welcome to "street signs." these are your headlines this thursday morning from london volkswagen shares rise after the german car maker backs its 2014 outlook and surpass expectations they tell cnbc challenges remain while the company moves toward an electric car. >> cost per kilo per hour is severe zidecisive factor.

we knew it was hard work and have to find offsets shell jumps after they beat first quarter profit estimates strong quarter trading offset falling oil prices meanwhile out of fashion german fashion house misses first quarter earnings forecast on higher costs and a strong dollar. the fed holds steady u.s. stocks drop fed chairman powell dampens the prospect of a rate cut. >> the committee would be concerned if inflation would be running persistently above or below 2% we do see good reasons to think that some or all of the unexpected decrease may wind up being transient. welcome to the program we've got some final manufacturering numbers out from across the euro zone i'll bring those to you quickly

now. final manufacturing pmi was 47.9 versus 47.8 and slightly higher than the march number. the final manufacturing pmi for april came in again higher than the 47.2 in march and the future output pmi has come in at 55.7, higher than the expectation of 55 and also higher than last month's final number of 55.5 you can see that the euro trading slightly stronger right now against the u.s. dollar. part of that, no doubt, part of the reaction to those numbers. let's take a look more broadly across the european markets. it's been a relatively negative start to the day it is trading more than .4% lower. we've seen a lot of earnings last few hours no doubt, investors mindful of those. we look at the individual sectors to see where that's happening in the markets, i should say

ftse is down .3% paris trading more than half a percent lower. same story in milan with the ftse trading very slightly into positive territory basic resources down 1.4%. similar story, technology also down 1.25%, household goods meanwhile down around a percent. autos, you can see those numbers there, relatively positive, having an impact on the auto sector, up more than .9% volkswagen shares trading higher after posting better than expected first quarter revenues and improved its outlook for 2019 the german car maker warned that the passenger car business will come in at the low end of expectations vw also set aside a billion dollars that stem from the

diesel emission scandal. frank vittle told cnbc earlier that the shift toward electric vehicles will also present a challenge. >> it is a huge inroad to electric vehicles but to be upright and honest even we see some improvements to today's combustion engines and the class related to it. we have to continue to work hard a cost for better results, cost per kilo per hour is a factor and we need to work hard to boost profitability. we knew the transition is hard work and we have to find offsets. meanwhile in the energy sector, first quarter profits of shell have fallen 2% compared to a year early, but still beat estimates. oil giant blamed that decline on tighter margins in its refining business but stronger trading

helped to offset those 47 cents per share and on the subject, head of oil and gas, thanks so much for being with us. >> thanks for having me. >> if you want an easy market of what higher oil prices mean for producing nations you would see a headline overnight from saudi arabia, saying they had a fiscal surplus for five years what does it mean for companies like shell the last 12 months, are we seeing the return to that greater profitability, which we've not seen in these quarter numbers from shell necessarily >> what you're really seeing is a long-term manifestation of changes they made from business years ago when lower prices and oil dictated that they had to high grade their portfolios, get lean, do more with less. you're seeing the fruits of that labor that they put in

costs are much lower than that time period, $40, $50 even breaking costs that's really filtering into the higher cash flows, greater earnings, income, and the stock is being rewarded. >> you're talking about existing products, looking to the future. what has this period of down, depressed oil prices done to the decision making of companies like shell when it comes to new projects and break evens of those projects >> taking a quick survey of what we've done, the reporting we've looked at, a lot of projects have focused on near-term paybacks, utilizing existing infrastructure, tiebacks, marginal fields tying back to infrastructure, helps to pay back earlier that's what a lot of these majors have been focusing on, lower cap-ex and pay backs. >> do you think, then, that there will also be some of those -- all the projects being taken off the shelf, dusted off

and revisited but with a very different mind-set >> yeah, i think that's probably where we're getting to now, those quick, easy projects, ones that we can integrate are starting to be few and far between. we're starting to look at some of those more difficult projects what they'll be benefiting from also is the cost deflation we've had. deepwater is looking attractive at this point, well over 40% from peak costs for day rates. those types of projects are definitely back on the radar but, you know, most of these majors are really exercising fiscal discipline if we can't get the break even down to 40 or $50, standardization of equipment or less ambitious development plans, they're probably not going to get sanctions or receive final investment decision. >> when you talk about cost innovation, are you suggesting shares in the u.s. will struggle more than some of these majors

