. welcome to "street signs." >> these are your headlines. >> trade optimism spurs the stock 600 to a near eight-month high while the euro spikes after key european service pmis beat expectations zbliern a softer pivot in downing street sterling extends gains as theresa may says she'll request a second brexit deadline extension and seek a compromise with her political opponent. >> we will need a further extension of article 50.

one that is as short as possible and that ends when we pass a deal and we need to be clear what such an extension is for, to insure we leave in a timely and orderly way. out of fashion burberry shares sink after jp morgan cuts its full-year core profit forecast. it's highly exposed to brexit-related sterling volatility and santander reaffirms its medium term financial targets and annual cost savings of 1.2 billion euros in its latest strategy update. we speak to deputy chairman he ana bottin later today it's it's been an exciting half hour for euro zone data we have the final composite numbers for the euro zone for the month of march, and those have come in at 51.6

slightly higher than the flash estimates of 51.3. just a tad below where we were in february. i want to point out, though, that the services components of that, the march final services pmi came in at 53.3. this is much higher than the flash estimate of 52.7, and indeed, higher than the february final estimate of 52.8 you're seeing that the currency is bouncing a little bit on the back of this news. we had a good strength come out of germany and italy just ten, 15 minutes ago if you want to talk about the breakdown not so much the case for france. definitely, as you can see, in the currency we are getting much better than expected services pmi numbers out of europe. also, not shown here, we're seeing a bit of a reaction fix fixed income as well with some of the core bonds in europe selling off this morning in light of the better news with that actually let's bring in the senior european economist from leland general investment

management for me reading this, we spent the first couple of months of the year talking about how weak the euro zone economy is looks to me as though things are beginning to bottom out. >> i do think we have seen pmis flatline recently, and the news this morning on the services pmis is particularly encouraging. given it's a bigger part of the economy, well then 60%, 65% of the economy, it's probably worth paying attention to that one the output revision to the french numbers in particular useful, but actually that is still in relative terms the weak link i would have been much happier to see the french pmi pick up more strongly. we know that the yellow vest movement, for example, in france is largely petered out we would have expected that part to have improved further nevertheless, it's better news >> within the different regions, interesting to see that italy in particular was quite strong today. should we read much into this

number >> i think we should take the italian numbers with a little bit of caution we know they entered a technical recession. we have seen borrowing costs come down from the spike that we saw earlier in the back end of last year, rather. we should start seeing some signs of stabilization even in italy. >> we'll talk about that in a little bit more detail we'll break down the market action for us. >> the markets are already reacting to this data out of europe we are seeing more strong gains for the european markets currently the stock of00 up about 0.8% this follows a stronger day yesterday as well. of course, it's not just the european data that investors are watching we've also got some optimism around u.s.-china trade providing a boost to sentiment encouraging headlines coming out. larry kudlow has said

negotiations -- negotiations are expected to make more headway this week. we've also got the financial times reporting that we are seeing the two sides smoothing out their differences on the key outstanding issues some positive rhetoric there providing a nice boost to european markets this morning. let's get a look at the different regions and see how this split is slahaping up. broad-based gains across the board here, and in terms of the services pmi numbers, the overall number, better than the market expected. in particular, we saw some strength in germany that was better than the market expected, and as we just flagged in italy as well, right now on the ftse mib it's up more than 1% quite interesting to see that services number was very strong. then, of course, the says ftse 100 in focus currently flat worth noting yesterday it was a key outperformer brexit in focus. we'll go into more detail shortly on the latest developments there finally, let's get a quick look at sectors and at the moment as you would expect given that positive rhetoric around

u.s.-china, basic resources are the key outperformers this morning. health care at the bottom. a clear cyclical slant to trade so far this morning. as you were saying, brexit back in focus yet again. the brsh prime minister theresa may has said she will once again ask her european counterparts for more time to resolve brexit at a summit in brussels next week after a day-long meeting with her divided cabinet, may also said she would begin fresh compromise talks with opposition labour leader jeremy corbin. let's take a look at the reaction in sterling, and you can see that it has been on an upward trajectory over the last 24 hours or so approaching 132. once it emerged that mrs. may had made that press conference that she would be reaching out across the aisle to begin cross-party talks, we did see the bounce in the currency, and that is continuing today as you can see, there's good momentum there almost up at 132

