zbloinchts welcome to "street signs. >> these are your headlines this morning. yourp even equities followed the u.s. higher after a dovish fed blames global headwinds for keeping rates on hold. >> in this environment we believe we can best support the economy by being patient and evaluating the outlook before making any future adjustment to policy higher oil prices boost net profit at shelby 36% in 2018 the oil major pays out almost $4 billion in dividends and shares

head higher. consumer giant unilever misses fourth quarter sales forecast as the new ceo takes the helm while spirits are lifted at diaggo >> north america, up 6%. europe up 5% the emerging markets up 10%. scotch whiskey doing well. we're feeling good about the business and about maintaining steady performance from here swauch ticks lower as the swiss watch maker reports fourth quarter sales below expectations and blames a downturn in asia and france.

the dow ended the session yesterday more than 400 points higher all sectors in the green a big boost for the tech sector as well. the nasdaq he wanteding the day up 2.2%. that positive mood prevailed into the asian session as well seemed a lift for asian equities you can see right behind me the heat map in europe is pretty much mostly in the green i would say 80% green. about 20% in the red as we sort of hang to some of the positive sentiment from asia overnight, the dovish tone out of the fed also coming into play as well in european markets this morning. it is also very, very big day not just on the earnings front for europe, but also on the macroside as well. i'm just going to run you through some of the key things we have been watching out for. this is the picture broadly speaking we're up .3% ftse 100 starting off there. almost touching 7,000 here big jump

up .7% for once we're not talking about the political back drop. we're actually talking about earnings some really strong numbers today come out of shell. trading up about 4 hers higher oil and gas company, of course posting the highest level of profit in four years it's one of the reasons why the ftse 100 is doing so well. as we were just pointing to, strong numbers out ofdiaggo, too. a bit of a disappointing few numbers out of unilever. we'll get into that shortly. a sector that's up 90 points, .8%. ftse up .3%. i want to point out from the macro perspective watch out for gdp numbers. those are coming in at 10:00 in the morning. we will break them here. this is the first preliminary flash estimate we'll get for euro zone as a whole expected to come in at .2% quarter-on-quarter

we also get the italian gdp number expected to be negative there. technical technically italy may have fallen into a recession. we'll be watching out for those even though the picture is quite positive for european equities that is the picture. let's get into the sectors i want to talk about the breakdown. i already mentioned oil and gas and the fact that shell posted very strong numbers. oil and gas is right at the top up 1.6%. auto seeing a rebound as well in line with some of the positive sentiment cyclical sectors health care also up 8% some zoedecent numbers out of roush. telec telecom, more disappointment let's talk about some of the specific earnings starting off with shell, which, as i mentioned, oil and gas is right at the top there full year net profit at shell has risen to a four-year high. thanks in part to higher oil

prices the company's earnings jump 36% to 21.4 billion dollars, and beat forecasts thanks to cost savings last year. free cash flow also increased to almost $40 billion that is a picture for shell. up 3.4%. also, dragging and pulling up other oil and gas stocks along with it. it's one of the reasons why the ftse is doing so well this morning. however, unilever has missed fourth quarter sales expectations with underlying growth of 2.9% now, the consumer goods giant said market conditions had been particularly challenging in the second half of 2018. the company also forecast more financial pain for the year. that was the first side of results for the first ceo alan, and he told me earlier that he was happy with the firm's performance. >> we think these are a solid set of results because they balanced nicely growth and margin kbrouchimprovement, and

good quality of growth it's two-thirds volume and one-third price, which is very much indicating that more people are buying our brands around the world. looking forward, we have indicated that we expect growth to be more in the 3% to 4% range, which is the lower half of our ongoing guidance, and it basically reflects some of the volatility in emerging markets notably, latin america >> some analysted would say that given the acquisitions that you have made and your foray into emerging markets, there's no reason why that growth shouldn't be higher. is it because the core businesses are not growing fast enough, or is it because some of the acquisitions you have made haven't grown as fast as you would have hoped for >> our biggest brands are some of the healthiest brands for us, and the acquisitions overall are contributing double digit growth the real issue is the volatility in meeemerging markets when we see notable slowdowns in place like argentina, brazil,

