good morning, and a very warm welcome to street signs we are just getting some fresh italian gdp figures across the screens. this is the final q1 gdp print it has been revised to 0.1% quarter on quarter and negative 0.1% year on year. that is down from the earlier estimates of negative -- of plus 0.2% quarter on quarter and plus 0.1% year on year. a negative revision versus the preliminary figures.

the q4, 2018 gdp was confirmed at 0.1% quarter on quarter and flat year on year. these are the revised figures on gdp, more negative than we were expecting. the market was looking for 0.1% and it has come in at negative 0.1% year on year. a slightly negative news for the italian market in terms of the euro reaction, not much of a move for the euro. it is currently trading about 0.1% higher versus the dollar around the 111 mark. willem marx is in rome, help us put these numbers into context. >> of course we knew late last year the italian economy was in contraction territory. we had essentially two quarters in a row of contraction, a technical recession, and it seems like the good news has not

yet come here in rome. in terms of the context, of course, there is a huge amount of political uncertainty, even leading up to the european parliamentary elections, and now after them a lot of people asking questions about the future of the coalition government here and what it means for the country's fiscal framework and its spending priorities that's where markets have been incredibly concerned over the last year or so since these two coalition partners took power and started to run the government they were looking at how they plan to fund their campaign priorities, and that remains a big concern for investors. we've seen yields much higher over the last 12 months than they were prior to last march's election of course that concern is not going away anytime soon based on this gdp print we've just seen and based on the rhetoric coming from people talking about the need for a flat tax and the conflict that inherently with

his coalition partners five star movement that has been much more focused on trying to distribute wealth the idea of stimulating the economy with a flat tax is something a lot of economists globally have said is the right idea but that's not necessarily been the reaction from the european commission. today is a very important day. not only are we going to speak to the central bank governor here, but also we're expecting to hear a letter from the finance minister giving the italian government's response to concerns about the fact that growth targets have not managed to meet the expectations they set several months ago, which at the time helped stave off some of the european commission's concerns those concerns will roar back front and center ahead of the 2020 budget discussions that could happen as soon as september. if there is any indication of a new set of elections, if the head of labor decides he's done

so well in the european parliame parliamentary elections, then those elections would play into that timetable around budget discussions and things could get very nasty indeed. >> in terms of the impact of these more negative than expected gdb numbers, mr. salvini is really pushing for more expansionary policy in italy, do you think this more negative print will embolden him saying this is proof we need to go down the path of easing and expansion like i've been saying? >> based on his comments over lat last few months that would be a fair assumption to make. even yesterday he was talking about the need to rerethink the framework for italian government spending the framework for its tackatixan policy that's something that's been

echoed by economists around the world saying actually that expansion may be something that's a possibility and may be a way to solve some of the dilemmas there are many others who say, you know what, these are structural problems. that's far more the line you hear from the kmueuropean commission in brusselss. >> we will be back with you in just a little while's time in rome the curb has moved higher. we are seeing yields rise across the board, and not spread between the ten-year bte and the ten-year bund widening lts bring in the executive vp of sovereign credit analyst, thank you for joining me this morning. we just got the revised q1 gdp print in it did show a contraction. the market was expecting slight growth, about 0.1% how much more negative is this

really than we were expecting? >> yeah, good morning. i think the print was weaker than expected. as you correctly said the flash estimate was stronger but new england in any case, even if we didn't have this surprise i wouldn't have been too positive on the outlook for italian gdp if you look at the pmi and other high frequency indicators, they've kol docome down at the t of q 2 even if the q1 print had been positive i would have expected it to turn south again in queue. i think the weakness of the italian economy -- first of all, the tightening and financial conditions resulting from wider spreads, secondly political uncertainty and of course the weakness in global trade which affects an economy like italy. >> in terms of the european commission and their view and stance towards italy, there has been a lot of concern that they're going to start the

disciplinary process against italy. how do you see this playing out, and what is the trajectory that you see at this point for italy's debt to gdp ratio? >> yeah thris is a challenging time for italy the italian ratio has been climbing, and in the absence of tightening measures next year and especially the application of the so-called safeguard clauses which imply a hike of more than 1% of gdp, debt to gdp looks set to pikspike, to rise faster in 2020 the commission is well aware of this without any measures it could be that the deficit goes to 3.5% or higher in 2020 i think the commission is pondering about imposing an excessive debt procedure for italy as soon as next month or, you know, in coming months