up half a percentage point for now let's get out to willem, who is live from westminster, as ever willem, break it down for us now. we know that the prime minister will be asking for another extension. what type of extension are we looking at, and is there a possibility that the u.k. has to put forward representatives at the european parliamentary election at the end of may >> that will depend on what the europeans say. the british prime minister, you remember, at the end of march went to brussels and asked for an extension on june 30th. the europeans spent many hours discussing that request, and then came back with a conditional offer essentially. if you can get your deal through by march 29th, you get until april 12th if you can't, you get until may 22nd if you get it through to may 22nd, if you can't, you get to april 12th she didn't get it through. in theory april 12th became the default date for no deal if she goes back to brussels and asks for a longer extension,

they are going to rightly question her about britain's willingness to participate in these elections. if they insist on a longer extension, britain will obviously have to field candidates for those european parliamentary elections at the end of may, and then a big question remains about how long those british meps would sit in european parliament. these are one of the many headaches facing the prime minister and her european counterparts when it comes to trying to find a solution to these challenges in terms of the domestic politics here in the u.k., though, this is theresa may budging. she has softened her stance for months, in fact years. she set out her red lines. her interpretation of brexit criticized labour's efforts, and yet now it seems like she will have to try and accept some of their proposals if these talks with jeremy corbin are going to it complete. >> i am offering to sit down with the leader of the opposition and to try to agree a

plan that we would both stick to to insure that we leave the european union and that we do so with a deal. any plan would have to agree the current withdrawal agreement it has already been negotiated with the 27 other members and the e.u. has repeatedly said that it cannot and will not be reopened >> she tried again and again and again to get her deal through. members of her own party and members of the dup, the democratic union party for northern ireland that props up her government, they didn't like an element of the divorce settlement, known as the irish backstop she's now going to try a different approach to try and renegotiate potentially the future blueprint for the u.k.'s relationship with the e.u. for that, she might have to soften her version of brexit to conform with what labour is demanding, but, of course, by switching tact, she has alienated members of her own party, including her former foreign secretary boris johnson.

>> it's very disappointing that the brexit process has now been entrusted to jeremy corbin and the labour party, and i think that the result will almost certainly be if corbin gets his way, that we remain in the customs union so that we can't control our trade policy the huge areas of lawmakers, we can't control. brexit is becoming soft to the point disintegration >> in reaction to theresa may's statement last night, at least one major business log group came out and said, well, this is all good and well, but it still doesn't provide any certainty. what they are asking for, and this is the british chamber of commerce, is specific action rather than just more details about process, and the idea that brexit could soften, that the u.k. could seek membership of the customs union, will be warmly received by businesses across the u.k

until things are signed on the dotted line, there's no certainty about that, and april 12th remains a rather concerning at least for businesses no deal until there's a dead looirn. >> willem, excellent thank you for breaking it down for us from westminster as always well, the imf managing director christine lagarde has told cnbc that brexit poses a clear down side risk to global growth speaking in an exclusive interview, she add thad a no deal exit would weigh on the u.k.'s economy >> absent a deal, it will -- it would certainly be very, very sad for the economic situation of that country and would have negative impact on consumers, on producers, on the supply chains, on pretty much all the trade relationship that exists currently between that country and the rest of europe >> let's get back to hattal, senior european economist from legal investment management. it looks as though theresa may is going to pursue a softer path

for brexit in terms of the extension, it seems increasingly likely it's going to be on the longer side in terms of impact on the euro zone economies, how do you think about the long-term extension versus some of the other alternatives we were considering before today >>i think in longer extension should keep european growth roughly where it is now, so at trend. i think anything that was short, again probably won't make a huge amount of difference, but the longer extension, i think the key thing is that we wouldn't have the cliff effect coming so soon we might see investment, particularly business investment, recover to more normal levels. i think a big sort of recovery or turnaround, particularly in the u.k. even, i don't think that is viable on what is still an unknown time frame. it's not enough businesses to make long-term commitments i think on the investment side,

