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tv   Street Signs  CNBC  January 30, 2019 4:00am-5:00am EST

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welcome to "street signs." >> these are your headlines. >> record 2018 revenue from pickup in chinese demand and stronger than expected leather good sales >> it's a beat for santander, and also shrugging off questions about the filled appointment of an dres saying the board took
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the right decision >> we make, again, the right decision a very difficult decision, but the right decision not to proceed. >> novartis shares miss expectations busht the swiss pharma giant ae eyes growth as it sharpens its focus on high-tech drugs. >> that really shows how this transformation is enabling us to grow into the future >> and siemens industrial problems persist as first quarter profits miss expectations while ceo reiterates his call for europe to green light its rail merger
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>> novartis has narrowly missed. it posted a 64% rise in net profit while sales increased 5%. the company also announced a share buyback of up to 10 billion swiss fraungs francs of 2022 he told cnbc that he is confident about the company's refocus on new medicines >> we're very pleased with, first, the results in 2018, but i think importantly for the 2019 guidance, there's really two parts to the story there's the story of the company we once were that it was really a conglomerate of different elements we guided to a low sale -- low single digit sales growth and a midsingle digit operating growth really where i want the markets to focus is our new focused medicines company. that's why we did almost $50 billion in transactions last year to transform the company.
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when you look at that guidance, we really are expecting mid single digit sales growth and mid to high single digit core operating income gret. that really shows how this transformation is enabling us to grow into the future >> and our top banking story today, santander's executive director has told cnbc that she's not concerned about the global shutdown and getting more subdued but sustainable growth scenario could be beneficial for the bank while highlighting opportunities in latin america jeff, just looking at these numbers, i think people don't appreciate how much of the overall profit actually comes from latin america more so than spain about a quarter of santander's revenues do come from latin america, and the stock is reacting quite well today in reaction to these numbers. >> yeah, absolutely.
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i think if you break santander open, you cut it down the middle effectively just a little bit more than 50% represents european operations and then the other sort of 48%, if you like, is the americas. north america has performed relatively strongly for them through this period. when i was here 12 months ago, we were having conversations about some of the challenges in the north american business, but, of course, as you point out, a lot of the satisfaction is particularly around the brazilian operation and the expectations that they'll do better there if there was one fly in the ointment in the americas, it was argentina. i think it's the high inflation and the currency weakness story that maybe took a little bit of a shine off of the numbers let's just return to that question that you have raised, if you like, around the u.k. and around brexit. it's where we start the
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conversation here with the executive chairman let's just listen in to how she answered my questions about the weakness that we're seeing in the u.k. market specifically >> there's always one country that doesn't perform too well. that's exactly the strength of her model. if you look through the cycle, we deliver very predictable earnings and growing earnings because we're in two couldnntin. if the passage was the u.s., this year the u.s. is the best performing country with profits up 42% on an underlying basis and 70% on the net basis on accounting basis. the u.k. is growing less because for the last couple of years we focused on it profitability. the u.k. still covers cost of equity this is very important it's not performing as strongly because the focus is more profitability than growth because we do anticipate some slowdown you know, the overall santander group, as you know, has delivered 18% increase in
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underlying profits over 30 in constant euros. what the country -- actually, it's the u.k. and argentina this year that have not performed in terms of growth, but they've done a great job in terms of resilience in the balance sheet and covering the cost of equity in the case of the u.k >> just gives us more on brexit. i think the market will be interested in your view. you're so embedded in the u.k. are the cost cuts you're taking out through the closures in part about brexit >> it's actually more about customer behavior, so if you look at what we've done over the last three years we've more than doubled digital customers. doubled transactions and doubled the number of sales that have gone through digital many through mobile. we now are doing one-third 30% versus 15% three years ago the u.k. is a leader in digital adoption and mobile adoption customers are not coming as often to the branches, and this is a main reason why we actually
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do some adjustments. by the way, this branch in which we are now shows you how we are thinking about the future. we want -- my line is always we want customers to want to come to the bank. in the past you had to go to the bank to do transactions. you don't need that anymore. you can to it all on your mobile you know, this is exactly the change in the model where we want to combine best mobile with best personal relationships. we have 100,000 people across the group talking to customers in 13,000 branches there might be less branches, but hopefully they'll be nice branches where you want to come. that is the main reason we are adjusting the size of our branch network. >> can i ask you about brazil specifically the market has very high hopes that they will be able to push forward his reform agenda even if they don't particularly like the man and his illiberal views.