southeast asia, then that's why we've come in at the lower end of the growth range. it is within the range in a we've guided, and, remember, it's accompanied with a very strong bottom line delivery. >> so talk to me about your partnership with jr. t.com it's been going for a couple of years now. i'm curious to hear how things are panning out on the ground in china given some of the slowdown recently we're getting out of china and the macro-data >> all of our e-commerce partners in china are delivering tremendous growth. choin is very special to me. i lived there for five years actually, the chinese market has become a source of steady and solid growth for unilever. we see the consumer markets in that part of the world and it's a very important market for the future holding up very well, in fact >> in terms of on a forward-looking basis, as i mentioned, you spent more than 13 billion euros or something on

acquisitions since 2015. your net debt is about 21 billion euros. almost twice ebida looking forward, can we expect more acquisitions out of unilever >> first thing i should say is that at the same time as we've been making these acquisitionac last year we returned 10 billion euros to our shareholders in the form of dividends and share buy-back we will definitely continue to evolve our portfolio through acquiring faster growing businesses and trimming off parts of the portfolio that we think are better owned by someone else >> you talk about some of the faster growing businesses that are of the healthy type in line with the changing taste of millennial consumers is that the direction that it's going? >> i think it's maybe helpful to think about it in two ways the first is prioritizing our divisions, and in that regard we've said that our beauty and personal care divisions are a particular priority. then, within each division, we

need to shift our footprint into the faster growing spaces. for example, in foods making sure that we're moving into healthy, organic types of foods going forward. >> i also asked him about the controversial attempt to move its headquarters out of the u.k. >> this is not really a discussion about headquarters. it's a discussion about helping unilever had a simpler legal structure going forward, and there's hardly a stakeholder that doesn't agree it's good for uniler our board will certainly be looking at that. we'll continue to look at it i would describe it as being in the important but not urgent box. >> meanwhile, diaggo has closed on a 5.8% rides in sales in key markets china and india has helped to offset the foreign exchange effects the british manufacturer the brands like johnny walker whiskey and smirnoff vodka said it would deliver organic growth for the year it also announced an increase to

the share buyback program. it plans to purchase 660 million pounds worth of its own stock. ceo evan jiminez said his firm can hand a no deal brexit, but he said he was concerned about smaller businesses >> most of our products move out of scotland. the board is in scotland we are planning around the very scenarios. we can handle them it's much tougher for the small businesses that support us, and that's why we are really keen to insure we don't create -- make it difficult for a lot of the smaller businesses in our supply chain, but overall, we're prepared for the various scenarios, but we clearly very strongly, would urge all parties to get to a deal >> swauch shares are ticking lower after the company posted full year net profit below forecasts. the swiss watch maker was hit by a fourth quarter slowdown in asia and weakness in france.

constant currency sales came in below estimates. the company proposed a lower than expected dividend of 8 chris francs per share swatch says it expects healthy growth in year and expects better opportunities in china. the swatch ceo struck a bullish stone and highlighted the strength of that chinese demand >> we have a growth everywhere from local consumers in the united kingdom, in the united states of course, also in china but when you talk about the fantastic chinese consumer, 1.3 billion people, and these middle class, the politics over there have done the right things they create a middle class that's what we need. a middle class that can really consume. that's what's happening and continues. there was never a chinese consumer that was always there >> let's bring in steven parks who joins us on set from brooks,

mcdonald i'm interested in the china angle for the earnings that have come out over the last couple of days, and just to recap what we were discussing, the diageo strength in china was there. chinese consumers are drinking whiskey. apple sales, not so much they're not buying phones. watches, swatch, not so much they're not buying watches lvmh, they are buying hand bags. what is going on here? the china consumer seems to be strong in some things and very weak in other things >> it seems on the luxury and semi-luxu semi-luxury goods it's carried on a lot of strength in china. when we look at the broad data, we're facing a slowdown in consumer confidence in particular and clearly any trade barriers that come up are going to weigh on that as well it's a mixed story with china. those who have a huge amount of their sales already to china, i think, are being hit a bit more than those trying to grow. >> it must be difficult to parse through all of that. our assumption just on the outside and looking at the

micro-data, everyone is taking about the slowdown, and yet, some companies point to a robust not in chinese growth and chinese consumption. others don't when you are thinking about analyzing a company, how do you account for the china macro? >> the main point there is trying to divide up between things which are consumer discretionary and consumers staples. i think things which are more staples are more exposed to general shifts in consumer confidence whereas, it's an emerging middle class story that we've got that should help consumer discretionary in a bit more. >> when it comes to earnings more generally beyond this season, do you think that investors are looking more at the past three months performance or looking more at the forward guidance >> they're definitely looking at the forward guidance if you look at the statistics on now markets reacting very quickly to the earnings produced particularly out of the u.s., actually, it's relatively whether you missed slightly or you actually beat, you are being treated relatively similarly by