which is i think the key -- it's been the key driver of the economy. i think i'm still quite skeptical. >> for the u.k. economy an extension essentially means more uncertainty, more questions about where we go from here. not good for investment, obviously. i want to go back and ask you something, an observation i've made about these pmi numbers, and i think many people are also beginning to come up with this there's a wedge between what's going on with the services sector and the manufacturing sector very much exemplified by the numbers coming out of germany today. just to break it down, the germany services final number came in at 55.4. the manufacturing number came in at 44.1. actually, german manufacturing pmi numbers were the lowest in all of the euro zone what do you point that divergence back to >> there's an interesting one because that gap is now the largest it's been since 2009 it's very unprecedented. we did actually see the reverse

of that through 2018 where manufacturing had almost overshot relative to the rest of the economy, and now we're seeing a very sharp deterioration. now, it's somewhat surprising given that we know that car production is starting to improve very slowly, but car registrations are also up, so there's something else pinning down the manufacturing side in the german economy sentiment does tend to overreact to cycles, but i think to some extent, we have to pin it on concerns around china trade, those concerns which are impacting sentiment that aren't actually currently baked into the hard data because nothing has happened as yet on that front. >> i was just going to say, isn't that somewhat of a coincidence then that the sectors that are getting hit the most are the ones that really have the most associations with china, so the negative shock essentially has come from china, so if china is beginning to turn around, surely that's a positive

thing for the your yes zone as well >> yes, it should be going forward, but there's been, i would say, a bit of a puzzle as to why manufacturing remains so weak, even though the disruption around the autos emissions testing has faded. i think it is about china, and we're quite confident that the china stimulus is going to start working its way through, and that should also help the german economy in particular. >> all right great. we'll continue the conversation shortly. just corporate news for you, burberry shares are at the bottom of the stock 600 after jp morgan analysts cut full-year core profit estimates of the luxury retailer by 6%. it's highly exposed to brexit volatility, and it sees few signs of a turnaround at the fashion house. also, stay with us to find out what imf managing director christine lagarde thinks about trade and the global economy more from our exclusive interview. that's coming up next.

zbliefrmgt the survey results suggest recently launched government stimulus measures are having an effect on the economy with the respondents citing stronger demand and better access to capital. meanwhile, u.s. and chinese trade negotiators are expected to "make more headway in trade talks this week. according to white house economic advisor, larry kudlow speaking at the u.s. chamber of commerce, kudlow said there is a "certain amount of optimism around negotiations between the two sides. chinese-backed premier is due to meet with steven mnuchin and robert lighthizer in washington today for further talks. imf managing director christine lagarde says there is need for both sides to move

forward in trade talks sounds like brexit speaking to cnbc, lagarde also has slowing growth concerns. >> it's a delicate moment because the growth is losing momentum, and it is losing the momentum that we had hoped for pretty much across the globe we have 70% of the global economy that is slowing down it's clearly going to be a little bit downgraded. i think added to2019, second ha, early 2020 should be better placed, but with clear down side risks, which have to do with country-specific cases what will happen to brexit how will it impact the global economy, the u.k. economy, of course, and europe, tensions on trade, which clearly have resonated negatively on the confidence index of any many

economic operators, which is still up in the air. >> last time we spoke, a few months ago, you were optimistic that a deal would happen between the u.s. and china there was commitment to making a deal what's your level of optimism these days >> well, a deal is a deal is a deal, and it's only done when it is signed, sealed, and delivered, as the old style british lawyer would say, and it is not there yet i'm still optimistic it's my nature anyway. there is a clear determination on both sides to move forward. it's vitally important because if there was no such deal, well, clearly there would be a very negative impact on both the chinese economy, but also the u.s. economy we've done some -- we figured, okay, if there was a 25% tariff increase on all trade between the two countries, u.s. and china, and there is a clear

negative impact, minus .6% on the u.s. economy, minus 1.5% on the chinese economy, so given that those are the two big giants currently, if you have that kind of negative impact on both, it would weigh heavily on the global economy and would be bad. >> that was christine lagarde warning about the -- well, it being a delicate moment for the global economy now, some relative good news the pace of growth in global debt fell sharply in 2018 rising only, listen to this number, 3.3 trillion dollars, according to the iis. that figure is sharply down from $21 trillion rise in 2017. that's a huge number that's the good news the bad news is global debt for the year ended at $243 trillion, leaving global debt to gdp at around 317%. what could possibly go wrong