my assessment would be that the crunch time is probably going to be september, october, when italy publishing the budget because at that point they were firm up the numbers, and i would say that the direction is not good at the moment because the request would be to do tightening measures and actually the italian government is talking about further easing, for example with the application of the flat tax proposed by salvini. it is a challenging time and i think tensions with the e.u. will continue and probably rise at some point this year. >> it's really clear as you've just laid out what the challenges are for italy at the moment i'm curious how you reconcile that negative output with the demand we saw earlier this week at their five and ten-year auction. i was looking at the results of the five-year auction. the demand for the five-year was the highest since august of last year according to the bid cover ratio. that is despite all of these headwinds. how do you explain appetite for

italian debt here? is it just at these prices you're being adequately compensated for the risk yeah, well, i mean, i would say that the auction went fairly well it's also important to remember what happened in pricing and the spreads for italy have been rising, so there has been demand, but the price hasn't been that favorable. in terms of italy and issuance, italy issues about 250 billion worth of debt every year it's a lot of debt to digest i think a key support remains the domestic investor base, the banks in particular over the past year have been increasing their exposures, but you know, the ecb now is out of the game in terms of net purchases, and foreign investors broadly speaking have been declining, and liquidity in the market is not as good as it was a year ago, so the auctions are not failing, obviously, otherwise it

would be big trouble i wouldn't view the technical picture as that supportive, especially looking at price action. >> thank you very much for your thoughts on italy. we'll be back with you shortly, stay with us let's get right to the big story that happened overnight, president trump announced tariffs on all mexican imports in an attempt to combat illegal imfwramigration at the border. trump tweeted from june 10th, the u.s. will impose a 5% tariff on all goods coming from mexico with levies increasing until the illegal immigration problem is remedied the move comes despite robert lighthizer sending a letter to congress to kick start the process of extending the new north american free trade agreement. mexico's president responded in a letter saying he wanted to avoid confrontation with the u.s. but telling trump that quote, america if irs first is a

fallacy because justice is universal brotherhood are more important than the borders the dollar currently about 2.6% higher versus the peso, so that is the reaction. we also saw the safe haven demand really kick up in response to this you can see a very strong bid for the japanese yen as well as the swiss frank. the bond rally continues as investors shift into treasuries as well as gold, so a really clear reaction from investors in response to this new trade war brewing. they are seeking safe assets now, separately overnight, we got an update on china's economy with china's factory activity coming in. it has shrunk more than expected in may the country's official pmi fell to 49 p.4 from 50.1 in april. >> china's latest economic data

disappointing. the latest manufacturing purchasing managing industry fell from 49.4 to 50.1 in april and missed expectations. anything below the number 50 indicates a contraction. new orders fell for the first time in four months. the weaker pmi is raising expectations that the leadership here will stimulate the economy more with the trade conflict with the u.s. looking as though it will only get worse a former central bank chief told a seminar in beijing he didn't see a major breakthrough for a trade deal at the anticipated meeting between presidents xi and trump at the g20 and the latest decision by president trump to hit mexico with fresh tariffs probably won't instill confidence among chinese negotiators that a trade deal with the u.s. would stick the tariffs threaten to undermine the new three-way trade pact for the u.s., canada and mexico beijing will probably be pleased

with the president's latest threat towards mexico. mexico has also been seen as a winner in the u.s. china trade war as companies here shift production there with tariffs on chinese goods so high. beijing has been attempting to project its as a steady leader in contrast to washington as a partner with consistent policies, eunice yoon beijing. while european markets are trading firmly in the red following president trump's announcement of those tariffs on mexico clearly taking focus at new trade war brewing just as investors are coming to terms on where things stand now mexico coming back into the fold investors trying to digest what this might mean. so far the reaction has been negative the stock down about 0.9%. worth remembering that today is the final day of trade in the month of may as it stands we are on track to see the first negative month in