the market what people are really looking for is what your 2019 guidance is again, when we say we're talking about what the strength of the u.s. or european economy looks like over next 12 months, we're in quite different stories from varying companies. we saw caterpillar from the u.s. saying actually quite a worrying growth outlook it's actually a few other companies that are a bit more constructive >> since talking about specific sectors within europe, today obviously we're seeing a big bounce in oil and gas because of bumper numbers out of shell. we also had some solid numbers out of roche as well too how are you looking at sectors in europe? do you think oil and gas is place you want to be despite volatility underlying, and also health care is one that also comes to mind? >> oil and gas and the energy sector and commodities more broadly are traditionally not a very late cycle trade. actually, we're tending to be underweight those, but actually, health care, so roche and roche is a particularly strong given fact that grieve yas has been a

stronger performance ever drugs. it's got that as well. health care is a sector, and you're tapping not into today's long-term demographic forces, but it's also a sector as we're entering the latter part of the economic cycle, you want be to shifting away from more cyclical sectors into defensive sector health care >> are you bullish on where european equities are being held it's been a difficult 12 months as a whole are you getting any indications out of the earnings that last week or so that things could be looking better in the next few months >> we're still relatively cautious on europe we think if we are moving late cycle, regardless of what the q4 earnings are looking like, actually, the -- looking at 2019, we're looking at low to mid single digits in terms of earnings actually, that's even with 12.5 times forward pe's that's not looking hugely attractive to us >> we'll leave it there for now.

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my colleague juliana joins us from near their headquarters in basil what can you tell us about these numbers? >> thanks very much. it was a strong set of full year results, indeed. both sales and eps beat consensus expectations the bulk of the sales growth, nearly 90%, came from new medicines. on outlook are they are guiding to low to mid single digit, eps and sales gret for 2019, which investors should see as a bit of a relief the question for investors is whether roche can generate

enough growth from these new medicines to offset the impact from biosimilar competition for their legacy portfolio where the bulk of their sales still come from to answer that question, investors must determine how quickly biosimilars will penetrate the relevant markets, and i asked the ceo about the magnitude and pace of erosion that they are expecting for 2019 take a listen to what he had to say. >> we see a continued strong momentum with new medicines, and as a result of that we are confident that we can offset the entry of the biosimilars that is, we will continue to grow in the future now, most specifically, as far as biosimilars are concerned, we expect similar impact as we have seen in 2018 and be expected for biosimilars to enter in the second half in the united states in spite of the entry of biosimilars in the united states, we still expect to grow

in the low to mid single digits for 2019 now, as you heard there, the ceo said that they expect to see a similar impact in 2019 from biosimilar competition in europe as they saw in 2018, but i pressed him for a little bit more detail around the pace of erosion that they're expecting for two of their biggest legacy drugs facing this pressure and that's their map -- and herceptin, and i want to highlight that sales dropped 47% for the former and 16% for the latter in 2018 as a result of these pressures. take a listen to what he had to say about these drugs in particular >> the impact of matera actually will level off a bit on the other hand, we have ab increased impact of herceptin because it was later if you take it in total, the impact will be similar in europe again, the good news is that we can offset that with new

launch launches, for example, our new cancer medicines we are very confident we'll continue to grow >> as you heard there, the ceo is confident that they will be able to offset the biosimilar impact with new product sales growth they delivered today, as you saw in their 2018 results, the question moving forward is can they continue to deliver right now it looks as though investors are confident they can. back to you in the studio. >> certainly it appears that with the stock and where i trading up 1.7%, thank you for that, from basil now accident or other top story overnight, the feds has kept interest rates unchanged and put on hold a three-year policy of constituted every steady tightening the central bank said it would be "patient" before pulling the trigger on rate hikes again. fed chair jerome powell said that domestic and global headwinds had weakened the case for rate increases