european economist, hattel, still with us. a staggering amount of debt in the system, the growth of debt is lower than it was in prior years. again, all this is coming at a time where there have been warning signs. a few people have been talking about recession ahead. find the numbers in the past couple of days they've been a bit better when should we start worrying, actually worrying, about this debt and potentially taking over >> it's really about increase relative to trend rather than the absolute number, and so that, i think, is, you know, a key recession warning indicator if we were to see a sharp rise in debt. the fact that debt numbers actually really starting to flatten off is quite encouraging. there's certainly some countries, particularly in em countries where they have a little bit of space to lever up if needed, and dm economies have actually already deleveraged >> china is a good example of

that they're an economy that have been pushing for deleveraging, and once again, keeping the economy from facing a hard landing. how do you see the mini-fiscal stimulus that china introduced just recently playing out and how much of an impact is that going to have in terms of ripple effects through the broader global economy >> i think it will start to have an impact. the slowdown that we've seen so far globally, i think, we can point the finger to a large extent at china or certainly idiocyncratic factors where we talk about the auto emissions or the yellow vest movements. there are a number of factors. and china going on simultaneous simultaneously almost like a perfect storm that have been pinning down global growth now that that stimulus is coming through, and we can start seeing that also in the credit data in china, that should also start to have a positive ripple effect back across to dm. >> here in europe we spent e spend so much time talking about the monetary policy side of things not nearly as much talking about the fiscal side of things.

you, interestingly, have the view that we are poised to see an uptick in fiscal stimulus where is this going to come from, and what's the scale of fiscal stimulus you are talking about? >> across the euro area we've had a period of largely, you know, either some austerity or largely being flat in terms of fiscal and change in the deficits there's largely been zero. for the first time this year we're actually likely -- it's surprisingly broad-based we know france has thrown some money at the yellow vest movement and there will be some tax cuts and minimum wage will be government-subsidized italy having pushed through their budget, they'll be doing some stimulus. even in germany we are seeing some signs it's actually very broad-based

>> excellent well, thank you so much for joining us this morning. hattel, senior european economy, general investment management. coming up on the show, we hear exclusively from margaret vestager as the eu competition eyes the presidency ahead of next month's yourp even electeus

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welcome back to "street signed." these are your headlines all the euro spikes after european composite pmis beat expectations.

>> we need to be clear what such an extension is for. to insure we leave in a timely and orderly we european chip makers surge at a report smartphone makers place more orders for taiwan's semiconductor chips. and santander reaffirms its medium term financial targets and eyes cost savings of $1.2 billion euros in the latest strategy update. we speak to ana botin later today wrrn you've got more pmi data coming in for you now. this time for the u.k. it is more disappointing than some of the other numbers we've seen earlier this morning. the march services pmi came in at 48.9 versus 51.3 in february.

this is below expectations of 50.9 this means that the services sector in the u.k. has slipped into contraction new business came in at 48.4 that was down from february's 49.7 this is below 50 for the third consecutive month. that's the new business components number. the pmi points to u.k.gdp stagnating in q1 and contracting in march it would just finally add the market says the u.k.gdp likely to suffer a downturn in q2 negative news for the u.k. services sector. taking a quick look at sterling. we are seeing sterling hold on to the earlier gains up about 20 basis points right now.

>> it's interesting because that breaks away from what we had of euro zone pmi numbers. the services numbers coming in at 53.3 versus 52.7. highest number since november 2018 and a good part of the rebound in europe was led by germany, spain be, and italy no surprise here just looking behind me, germany central dax index up 150 points. 1.3% higher. italy as well also up 1% about 200 points higher. some surprising strength there in the services numbers transpiring. as we were just talking about on the show, there seems to be a divergence between what's happening at the mfrgs sector, which, of course, is exposed to china and the global economy versus the services sector, which is beginning to rebound somewhat not so much the case in the u.k., and you can see that right now ftse 100 has just slipped into negative territory on the back of some of the weaker data that we just had warngsz that for the month it

looks as though gdp in the u.k. is tracking into contractionary territory. can you see here's the board of chipmakers behind me. some of the key chipmakers they're all trading higher for that smartphone maker that has placed orders for taiwan, semiconductor chips. now, the stocks are also being boosted by positive sentiment after u.s. firm amd closed higher in trading yesterday. giving the tech sector a bit of a boost today in europe. switching to foreign exchange, and i was talking about cable. let's start off with that actually you can see the reaction we were trading 131.80 before they came out. the pmi southwests number disappointed we've dropped about 20 ultimately, this currency pair is pricing in the political -- well, developments that are unfolding, and they are removing the possibility that till risk

