♪ welcome to "street signs." >> these are your headlines. >> european stocks open lower as weak trade raises fears of a sharper slowdown in the world's second largest economy. >> shares in chip maker dialogue rebound from a near 3% drop after the apple supplier post fourth quarter sales at the lower end of its range. shares pushed lower after germany echo concerns expressed

by its eu counterpart over a merger of the two firm's rail units. uk prime minister theresa may warns stopping brexit would be a catastrophic breach of trust. ♪ good morning, everybody. welcome to "street signs." i want to start off talking about the price action we've had in u.s. markets. on friday's close, dow s&p closed slightly softer but awl in all we ended the week with a positive trading week. for the year, big difference between what we're seeing in the first couple of weeks of the trading year versus what we had for all of 2018. s&p is up 3.6% the dow is up 3% nasdaq so far is the big outperformer up 5% however the theme overnight is one of asian weakness. yet again we have more focus

back on china trade data, very weak trade numbers being exhibited. just to give you an idea of some of the numbers that came out, china witness 4d.4% drop in export weakest year on year number since january 2017 7.6% drop in imports and certainly investors are eyeing the trade data very, very closely. shanghai is 3/4 percentage point. stoxx europe is down let's move on and talk about some of the individual markets specifically and starting off with the ftse 100, down half a percentage point very important 48 hours coming up in this country we know that today the prime minister is expected to deliver statement at 3:30 p.m. and expected to go over some assurances regarding the backstop very contentious issue as far as

the vote is concerned. it will take place tomorrow. it's not expected to go through the house of commons investors will eye what happens from there onwards we'll talk more about that on the show the picture for the rest of the european markets is also very much in the red. fste-mib is down .9% we have nothing trading in the green this morning real estate only down .1 percentage point and travel and lee sure down .2 percentage point. autos are actually the relative outperformer, only down quarter of a percentage point. remember, i was talking to you about the weak china trade data. also very weak auto data coming out of china as well car sales fell 13% in december this is six straight months of declines and first year on year contraction for the first time since the '90 s in china

health down .9 percentage point. tech as well again, here we have bad news out of semidialogue conductor and there they posted fourth quarter sales disappointing relative to expectations again, the supply chain effect as it pertains to apple, oil and gas also down .9% in line with the movement spot. i want to move on and talk a little bit about home builders as well in the uk. and this as jp morgan raised their outlook for uk home builders from under weight to overweight coming after merrill lynch last week also upgraded the sector to neutral. the biggest weekly gain in three years. this is the picture for uk home builders up a fraction it's interesting that many of these analysts are upgrading their outlook for some of the domestic stocks. the view that perhaps some of the no deal brexit has subsided. we'll talk more about that in

the next couple days very big 48 hours for the uk >> going into brexit in more detail, the big story at the next 48 hours at the very least theresa may will tell the country today that no brexit is more likely than no deal the uk prime minister will warn mps they risk, quote, catastrophic harm if her deal is defeated she will say this in a speech to factory workers ahead of the commons meaningful vote tomorrow evening, she will repeat that lawmakers risk undermining faith in the democratic process. now the british trade secretary says a no deal brexit is the, quote, default policy of the government if the prime minister's deal is voted down. liam fox said a no deal would be economically damaging but survivable and also confirmed may will make a statement in parliament today following discussions with eu leaders. will m joins us from westminster where he has been all morning

covering the latest. is there any sign of a change to number ten's position ahead of the vote tomorrow? >> reporter: well, what they have said over the last few days is that there is essentially a plan b they're not willing to spell out what that would be these comments we've had from liam fox and also chris grayly, theresa may's transport secretary over the weekend essentially reemphasizing the idea that there is a possibility that brexit could be reversed. this is intended, one could only assume, to try to persuade some of those conservative mps who like the idea of a no deal scenario to try to persuade them if they pursue that by votin down the prime minister's proposals tomorrow night that could lead to the possibility of a second referendum and the possibility of brexit being reversed you mentioned their discussions with the europeans, what's clear is that later on today there will be some kind of choreographed exchange of