powell complete changed his tone is this a person who is keen on reminding the market that there is such a thing as a powell put? >> he is going to distance himself from the exact phrase of powell put clearly, the data hasn't massively changed sense the middle of december equally, every market has been a bit more void, but, again, it seems straenge that now is the time that powell has done this entire u-turn from policy that he has been setting up the last 12 months or so. >> let's look back at 2018 and you and i had discussed this before i was just discussing this with wilham it was a yoear encapsulated and am combined with wide deficits coming out of the u.s. up to $1 trillion. it's going to keep moving wider on the back of their fiscal spending plan. you've had a huge amount of treasury issuance coming at a time that the fed are hike, withdrawal of dollars from the markets. with the fed announcement now

and their seemingly desire to be on hold for the foreseeable futures, does that reverse some of the u.s. dollar liquidity withdrawal we had last year? >> well, what's key is what's happening in terms of the balance sheet reduction. at the moment we're seeing $30 billion removed every month on a net basis. it's really interesting if you look at the specifics on a month-on-month basis you have the 30 billion targets. they'll go out and buy 50 billion of new issuance. you look at the times when it's really stretched in terms of market liquidity namely october and september of last year. they were the two months where the federal reserve bought none of the new issuance in the treasury market. we're seeing that quite exactly. it's not necessary normally the catalyst, but it creates this really fragile environment as liquidity is being squeezed out. >> we had a lot over the last five or six weeks about the government shutdown in the united states, and i wanted to ask you, what impact that had that perhaps has not been talked

about a lot when it comes to the fixed income market. >> and issuance. >> the key difference there, in essence, government shutdown is when you reach your debt ceilings you can no longer issue as many treasuries as you like to do it was a perverse element, and cbo has been focussing on the $11 billion loss at market, but, actually, the government shutdown has supported the market actually, because of that fact of the new treasury issuance hasn't come to market, the fact the fed isn't buying it, doesn't matter as much especially what's happening is it's been quite supportive of liquidity. in addition to that, government spending is actually coming from running down the treasury cash reserve rather than going out and sucking money out of the economy. actually, strangely, this is quite supportive >> seeming this agreement actually is extended beyond mid-february, are you then expecting there sob a resumption of treasuryish wednesday, and, therefore, another financial tightening how does it plan to the bigger rescue spectrum?

people are buying into this risk on rally, buying into it >> february is a month where the fed is still going out and buying the marginal bond it is then when you are looking out to march, looking out to april, where they're not providing any support where they expect volatility to come back, and, again, it probably isn't going to be the catalyst in and of itself, and the fact that it's creating a fragile back drop in march and april. i think volatility is more likely than not. >> just one final question for you. we've talked about that february deadline to try and end another shutdown what about the other deadline, march the 1st, for the u.s.-china trade talks what have you heard in the public domain that gives you any cause for optimism >> optimism is always around this idea of this trump maximum pressure tactic. you can largely ignore -- not that helpful for an investor, but you can largely ignore some of the more aggressive rhetoric up until that much diverse deadline huawei will be hanging over that for some time. >> we have to see what happens with that, don't we? >> we'll leave it there. thank you for joengs, edward

park, the chief investment officer from brooks mcdonald also coming up, the leaders can add the word finally meet to discuss brexit as the e.u. insists the withdrawal agreement cannot be renegotiated stay with us

>> european equities follow higher after a global head wind for keeping rates on hold. >> in this environment we believe we can best support the economy by being patient and eve waiting the outlook before making any future adjustments to policy higher oil prices boost net profit at shelby 36% in 2018 the oil major pay-out almost $4 billion in dif depds, and shares head higher. consumer giant unilever

misses the sales foesh as the new ceo takes the helm, and spirits are lifted at dieageo. >> growth in every region of the world, north america up 6% europe up 5% the emerging markets up 10%. scotch whiskey doing well. we're feeling good about the business and about maintaining steady performance from here and swatch ticks lower as the swiss watch maker reports fourth quarter sales below expectations and blames the downturn in asia and france.a ba risk on tone, and we are seeing that in europe this morning. we've got ftse 100 just shy of that 7,000 level lots of earnings coming out there. we were just talking about shell one of the main performers in

the ftse very strong earnings there the biggest and largest profit in four years. that's helping to give the u.k. index a bit of a boost up .5% dax and cac, the gains are more muted there. up .2% both of them slipping a short while ago. below that 5,000 level ftse also met weakness there now down 0.3%. we will get the gdp data all eyes on italy gdp. the expectation is they had formally slipped into a recession. it has been a very big earnings day, and that has been mostly the drivers for a lot of these indexes this morning in terms of sector composition as well household goods underperforming with oil and gas outperforming let's switch on, though. i want to talk about foreign exchange because after the very dovish fed yesterday at the dollar stage, a bit of a turnaround weakness there we're seeing that transpire versus the euro. almost at 115, 114