possibility still of a no deal brexit with the latest developments there that is the picture for cable. we talked about the euro zone numbers. we're seeing a bit of a spike here 112.40 is the mark up three-tenths of a percentage point. can you see that the picture is green across the board we've had -- well, i would say a royal flush of positive services numbers. we had china coming in very strong we had euro zone numbers coming in very strong later on today we get the u.s. services numbers as well the ism non-manufacturing, all eye on that. it looks as though the u.s. markets are set to open up in positive tear trritory as well. vestager's campaign to become the next president will focus on fighting climate change the european competition commissioner also said she is

aiming to raise voter turnout for the parliamentary elections in may what else did she say about the pranz to become president of the european commission? >> the position is slightly different from the other candidates let me explain this process, which is a little bit -- the european parliament, every party in the european parliament puts forward their own candidate to become the next president of the european commission. the liberal family at european parliament chose this year to have a team. so-called team europe. it's part of that team yesterday in the interview i asked how is this going to work in the european elections? let's listen in. >> we have sort of two sources of legitimacy.

the directly elected representatives in parliament and ministers and heads of state of government in the european council. the two will have to decide together want one, not the other, but together after the elections, groups will be formed in the european parliament, and, and they will have to form a majority who will be behind someone to head the commission there can be discussions and back and forth as to who will be the best person to fulfill this substantial mandate. it's a dynamic process where a number of things will come spew consideration. you will have a first vice

president. you will have the equivalent of our foreign minister you would have the council for heads of state in government, so a number of different sort of things will have to be decided more or less at the same time. >> let me explain a little bit what she meant by two forms of legitimate city. back in 2014 whenle european union appointed jean claude juncker, that happened the leading candidate. he was effectively the candidate of the epp who got the most votes in the election, but the remarks are really interesting because she's challenging this process, and she's saying that the heads of state will have a key say in who becomes the next head of the european commission. of course, this increases her odds of becoming the next leader of the commission because alda is not seen as getting the majority of the votes in the

upcoming european elections. >> we're lucky we have someone who actually understands the intricate details of how european bureaucracy works it's good to have you on board, sylvia does vestager have a real chance here obviously, she's very ambitious, and she's throwing her hat into the ring, but she's not one of the names that come up as potential frontrunner. >> she has two main challenges first one, convincing her own country, denmark, to appoint her. the government in denmark needs to appoint the next commissioner to represent its own country, and at the moment the government is run by the opposition, not by the danish party the second challenge is convincing germany and france, the two biggest euro zone economies on the back of that deal where their relations were a little bit tense >> both sides were not happy with that. >> exactly >> well, sylvia, we will have to leave it there thank you for bringing us that interesting interview. meanwhile, one sector we've been following quite closely over the last week, the

aerospace sector the $35 billion airbus-china deal signed last week reportedly included repeat announcements and advanced approval for deals that have yet to be finalized. the high-profile agreement characterized as a so-called framework order was driven by political considerations according to reuters now, we are joined by somebody who knows a lot about this space. john snel lor, head of aviation. i want to pick up on the china airbus deal, and reuters there saying that political considerations had a lot to do with perhaps why china chose airbus for this order. do you think they were always going to choose airbus as opp e opposed to boeing, or does this reflect a lot of what's going on between china and the u.s. at a national level >> there is a mixed view of that, but what i would say is that in the current climate that the direction to move towards airbus is perhaps understandable

for china in the current political position they're in. also, it's worth saying that china had also just -- the president had just been to italy before and signed another deal, another wide-ranging contract so that -- >> i could talk about that for hours. >> exactly their engagement with europe is moving this way. that is just a continuation of that process, i believe. >> in terms of the woes that boeing has faced oh the last weeks in the wake of the ethiopian airlines crash, is airbus in a position to benefit from a market share perspective or are they restricted because of their own capacity issues >> they certainly are at capacity i'm going to have backlog figures, which suggest that airbus has a backlog of about 7,600 aircraft that it needs to make, so, you know, it's got a huge -- >> what's the number for boeing?