letters between the european commission and the british government since mid december when this vote was postponed by theresa may, she has been trying to get some kind of assurance from brussels, a form of clarification that the northern irish backstop, part of this withdrawal agreement is not something that brussels will pursue and it is not a trap that would keep the united kingdom as part of the union at innigh tum. going into this vote tomorrow night, we have a bit of a lack of clarity about what the cause of action will be for the prime minister we also importantly have a bit of lack of clarity from the opposition from labor about what they will do what they've said all along is their priority to call for a general election what we haven't heard from the leader of the labor party is when he would table a motion of no confidence of the government to potentially trigger that and no certainty as to whether he would be willing to campaign in favor of brexit or against it if that general election is called.

>> thank you very much for breaking it down for us. lots of interesting points you raise there and we'll be out to you shortly. right now i want to bring in the chief investment officer from barclays investment solutions is joining us on the show thank for joining us just going back and looking at some of the brexit developments the last couple weeks, what's interesting is there have been several amendments being put forward which essentially are giving more power to the parliament versus the cabinet. with these amendments, do you think that that has reduced the possibility of us heading towards a no deal brexit, given that the parliament composition arrangeme arrangement? >> we have a range of probabilities of brexit outcomes one end you have no deal and that's no deal proper crashout with any hastily stitched up bilateral agreement and on the other deal you have no brexit. more likely, as all of that lump in the middle almost irrelevant

to markets in a sense is that kind of some form of deal. now, i think you're right. i think in the last few days you've probably slightly ticked up your no brexit. and that's probably come at the expense of no deal but it's complicated like you say, leave strong convictions at the door. that's the thing greater confidence someone tells you what's going to happen next on brexit the less you should trust them. >> nobody really knows, do they? it's interesting that going into tomorrow's meaningful vote and implied volatility is actually lower than what it was back in december essentially people have come to terms with the fact that it doesn't look like the deal is going to pass on first blush therefore, the bigger question comes, okay, what is plan b. once the deal fails, what happens from there onwards is your baseline scenario still that some form of this deal with perhaps further assurances on the backstop is the one that's going to get passed through?

>> that's probably right in a sense the dow come at hard brexit that insent viseds policymakers to get over the line with some form of deal like you say. the reality is if you're looking at assets right now the street is under way there will be few people loudly touting, yeah, we'll be overweight uk assets look at uk stocks, for instance. the gap between you realize dividends yield is at 80 year gap hasn't been seen for 80 years. that shows there's extreme pricing and quite a lot is priced in. and even the way that sterling reacted last night to rumors all last week shows there's a lot priced in already. >> in terms of the different options that may happen if we do see the deal defeated, which it looks poised to do, what do you think the markets would take most positively in terms of outcomes following tomorrow

night's vote >> i can't see what a general election would necessarily solve. i'm not sure that markets would welcome that as the reporter pointed out, it's not quite clear how labor leader would campaign and not quite clear what would be the result and whether you would find yourself after all of that in a materially different position to how you are now. second referendum, again, hasn't been a huge swing. i mean there is some sense that some -- there is some regret from some brexit side, so you have maybe seen a slight tick but not substantial enough to bet on hard. so, you may just find yourself in the same position >> sterling is priced for a potential labor no confidence vote if the deal fails tomorrow? >> that's very hard to say that's the trickiest question i'm going to get all week. >> jeremy corbin may finally pull the trigger this time. >> i think the problem you have if you're looking at it is the idea that if there was a confidence vote, does that

necessarily result in a general election because if you look at whether the conservative base, any part of the conservative party would want an election and whether the dup would want an election it doesn't seem that it would be necessarily in their interest. so you may find yourself -- that may be potentially the route to a second referendum in a sense. >> just very quickly on friday they said the market has decided that brexit isn't going to happen pound should rally it's oversold do you agree >> that's quite extreme. i would reiterate, we're not taking strong positions in sterling assets at the moment. be ware of strong opinions >> william, thank you for joining us on the show and good luck with the trading over the next 48 hour it's certainly a lot of mines to navigate there william hobbs. now switching gears away from brex it to the oil markets. saudi arabia's energy minister told cnbc exclusively that opec