2019 so a negative turn for european markets. in addition to the trade war, italy in focus today as we just saw those q1 gdp numbers come into focus, more negative than the market was expecting, and negative data coming out of china. a lot of headwinds for markets this morning the ftse down about 1.16% right now. it is red across the board the dakot french and u.k. stocks dipping into negative territory. autos sharply in focus this is an extremely trade sensitive basket of companies. they are trading lower a couple of figures courtesy of deutsche bank. u.s. imports around $30 billion worth of goods from mexico each month, around 30% of which are autos. the auto sector reacting

strongly we've also got negative headlines around fiat chrysler and renault coming through they have run into a dispute around valuation so putting that into that deal into a little bit of jeopardy potentially, so renault shares trading down more than 4%. fiat chrysler down about 4.4%. plenty of fresh money very quickly available to come out of that overall a negative picture for autos this morning coming up on the show, a top fed official signals they're open to rate cuts if the u.s. outlook dims stay with us ♪

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yuck, that's gross. you got to get that under control. [ dogs howling ] seriously? embrace the mischief. say "get pets tickets" into your x1 voice remote to see it in theaters. welcome back to "street signs. let's take a look at u.s. yields they've been sharply in focus this week as the inversion has slid deeper and deeper this is amid continued concerns around trade tensions. of course overnight things accelerating as president trump tweeting about tariffs on mexican imports. as you can see across the curve

from the two-year to the 30-year yield moving lower. the 10-year trading around a 20-month low, a 2.16%. also worth noting in addition to trade tensions we got the second q1 pce print, and that was vised down yesterday 3/10 of a percentage point to 1% q on q. a fairly dovish. rate cuts if the economy weakens, so altogether this is painting a picture where yields are moving lower i want to take you to one part of the yield curve in particular, and that is a comparison between the three-month treasury bill and the ten-year note. this week we saw inversion between those two widen to its deepest level since the financial crisis clearly the bond markets is flashing warning signs about the future of the economy. now, as i mentioned, we did get some comments from one of the

key fed voices the fed is open to rate cuts if the u.s. economic outlook worsens, according to fed vice chair richard clarida. it was important for the central bank to stay nimble and take into account any shortfall in inflation or material rise in global risk. his comments come as traders price in a more than 80% chance of at least one fed rate cut by the end of the year and a 40% chance of two according to the cme's fed watch. lets get wak to the executive vp and sovereign credit analyst from pimco ha do you think of the importance of the yield curve inversion? should we be looking at this as an reliable as indicator as it's been in the past of an impending recession? >> i think we should be respectful of the signal of the yield curve. it has been a fairly accurate

predictor of recession in the past having said that, i think there are some special conditions right now that mean it's probably not as reliable an indicator as it used to be most importantly the unconventional monetary policy easing, quantitative easing, forward guidance, long-term liquidity operations have all led to a reduction in the term premium, and therefore i think there are some technical reasons why the yield curve, you know, could be flatter as well so we take it into account, but we don't place excessive emphasis on it you know, our own view is that the u.s. economy is weakening. it's been slowing, and that's been our expectation i would say that we still don't think a recession is likely. it's not the best case as the typical recession drivers of the past which have been overheating, and financial imbalances are absent. the fed is supportive, and the

manufacturing weakness is important, but manufacturing is only a small portion of the u.s. economy. we think we skirt recession this year. >> it sounds like it should be taken as a warning sign but some caveats relative to how it might have been used in the past so looking at that three-month treasury bill to ten-ye spread, it did widen to its widest spread since the financial crisis at what point is it a sign for fed to start panicking and changing their stance on rates is there a spread where you would take it as an extremely strong indicator of what's to come >> i wouldn't have a specific level in mind. i don't think the fed either has a particular target in terms of, you know, acting on it i think the fed is taking it into account the fed is also looking at a broader set of data, growth data, inflation data it is quite clear that the fed is -- errs on the side of caution.

even though our expectation is that the fed will be on hold throughout this year, it's certainly the case that the risks of a cut are higher than the risks of a hike. c c if the data weakens further our rate cut can certainly not be excluded this year. >> on the data front, one big factor is how trade relations develop between the u.s. and the rest of the world. now overnight president trump tweeted about tariffs on all mexican imports. how important is this development, and how do you see it playing out >> so, yes, i mean renewed trade tension and the weakness are the key downside rates the typical drivers are not really present right now, but i would say that the main risk to the outlook is geopolitics and trade tensions so you know, i don't think the measure of mexico per se is a huge deal, but in the context of