>> it's about 5,900, as far as i can see there from the end of year summary that was provided by boeing. obviously, that goes up and down by and large, you know, that's -- they're incredible figures. the backlog is there, but, of course, the 737, which i think you alluded to, and the airbus a-320, they are neck and neck. very close competitors in this market >> just a quick follow-up question on that first question very quickly. as of now, who is selling more planes into china, boeing or airbus >> i think airbus by a short hair, yes. >> small margin. >> yes but it's close because each airline has its particular requirements, and obviously historically if they have had boeing products or airbus products, then the training, the maintenance, their entire infrastructure is set up for those aircraft and the relationship is formed breaking away from that is a big change from one to the other >> there's also been another big change as well i actually interviewed the outgoing ceo of airbus just a

few months ago when they announced that they're going to stop producing the a-380s, the four-engine double-decker jets, essentially. is this the end of an era as far as those gigantic passenger jets are concerned, and do you see the trend shifting more towards shorter, more efficient, you know, airlines that are equipped for short haul navigation rather than long flights? >> yeah, definitely. i'm afraid to say, four engines are expensive. while they carry very large passenger loads, you have now got incredibly efficient engines that can carry, you know, 300 odd passengers from singapore to new york, so you are now limited probably by how long people want to sit in an airplane going from a to b rather than that -- if you can have more of those types of aircraft with any two engines, two efishficient engines, that s the direction these companies are going. >> i want to go back to the

issues that boeing has had, and some analysts seem to be pointing to the fact that boeing was pushed to get out an answer to airbus's neo a-320s very quickly and perhaps rushed to market sooner they would have otherwise with the 737 max planes >> yeah. >> do you think that this could have led them to releasing the range sooner than perhaps was safe to do >> i don't think so, to be honest there are very strict certification requirements to get aircraft, you know, approved to carry passengers, and if i just look at my notes again, you know, they have sold nearly 5,000 aircraft it's not trivial their order backlog is huge for the 737 max, of which 380 have been delivered that's really over the past three to four years. while it's competitive, you're absolutely right to say there essentially, you know, there is a large piece of market which the 737 max has captured, you

know, to a degree, at the expense of the a-320 >> excellent well, thank you for joining us, john snellor, head of aviation irks ihs markets. our favorite segment the football segment there is three football matches taking place in the english premier league this evening. exciting one >> i can't wait. >> our evening sorted now. with man city looking to go back to the top of the table with a win, it's also a big night for tottenham hot spur as well as the london club are set to play the first match in their new stadium. adam reed has more >> after nearly nine months of delay, wednesday, april 3rd, will be a famous day in the history of tottenham hot spur football club as it will be the first match to be played in their brand new stadium. built on the site of the old white hart lane, the club has been playing all of its domestic and yourp eveuropean fixtures at

wembley. crystal palace are the first visitors for a premier league match after two recent successful test events it's not come cheap, though, for the club make a state-of-the-art stadium as well as those delays have seen the final cost come in somewhere around the $1 billion mark they can start to recoup some of that, though, through a brand new club shop, which also happens to be the biggest one of its kind in europe spurs will now boast the largest club stadium in london as well with a capacity of 62,062. that's just over 2,000 more seats than just down the road at the home of their north london rivals, arsenal, at the emirates stadium. a season ticket price for the new ground will now cost you around about $2,800. it's jam packed full of features, too, as well as being a completely cashless venue. there's a retractible nfl pitch underneath the soccer playing service. there will be two regular season games held there every year starting later this year in

2019 there's also a microbrewery on site as well as heated seats for the v.i.p. guests. now, one big talking point still to be resolved is the naming rights for now it's meant as the tottenham hot spur stadium, and the potential is there are for a big sponsorship deal with several parties rumored to be interested whether spurs can secure champions league football for their new home for next season, may play a big part in deciding that as the team still have work to do to secure a top four premier league finish. >> are you going to be watching the nfl tottenham hot spur stadium? >> yes, i hope >> all right >> a girl can dream. >> also coming up on the show, bank of america ceo says the fed doesn't need to juice the economy. find out what he means after the break. - my family and i did a fundraiser walk

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you'll even get free shipping. get started today at customink.com. 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. welcome back to the program. bank of america ceo brian moynihan doesn't believe the federal reserve needs to "juice" the economy. speaking to cnbc in an exclusive interview moynihan reiterated his confidence in the u.s.