and its partners will meet production cut commitments this year however he stressed that some members like russia have reduced output slower than anticipated. hadley joins us and getting terrific exclusive comments from all of the oil major influences over the last weekend. hadley, tell us more about what you learned. >> that's right. we had a really exciting weekend here in abu dhabi on the sidelines of this global energy forum meeting. we were speaking not only to saudi arabia's minister and opec secretary general in an exclusive interview. but i want to point out what he said i asked him several different questions about the 2021 date. we are still on track for that he also said that they're willing to work with all partners, not just opec and opec plus members but also the broader international community. of course he was referencing not only the trump administration but all of the shale producers

as well. but let's listen in to what he had to say about the volatility. >> i'm concerned about the volatility we have seen in the fourth quarter of 2018 and i hope we can arrest it and bridge it under control i think early signs are positive we've seen the fundamentals lead the markets into a positive territory and time will tell of course, we'll remain individuvigilant and do what we need to do. >> what are you doing to balance the market >> we've already done it we've been decisive in our action not only the kingdom but other countries. we heard from the emirates i talked to my colleague from iraq repeatedly and they've already taken action russia has started slower than i like but they've started and we will i'm sure as they did in 2017 ultimately catch up and

be a positive contributor to rebalancing the market >> some of the take aways from this conference over the weekend right here in abu dhabi, guys, really emphasis yet again that they are really looking at these geopolitical head winds and are concerned about the trade dispute with china and are concerned about slowing growth in china and are concerned more broadly about continuing the communication efforts not just with washington but as i mentioned earlier all these shale oil producers. they seem to have found so far that they are having more luck when it comes to opening up those channels and really, really communicating and having a dialogue there, but it will be very, very interesting going forward how that develops. i think, guys in context with the president's continued tweets and also, of course, none of this is happening in a vacuum. you know, of course that the secretary of state mike pompeo has been a whirlwind tour through the middle east and has already met with the crown prince of saudi arabia and a lot of people are going to be wondering just how hard mike

pompeo pushed the crown prince when it come tos to the murder f jamal khashoggi. a lot weighing on the oil markets and we'll bring all them to you as they happen, guys. >> thank you so much that sounds great. >> oil is down another .6% point today. elsewhere, chinese exports sharply missed expectations in december is this a sign that the trade war in washington is beginning to bite? we'll discuss after this break 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. ♪ did you know you can save money by using dish soap to clean grease on more than dishes? using multiple cleaners on grease can be expensive, and sometimes ineffective. for better value, tackle grease with dawn ultra.

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welcome back to "street signs. dialogue has posted preliminary fourth quarter sales at the bottom end of its range. the chip maker reported unaudited preliminary revenue of $431 million during the quarter compared with guidance between 430 and $470 million the company shares have been under pressure after apple issued a profit warning and cut its revenue outlook on weaker iphone sales. >> continent has forecast a fall in 29 profitability after fourth quarter earning disappointed

they warned margins would slid due to growing pressure on the car sector the ceo blamed, quote, profound changes in our industries for the expected drop in growth. >> and yet weirdly as we said auto is one of the outperforming sectors this morning elsewhere the ceo of banco bpm has ruled out tie-ups. in an interview in a newspaper he said market volatility has made deal making less likely but added that there's still space for sector consolidation in the future according to several reports, banco was one of the potential buyers of the the troubles bpj the biggest decline in two years and big miss from the 3% growth from reuters. imports fell by 7.6% the full year exports rose 10% the strongest growth in seven years and imports in 2018 rose

nearly 16% creating china's lowest trade surplus in 2013 the country's surplus with the u.s. hit the highest on record a34id a trade war between beijing and washington for more on how asian markets reacted to this data, nancy joins nus singapore. >> hi there. well, you can see on this wall behind me the reaction is not a positive one in fact, we're seeing red across the region today and a lot of the selling was concentrated in the greater china markets. the bulk taking place in hong kong you're looking at the closing print for the hang sang. for the mainland, we did see both the composite and the shanghai come back from their worst losses on the session. you're looking at the closing print for shanghai composite off 0.7% it just wasn't china here. take a look at the south korean market off some 0 .5%.