looking at new offshore projects >> it's a bit of a -- kind of two different stories, really. the u.s. onshore, premium focused operators are really struggling more with the kind of expectation of returns to shareholders the big emphasis for a while was on production growth that was kind of the headline number that they used to kind of spur the industry, but now it's really shifted back to who is paying dividends, who is increasing shareholder value through buybacks and really the majors like shell and bp have really positioned themselves to have a well integrated portfolio. it's high graded, high-margin assets those are things that shareholders are feeling are valuable in this kind of oil and gas space. >> i want to briefly touch on fed numbers. we saw an increase in the muscular u.s. dollar in recent months what does that mean, if anything, for the big international firms like shell

to pay down dollar-denominated debt in some of the markets they operate? >> overall for bp and shell, their gearing is within expectations shell has jumped up slightly as a result of some of the accounting changes for irifs 16. really we look at dollar strength more from how it affects merging market demands stronger dollar generally erods demands. with the dovish policy coming out, mixed signals on that, that's what we're trying to attract now, how the weaker dollar and how that could filter through to how the majors in the refining and emerging markets pay off or hurt them. >> just a slightly broader and more long-term question, just to end on you know, we hear from transition to electric vehicles, from auto manufacturers

overnight. essentially, the british parliament has issued a nonbinding call that there's a climate emergency. i just wonder how has this desire we're seeing across many sectors for lower carbon footprint translated into the action of some of these oil makers in terms of decisions around oil versus lmg? >> i think, you know, the companies are making probably two different types of efforts really, they're shifting funds into what i would consider is the energy transition. that's looking at emissions reductions, electric vehicles, more of that kind of aspect. the other half of it is really how they look at their portfolio long term to switch from liquids to gas as you mentioned, well over 45% of the revenue. really they've transitioned to what they believe is the future energy, which will be more of that gas element and more of the electrification side of things

near-term spending on the emissions targets, the kind of longer term stuff in terms of the upstream portfolios where they're focusing more on gas is the shift we're monitoring and that's an indicator of how these impacts emissions and the energy mix and things like autos and justification. >> thanks for your time. head of oil and gas analysis talking to us there. shares in hugo boss are lower after the german firm posted weaker than expected first quarter earnings a challenging u.s. market. german fashion house posted a 1% rise in sales but a 22% fall in profit quote substantial acceleration in earnings for the rest of the year reckitt benckiser blamed a cold and flu season in the u.s. and

europe that it said had been, quote, unusually weak. the maker of brands said that growth would be weighted to the second half of the year. meanwhile bayer has opened higher after reconfirming earlier judgment that the chemical compound glyphosate is not a carcinogen, including in bayer's round-up product 13,000 lawsuits from litigants who claim round-up was responsible for its cancer diagnosis. beating expectations on first quarter net income as they back their first quarter guidance more after this break.

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welcome back to the program. i'm going to go through some of the financial sectors, earnings numbers we've seen this morning. metro bank shares plunged at an

accounting error compounded the bank's financial challenges. ceo craig donaldson also revealed the number of, quote, large customers had recently left the bank. meanwhile, lloyd's has opened lower after its pretax profit slightly missed expectations the figure was significantly higher compared to the previous year the british lender said while brexit could impact no assets on its loan book, reducing the lender's capital requirements against future risks ing has blamed higher provisions and lower rates for the fall in its first quarter profit, narrowly missed estimates and ceo said the macroeconomic outlook was worsening and growth in the u.s. was expected to slow uncertainty would damage trade and growth in the euro zone.