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how do you think brazil is going to go for you, and what is your relationship with the government >> we work with any government that's elected democratically by the people it's for the british people. it's for the brazilians to choose the president dent. we need to work with every government we have a lot of faith in brazil i always say the lows are always higher brazil has suffered one of the most deep recessions in history. it was 19% increase in gdp our branch performed very well in that period people think of santander more risky. it's the opposite. we have very deep franchises we understand the country. we can manage these. i believe brazil has an amazing opportunity. there is one thing they need to do, and we met with the economic minister of brazil who say, you know, tough professional he understands what needs to be done he has a great team, and the plan that they have to get the venture reform approved is the
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single most important thing. if brazil gets the pension reform approved, the other things they have to do, but i believe you could see ten years of growth in brazil at, you know, even 3%, 4%. that is very positive, of course, for brazil as a country, but also for us as, you know, the second or third private bank in brazil. >> so there you have the comments from anna botine about brazil and about the u.k of course, no conversation about santander at this point would be complete without discussing what happened with the ubs investment banker, andrea who was set to become the new ceo of the santander group, and, yet, as we know, that fell apart because santander and the board ultimately said we will not pay the price necessary to bring him
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on sides there has been a lot of conversation about just how much money he would have have needed to have been paid to make p for those deferred stock payments from ubs that's been where a lot of the focus has been, but there's always been this nagging suspicion that this may not have been about the money it may have been jrs about two large personalities who within the same bank may not have got on i ask that question initially to the executive chairman anna bottin i said is this really just a case of two large egos couldn't actually work together let's hear what she said >> we as a board went through the process of the appointment, we took into consideration all these factors, what would be the combination of antonio and an dres and myself. there's always three of us as executive directors. this is a big group. we know that we knew the personality. we believed andres would have added a lot to the team.
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we went through the process. we had to announce early, and the reason, as you well said, is as we came to the conclusion that the buying-out, we would have to face was of a size that was too large for us we made a very -- i think the right decision a difficult decision, but the right decision not to proceed. >> as you replay the story, though, for yourself, where is the regret sf what do you regret that happened in this circumstance or are there no regrets? >> you know, what's important is that we followed a rigorous process. when we came to the conclusion that the buy-out was too big, we really honestly could not go through with that, and that is the right decision in terms of our values we believe that, you know, in today's context and there were some material contexts between september and december that that was the right thing to do for all our stake holders where. >> just to wrap up on this, what
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plays out will play out, but one assumes you did your homework with the lawyers, so all this talk about him coming at you with a legal case, you're not worried about that taultd? you have protected yourselves? >> the board foltd a very rigorous process, as i said, and that is something which we do all the time we have a very high level gorchlance, and it's bosht for us that, you know, when we come to a conclusion, that it was taking everything into consideration, which we did. for us the important thing now is to look forward we are very excited about the opportunities ahead for santander. we had the scale 144 million customers. we have 85 million credit cards. the scale we have and the team has done a fantastic job antonio continued being ceo all the way through. we have worked together. not just antonio and i all the ceos on the countries on
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the next plan which we'll be presenting in april in london. i think it's the 3rd or 4th of april. it's really an amazing opportunity which are going to be very much focused on working across the bank, on building global platforms at the end, today's technology allows you to do that. that's going to be the focus, and santander is, i think, still a bank that has profitable growth >> we all speak. >> of course, we still speak all the time those were the parting words for anna botin as i say, we'll just have to wait and see whether there is a legal recourse from mr. orcel in this situation, but i think her message was fairly clear
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one assumes this is not amateur hour, and they did talk to senior legal counsel before they took their decision. i think the ball now very much in mr. orcel's court if he would like toss to come and chat about his next step on cn cnbc, we would be very happy to have that conversation guys, back to you. markets are actually -- investors are actually reacting quite positively to the results. the stock is up 1% let's talk about the broader market picture this morning. just to take it back to the u.s., it was a bit of a mixed picture. we had the dow ending the day higher, but nasdaq and s&p both ended lower with microsoft and -- microsoft will be reporting after the close later today. we had earnings from apple after the close yesterday evening. traded up about 5% in the gray hours. we'll see how that translates. generally, the picture overnight