considering where we came from last week, we did see the big rebound. the 2019 recovery a rather tentative one but we saw one and a half month highs for the broader asia region. giving back some of those gains. nikkei 225 was shut for holiday but we're seeing the reaction in the southeast asia markets still in action but the mood is lower, too. quite simply you talk about the fact that both exports and imports missed forecast, investors are nervous this is yet the latest sign of the slow-down taking place in china's economy. a lot of that front loading we saw with exports coming from the country to get ahead of the u.s. tariff changes, that seems to be fading and if you look at the import data, especially, that signals that demand coming from china is waning that is something we've already heard a lot of warnings around, especially if you consider the lines coming from apple of late. guys, back to you. >> nancy, thank you so much for that added color speaking of china, chinese foreign direct investment into north american europe has sunk

by 73% to a six-year low a sign the trade war is starting to bite, investment into the u.s. took the biggest hit, down 83%. deals into europe fell broadly, however data from baker and mckenzie indicates that fdi into germany, france and spain grew over the last year the uk was the greatest recipient of chinese fdi getting under $5 billion in 2018, however that also marked a 76 annual percentage decrease the u.s. saw more than $4 pl worth of chinese inflows when it comes to sectors, most chinese foreign investment went into basic materials followed by autos and health care. some big drops there, 76% across europe and north america. how much of that is pointed to the on going trade war and the geopolitical situation right now in the world

>> i think that that's important, most important, though, is chinese economic policy so, they're doing a number of things first of all, they are exercising capital controls because of the strength of the dollar they are also making sure that certain companies that were very big foreign investors deleverage and they are also, i think, signaling that they're slightly discouraging of investment specifically in the u.s. >> now, chinese investment into the uk fell dramatically as well, but the uk still received more than any other country in the western world. will brexit make the chinese more important investor in the uk economy than it was before? >> i think that they've already demonstrated that they're an important investor in the uk it's clear that the uk wants to continue to be seen asa very

attractive place for england investment i think china will continue to be a material investor, yep, very important. >> just a followup to that the uk launched a consultation in july tightening rules on foreign investment, so presumably china was at least one of the countries they had in mind how do you reconcile that with their desire to continue facilitating that investment from china into the uk economy >> i think it's very important to distinguish between security issues and general economic policy relating to inwood investment all of the discussion of the new laws in the uk or eu or tightening in the u.s. that's all about specifically security concerns, it's not about a broader concern about foreign ownership. >> but indeed security is a big concern there. do you get the sense that chinese fdi flows are moving, rotating away from europe, western europe, north america towards say russia, africa,

south america, places where they are subject to less geopolitical and less scrutiny when it comes to scrutiny as well. >> i'm not sure there's less scrutiny, but certainly they want to put the message out to the world that it is very possible for china to have strong, bilateral relations with other parts of the globe, not just the u.s. and europe but if you look at what it is that china wants to access by foreign investment, yes, it's okay if it's just a resources play, that would be fine in latin america, africa, russia, but what they really want to do to continue their development of their own domestic economy is to have access to technology. that means the u.s. and europe remains absolutely fundamental to their strategy. >> so when you talk about the composition of where the fdi has been going, have you detected a