and bnp paribas has reported a rise in net income that exceeded expectations, seeing revenue for the period growth thanks to international financial services and corporate banking units. bnp also reiterated its 2020 targets. my colleague juliana is in paris this morning what does the bank say how to drive these improved numbers >> reporter: it was, indeed, a decent set of results, phil. certainly in contrast to q4 when hit by the extreme market conditions and their trading revenues were down significantly. now this quarter, cib, which houses bnp's market business, feksed income was the main bright point equity performance other hand was weaker on the cost front, key issue for investors, they're also showing signs bringing it down to 75.8% this quarter, down from over 76%

in the same period last year and generating a positive jobs effect, putting it all together. really their transformation plan is beginning to bear fruit now on their 2020 targets, as you mentioned, they have reiterated those remember, of course, this is after they cut those targets just a quarter ago this is keeping them in line with down with their revised expectations i had a chance to catch up with the cfo to ask him to elaborate on trading quarters this year. >> if you look at fixed income, really we did quite material changes. so we introduced photo digitalization but also the release that led to a strong growth in fixed income equities, indeed, there was a turmoil in the end of the year in europe and what you saw was a gradual return of customers to those equity kind of products. that is why at the end we were

ramping up at the speed we would have expected but it took time to ramp up. >> so, as you heard there from the cfo, they have seen improvement this quarter on the revenue front. they're shifting gears away from the results. i also did get a chance to speak to him about the more strategic ambitions, in particular their plans when it comes to disposals of their noncore assets and also european banking consolidation you probably know that reports have emerged recently, linking commerce bank to bnp i put the question to the cfo, whether they consider doing a deal with the german lender. take a listen. >> we're basically looking at businesses which do not deliver as we expected initially that basically means we enter with one activity and intend to start others f that does not happen for one reason or another, it might be an entity we review and say is there not a

more logical holder than us? don't expect any major things. we are staying in africa, in europe, in the u.s there are things we do not necessarily deliver as we anticipated initially, we might find other natural owners. >> when we spoke in february you told me m & a was not on the agenda since then, reports have emerged linking bnp to commerce bank now that deutsche bank commerce bank talks have collapsed would you consider taking a more opportunistic approach with commerce bank? >> ramping up to 2020, it's all about digitalization because digitalization changes interaction with customers and allows us to materially optimize our branch network that is basically what people are doing. we are not looking at any acquisition. it just brings on another series of branches and that is not our focus. our focus is digitalization, so no acquisitions. >> so putting it all together,

the operational performance at bnp this quarter was an improvement versus what we've seen recently on the strategic front, the cfo retains a stance that m & a is not on the agenda, they're not interested in acquisitions at this point, trying to dispel those 2020 targets remain in tact long way to go in capital, 11.7% at the moment. they're trying to reach that 12% mark cfo remains confident that is a realistic ambition back to you. >> juliana live in paris, thank you for joining us in paris there. final word on the banking sector, coming up later on today, my colleagues in the u.s. will speak to the ceo of citi, michael corbat at 3:00 p.m., 1500 cet higher first quarter sales thanks to stronger performances in generic infusion drugs and

dialysis units reiterating guidance for this year, hailing a solid start to the period after a difficult 2018 i'm happy to say we're joined by s stephan sturm, ceo of fresenius. good morning, sir. much of it driven by north america and europe what specifically is behind that sales growth in those developed markets? >> thanks for having me this morning. as a matter of fact, we are happy with the solid starts to the year and the sales goeth has been fairly broad based across the four businesses that we're having guidance for the full year that we published in february called for constant currency increases between 3 and 6% we're now at 5% already in the first quarter. that bodes well for the rest of the year as i said, nothing to sneeze at.

it's really broad based across all four businesses and also within that pretty well balanced between the individual business groups. >> you mentioned that guidance from february. of course, toward the back end of last year, you had to lower your revenue forecasts because of what you called a challenging environment in some emerging markets. you also blamed currency fluctuations and weaker than expected numbers in north america. in recent months it looks like the stronger u.s. dollar has helped you and north american revenues are up. you are still struggling to find growth in the emerging markets, particularly africa. what's going wrong there >> africa has always been and continues to be, like for many others, a very small contributor to our business for the time being. just like in the african countries and more so in the asian countries, we're doing well and investing quite heavily but it will be a while before it's a more visible contribution