a continued escalation of trade tensions, business is getting concerned and conduct investments on the back of that. i mean, and financial conditions tightening, all of that creates risks. while the u.s. economy is likely be hurt by this, the euro zone economy also looks very vubl neshl vulnerable even though the euro zone is not in the epicenter of the trade crisis, it is one of the economies that's going to suffer the most from it. >> i think that's an interesting point that europe is already suffering as a result of u.s. relations with china we are seeing a very negative reaction today to the mexican news, but this is all before the u.s. directly goes after europe, which is as it stands a major risk looking ahead how much more downside is there

to the european economy once trump shifts his attention to europe directly. >> that's a point of concern for us i mean for now president trump has decided to delay the application of auto tariffs, you know, and delay essentially the tensions with europe, partly because he's already dealing with china and mexico, so putting too many things on the plate is probably not in his interests, but i think as we go through the year, i think the risks of auto tariffs and of europe and especially germany becoming the focus is there, and you know, growth in the euro zone is already very weak. it's below 1%, and you know, q1 was relative ri stroly strong b don't think that growth will be -- i think it is definitely a factor of it's a source of downside risk for an economy that is barely growing above

zero so yeah, the outlook remains weak >> thank you very much for weighing in. executive vp and sovereign credit analyst from pimco. coming up on the show, stay tuned as we break the bank of italy's annual report ahead of our exclusive interview with the governor rebekkah: opioids has taken everything and everyone i've ever loved away from me. everything. i blew my ankle out and i got prescribed pain pills by my doctor. if making my detox public is gonna help somebody i'm all for it. i just wish i would've had a warning.

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welcome back to "street signs. these are your headlines european markets sink, dragged lower by the auto sector which strikes its lowest level in almost five months after president trump threatens to slap tariffs on mexican imports. the mexican peso hits multimonth lows versus the dollar italy posts anemic first quarter growth missing expectations and throwing rome's full-year forecast into doubt. we'll speak to the governor of the bank of italy at 11:30 cte

as the central bank gets set to release its annual report. and uber posts a billion dollars loss shares rise after hours as net losses match expectations. it is a big morning for italy. we had q1 gdp data out a couple of months ago, and now we have got the bank of italy's annual report the bank of italy has urmged th government to find a rigorous strategy it also warned that only careful budgetary controls and efforts to boost growth could help to lower bond yields to match the rest of the euro area. now, willem is in rome this morning. you have had a look at the q1 gdp numbers. now we've got the annual report. what does all this mean for the

trajectory of the italian economy? >> well, there's a lot in here let me try and break it down for you briefly, juliana what's really interesting to me immediately is pointing out some of the numbers that are perhaps slightly surprising when it comes to things like household debt, corporate debt, it's much lower than the euro zone average, and yet because of as we've seen those quite difficult gdp numbers in the last half an hour or so, it's things like the high unemployment rate here that makes it so difficult for that gdp growth to tick back up the report looks at the italian economic climate, and says it's quote little predisposed to business, to growth, to investment, to employment. they've had 20 years with growth lagging behind the european average. it also cites unsatisfactory quality of public services, inadequate infrastructure, low levels of competition and the distortions associated with widespread tax evasion and

corruption not to mention the obstacles posed by organized crime. higher public debt is counterproductive if financial conditions and confidence deteriorate and the higher government financing costs you'll see if there's any more political uncertainty about budgets and things that will offset all the expansionary effects you could see introduced by changing to the taxation system, and that quote, what's needed is incisive interventions in the spending and revenue. not spending more money for the sake of it, it needs to be incredibly targeted. high debt to gdp ratio continues to be a severe constraint on the economy. the government must define a rigorous and credible strategy to reduce debt to gdp ratio. a lot of skepticism i'm reading between the line we'll be asking the governor whether he believes that is indeed something that can happen

here in 2019. >> willem, one of the other issues or one of the tangential issues here is the gam between the north and central regions in italy and the south. this was cited in the report as well surely raising the public deficit would provide some te temporary relief would this actually solve some of their bigger problems, one of which is this? >> one of the concerns the bank seems to have is just the idea of transfers is not going to be good enough. when you look at the numbers, when you compare the south to north, a third of the country live in what's defined as the south of italy and yet only a quarter of the gdp comes from there. it talks about the brain drain where a huge proportion of university graduates from the south of utlitaly travel to find work in the north. decades trying to support economic growth in the south it says has failed and they would like to see more of those targeted efforts that have kind of indications as to whether they will work ahead of time

