welcome to street signs. these are your headlines. >> italian assets gets boosts among indications a new coalition government could form soon as he pushes parties to make a quick deal. >> european stocks remain subdued as china ups the ante in the trade war saying it's getting ready to publish a list of unreliable entities beijing's answer to the u.s.

blacklist. >> key readings come in stronger than expected but german activity still contracts amid the slow down in the larger economy. and the chilean miner warns decline in copper prices have hit it's production outlook. well, good morning and welcome to the show. we had quite a busy morning in terms of european data but we just got the overall flash pmi numbers for the euro zone as a whole. let me break them down for you the flash composite pmi is higher than 51.2 and also higher

than in july 51.5. we got 53.4. this is higher than the consensus and also higher than where we were in july. manufacturing which is key and what everyone has really been focused on in europe also came in at 47 that's higher than the expectation and also higher than where we were in july. so it's definitely some progress on the pmi fronts and if you want to look at it in a little bit more detail the french numbers also came in much better than expected about an hour ago. we did see some improvement in the manufacturing pmi numbers coming out of germany. that had been a big focus for the market but still very much so in contratioctionary territoy it's still very much in the middle of the 50 mark which is at expansionary level

let's talk about the politics. the italian president is pushing parties to make a deal quickly as he needs the leaders to form a new coalition government a once unlikely allowance between opposition party and the five star movement could stop a snap election from taking place. let's take a look at how italian assets are reacting to the news today. we have gone up a quarter of a percentage point up 1.2% and up 1.6%. some of the blue chips there really having a good start to the day. i should tell you, this week, ftse mib is up 2.8%ment despite the noise in the background italian indices have been performing quite well. this interesting too we are seeing the bid for italian fixed income today 10 year btp. this is roughly 10 basis points

lower than monday morning. it's been a bit of a roller coaster ride but generally speaking if you look back to where we are today versus where we are in the beginning of the week, everything is trader firmer let's talk about the politics. the market is encouraged by the fact that we may possibly see an alliance between pd and 5-star what are the outstanding obstacles that need to be overcome in order to see that alliance take place? >> well, there's quite a few of them they're the ones that started the opening between these two parties and it was lead publicly by the party's former leader and former prime minister and they yesterday met together most of the members of the parliamentary party and essentially endorsed unanimously a set of conditions they would like to see met if they were to work together with the 5-star and, in fact, participate in any

kind of new government those involve things like changes to the way the economic models are developed a boost for investment and change in the relationship for europe to guarantee loyal membership of the european union. frl th from the 5-star's perspective it's not clear they have reached out and had conversations with the pd and counterparts there that's something that we're very clear on but in terms of what their conditions could be it's not at all clear but that's because they have real challenges when it comes to the idea of fresh elections. they saw a huge, huge ground swell of report. they ended up with the larger part of the seat in the upper and lower chamber but based on current polls that doesn't look like they could repeat it and even come vaguely close. they have a huge amount of self-interest at stake they want to stay relevant if they want to hold on to the

power that held for the last 14 months, they need to find a compromise to keep them in government because if they go to fresh elections, then they could be frankly toast. >> let's talk about parliamentary arithmetic let's talk about it in italy as well if you combine the respective number of seats together you end up with 165 seats for this potential alliance you need 158 to command the majority what does this mean for the upcoming budget discussions? because this is the key point for markets here and whether or not this potential alliance actually has the push to get through some market friendly outcomes here. >> so those are the numbers for the senate that number involves some of the independent members of the senate those that belong to much smaller physical parties that could be natural allies of the 5-star movement but of course there's no such thing as certainty in italian politics.