change in where the investment is going because of the changes we've seen in the world in the last 12 to 24 months do you get the sense that it's a lot more difficult for chinese companies now to go into an investment, we would think, into tech companies in the u.s. >> well, i think that that's sort of the most obvious example. but you're seeing a shift partly because there's a difference in strategy where there are different position in the economic cycle and it's very important for some of those aggressive foreign investors from china to deleverage at the moment that's why you're seeing the scale of disinvestment in the u.s. and europe. not so much a change in economic policies it's just saying there are some companies here that absolutely need to deleverage >> now, if i look back at some of the major deals that the chinese have done to get access to certain technologies, one that comes to mind is the

acquisition of sin general ta gave them huge access to technology and agriculture space. until we see resolution on the u.s./china trade war, is it safe to assume that deals of that scale are completely on hold >> i think deals of that scale are definitely off the table for the moment something much more modest, particularly if you're in a security nonsensitive area, then i think that's still game on >> so megadeals are pretty much out of the question for the time being. how much does the currency effect fdi investments abroad? last year was big depreciation and that seems to have continued sbha swha and also been correlated to the u.s./china trade war. the weaker currency does that disincentivize fdi >> i think it does and indeed the flip side of that is with continuing weakness in sterling, they continue to see

good value in the uk that's why i think you've seen decent levels of investment last year. >> tim, thank you very much for joining us on "street signs. coming up on the show, theresa may warns parliament about the catastrophic consequences of halting brexit stay with us 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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♪ welcome back to "street signs. these are your headlines european stocks open lower as weak china trade data raises fears of a sharper slowdown in the world's second largest economy. shares and chip maker dialogue rebound from a near 3% drop after the apple supplier post fourth quarter sales at the lower end of its range shares push lower after germany's competition watchdog reportedly echos concerns expressed by its eu counterpart over a merger between the two firm's rail units.

theresa may warns stopping brexit would be a catastrophic breach of trust as the eu reportedly prepares to set out written assurances on the irish backstop later today european stocks have started the week on a negative note following a lackluster day on friday as you can see bind me, every major region in europe is trading lower, the worst performer of the bunch the ftse mib but no region unaffected by the downturn the china trade data over the course of the morning we've been talking about sharply in focus raising concerns about the impact of the u.s./china trade war as well as domestic issues in the chinese economy and how that effects the european market brexit sharply in focus. we've been at westminster tomorrow morning huge amount of uncertainty there. the ftse is down .45%.

over the last week we have seen more weakness in the u.s. dollar that is of course on the back of comments from the fed chair over the last week. several members of the fed, in fact now this morning we're seeing the euro gain marginally versus the dollar hoovering just below that 1.15 mark come over to sterling, we're seeing a little bit of weakness but the pound is around that 1.28 mark that really feels like investors are in wait and see mode as we head toward tomorrow's parliament vote getting over to the u.s. futures, we are coming off of a pretty muted end to last week. we saw all three major indexes break five-day winning streaks on friday, ending the day little change now as you can see behind me, we are seeing some negative signals across all three major indexes the dow jones is poised to open nearly 200 points lower today. s&p 500 indicating about 20 points lower and the tech heavy nasdaq indicating about 60 points lower at the open

it is shaping up to be a pretty cautious start to the week, not only in europe but also state side >> thanks. now back to the uk where theresa may will tell the country today that no brexit is now more likely than no deal. the uk prime minister will warn mps they risk, quote, catastrophic harm if her deal is defeated she will say this in a speech to factory workers. ahead of the commons meaningful vote tomorrow morning, may will repeat that lawmakers risk seriously undermining faith in the democratic process the european union will deliver written assurances to the uk government today on the irish backstop they will jointly issue a letter according to irish state broadcaster. the letter will stress that the backstop is not the preferred eu solution to avoiding a hard border, however, it will reiterate that the backstop can't be renegotiated. now, willem joins us from westminster where he's been all