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in asia has been a little bit more muted some of the apple suppliers actually warning about the outlook, warning about actually slowing sales, slowing demand in the future we've seen a bit of a negative reaction in the key chip maker stocks and the asian session europe overseeing a moderate start to the day slightly higher. about .1% higher we are right in the middle of earnings season. as i mentioned, lots to watch out for. also, on the macrocalendar today. don't forget that we have the fed meeting all important to look forward to when it comes to the tone that comes out of the fed. that is the macro setup. let's talk about some of the individual systems, though you can see the reaction in the ftse it's quite positive this morning after another very long session in the house of commons yesterday. we're essentially the prime minister has been given a mandate to go back to the e.u. now and look for modifications the market is certainly reacting more positively this morning
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up .8% lots of questions, though, for us the next couple of weeks about what's that going to mean about what the final deal is going to look at whether or not we are actually headed towards the default scenario right now if no deal is reechtd, which is a no deal brexit you can see that is the wonder performer today. up 114 points. we had some decent gdp numbers earlier this morning positive surprise there on the macrofront ftse also slightly more positive as well. let's kwet into sectors because i mentioned it has been a big earnings day in europe right at the top you can see we've got household goods. up 1.4%. really strong numbers out of ldmh thorpg. we've been traug about china and the context of tech stocksry lot. in the context of luxury stocks, it tells quite a different narrative. again and again these luxury companies are coming out citing strong consumption demand out of china. ldmh being one of them that stock is up 5%, boosting
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all of the names in that sector. montclair, burbury as well at the bottom we have telecoms down half a percentage point in line with some of the weakness we've had the last few days. health care also down a little bit as well. .5 periods drag down. we had novartis this morning slightly disappointing relative to expectations, and on the dividend pay-out, they're -- real estate he defensive sector also lagging a bit this morning. i want to talk about industrials, though.
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skbro dragged down the industrials economics as well. juliana. >> thank you very much want to give you more detail on lvmh very interesting results from them this morning. they have reported a record 46.8 billion euros in full-year revenue helped by stronger chinese demand in the fourth quarter. the french luxury group said it was confidently confident about the year ahead and stropger than expected leather goods sales lvmh also nounts thad lou yis vitton sales raised. that was dragging up the whole of the luxury sector this morning. now, coming up on the show, u.k. prime minister theresa may says she will return to brus illesel.
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brussels says it is not up for renegotiati renegotiation. more after the break for aspaces. hang on. radar that senses things the human eye can't. busted. and the ability to make a thousand decisions before you even make one. was all this, really necessary? what do you think? ♪ unpredictable crohn's symptoms following you? for adults with moderately to severely active crohn's disease, stelara® works differently. studies showed relief and remission, with dosing every 8 weeks. stelara® may lower your ability to fight infections and may increase your risk of infections and cancer. some serious infections require hospitalization. before treatment, get tested for tb.
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>> theresa may has said that the house has clear to approve a deal brussels says they're not open to renegotiating what's happened next the question is what happens now? >> theresa may will go and have
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a private discussion with young -- barnier and a few others in private you'll get a different story to what they have said. this is absolutely i'm amiezed at the naivete in that place. they wasn't call it containing tleel call it clarification, and somewhere they'll work in the next sort of 40 days into a place where the backstop could be melded so the e.u. does not have the ability to say you will not leave the e.u., but apart from that there will be a way the backstop can can work. that's where we'll work towards. a lot of egos have taken place back
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i chair -- it's not brexit we're fright erched of, actually we're the fifth biggest economy on earth we have not got a problem with it what we have a problem with is uncertainty. the just wish the political class have got the -- they have no understanding of the way it's working in brussels, and they have no understanding of the way business is. where are we what's next? it will be a -- in private which
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i know you guys won't like, but it happens when i hear, well, it's all cooper barnier has already said he won't accept it. of course he sent that doesn't mean he means it what proechl do they need to take to get people like michelle barni re r to publicly say we will try to accommodate you even though they've repeedly said they won't >> i do believe it's last. when he said we will talk to you, i think at last this is where theresa may can be criticized i think no one who even her worst enemy would never criticize her there's a little
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bit of, oh, it's all happening now. now, there's paurt of the all happening now, which will all have in negotiations, especially your wrurp she could have gotten more like-minded souls. i don't mean six months earlier because you need deadlines to focus minds, but i do mean possibly eight weeks ago >> you don't speak for the british government, but members of the cabinet who do this morning have not been able to provide any clarity when it comes to what these alternative arrangements to the backstop could be.