to our top line. finished 2018 in style, 2019 the guidance has been very much in line with investor expectations and, as i said, our q1 bodes now well for us delivering relative to the expectations. >> you promised this year that your firm would invest in growth areas like home dialysis and i wonder whether we can see those investments reflected in your numbers for this most recent quarter yet. >> not yet, given that the next stage acquisition only closed the back of february so we have a good month of revenue contribution and negative earnings contribution in those q1 numbers. you're going to see more sales and also, unfortunately, a bit more negative earnings contribution over the remainder of this year but that is all well planned because we're really going to prepare ourselves to drive the concept of home dialysis further in

north america to start with but going forward also in the rest of the world. >> do you think that will help the top line, will increase revenues if you spend money on things like home dialysis? are you at all concerned it might reduce some of your margins compared to the existing business you've had for dialysis >> i'm not sure that that's going to be the case i am looking forward to a very meaningful top line and earnings contribution by next stage and above that, we are trying hard to set up infrastructure for home dialysis in very many asian countries. that is also a reason we called 2019 an investment year and coming back to your question about the emerging markets in particular as far as our hospital supplies business is concerned, we have really had a

tremendous first quarter with very, very meaningful, organic growth in china and in the rest of asia. >> stephan, thank you for joining us stephan sturm, ceo of fresenius on the phone we'll discuss the bank of england's options coming up after this short break

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welcome back to "street signs. these are your headlines this thursday morning volkswagen shares rise after the german car maker backs its 2019 outlook and first quarter sales accelerate past expectations cfo frank witter tells cnbc challenges remain as the company transitions towards an electric future. >> cost for the better results, cost per kilo per hour is another decisive factor and we need to continue to work hard to

boost profitablity we knew the transition was hard work and need to find offsets. shell jumps after they beat first quarter assets, falling oil prices. out of fashion hugo boss shares sink after the german firm misses first quarter earnings, higher costs and a stronger dollar. and the fed holds steady u.s. stocks drop after fed chair jerome powell dampens the prospect of a rate cut. >> the committee would be concerned if inflation would be running persistently above or below 2% we see good reasons to think some or all of the unexpected decrease may wind up being transien transient. >> we've got some fresh uk construction pmi data out in the last moment. it's just come in at 50.5. that is the highest since

january. expectation of 50.3. and again the march number of 49.7, looking like the british construction sector is returning to growth thanks in part to pick up in house building although it looks like it's a little less certain due to a sharp fall in new orders you can see the pound strengthening against the dollar by more than one-tenth of 1% relatively positive developments there in the uk construction sector as part of an indication of the british economy's health and that the bank of england today is widely expected to keep all rates on hold. they will release its latest inflation report and minutes, first rate decision since brexit was postponed until october. my colleague joins me now live from the bank of england with a bit more detail. giovanna >> yes, it is a big day.

the first, of course, is that all-important rates meeting about to take place in a couple of hours time. another thing that's been happening right behind me, actually, protests all morning on climate change. a group of demonstrators have aggregated at the front of the bank of england. i wanted to correct myself from earlier. i said it was a demonstration by sxings rebellion it's been fossil free uk pushing on the bank of england to take the charge and on governor carney himself that's one of the things that's been happening here. the other thing, of course, and the main events that will happen in a few hours time at the embassy meeting, the first meeting taking place since that brexit extension of six months and i'm very happy to say i've got a specialist with me on the subject. it's great to have you here. i'm not going to ask you some climate change questions

i want to bring it back to rates. it feels as though there's a lot of room for a hawkish surprise coming out of the decision. >> that's right. two reasons to think that. first the uk has some building inflation risks, expectations elevated above 2%. you have accelerating wage growth you have labor costs rising because businesses just aren't investing. productivity rates are sluggish. the second reason is that the bank of england since the last rate hike that they expect to hike interest rates over the medium today we're looking for more precise guidance when that next hike could be and looking at august. >> how can they give such precise guidance if their hands are tied by politic aal developments do you think there's a chance to hike even if the uk hasn't exited the eu? >> yes we know a hard brexit could come