economy. >> economy is growing and wages are gross e growing faster than people think. >> speaking of the baimging industry santander has underlying return on exit between 13% to 15% karen joins us with more i have to say, looking at the

numbers, 13 parking lot 5% target seems very ambitious in an environment where other banks are struggling to get to 10% >> this is a bank that has ambitious targets, and the problem is that there's a chill in the air when it comes to european banking at the moment some of their optimism that was in the banking system about expanding mims at some point in 2019 and 2020 just evaporated recently with a very dovish etb. the other big issue, of course, is brexit and the uncertainty happening in the u.k while this is a bank that does have a big emerging market footprint, the operations in brazil and mexico, there are still questions at this investor day about how to cheese those very lofty targets let's get to an investor who has been inside listening to what's been taking place. derek quinn joins me, the european bank analyst. good morning to you. >> good morning. >> we're talking about some of the return on equity return on tangible equity targets, 13% to 15% from 11.7% where it's been cost of capital increases as

well do you think it can achieve these targets given all the head winds across the european banks at the moment? >> i think the challenge for santander is going to be in growing revenue, and seeing markets like the u.k. like spain where despite a reasonably supportive economic back drop, it's tough for retail banks to grow there's no loan growth and margins are under pressure santander acknowledging the revenue problems by focussing a lot more on costs, and that will certainly help they're also acknowledging part of that focus on cost is really just to offset a weaker revenue environment. i think the challenge would be in growing revenues where. >> we've led the strategy before about cutting away to growth, and 1.2 billion euros tallied up today. where do you think the cost-cutting is going to come out of and how effective that will be in terms of driving profitability. >> a lot of the focus for the cost-cutting is around i.t., being more efficient across the group, and, yeah, i mean,

they're targeting not an insignificant increase in profitability, but i think, you know, those cost cuts are really going to be offsetting lower revenue growth i think that's where most people's concern is going to lie. >> we were talking about that in areas of focus for santander even though it's brazil. it tends to see some heavy lifting in terms of returns. the u.k. market, spain, and the united states is interesting because united states are at 5% of the contribution to profits for the bank >> yes the u.s. is an interesting one effectively, there are two businesses in the u.s. one is consumer finance business that generates a decent return, and the other is a retail commercial banking operation to be honest, it's never really generated its cost of capital, and have you to wonder if at this stage of the cycle they're not covering their cost of capital. will they ever

>> we'll get through the first part of its presentation and its q & a without any mention of andrea, the star banker who was meant to be part of these operations today because he was going to be the big name hire until they sign on and it was too great. it was citeed in some media reports. since then we've got the current ceo, jose alvarez staying on changing management structure in terms of who reports to him. what do you make of the question marks still around the executive team it clearly paints sort of a picture where it's difficult to now hire someone for higher price tags the current ceos longevity at the company. what do you make of those questions yet to be answered around the team? >>. >> a good representation and is doing a good job i don't think really there's a sense listening to what they've

outlined today that there's any major change in strategies in effect, it's almost like let's just kind of pretend the whole thing never happened, and let's go back to what we were doing, which is focus -- >> i want to get to the difference they are clearly focused on europe, and then you have a couple of other banks in the banking space and santander is one of them, and there's a big focus in emerging markets, and that can offset some of the numbers. >> there is a reasonably profitable european bank that's generating over 11% return on equity the problem is they're not generating enough. probably the biggest difference with santander is its global business, the level of capital, and that's probably the biggest challenge is, you know, even though they're generating a little bit of capital every

year, the regulatory demands for capital are growing faster than they can generate capital. the biggest question people have is, you know, will they be able to reach 12% ct1 in a reasonable time frame >> thank you so much for stepping out of the investor speech the european banks analyst at kbw. let me toss it back to the studio we have an interview coming your way with the executive chairman a little later on today 4:00 cet. be sure to tune in to that >> looking forward to that one, karen. very quick look at u.s. futures. it is shaping up to be a positive day across the board. all three majors pointed to open up in the green. that's it for our show worldwide exchange is up next. so with xfinity mobile

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it's 5:00 a.m. at cnbc, and here's your top five at 5:00 high-level trade talks between america and china picking back up in d.c. a showdown on the southern border big business sounding off as president trump threatens to close our border with mexico we have the full fall-out. another brexit delay possible british prime minister theresa may says she needs more time to figure out an exit plan, but will her bold new gambit really work this time ousted nissan chairman carl goee what he said that has everyone's