rather than just blanket spending which is something the five-star movement seems to have tried to pursue over the last 12 months or so thank you very much. in the meantime, let's take a look at european markets and see where things stand about one and a half hours into trade, the final day of trade for the month of may we are on track for the first negative month of 2019 for european stocks. as you can see there, negative moves across the board including in italy, the ftse is down about 1.28% at the moment. the dax is the worst performer down nearly 1.5%, the auto sector being hit particularly hard on the back of president trump's move on tariffs with regards to mexico. so investors not only now digesting where we might go with u.s./china trade but also where we might go with u.s./mexico trade. let's take a look at fx markets this week. just overnight we have seen the

euro gain pace versus the dollar it's up about 0.15% at the moment just hovering around that 11145 mark the pound also strengthening versus the dollar around 0.1%. of course what's been happening in the yield curve with yields moving lower across the board in the u.s. as bond markets really flash warning signs about the direction of the u.s. economy. on thatn't fr front, let's takeo at u.s. futures. we are looking at a negative open the implied open for the dow is down more than 200 points. the nasdaq also down about 85 points, and the s&p looking at a 25 point drop, and worth remembering that trump tariff news came overnight. we have yet to see the reaction when markets are trading live. another development overnight, uber shares have risen in extended hours after the ride hailing firm post add quarterly

net loss of $1.1 billion in line with expectations. first-quarter revenue rose 20% compared to the previous year. uber added it is seeing competition easing from domestic rival lyft elizabeth joins us on set. you heard there that they did mention lyft and easing competition. i mean, how did this play out? explain -- give us the full picture. this was a huge concern going into the ipo. >> competition is one of the biggest concerns for uber and that was the case when it was a private company and now in its first eernarnings report that loss remained $1 billion, and this is a huge loss for this company expected from that initial ipo filing but continues to weigh on those outlook going forward, and a lot of the reason for the loss is that it just doesn't know how to monetize its core business, which is ride hailing. on top of that there are the

competition concerns we heard on the earnings call about a little bit of how the competition from lyft is easing but the underlying threat of competition is still there take a listen. >> in the u.s. you listen to the lyft conference call, for example, they talk about competing more on brand, and i think that competing more on brand and product is call it a healthier mode of competition than just throwing money at a challenge, so we have seen that pencil out into the market will things get better or worse we can't predict, but i think that sitting here today versus where we were three months ago, we're always uncomfortable if our chairs, but we're less uncomfortable so to speak, and i think we have more of a handle on the competitive situation that can get worse or better. >> so less uncomfortable, not completely selling it there that this whole threat is gone. we did see some of those competition concerns showing up in the numbers

the latin america division declined 13% revenues year on year, while we did see strong growth across other regions including u.s. and canada, europe middle east, africa if there is this long-term road to profitability but still a lot of big fundamental questions remaining. >> this is a new sector for investors. it's it's not just revenue and bottom line take rate ss a metric that's really important to investors. explain how take rates are calculated but more importantly what the take rates they reported suggest about this potential profitability trajectory towards profitability. >> as with any new kind of public tech company especially in the space where uber and lyft are the first to go public, for uber it's this take rate adjusted net revenue as percentage of gross bookings what that ultimately meen meanss

the numbers uber takes away from each sale. uber eats, the take rate is 7.8% ride hailing for comparison is about 20%. the problem is that these margins for uber are not very big in areas where it's focusing on growth and expansion, and that's why a lot of those underlying questions remain about how it can be profitable. >> so far investors seem to be giving them a chance to prove themselves we'll see if it lasts. switching gears to the sports world, the toronto raptors have claimed victory over the golden state warriors they won 118-59. the first nba finals game to be played outside the u.s game two of the best of seven series takes place on sunday. elsewhere in the sports world, european football's biggest club competition will have an all english feel when to

then tottenham and liverpool face what are we going to be looking for on saturday? >> thank you very much, yes, we're going to be looking inside the stadium just behind me final preparations are underway for the show piece final between tottenham, and liverpool a huge game for european football both coming through miracle semifinal come backs they thought they were going to go through against tottenham but didn't think about lucas moore in the last minute and he made sure it's back to back finals for liverpool. that looked improbable when they were three down from barcelona an all english final, hasn't happened since moscow just about 11 years ago, and it's going to

be exciting game. these are two sides that play brilliant attacking football these two sides will be first of all going to the stadium behind me later on today to do their final feed media activities he's so proud of this team he's put together they've achieved quite a lot this season, but they haven't won a trophy yet he thinks that can all change tomorrow night. >> i've never been part of a final that's true, but in different times for different reasons, my teams were good as well and yeah. i'm not so surprised because the boys are we call it mix of potential with attitude in the best way of offensive ever, so that's just brilliant. it's exceptional and that brought us where we are.