in thelower chamber, there's a slightly more comfortable but still very slim majority the challenge is some members of the 5-star movement decide they don't like working with a party that they have criticized for many years again and again and again, you could see them split away from the main body and that would leave you a very unstable majority inside of both of those chambers and in terms of passing the budget, something that the parliamentarians here in rome struggle with every year, it would make that process far more convoluted because of the interests and because of the differences on policy that you see between the two parties going into that process starting in mid october all the way through the end of the year, you'd have a lot of very public bickering over whether they should spend their money or save their money and how that would be reflected on the european commissions approach to that entire process. >> where is mr. salvini in all of this? have we heard from him just looking at it from the

outside and you talked about how the respective parties have performed since the last election, they had risen a lot in the polls but could also argue that they're not being represented in this future government that's being formed there's questions about democratic representation here. >> well, that's certainly been something that they have talked about the last couple of weeks and frankly, it's very hard not to hear from mr. salvini he was outside of the front gates of the italian parliament yesterday answering questions from a massive crowd of journalists. he's not someone that shies away from the media spotlight as we know in terms of his approach over the last couple of weeks since he first talked about existing this government, it does seem like he has slowed down very slightly he's not automatically pushed through that vote of no confidence that he maybe talked about pushing through a week or so ago

it's a recalibration among the leadership realizing by pushing too hard that's why mr. salvini and our producer here caught up with him yesterday after this massive media scrum outside of the parliament he said he would have one word when he came here later today to talk to the president for his one-on-one consultation and that would simply be elections. that's his way out of this crisis he sees his numbers as being very, very important and he talked about the idea that his supporters would take to italy to complain if an election was blocked by some of these other political parties. >> which is clearly what they're trying to achieve at this point. thank you very much for the break down in what's been happening with the italian politics and as we mentioned the italian index is doing well on positive signals coming out. the possibility of a government being formed there and you can see today the ftse mib is the

only one trading in the green despite the positive pmi numbers we have seen ftse down again. the politics is heating up here. we have an important meeting set to take place between the prime minister and macro later today we'll see whether or not there's positive signs coming out of france we talk about the italian banks doing well and that sector is performing well gaend, this is-- again this is a story. more shots being fired by china when it comes to the trade war

keep an eye on that. i want to talk to you about fixed income and the market is in on that and what we're seeing today is that the ten year is back around 160. so hovering around flattish to inverted so keep an eye on that we also have it just off all time record lows they continue to get a bid this morning trading at 132 now a fed divided. policy makers were not united over a decision to lower interest rates they combat low inflation and the impact of global trade tension while several favored mane taning t maintaining the target range however many saw the decision to slash rates as a mid cycle adjustment to address economic

uncertainty. they wanted to avoid any appearance that the fed was on a preset course. meanwhile, president trump as ever reiterated his call for the fed to slash rates. >> if you look at what's happening around the world, j. powell and the federal reserve totally missed the call. i was right and just about everybody admits that. he did quantitative tightening he raised interest rates too fast, too furious and we have a normalized rate. you can call it that and now we have to go the other direction we'll see if he does it. if he does it, you'll see a rocket ship. if he does it we have a very strong economy. >> okay. ian, it's great to have you with us on the show

and have you learned anything new? >> we learned where they sat at the end of july which was of course before president trump issued his threat to put tariffs on all the chinese imports and that of course has changed everything but before that it's clear that there was a widespread opinion and those that are focussing more on the risks it's not unreasonable to think that growth is under some threat. but there's also cyclical slow down in china which is a problem as well and that's transmitted

clearly into europe and the u.s. manufacturing sector is pretty weak as well but on the flip side i would say well look at the consumer which is 70% of u.s. gdp and is charging along quite happily confidence dipped a little bit but fundamentally the consumer is dragging the whole economy along and for now i don't see that changing and in july that was reflected in the minutes now with the dow down since the july meeting i suspect the calculus is changing and i'm guessing there will be more than will be willing to go ahead with an easing next month so i'll be pretty astonished if they didn't cut rates since september.

where should investors look at to get clues that the u.s. is headed toward a recession in the next 6 to 12 months? >> we have to see a weakening in the nonmanufacturing economy right now the manufacturing sector is in a mild recession but we have seen this before in 2015, 2016, it's in recession for more than a year and gdp growth continued to run at about 2% and i think markets and the media are focussing on this manufacturing story where it's only 12% of usgdp. it's not weak enough to drag the whole economy into recession so i need to see meaningful weakening in the economy at the moment there's no sign of that admittedly the strength of