90-ish is the mark here. seems leak a completely different story to where we were a week ago, talking about the ecb. the dovish ecb, people turned negative ever since then the story has been one of dollar weakness rather than euro strength. also, cable, sterling trading at 131.20 that is a figure flattish on the day. again, it continues to strayed strong despite the one could say worry soomsome news going on in the background which weather it comes to the political talks about brexit overnight we're seeing strength being translated in the yen. .4% stronger versus the dollar that is a picture across the board. perhaps a little bit more movement in equities, though, than we're seeing in currency space. >> thanks. an interesting story across the wires here in europe deutsche bank expects a merger with its german rival by the middle of 2019 if its turnplarnd fails. that's according to bloomberg.

the news agency reports that executives fear this will be the only option if there's no real improvement at the german lender deutsche bank declined a cnbc request for comment that the bank will report fourth quarter earnings you can see shares down around 1.9% very much near the bottom of the dax index at this stage. chinese manufacturing activity has contracted for the second consecutive month it dropped to 49.5 the pmi for new orders that look at future activity also remain in contraction territory this is raising concerns about growth slowdown in china, but services data for the month came in at 54.7 separately, the u.s. and china have begun a new round of trade talks in washington. china's top trade negotiator leads beijing a high level negotiation. deep divisions, of course, remain between the two sides in the areas of technology theft, intellectual property rights, and, of course, economic

reforms. let's get a quick check on how u.s. futures are shaping up ahead of the open in a few hours time yesterday we had a solid session across the board for the three majors a strong day for nasdaq. also, facebook reports after the close at a strong after hours performance there leading some of the tech gains. you can see the pictures are pretty mixed and more muted as we head into the u.s. session. dow ten points weaker. we are very much in the middle of earnings season with more than 100 companies reporting this week, and a lot more to go between today and tomorrow i'm happy to bring in nadia grant, thread needle investments. i want to start off by asking about the macros we've had seemingly major developments one of the feds turning dovish, and then also, some positive narrative, positive spin going to the trade talks between china and the u.s. from a macroperspective, would you say that the outlook is looking a lot more positive for u.s. equities?

>> yes i think there's a recognition that the risks that there are a lot of risks to the outlook. there's a recognition that the growth is still on the solid footing in the u.s it's slowing outside of the u.s., and with the companies reporting right now, they're showing just that. they are executing we're about 40% of the way through. and i think the fact that the fed chairman came out and acknowledged that while he is not on autopilot as he has explained and that he is going to be patient, he is alleviating a lot of concerns that you could have had too much tightening at a time where perhaps outside of the u.s. you are feeling the crunch on high rate from debt, corporate debt, outside of the u.s., but also a leverage within the u.s. the system is indeed more fragile. >> correct my if i'm wrong, but earnings growth forecast for this year, eps growth, is around single digit territory last year we looked at broadly

17%, 18% high double digit territory for eps growth, and, yet, u.s. equities could not perform. this year we're looking at eps growth much lower than what we had last year, and, yet, we're starting off on a strong footing for 2019 why are investors paying more attention to the macro-narrative than what the companies are twiel coming up with in terms of earnings growth? >> yes i think last year we -- i think last year the market was pricing in a very high likelihood over a recession coming in at the back end of this year when we looked at where we were from a valuation standpoint, at the end of december, the market was trading on 14 something times farther earnings, and that was basically implying negative earnings growth for the s&p 500 going forward. it's obviously a discounting mechanism. as you know, as you said, the consensus or from a bottom-up standpoint, we don't think we're going to get negative earnings

this year. i think alleviating some of the risks so the risk of too much tightening of a policy mistake, says alleviating some of the pressure from trade, getting a more conciliatory tone, getting closer to a compromise all of that is contributing to the market basically saying, well, you can deliver on that earnings growth this year. >> essentially, you are saying the picture looks a lot rosier than a few months ago because of the factors. i want to ask you about the length of the economic cycle bab based on what mr. powell said yesterday and based on the slightly rosier picture. do you think the economic cycle could extend as a consequence of the current set of circumstances? >> so i -- we thought that the cycle was fine where the latest stage obviously of that business cycle, but as we know, the cycle, they don't die of old age. you need to have built excesses. historically, you have -- you