>> now what we hear from the t -- the very first question he's quite likely to be asked is whether or not harry cane will be fit to start. he hasn't kicked a ball in a matched atmosphere over two months because of an ankle injury he has used the time seasons the end of the season to get fit and has put himself in contention for this game. now cane has been quite obviously talking up his own chances he's got a big couple of games with england potentially next week. is harry cane in his own wards going to be fit. >> great, so over this next week, and sweek see if i'm ready to start or play i've just got to make sure i'm ready for anything. >> reporter: the chant is that

he's one of their own because he didn't cost them any money came through their youth academy. went on a few lone spells. he's been very prolific over the past few years, and when you look at the two sides comparatively where thai been put together, liverpool way out in front in terms of transfer fees paid for players. for a time allison beka was the most expensive goalkeeper as well and the front three that are so prolific, they cost a pretty penny as well tottenham by contrast, they haven't signed a player at all since january 2018 when lucas mora, the hero of the semifinal was signed he may not even get a starting place tomorrow night if harry kane is fit. th their total combined team is a lot less than liverpool, $150 million or so the economic impact for madrid

could be anything between 60 and 66 million euros, so a huge sum of money as well, and around about 80,000 fans, less than half of that will have tickets, will be coming to the city over the next couple of days, many of them already here seen last night singing songs in the square there's going to be a huge security presence to ensure everything goes off without a hitch. the main thing is that this incredible match is all set to be played out in this stadium behind me tomorrow night tott tottenham against liverpool. who will win >> it sound like madrid and all the hotels and airbnbs in madrid as well. thank you so much for setting the stage. let's take a look at german bond yields. we are seeing the ten-year bond now trade at negative 0.202% that is a record low it hit around that level back in

2016, but as you can see across the curve there, the two-year, five-year, and ten-year trading lower amid trade concerns and negative data coming out of italy. quite a down day for those german bunds keeping an eye on the ten-year. coming up, president trump sets up another trade battle this time with mexico. details next up. it's us. millennials. hey. we all worked hard in school. but then? we got to pay back an obscene amount of student loans. so...buying a house? paying for a wedding? meanwhile our parents paid for school by waiting tables. it's just not right. but refinance your student loans with sofi and you can save thousands. and get your dreams right. fast, easy and all online. get your money right with sofi.

. welcome back to "street signs. it's been a big morning for italian equities the italian banks trading at their lowest level since november 2016, down about 2% on average. you can see there. we had that italian gdp come out this morning, more negative than the market was expecting, down 0.1% the market was looking for plus 0.1%, so the economy and worse condition in q1 than the market had been expecting now, the bank of italy governor is speaking now.

they issued their annual report about 25 minutes ago he's fwifg hgiving his thoughts. willem will be speaking to visco at 11:30 cet stay tuned for that interview. president trump has announced tariffs on all mexican imports in an attempt to combat illegal immigration. trump tweeted from june 10th, the u.s. will impose a 5% tariff on all goods coming from mexico with levies increasing in the l illegal immigration problem -- sending a letter to congress to kick start the process of approving the new north american free trade agreement mexico's president responded in a letter saying he wanted to avoid confrontation with the u.s. but telling trump that, quote, america first is a fallacy because justice, universal brotherhood are more important than borders now in terms of market reaction

to these developments, you are seeing quite a step down in european autos across the board. you see pretty steep hoslosses o one up to 5% the auto sector very sensitive to trade war disputes given their extensive global supply chains fiat, chrysler and renault underperforming the packs. idiosyncratic hitting those stocks the french press throwing into doubt the merger altogether a negative day for autos. i'm very pleased to say i'm joined by jimmy conway, head of equity trading strategy from citi to help us make sense of some of these market moves this seems as if it was a surprise to markets, president trump's move to put tariffs on mexican imports. of course this has been a point of tension for him the timing seems as though it's taking markets by surprise given the reaction is that fair