consumption isn't sustainable. so until you see signs of wobbling there's not reasons to think it's imminent and i think growth will average about 2% it's not great but it's probably enough to keep the unemployment rate stable or maybe falling a little bit and it will probably maintain that pressure on wages and as you said, inflation is now tracking on a quarterly basis above 2% and broader members of inflation are quite robust i'm with those that think that it needs to be done very carefully and i need to see solid reasons why they want to cut gain

absolutely there's a lot of pressure here. >> do you think the markets should start thinking about the possibility of a change at the head of the fed given how much pressure the fed chair is under from the president is this something that you could envision happening at some point? >> i really hope it doesn't. i think he's a pretty robust character. he's been around washington for a long time and i would be astonished if he were to walk away from the job. it would be an absolutely dreadful development and it would take years and years to recover from the damage to the fed. i think he'll tough it out it's extremely difficult for him and the pressure is horrendous

but there's a great deal of sympathy for him and what the president is saying is outrageous and wrong. he is under pressure and there's a case to be made for interest rates but when that happens they're doing what the president wants them to do and that's an unfortunate appearance even though you can justify it on grounds of external threats and low inflation and all the rest of it. he has to tread carefully in order to maintain the confidence of the markets but the fact that he has lost the confidence of the president is no reason for him to go and i don't think he will. >> pretty clear on that point. where are you on the debate? we spend a lot of time analyzing the shape of the yield curve now. some people are of the camp that this is the best prekick to of an upcoming recession.

do you think it still has that predictability power >> i'd be more convinced if the curve had inverted because short rates had gone up a long way but longer rates have come down a long way that's a different story that to me is markets are overweighting two things first of all the weakness of manufacturing and markets seem to con flat with the whole economy which it just isn't and markets are putting too much emphasis on low year over year inflation rate it's low because we have that run on the first quarter but since then it's quite strong and broad inflation, the dallas fed is running solidly at 2% and i think markets are still kind of looking back at those first quarter numbers which pushed down the year over year rate and assuming that will continue and i don't think that's the case. it's true a flat curve is not

something that anyone could be comfortable with and we haven't got very high rates. the real feds funds rate is zero there's never been a downturn in the economy with the fed funds rate at zero costs for consumers and businesses are rock bottom and they're not rising and confidence is pretty strong. so i can see one very strong signal of a downturn in the shape of a yield curve but i can see lots of other reasons that are not pointing in that direction at all so i'm open minded but at the moment i'm willing to be more bullish than the curve might suggest. >> i'm going to leave it there thank you very much. >> now president trump praised germany's no interest bonds after a negative yield for the first time but the sale failed to impress in less than half of the 2 billion euro offering was bought picking up the balance.

it pays no interest whatsoever now he also referenced germany as he left the white house for kentucky. >> we're much stronger than germany but we do compete with germany. in germany they have zero interest rate and when they borrow money, when you look at what happens, look at what's going on over there. they borrow money, they actually get paid to borrow money and we have to compete with that policy makers gather in wyoming later this week for the jackson hole symposium also coming up on the show, u.k. prime minister boris johnson looks for a sympathetic ear in berlin and paris says it won't budge on brexit. more when we come back

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it's required around the u.k.'s relationship with the eu however. >> the backstop has always been a full back position if you resolve this position, if you have a solution how to do it it has been said that we will probably find it in the next two years but maybe you can find it in the next 30 days. why not? then we'll be a whole step ahead and we'll have to make an effort to find something like that. if i may add that presupposes, however, that we have clarity as to what the future relations of great britain with the european union should look like and i think that this clarity has now increased and that is why we still have something good to discuss tonight. >> now johnson welcomes merkel's offer saying he was more than

happy to accept the quote, blistering timetable. >> we need to remove those elements of the withdrawal agreement. i have spoken to the protections of the rights of eu nationals but the backstop, that particular arrangement which i do think has grave, grave defects for a democratic country, a sovereign democratic country like the u.k., that has to go but once we get rid of it, if we can change it, then i think there is the real prospect of making progress very rapidly indeed. >> however, french president emanuel macron played down the chance of renegotiating the brexit deal. he said the terms being offered by the u.k. are not, quote, workable he warned a no deal brexit would

be britain's fault and a trade deficit would not offset the cost of that scenario. >> and osram cleared the way for a takeover bid from ams. osram waves an agreement that kept them from making an offer to challenge a bid germany's financial regulator has ten days to review the proposal before ams can launch it officially. the company expects it to be done before the offer expires on september 5th in which case, the proposition will be extended for both to be considered at the same time the company was on track to meet it's full year profit and it is

on track to decline in 2020 on global trade concerns and market sentiment. >> china will publish a list of unreliable entities soon as the trade war with the u.s. keeps up more on that after the break