as early as october. that gives a good six months for inflation risks to continue to build. it's the government's official policy to get the deal with the eu, which will boost the economy over the medium term relative to the suppressed growth rate linked to the hard exit. signaling the hike could come in august, which would be the next opportune time, could hedge against those boosted inflation expectations that would come on the back of the brexit deal. >> it's interesting because when you think about the comparison between the u.s. stance and, obviously, they are facing low levels of inflation, based on what they're expecting in this country, where inflation expectations are continuing to shoot up, there's different ends of the spectrum. one is guiding dovish and one is hawkish. how closely are they looking at these expectations >> it matters because where we expect prices to go affects how we set prices today and how heavy we bargain for wage

increases. the uk and u.s., you may argue, are at different stages of the cycle but because of brexit, bank of england hasn't been hiking as much as the fed. secondly, you have boost from deregulation in the uk you have a big supply side hit from brexit certainly those linked to depressed supply, boost inflation, boost inflation now the bank of england has to hike because basically brexit created an inflation problem, which we might not be facing had we not spent two years negotiating with the eu. >> very high levels of indebtedness we're talking about growth around 1.2% for this year. these aren't extremely high levels of gdp. >> no. the uk economy is not growing at a strong rate by any stretch of the imagination. remember, that does not mean low

inflation, especially when it's driven by depressed supply side gains. uk economy now on one hand you have generally strong consumer spending, demand side stuff. on the other hand you have weak investment if it boosts your supply over the long run this is economics 101. when demand grows faster than supply, prices rise. that's essentially what the uk is facing. >> looking at financial instruments, yesterday positions, had to look at that in capable pound sterling seems to be quite long most people had been getting into those positions once it became transparent that the possibility of a hard brexit has been avoided for the time being. do you think that there is room for the rates market to reprice after this meeting >> yes i think that rates and sterling both still capture hard brexit risk o once that is removed from the table you'll see out of sterling

out of interest rates. i'm expecting cable around 140 within a year and looking for almost 100 basis points on ten-year guild brexit coming off the table, bank of england signaling higher rates over time and uk economy riding higher as a result of the hard brexit risk fading. >> i thought i was being hawkish. you're taking it to another level. giving his views with a bit of a hawkish spin. >> thank you so much tune in to watch us at a special program bank of england's next move "decision time" will begin at 11:55 british summertime. meanwhile in europe, weaker data in italy and germany, french factory activity exited contraction territory. the reading was 50, slightly up

from the final march reading of 59.7 let's take a look at european markets so far this morning. we take a look at the specific numbers in london. for instance, ftse 100 is down almost .1% in germany, still very slightly above the flat line, slightly weaker performance in paris. and milan, down .4% you can see some reflection of those pmi numbers i mentioned. again, those pmi numbers might be having an impact on both the euro we can see it's .14% stronger against the u.s. dollar and pound sterling .1% stronger against the u.s. dollar. dollar is .10% stronger against the yen and swiss franc as well.

futures market ahead of the open on the other side of the atlantic you can see all three major indices looking to open higher with s&p 500 up more than two points dow jones looking to open more than 20 points higher and nasdaq expected to open around 8 points higher at this stage in the morning. qualcomm expects to make up to $4.7 billion from its landmark settlement with apple chip maker announced the boost along with quarterly earnings, which beat on both the top and bottom lines the stock is up 40% since that apple settlement april 16th was announced but shares have fallen in rounds of trading as overall guidance missed expectations meanwhile, apple's first quarter earnings beat for the first time in more than six months. investors were encouraged by the 16% year on year dproeth growth

services like icloud shares still closed almost 5% higher the tech giant's optimistic guidance boosted shares of asian suppliers, such as byd and acoustic maker aac best six months strategy has become popular on wall street, investing in the dow jones between november and april each year and then switching into fixed income for the other six months has apparently significantly outperformed from may through october. my colleague in the u.s., bob pisani, takes a look at whether the strategy still works. >> sell in may and go away it's that time of year you may not want to sell just yet. six-month theory, sell in may and go away, switching into fixed income for the next six