morning. as we've been discussing the question tomorrow is not about whether or not the vote passes but really what the margin of defeat is for the prime minister and what her plan b is from there onwards. >> reporter: yeah, that's right. of course if it's a very, very, very significant defeat for the prime minister could lead to one course of action where as if it's very tight a lot of analysts pointed out that could encourage her to come back at a later date and try once again to get this through the commons to discuss all this in a bit more detail is i'm joined by tom. thanks for being with us this morning. theresa may warning that this would undermine democracy if brexit is reversed the focus over the course of the weekend is to warn members of their own conservative party that no deal is less likely than no brexit. why does that matter is that likely to work on some of these mp snz. >> the prime minister has been

making empty threats for some time the likelihood that they take it serious at this point seems pretty slim. in all honesty, most members of parliament have locked into a position they're going to vote the way they're going to vote tomorrow night and make a judgment call based on what happens next in the statementthe prime ministe gives as a followup to almost inevitable defeat tomorrow evening. >> so when we hear things like a report from i.t. that will be seeing a letter from the european commission clarifying that the eu would not like to see the irish backstop triggered at any point in the future, you think that's too late? >> it's too little too late. we don't really mean it but the legal text remain the same i think we'll simply fail to persuade the hardliners in the european research group. so i think it might sway a few votes. but at this particular point in time she's set to lose by such a

large margin it will be basically irrelevant. >> without getting too far into the weeds, once she does lose, which you seem to suggest will happen tomorrow night, what happens next >> she then has three sitting days, monday to thursday, three sitting days to make a statement to the house about what sh plans to do next natch will probably be on thursday this week or possibly monday of next week after that, within seven days she has to bring forth a government motion that sets out the future plan. that's where they will have a chance to put down amendments in all likelihood of that motion and set out what their alternative plan might be. so this is just the beginning of what's going to be quite a bumpy few days here in westminster. >> inside this building here over the next couple weeks, do you think we will get a sense of what it is the commons would vote for as a majority >> i think we will i think we're unlikely at this

stage to see any majority support for a particular direction. there will probably be some horse trading. one thing that hasn't been paid enough attention to is the fact that the deal comes in two parts. the withdrawal agreement and then there's the political declaration. the elg are pretty hard dug in against the withdrawal agreements i don't think that is going to change i see no signs from brussels that they're ready to renegotiate the withdrawal agreement. the principle declaration on the other hand is a statement of intent, it's not a legal document there's actually probably a lot more flexibility there to concede to different points. so, for example, the labor party has been saying that it would support a permanent customs union. perhaps the political declaration might be edited or tweaked in that direction. maybe that brings over some support from the opposition benches. we don't know at this point. right now it's too early to say whether any of the other alternatives or second referendum or anything like that whether those have enough political support in parliament. >> it seems that there's quite a significant amount of pressure

on jeremy corbin to table a motion of no confidence if this vote does fail tomorrow night. so far he has not been willing to say when he would pursue that cause of action. it does call for a second general election if that happens f they manage to get a motion of no confidence passed against the government, if we see a general election in the uk, what does that mean for the late march deadline? >> well, of course, the government would be the natural consequence of it losing its major piece of legislation it's only recent that the government could lose its major measure and stay in office no confidence is the right and logical thing to occur most people expect if that took place this week she would still win it and the government would still stand. if it didn't, there would be a general election and expect to see the article 50 negotiating period extended perhaps through to the start of july so there is a bit of time if

there were to be a general election i think if there were a general election that withdrawal agreement would remain the same. it would be a future government that would negotiate on the political direction. in all likelihood the withdrawal agreement is the withdrawal agreement is the withdrawal agreement. >> thank you so much, tom. hand it back to you guys in the studio. >> thank you for bringing us the latest of course, as your guest said it will be a very bumpy 48 hours for the uk. opposition leader jeremy corbin said if the vote fails he will table a motion of no confidence, quote, soon. a move that could lead to a general election but former labor prime minister gordon brown told our colleagues in singapore he believes another referendum is more likely. listen in. >> i think at some stage as i said before there will be another referendum i cannot see when it will be and would not like to predict it would be in the next few weeks but i think at some stage you will have to resolve thissish shy and finally come to