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stlz a concept that the e.u. can say, no, you can't leave 17.4 million people voted for many reasons, but the one thing they did vote to do is go, and -- not the customs union that's what the backstop relates to, isn't it >> the two things are -- the agreement has that you can say in that agreement that it's only something to go that won't work.
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that does an amazing mistrust built up over 40 years >> that's -- i want to ask you about another goal post that seems to have been moved liam fox may these promises a couple of years ago. we all know what they are.
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would it be as easy as he thought? no i think what happened a year ago is i think everybody on the brexit side, be they in government or the most passionate lobbyists, they think -- they all thought the country would come together more early than it's going to they've been able to say you're a divided church i'm not talking to you until you're unified whether it's jaena miller or cooper or jeremy corbin, whoever it may be, whether it's jacob reece or boris johnson, thief all tried to sabotage it one way or another it's very, very, very difficult to sit in -- i've done it. sit in a negotiating room and say i represent this when everybody knows you don't. you only represent half of it. that's your problem. >> thank you very much i'm going to hand it back to you in the studio.
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zbloifrmt welcome to street signs. these are your headlines snoo the first group reports sectors for 2010 revenue, and stronger than expected leather good sales santander beats expectations in the third quarter thanks to a strong performance in brazil executive chairman anna botin shrugs off controversy, telling cnbc the about-face on his appointment is the right move. >> the buy-out, we would have to face was of a size that was too large for us.
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ceo tim cook also striking an upbeat tone on trade tensions. >> and theresa may gets a mandate from mps to renegotiate her brexit deal with the e.u a bid to break the deadlock, but brussels says no >> the european markets are mostly edging higher this morning. it's a lot of the same macrotopics factors we've been watching all week that continue to remain overhead the u.s. trade talks kick off washington today where u.s. is expected to push on structural reform the fomc meeting taking place today, and, of course, brexit sharply in focus here in europe and then on top of all that this
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we got a number of corporate earnings in focus. we just ran through some of the highlights of the santander, novartis a huge number of earnings to focus on cost. we are seeing the steep eest its up about 30 basis points back above that 1.31 mark last night we did see the pound come off on the back of those parliamentary votes, but it has been clawing back those losses so far today the euro is currently trading just a touch lighter versus the dollar let's get a quick look at u.s. futures. the big event took place after markets closedit looks like th
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s&p and dow are all poised for a higher open. >> you mentioned, juliana, more than 100 companies reported by the end of this week so far 70% have beat know expectations more companies today, as you just spelled out, some of the key ones we're looking out for microsoft, mcdonnell's, facebook, tesla. all of the names that we'll be reporting later on in the day.
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>> last time we spoke we were -- so far markets have reacted positively to that are you expecting him to continue along that path today, or go along the lines of, look, we need a little bit more time to determine whether or not this new found dovishness is here with us to stay or whether or not we can go back to data dependency in the sense that if the data gets better, they will go back to being hawkish again >> i think they're going to stay with the program of being patient simply because the markets and the price in the markets are telling them to be patient. it's not so much a question of the data that they're getting today, but what the signaling in the capital markets tells them about the flow of credit and the kind of growth they're going to get going forward. now, the fed never likes to just -- because, remember, they raised rates in december they don't like to just turn around and reverse course. you know, six weeks later. unless there's some obvious disaster going on, which there
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isn't. the market reacted very positively there's a lot of ways they can go about it in terms of they can say we're going to be done by august or we're going to go to a different end point in terms of the size and then the math works in a lot of different ways, but the end result is it gives a sense of relief to the market. >> certainly the expectations are super high then going into that meeting if people think that they're
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going to announce a formal taper for qt, then it could send some shock waves. >> you have done a lot of work looking at historical fed decisions and credit market behavior, and you found that a classic signal of a developing credit crunch, if you understand correctly, is already evident in the corporate bobd market. what is the signal >> well, i think what happens is when you see the curve flatten a lot, and thn you see credit spreads widen, what you really are doing is you have -- the ridening of the spread is telling you that people are more concerned about credit than they were when you come out of a recession or are in a veegs, what does a fed do it engineers a steeply positive curve. that yields, say, five, ten-year yields that are much higher, right, in an if you kept money in the bank.
