw him after he lost the wimbledon final in 2011 -- yeah -- sorry, 2012. he got within the final, roger federer. he was crying on court in sue barker's arms and came back a couple weeks to win his first olympic gold medal your feeling is as sympathetic to the cause of andy maurray asa sportsman. >> i don't want to express my view on this 42 weeks at number one an era achieving that was difficult to do. i can't help but ask you if he was to continue for another five years, let's say -- he's what, 31, federer is 37? >> yes >> if andy murray played another six years, one could assume in the next six years federer would retire that would have been an opportunity for him, if he stayed on top of his game and survived as federer has, to pick

up more grand slams. >> i don't think this is a decision he's taken lightly. he's not saying he's retiring now. he's saying it looks like he's going to have to retire after this year's wimbledon tournament now, he's saying he's going to need, regardless whether he plays on or not, more surgery on his hip. to quote him, just to give himself a better quality of life now, some people have said there are reports he even has trouble getting in and out of a car. i don't think it's a question of whether or not he can win more tournaments at certain levels. i think it's just whether or not he can deal with the pain given from what he said this morning as well. let's see how he goes at the australian open. it will be a good indication, but hopefully he can retire on his own terms because as many people, including billy jean king, and dell poe toro said today on social media, it's always a sad thing when a sportsman can't retire on their terms. >> adam, thank you so much adam reid joining us in london a number of courts in german cities, keel, effort, have been evacuated this morning

we're just getting reports, following a series of bomb threats, police departments in those respective places have confirmed they are investigating reports of suspicious packages >> and finally, let's give you a look at u.s. futures and see where we're looking to open up all three indices have now turned negative. no massive moves there still, of course, early s&p 500 looking to open three points lower. dow about 12 points lower and the nasdaq down about the same that's it for today's show i'm julianna tatelbaum >> and i'm willem marx "worldwide exchange" is coming up next. have a great weekend hey, darryl. would you choose the network rated #1 in the nation by the experts, or the one awarded by the people? uh... correct! you don't have to choose, 'cause, uh... oh! (vo) switch to the network awarded by rootmetrics and j.d. power. buy the latest galaxy phones, get galaxy s9 free.

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five records topping your five at 5 on this friday morning. one, the government shutdown entering its 21st day, that ties the record for the longest shutdown in history. two, macy's coming off a record bad day, investors losing 18%. more on the retail rout ahead. three, oil now in its longest win streak in nearly ten years, but will record american production stifle opec's plans to boost price s? four, america's record high national debt starting to worry fed chair jay powell what he said ahead and five, treasury secretary steven mnuchin going on the record about china what he sa