have built an excess, exuberance for the cycle to burst we did not think we had done that this time around. what we are having now is -- you may or may not have a recession in one year, two years time. at one point we will, but not to say that it's happening right now, and surely, we're not seeing signs of that, and the fed has indicated that they're very flexible and willing to support the cycle. >> do you not think that markets are just getting too addicted to the central bank because the only reason stock markets can rally is when the fed turns dovish now we know china are thinking of a stimulus. they're not going to hike any time soon. they're thinking of extending the electr the liquidity operations it has gone from the central bank looking at what's happening in financial markets and taking a step back and saying, actually, no, we're not going to do anything in which cases you get the relief rally are stock market investors not too dependent on central bank

decisions from here? >> i'm an active investor, and i also don't think that the market is rationale, and i think there are inefficiencies to be exploited, and you can overshoot on one side or the other i think that what the market is taking concern of over slowing -- such slowing growth outside of the u.s. in particular, taking concern about trade, protectionist policy, i think it's warrantied. from a fed standpoint, you have had as a result a tightening of financial conditions, and you have also had an increase in risks. i think it's good that they're indicating that they're not d dogmattic, and they're looking at the data and they're flexible i think it's a very positive development as the market has shown. >> and patient >> right don't go anywhere. that's nadia grant from thread

nooelgts needle investments. the withdrawal agreement remains the best and only deal possible according to the e.u. commission president jean claude he told members of the european parliament that a risk of disorderly exit has increased. that's after a majority voted for u.k. prime minister theresa may to seek changes to her own brexit deal. meanwhile, the e.u. council president donald tusk, took to twitter to reiterate the e.u.'s position that the agreement is not open for renegotiation in london the u.k. prime minister theresa may has met with the opposition leader, that's the head of the labour party, jeremy corbin, to discuss the next steps in the brexit process. he urged the prime minister to -- he said it was ub acceptable for may to leave that option on the table. the prime minister tweeted after that meeting that the only way to avoid a no deal brexit would be to vote for a deal. >> a deal or her dole? >> well, she said a deal

speaking to cnbc, vin, the ceo at the european banking federation, says that brexit will certainly hurt the u.k. economy. >> brexit is not good for business not for fin tax as well. if you look at london and how much effort the united kingdom has put into getting fin tax the right environment to start up and the same is happening on the couldn't meant, if you compare to the united states and china, it is obvious that the bigger the market is, the better it is for fin tax. the faster they are can start, the more opportunities they have if you cut up that market, you are urt hadding yourself, which is brexit in one word. also coming up in the show, facebook exits a scandalous year we're going to discuss that and more your brain is an amazing thing. but as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. thankfully, the breakthrough in prevagen helps your brain

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>> strong growth both on revenues eps. as you mentioned, record profit. now, cbs julia borestein had a chance to speak to facebook's sheryl sandberg. >> it was an end to what was a challenging, i think, really important year for fsh year quite pleased with the growth of our community. we announced today that there are 2.7 billion people who on a monthly basis are using at least one of our services. whether that's facebook, instagram, what's app, or messenger, and importantly, the community that uses facebook is growing. we're at 2.3 billion every month with 66% coming back every day i think one of the questions people have for us right now is

we're making such big investments in safety and security can we make those investments while people continue to use our products and while we continue to grow our business i think this quarter shows that we can do beth now, we still have a lot of hard work ahead of us, but i think this shows that we can make progress across multiple fronts. >> what was driving that upside, though was it a higher ad load? was it better targeting? how did you manage to grow the af new revenue per user so significantly? >> well, we're seeing growth in the community. we're seeing very nice and consistent engagement. it's worth noting that even as we have grown the facebook user community, the same percentage are coming back every day because facebook is part of their daily lives. we've increased ad load over the last couple of years, but nothing that important this quarter. we've done a good job, i think, making the ads more relevant to people while protecting people's privacy. i think that's something that we need to do a better job

understanding. people worry that if our business model is advertising, we can't protect people's privacy at the same time, and we do we can we don't sell data we don't tell advertisers who people are we can use that information to show people things they're interested in, which is better for people and is growing our business >> she's highlighting growth of this company despite this year of scandals. 2.7 billion people worldwide now use facebook, what's app, instagram, or messenger. that's a lot of people when you think about it >> let's bring in nadia grant, the head of u.s. equities for thread needle investment, who is still with us. were you surprised at how strong these numbers were out of facebook, and does it change your perception of the company after it was a year of scandal, and they're still managing to gain so many active monthly users? there's a strong business case to look at this company, isn't there? >> yes as you said, i don't know if we were surprised, but i think what was really key this quarter was