months dramatically outperformed owning the dow from may 1st to october 31st if you invested $10,000 in the dow in 1950 from may 1st to october 31st, you would end up with a little over $11,000 today, in 69 years but if you invested the same $10,000 from november 1st to april 30th, you would have a return of over $1 million, according to the stock trader's almanac. that's huge and the power of compounding interest why does the dow do better between november and may than may and november there's slower trading activity in the summer, back to school, window dressing that's caused stocks to sell up. in september and sometimes october, which is why september and sometimes october typically bad months for the year. when you move into november, company's efforts in the fourth quarter to beef up their numbers can help drive the market higher

as do holiday shopping and an influx of year-end bonus money sell in may does not necessarily mean may will be down or even that the next six-month periods will be down doesn't mean that. the point is that most of the market's gains occur november through april and the market tends to drift sideways and is more prone to sell-offs in the may through october period. >> that was my colleague, bob pesani there two major wall street banks are warning clients to be ready for a sudden jump in the stocks known as quote a melt up. ter eaheresa may has fire d secretary williamson after he leaked information launching an inquiry into how confidential information focused on chinese firm huawei was revealed to the daily graph newspaper. may sent a letter to williamson

at the end of the investigation saying, quote, there was compelling evidence suggest iin your responsibility for the unauthorized disclosure. williamson has vehementally denied the claims and has claimed he is a victim of, quote, a kangaroo court. maydaypro tests turned violent across france with up to 150,000 people taking to the streets. french police deployed tear gas on the crowds in paris and made around 380 arrests this, of course, comes days after president macron announced measures to sustained unrest from the yellow vest movement. in venezuela, anti-government protesters clashed with security forces after demonstrations led by juan guaido opposition groups claim tha young woman died after being shot in caracas, backed by guaido throwing its support behind the

protest once again, against nicolas maduro, also separately backed by russia u.s. crude stocks rose to their highest levels in september 2017 just last week. record high of 12.3 million barrels a day while refining activity rates also fell well, if you missed the big match last night, it is advantage to barcelona in the first leg of the champions league semi final. beating liverpool 3-nil after a master class performance from, you guessed it, lionel messi, scoring twice in the second half, a stunning free kick that marked his 600th goal for the club if you're a fan of mr. messi or, indeed, barcelona, don't

hesitate to get in touch at twitter or tweet me directly at willemmarx would be happy to hear your thoughts on that game. jerome powell ignores the criticism from president trump

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welcome back to "street signs" u.s./china trade deal is possible by the end of next week, sources tell cnbc after u.s. trade representative robert lighthizer and steve mnuchin concluded, quote, productive talks in pay jing. chinese vice premier will head to d.c. for another round of negotiations starting wednesday. china has announced a further relaxation of rules on foreign banks, announcing those measures as u.s. trade talks concluded in beijing, allowing banks with less than $20 million in assets open local branchs and remove caps on individual

shareholders investment in commercial banks. the federal reserve, meanwhile, has played down the chances of a rate cut as it kept interestrates on hold this may meeting. in a statement, fed cited lack of inflationary pressure despite, quote, solid jobs market. >> fed chairman jerome powell tamped down expectations for a rate cut at his press conference wednesday, saying the drop in core inflation was less of a concern than many believe because it's likely to be transient. >> the committee would be concerned if inflation was running consistently above or below 2% we have reasons to believe some or all of the expected decrease would be transient f we did see a persistent, inflation running persistently below, that's something that the committee would be concerned about and something we would take into account in setting policy. >> powell pointed specifically to financial services and apparel that he believes will work their way out of the data

in coming months, causing inflation to firm. core inflation has fallen three straight months and stands at 1.6% year over year, moving further away from the 2% target. declining inflation could be a reason for the fed to cut rates in coming months but the immediate market reaction of powell's comments were lower stock prices and higher bond yield as they thought twice about whether that rate cut was really coming. generally positive comments on the economy and the outlook, noting that the labor market remains strong and economic activity is rising at a solid rate powell, in his press conference, said some of the risks that have kept the fed on hold have eased. >> it appears that risks have moderated somewhat, global financial conditions have eased. recent data from china and europe show some improvement and the possibility of a disorderly brexit have been pushed off fo r now. trade talks between the united