conclusion about the details and not just the principle of britain's relationship with europe. >> second and another referendum if it were to come to pass three years on, would the outcome likely be different britain's three years on, more aware, more informed would they make a different decision >> what's happening in europe is different than where we were in 2016 every urinen country, france, belgium, germany, they're all having to look at new ways of dealing with this issue of freedom of movement. they all have different ways that they are doing this within freedom of movement. equally on sovereignty, you go o the german and italian and french courts they're interpreting the role of the european court of justice quite differently from what was really happening in 2016. so, the situation has actually changed in europe. that means that i think people would want to look again at some of these issues and with what

you could do to resolve them in the future this is also a issue about the unity of our country and i have not seen britain more fractured than it is now it will need more than one off initiative or a quick fix to solve this issue of unity and of the integrity of the united kingdom. so, i think we've got to stand back, look at what's not been achievable under the parliamentary process we've got and think about how we can actually resolve this issue in the future >> now, as the former prime minister said it's not just the uk who is facing political challenges at the moment from a domestic perspective france is as well. french president emmanuel macron has begun a three month national debate in the hopes of ending the yellow vest protests in a letter published in newspaperers across the country he said new ideas would influence policymaking but also stuck by the pro-business economic policies that have angered the demonstrators and will give his conclusions on the debate in

march. elsewhere, greek prime minister has called a confidence vote in his own government after its key coalition partner resigned defense minister withdrew his party's support for the party in protest over a deal ending in 27-dispute with macedonia regarding its name now the vote is expected to take place later this week. let's have a look at greek ten-year yields in reaction to this news. not a huge amount of change there. they are no stranger to political unrest, political turmoil. but certainly one to keep an eye on again, a reminder, it is not just the uk who is facing political challenge at the moment. >> it should be said that it is expected for them to actually pass that no confidence vote otherwise he wouldn't have called for it which is probably the reason we aren't seeing that much of a reaction but now some say it's the lowest form of whit, but a new survey suggests americans have a tough

time understanding bris ining b sarcasm. 49% of americans with the greatest respect is i'm listening to you compared to 40% understand the sentiment i think you're an idiot. half of americans wouldn't be able to tell that a brit is calling them an idiot. do you have a favorite brittism. >> with the greatest respect, firstly i think americans do understand british sarcasm >> how do you do how do you respond to that you just go how do you do? i do well. how do you do? >> i do well it's kind of you to ask. and i've been meaning to tell you i would like to have you over for dinner. >> you must come around for dinner which basically means never, ever don't turn up at my house. if you want to get involved in our britishisms coming up on the show, u.s.

bank stocks declined in 2018, but should we expect more losses this year? we'll discuss when we come back.

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welcome back to the program. german companies have been warned to back off the russian-led to gas project or potentially face u.s. sanctions. the baltic sea pipeline would effectively bypass ukraine causing the country to use ref news and causing concern in washington the u.s. ambassador to germany has written a number of companies about the project, a move that has raised eyebrows in angela merkel's government meanwhile, the fbi reportedly opened a counterintelligence investigation into president trump in 2017 amid concerns he was working on behalf of russia. according to "the new york times"s, the investigation was prompted after he fired former fbi director james comey no public evidence has emerged that trump was in contact or under the direction of russian officials. the white house has described the report as, quote, absurd heavy hangs the crown who

has seen his assets under management sink below $1 million. his unconstrained bond fund now manages $950 million over half of which is made out by gross's own estate funds now back in 2014, gross ran a book worth over $300 billion the money manager has come under fire for his bet on u.s. treasuries he was criticized by janice henderson's own ceo who told cnbc in august that gross made some, quote, bad bets. head to cnbc.com to find out why one investment firm thinks buying last year's losers will be the best way to beat the market this year and earning season kicks off state side with several banks reported that citi will post its fourth quarter results later today followed by jp morgan and wells fargo. happy to bring in portfolio