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good morning and welcome to street signs these are your headlines italian assets get a boost amid indications that a new coalition government could be formed quite soon as they push parties to make a deal quickly. european stocks remain subdued as china ups the ante in the trade war saying it's getting ready to publish a list of unreliable entities. beijing's answer to the u.s. blacklist. key early readings came in stronger than expected and still contract amid a wider slow down in the euro zone's largest economy and shares chip away as the chilean miner warns

declining copper prices have hit it's production outlook. right, let's talk action in european markets the only index trading in the green today is the italian index. the ftse mib is up .3% on anticipation that we may see a deal formed between the party and the five-star party to take over a position in government. so all eyes on those discussions and we should be getting some light hopefully in the next week or so. something certainly investors are eyeing in the ftse 100, the relative underperformer down 5%. big day for brexit discussions the prime minister will be meeting with emanuel macron ahead of another crucial weekend of discussions this weekend. so keep an eye on the political developments there also trading in the red despite

the better pmi numbers that came out this morning switching to foreign exchange, let's take a look at the currency the dollar is trading weaker today. about a tenth of a percentage point softer so that's manifesting itself versus the euro and pound sterling pound sterling at 120 or 150 also weakness there weaker against the u.s. dollar and we arenow at another 11 year low. the weakest since march 2008 so keep an eye on that currency pair we were talking about it a lot the last couple of weeks so keep an eye on where the chinese currencies heads and u.s. futures, quick look at the move there, the three indices are slightly in the red. we have the fomc minutes yesterday signaling that the fed back then when they cut rates in july were still fixated on this concept of the mid cycle adjustment and cameas a hawkis

surprise to the market but all eyes will be on jackson hole and developments there the next couple of days we also get pmi numbers and watch out for manufacturing numbers in the u.s. later this afternoon. now china says it will soon publish a list of unreliable entity which is is beijing's answer to the u.s. blacklist a spokesperson said if the united states rides roughshod over china's opposition and impose any new tariffs china will be forced to adopt retaliatory actions. president trump has begin defended his use of tariffs against china and described the trade conflict as a long time coming the u.s. leader says he was uniquely qualified for the task of taking on beijing. >> somebody said it's trump's trade war. this isn't my trade war. this is a trade war that should have taken place a long time ago by a lot of other presidents somebody had to do it.

i am the chosen one. somebody had to do it. so i'm taking on china i'm taking on china on trade and for more on the trade tensions, find out why a trade war with europe could be larger and more damaging than washington's spat with china that's on cnbc.com and i also tweeted it a short while ago now bank of america ceo played down fears over potential u.s. recession. he says strong consumer spending will help bolster economic growth. >> the underlying consumer is doing well and making more money. and more importantly they're spending more money. so in our customer base this time, you know, it's up from last year through the same period of time so 8.5%, 18 to 19 you're up

8.9% it means a u.s. consumer continues to spend. >> a bit of a positive note there. it's great to have you with us on the show. let's talk about the market price action here. and yet you have bond yields approaching levels we haven't had in years what do you make of it >> it's a great message and the what we see is continued easing from the federal reserve and other central banks and that's impacting the bond market and what the stock market is saying

is that would be a mid cycle correction and not a recession. >> and just again, taking it back to markets, we just heard from the ceo of bank of america pointing to the strength of the u.s. consumer so a lot of the domestic focus economies and companies continue to do well and yet if you look at say the russell index which is a measure of small cap stocks in the u.s., that index is notably underperforming. still about 13, 14% from the all time highs there what do you point that down to >> some of that is sector mix and you have to focus on the u.s. consumer and whether the