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in this last ten-year period is zero or negative in europe. >> i'm afraid we're going to have to leave it there thank you for a heads-up right in the middle of earnings season as well steve blitz, chief economist from ts lombard. u.k. prime minister theresa may will meet with opposition leader jeremy corbin later today, according to the brexit secretary steven barkley in an interview with the bbc he said the government is exploring alternatives to the backstop it comes after prime minister theresa may said she will seek changes to the brexit withdrawal agreement.
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speaking of parliament, the scottish national party's ian blackford accused the government of tearing the u.k. apart. >> governments right across these islands. this government westminster and the tory party has no respect for the administration and for the other --let's get back out to will ham who is live in westminster. as we've just been discuss, she clearly now has a mandate to go back and look for some form of a modification on the irish
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backstop big question, though, is how our coalition partners at dup will react to that. >> well, let's try and answer that for you i'm happy to say we're joined this morning by sammy wilson from the dup my colleague there just talking about whether you will support the prime minister's efforts and what those efforts will look like she's going to be meeting with jeremy corbin later today. she's confirming he, of course, is pushing fwor a customs unionas a solution to this we've heard from peter, the european partly im's court naturor of brexit, and they like the idea of a customs edition. with the dup, will they ever counter that, and if not, why not? >> i can understand why the e.u. would love the united kingdom to say in the customs union as a solution to the problem they've got on the irish border. we spp that one of the reasons why they have such a big issue is because precisely they wanted to keep the young ietd kingdom within the customs union
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we would not support that. the reason why we wouldn't support it is that one of the reasons why we wanted to leave the e.u. was to have the freedom to do deals with countries around the world where we could believe that there were economic opportunities which didn't exist with being part of the customs union of the e.u don't forget, the e.u. is protectionist trailing block, and the because of that opportunities which could have been had with india, china, a lot of other expanded economies around the world were missed we believe that one of the reasons for getting out of the customs union was to be able to exploit those opportunities and to break free of the kind of protectionist block that the e.u. is. >> i want to just give you a slight thought experiment here.
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>> there thereby a new border. >> what happened >> let me just use the words of the chief negotiator of the e.u. who only this week has said that they would have to -- he said that he had a team working on the present. these are the two things he mentioned. first of all, they would look at paperless solutions. in other words, they would look at electronic means of capturing the record and trade, and they would look at decentralization in other words, they would look at either checking goods at the point of departure or the point of arrival away from the border. now, those are things that we have been arguing for the ras
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two years should be done they are saying they would embrace nem e them in the event of a no deal it's a lot more sensible to embrace them and make them part of a deal. >> i know you don't speak for a government, but you are a partner of the party that is in government, essentially, and i want to ask you this we've heard from a number of government representatives this morning. they've been unable to explain what these alternative arrangements would be that are part of graham brady's amendment and arest passed for the majority last night. do you have any clear way of explaining to our viewers what those could consist of >> i mean, the first thing is that we are saying to give comfort to the e.u. and to give comfort to the irish, that there should be a legally binding protocol in respect for northern ireland that none of this -- the parties through the agreement would ever erect a hard border, and then secondly, that there would be a menu of means by which that could be achieved, and including the paperless solution which the e.u. say
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they're looking at at present and including decentralization, i.e., looking at checks away from the border, including the trusted trader status, which is already an operation anyway for goods crossing the border where taxes have been collected currently because of exize differences, vat differences, sales tax differences, in your language, and so there's a whole range of things which have been looked at and put forward in the past, which have been rejected by the e.u. and -- >> why did they reject it? >> i think that the reason why they rejected them is because they saw the irish border issue and the way in which they presented the irish border issue as a way of keeping britain in both the customs union and the single market. that was really their objective. they didn't want britain to be free, to be able to be a competitor on the world stage, and, unfortunately, the prime minister fell for it the house of commons wouldn't accept it. she's now having to go back to
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renegotiate. >> do you think the reason they want this backstop in place in the form that it has right now is to stop britain from being a player on the world stage? >> i believe that neil has been used by the e.u. and has also for his internal domestic politics reasons where he is having to make the border a big issue, and, of course, coming back on the irish government there's a grow of panic because if we leave, the irish economy will suffer very, very seriously given that 50% of their exports go to db and then they would find barriers between themselves with very high tariffs because it's high -- you know, we're looking at a solution.