to show that this scandal had not impacted the franchise in fact, the users were still shoring up and engaging as much. indeed, they can grow their output and so that number was definitely ahead of expectations it was really a key number to watch. >> nadia, you look at that, and just to pick up on what was said, you look at those sets of numbers, and you consider how much bad publicity this company has had over the last 12 months. as an investor, do you think, well, there's nothing that can happen that will damage these guys permanently in terms of this public outrage is clearly not going to go away we're going to continue to hear these stories, one imagines, about actions taken by management or not that are damaging to their credibility, and, yet, you see these kinds of numbers in the latest quarter.

do you think as an investor i've got nothing to worry about long-term, or are there concerns with fermz like this >> of course as you mentioned, the regulatory concern is not going away, and it's a tough one to handicap in terms of looking at what does it mean, how can i quantify that risk it felt coming into the year that a lot of that had been priced in. it was not about the execution it's never been about the company's ability to deliver on the top line the concern was mostly on what's the cost of doing business, and how they're doing business it seemed to be on the side of the company they are investing, the sentiment is still going to revolve around what's happening with district attorney here and there. at least we know from those numbers or we have a strong indication from those numbers that the problem is not on the pnl. the problem is how they are delivering the numbers and what

they do around that. >> to your point on investment, i think it's interesting the way i think about it they have 2.7 billion active monthly users. the users are there. when you think about facebook, you have to think about how they're going to monotize those users and across all of their different platforms, and then the second is balance that versus the complete cap-ex spending that's dealing with the fall-out of the data privacy scandal from last year elizabeth, from your standpoint, how can they balance the two together cap-ex spending on one side versus monotiesatization on the other. >> once that regulation came in gdpr, the big framework that protects user rights here in europe, privacy rights, user growth did slow in europe in facebook on a monthly basis, but what we saw this quarter is that all of those users came back these measures haven't really been enough to turn away customers from using the platforms, and ultimately, what that means is that advertisers

are coming in strong too part of the reason advertisers are there is also because of a lack of alternatives, and that kind of plays into the regulation question. is facebook just too big, there's nowhere else to put their money? the fact that the users keep coming back, the advertisers are growing, it's a good sign for this business? >> just to broaden out from facebook, when you talk about the tech sector more generally, so long as they deliver good products, do you think that consumers have short-ter memories and, therefore, investors can discount the scandals facing any of these players in the sector? >> i very much agree with what you have just said this is just the fact that this is a draw of 80% we are having secular growth the move of the advertising to digital. 80% to 90% of that is being captured by facebook and goggle. there's no other place to go

you're still at early endings in that secular shift i think more importantly, what they've done with their opex and how they are ek cute and whether that opec is going to go back down or grow more in line with that top line. google for sure at the moment has had better execution and seeming to have had a better handle on the -- around policy in the welcome back site >> does that make you want to favor owning google over the others broadening out, we talked a lot in december about the rebating that happened there. we've had a strong start to the year are you buying into the story as well or being more selective about the stocks you want to own? >> we have a pretty concentrated portfolio, and we look at valuations we look, obviously, at those

issues a lot of those names google as well as facebook, we think were offering the secular growth growing in the sort of teens, their earnings, and, yet, trading at multiples that were very attractive. we do like tech in general, but we're specific in terms of the themes we like to be exposed to those secular mega trends that has moved to digital cloud >> you already mentioned earlier in the conversation how significant you think the impact was of trade dispute last year on equities. >> it's -- it's a risk to the trait negotiation. in doubt we do believe that there is both interest -- both parties have expressed an interest in getting

some resolution. so i do believe that we should get elements of resolution in -- before the end of the -- by the end of the trade truce, and that should be good for the sector as a whole. we continue to be overweight >> thank you that was nadia grant head of u.s. equities. thread needle investments. r whexcngconge mi upight now

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>> here's your five at 5:00. facebook delivers. the stocks is soaring after the social media giant posts a record profit. you can't say the same, though, for tesla. those shares getting hit they're hitting the skids really on a profit miss and another high level departure we're digging into that big move poet of them straight ahead. >> jay powell willing to take his time with future rate hikes, and, of course, trade remaining front and center for investors the u.s. and china holding second day o