>> i think it's father it's happened twice now. i don't think the market was anticipating the stepup. increasingly difficult for investors to trade this because you know, you keep getting blind sided by what seems to be very unpredictable and nonlinear changes in attitude. >> in terms of what we might expect from the u.s. mexican trade war is very hard to say with certainty, but do you envision it taking a similar path to the u.s./china trade war which has turned into a really protracted complex process, a lot of people likening it to the cold war, or is this going to be a lot more targeted and perhaps this is more tactical and reflective of what trump is trying to achieve domestically when it comes to congress and their approach to the border >> i think that's probably the right way to differentiate the two. one is a tactical policy driven short shock, which is what is the ambition with the stocks vis-a-vis mexico the other is perhaps a little

more strategic the question from investors will be whether or not the rubicon has been crossed in both instances. what has been surprising is president trump seems to be willing to fight more than one trade war at the same time so from our perspective this is more and more becoming about the fact that so long as the s&p stays at quite high level and the economy's roaring at 3%, he has a high enough degree of confidence to keep doing that. the ultimate arbiter increasingly seems to be where the s&p is trading >> as long as the s&p remains in a relatively okay level, then it gives him the sort of freeway to start these different trade wars >> yeah, i'm sure that's a little bit too explicit in terms of how hoe's approaching it the president is known of looking at the index as a barometer for how the economy is doing. as long as the economy is not

rolling over there is a confidence to pursue a slightly more aggressive stance on trade. >> if we can zero in on some of the sector moves we're seeing today highlighted there, the auto space in europe trading sharply lower on the back of this news, the auto sector clearly vulnerable given the highly integrated global supply chain, but do you think that this sector is oversold at this point? and it's historically always traded very cheap, but i think there are -- there's the con fli conflation of multiple headwinds. the tech sector's going to face similar sorts of problems. i think it's also that they're having to very quickly fight the disruption that's coming from the ev platform while the legacy issues of the problem of having spent so long developing diesel

platforms. it has been -- it's cheap. it screens very cheap. it's a very decent value stock it's hard to say that it's a buy, and again, the next level of concern will be the cost of capital for some of these companies. >> we have seen a pretty strong bid for safe haven assets in reaction to this namely the swiss frank, the japanese yen, gold in the equity space, if you want to avoid the swings on trade headlines or if you have a bearish view on where things go from here with regard to geopolitics, where do you suggest going? >> i think it's investors have already largely gone if you look at the divergence, where you sacrifice some of the capital upgain or capital upside for very good transparency around future earnings and stability of the dividend, there's been a massive bifurcation globally already, particularly strong in europe.

again, it's going to be the stap staple's names when i think all of european fixed income or major fixed income, negative yield other than italy for some very clear reasons, picking up that #.5 to 2% dividend yield as long as it's stable seems increasing willly attractive. >> uber reported we saw modestly positive reaction in uber shares but still their path to profitability remains incredibly unclear. how do you think about tech stocks i'm not sure if you can comment specifically on uber, but tech stocks generally that are loss making you see a little glimmer of hope and investor reaction is positive, but is that the correct view >> it's hard to say. i have sympathy for the reason, tech sector in general has been a gravy train because people have been looking to buy d disrupti disruption, and that's the reason we've seen europe

underperform investors will be willing to right that gravy train and be as patient as they have been is increasingly under question. i think there's a degree of sort of a grace period that is perhaps elapsing now with regard to some names, and we're seeing that in the price action however, on a 20-year view it's going to be very difficult to argue these companies are going to have to form some portfolio to hedge against the future. >> all right, thank you so much jimmy conway head of equity trading strategy make sure you join us at 12:15 cet for our exclusive interview of the banofta gerr.k ilyovno that's it for the show i'm julianna tatelbaum "worldwide exchange" is up next. ♪ ♪

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breaking news on this friday, there is a new front in the trade war. stocks set to plunge president trump threatening tariffs on mexico. mexico responding in a big way, and industriesfrom autos to railroads to oil suddenly thrown a massive curve ball will this political move backfire it is friday, may 31st as "worldwide exchange" begins right now.