states and china the committee views these development developments, along with the outhook for continued growth, strong job market and muted inflation pressures as consistent with continued patience. >> powell also made clear while the cut may not be in the cards, neither is the hike. in the fed's new policy to patience, will have to wait longer till the data more clearly signals path to reduce rates. steve liesman. >> nick, did anything surprise you about the market reaction to powell's comments? >> frankly, powell played it right. i think the markets were getting a little ahead of themselves i am of the view that ultimately we will have to go for a rate cut in the u.s., probably next year, but markets were getting a little ahead of themselves and i think powell was trying to bring that back a little bit so, no, it actually didn't surprise me. i think we needed a move up in interest rate expectations, given where they were.

>> the fed's view that inflation will eventually meet that 2% target, using the preferred metric. >> yes. >> how confidently the market is about that happening. >> i don't think the market is very confident of that frankly, my biggest concern and what i think markets will ultimately be focusing on and will the fed is what's happening on the growth front. we had this wonderful gdp number in the first quarter, 3.2% growth as i'm sure you've discussed on the program, underlying numbers, in fact, are quite weak. manufacturing ism, which has been in decline or moderating since the middle of last year. you look at what's going on with business investment. and you realize, actually, maybe the u.s. economy isn't in as fantastic a place as often is perceived. i suspect ultimately that will have to force the fed to cut. >> you didn't mention wages. >> right. >> where do they factor into that >> i think it's a dilemma that

all central banks and academics and private analysts are trying to deal with, which you've got very low unemployment in the u.s., here in the uk, for example. wage growth is picking up. yet it doesn't seem to be feeding through to even core inflation. and i think, you know, i'm not going to give a full answer here on that, on the program. part of it is that the world has changed and i think labor markets, dynamics have changed and perhaps central banks need to allow economies to run hot for longer period of time in order to start to see that feed through the broader economy. in addition to that, i think part of the issue is, as we know, profits share of gdp, labor share is very low. maybe companies need to start taking a bit of margin cut and that may be why we're not seeing these wage increases lead to higher headline inflation. >> you have a timeline for how

long that below target inflation will continue? other factors to mean at the fed decides not to move? >> well, i think that -- and we'll see how the dynamic changes in the coming months even if core inflation, core pce starts to move above 2%, as i suspect it will later this year for technical reasons, if the ism has moved into negative territory, if economic growth looks like it's decelerating quite quickly and there's very little scope for fiscal stimulus, the fed might say inflation is higher, but we're not overly concerned about that at the moment because we think ultimately it will start coming back down again with a lag as the economy slows and demand slows. >> translate that in british for me what that means for the u.s. >> in the near term we'll see more moderate growth but slightly higher inflation.

as we move into the latter part of this year and 2020 i expect the ten-year will be coming off relatively sharply. >> one final question for equity investors, is now the time to start positioning themselves for a downside >> yes i think we're due a risk asset correction and a big one later this year. >> appreciate your time. nick brooks, head of economic investment research at intermediate capital group we'll get more insight into the fed's policy stance tomorrow when my colleague from the u.s., steve liesman, sits down with a number of sitting federal reserve presidents, live from stanford university and beginning at 2:40, that's 1440 central european time. one corporate earning story for you here, carlsberg saw a jump of over 9% in the first quarter, thanks to strong growth in asia. 28% during the period boosted by positive currency movements.

the finnish firm expects profit to grow by mid single digits over 2019. also zalando confirms the 2019 outlook after reporting a stong first quarter. it now expects to expand to italy and france let's check in with the futures on the other side of the atlantic all three major indices looking to open higher dow jones in particular, to open up more than 36 points tune in to watch a special program later today, focused on the boe's next move "decision time begins at 1155 pst. i'm willem marx in london.

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it is 5:00 a.m. at cnbc. here is your top five at 5:00. breaking news, u.s. clamp down on uranium oil is over today can we really expect exports to go to zero venezuela at a tipping point, more street protests expected today political tensions there are finally boiling over the fed, holding rates steady but one word jay powell used that is raising eyebrows. where's the beef apparently it's on wall street call it the investing edge