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>> do you think they've lived up to their responsibility to business owners? >> i think they have because, first of all, that was always known. it's been known sebs the withdrawal agreement or the withdrawal bill went through that 29th of plar would be the date in which we were leaving. there's been no one for at least six months that this withdrawal agreement was not going anywhere, and we were probably heading towards a -- if there was no response from the e.u.
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that we were leaving without a deal, and, you know, it's not only the people and the house of commons and the house of lords and the government who have to take some responsibility for this, but, of course, if we finish up with no deal, it will be because the european union play the part and not as well by being
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also saw sales of its key iphone device. the results come after apple slashed its revenue guidance in the first earnings preannouncement in 15 years. we are joined in the studio by nick ford, u.s. fund manager at mightan. now, the big question after the big preannouncement january 2nd, was is this an apple problem, or is this a china problem?
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do we have the clarity >> there are two issues with apple. first of all, knee been very aggressive the last few years. >> that's a lot of money that they would have to cough up. in china with the economy slowing and consumers feeling the pinch a bit more, there's a lot more selective about which sort of device they buy. the other issue with apple is the competition are catchingup pretty rapidly they've got competitive products you think about the other factor that's important the impact of the trade war. if you are a chinese consumer and you have a choice between a u.s. product, an apple iphone, or a locally produced one supporting the chinese economy, and you are reading about donald trump's slightly belligerent
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rhetoric, you're probably going to choose the chinese products i think they're losing a little bit of market share at the moment they've been a bit aggressive on price. >> 60% of apple's world revenue does come from their smartphones. as you mentioned on the price point, they've clearly got it wrong. they've had to adjust prices lower, and you have the currency impact as well margins in that segment are much lower than the overall group margin for the smartphones it's about 34%. the group is about 38% he is kuhn to get services higher it's profitable, and it will afford apple a higher valuation if they can make services a bigger part of the overall pie
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those revenues are highly valued there's a deep push into the health care space into the services division. we can use the iwatch to dial in with health insurers to make sure that people are monitoring their health more efficiently, taking action to improve their fitness. this can be an exciting area of growth for apple >> excellent thank you for that insight nick ford, u.s. fund manager at mitan. that's it for today's show i'm juliana at that timelebalm >> stay with us. worldwide exchange coming up next - my family and i did a fundraiser walk
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in honor of my dad, who was alzheimer's. i decided to make shirts for the walk with custom ink, and they just came out perfect. - [announcer] check out our huge selection of custom apparel for every occasion. you'll even get free shipping. get started today at customink.com.
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and the army taught me you'a lot about commitment.ng. which i apply to my life and my work. at comcast we're commited to delivering the best experience possible, by being on time everytime. and if we are ever late, we'll give you a automatic twenty dollar credit. my name is antonio and i'm a technician at comcast. we're working to make things simple, easy and awesome.
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azplienchtsz your top five at 5:00 apple the stock to watch today china a proob, yes shares are rise. we're going to tell you why. speaking of china, trade is front and center high level trade talks between america and china kick off today in washington. you are also just hours away from the fed's first rate decision of the year what you can expect on that guy, jerome powell and company. breaking his silence, jailed auto executive carlos ghosn saying his rivals are out to get him. it's his first interview since his november arrest. wow, dangerously cold. insane temperatures across the midwest. disrupting everything from air travel t

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