manager and global head of financial research at pimco. good very early morning. looking at your notes you said 2018 was a record year driven by tax boosts and strong underlying performance. you say that yet by the end of the year financial stocks were down more than 15% why didn't investors buy into the story? >> well, you know, the market strength before looking two years ahead. i think it's fair to say that the second half of the year has been dominated by late cycle concerns, slow-down concerns, views that fed policy was no longer to be as many hikes as we thought. that really has been dominating the lower price action for the banks. so the view is that 2018 was as good as it gets. then going forward, you have a number of lingering macro concerns weighing on the other banks to the point that now you see the sector trading on really

cheap evaluations. it's very low for u.s. banks are we going to see a big recovery this year it's not obvious i think again investors are quite cautious and being willing to engage in some of the more cyclical stocks. >> certainly as you say this evaluation game at play there and actually just year to date i look back on the first couple weeks of the year, financials are still relatively underperforming so investors are still aren't buying the story. coming back to what you said, though, about banks and investors being forward looking, we know that the interest rate markets had gone from pricing in three hikes the pricing in no hikes essentially for 2019 do you think the banks outlook will be a good litmus test for what is actually happening on the grounds right now in the u.s. >> yeah. i think another correlation has been quite strong between money trade policy views and the performance of the banks, especially in the u.s. has been the big, big driver for the past

couple of years. we don't quite agree with the expectations we think we'll get one, maybe two hikes this year. market is too dovish in our opinion. but these statements at the beginning of the year from the fed certainly goes a long way to explain the relative and the performance of u.s. bank equities again year to date. >> how much do you think the bank's prospects from here are going to be underpinned by the language that comes out of the feds and indeed the chairman powell has actually flip-flopped a little bit in tone from where he was in december to if you look at some of the language from last week, the week before, certainly you get the impression that the fed is turning more dovish would you say that this would be a positive catalyst for the banking results from here? >> i think the banking results have been boosted by higher rates. you've seen income go up on the

back of higher rates so anything that points to lower rates environmental even rate cuts is not another good bag drop for the banks so i think if you're a banker and seen diamond calling for 4% in ten-year treasury, that's what the sector not necessarily forecasted but they're hoping for it because it's good for their earnings if you're in an environment where rates go lower, that's not typically good news for the u.s. banking industry having said that from a financial perspective, we think that the u.s. banks are in very, very good shape, al capitol levels very strong asset qualities few cracks and it will be interesting to see what's happening in the market for instance but i don't think there's anything alarming. >> if we look back at the last reporting season, one of the things that investors were

closely watching was overall loan growth in the u.s do you think that concerns around this overall loan growth are overdone by investors? >> well, it's been picking up in q4 we have to analyze where does that come from because you've had capital markets been very weak obviously in q4 we haven't had a single issue until last week between the end of november, which is pretty much unheard of since the financial crisis so, that's -- you could argue that's preventing some opportunities for smart bank lending, if you wish but an element of that would be how much of that has been drawing on credit lines, banks being capital markets and providing lending at the levels. so i think that will be a big part of this scrutiny in terms of what we look at in the q4

statements will be about the lending behavior, where is that loan demand coming from and what's the outlook in terms of demand but loan growth has been relatively strong this year. cni, which is the corporate loan growth has been closer to like 8% year to date. >> all right thank you very much for your time he was in london, not on the west coast as i mentioned earlier. >> quick look at u.s. futures before we head out it looks as though most of the -- all of these indexes are looking to open up in the red. very cautious start to the trading week that is it f torhe show. >> "worldwide exchange" is coming up next 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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it's 5:00 a.m. on cnbc, here is your top five at five on this busy monday. get ready because all the biggest banks are set to post their numbers this week. will they indicate the u.s. economy is slowing down? d.c. dysfunction now taking it to an entirely new level as the government shutdown enters its 24th day trade wars, easy to win? china exports plunge as the trade war takes its toll the ceo of california's pg&e suddenly quits is that company report lid prepares for bankruptcy to ward off claims from devastating fires. and ford, making an even bigger bet on all electric cars. yo