consumer if the u.s. consumer was an economy it's the size of china and germany put together and that power is certainly likely to keep the world out of recession here and keep in mind that things like the lower rates from the federal reserve are spurring mortgage refinancing and put more money into the american consumers pocket. that's something that we're watching very closely as some of the other data around say manufacturing which is a smaller part of the economy. as that data starts to deteriorate a bit, all eyes remain on the u.s. consumer. >> how has the on going narrative between the u.s. and china effected where you're advising clients to put money. there's been equity outflows away from china. so where do you put that money do you still want to have exposure to emerging markets

do you still want to invest in the u.s. given the uncertainty that lies ahead? >> well, i think that if you take the trade conflict in the conte context, it comes back to a few core messages. one is certainly to diversify out of any one political economic regime the second is we don't always see clienlts doing that we see clients too much with a home bias and very high levels of cash perhaps understandable given the uncertainty but as we know, central bank policies, negative interest rates are things that mean that too much cash will create uncertainty which is a certain loss of capitol going forward and that's

why this is a time when given the central bankaction to perhaps take on more risk and what we like are positions globally diversified because we do think that pressing yields further will allow some of the positions that have yield to d well as more and more investors are forced to look for something that has a positive yield. shares there are up 2.5% after kkr and part of the eqt are among interested parties for the elevators division the stock is up be.5% now. there will be lots of talks and

they have been spending it off and it appears now that a group of private equity firms have gotten together to buy that particular movement. that's one reason they're shooting up on the news. we'll keep you posted on that story. now the g-7 will not and the french president decided to abandon the statement following deep divisions in 2018 last year's joint communique was thrown into chaos after president trump attacked canada. he said the world is living in a very deep crisis of democracy and described the statement as pointless. meanwhile, president trump says russia should be allowed back into the g-7 he said it would be easier to conduct international affairs with moscow at the table

>> he totally outsmarted president obama on crimea and other things including the red line in the sand he outsmarted -- he made a living on outsmarting president obama and because of it, obama was upset. i think it would be a good thing if russia were there so we can speak directly and not have to speak by telephone and other things so here's the thing it's a vote of what's now the g-7. >> and the imf board recommended removing an age limit for the managing position. it raises the prospect of the world bank ceo taking on the job. she is the european unions pick for the role previously candidates for the position could not be over 65 and couldn't stay in the role

beyond the age of 70 i want to take live pictures of demonstrations in hong kong and this is a student rally being held these are students getting together and you can see them huddling around. this is after clashes between police and protestors overnight which marked the end of a relatively peaceful period of anti-government demonstrations it came after crowds gathered to mark one month since a gang of white shirted men attacked protestors the crowds sprayed fire extinguishers but police did not use tear gas also coming up in the show, we'll round up the latest earnings and some of the biggest are he ta retailers in the u.s., details are coming up next do you have concerns about mild memory loss related to aging?

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welcome back to the show u.s. retailers provided strong

tail winds to the markets thanks to positive earnings they all beat quarterly profit estimates sending shares higher. a number of reporting results, after the bell not as strong as what we heard in the morning let's start with nordstrom beaten nicely on earnings but missing revenue expectations and lowering guidance for sales and earnings it's evaluating the new risk on tariffs of goods from china, expecting it would be immaterial for the year though it hasn't yet accounted for it in it's updated forecast the department store says the quarter got off to a slower start after a disappointing first quarter, nordstrom rack

division falling l. brands reporting stronger earnings but weaker than expected revenues. they did reiterate full year earnings guidance. comparable sales fell 1% total victoria secret, those comp sales down 6%. bath and body works up 8%. no details were given until the conference call thursday morning here in the u.s. we'll hear more about the quarter then target shares gain 20% logging the best day ever after beating analyst expectations across the board and increasing it's annual guidance range despite upcoming head winds comparable sales grew more than expected with contribution for both strong store traffic and website sales. the retailers three same day online order more than doubled their sales in just a year's time proof that shoppers are increasingly using both targets website and stores together. and lowe's beating profit expectations too, posting stronger revenue than estimated. comparable sales gaining more than anticipated at the home

improvement retailer and u.s. comp sales slightly outpacing home depot in the quarter. this for only the third quarter in five years. lowe's reaffirming it's full year forecast. shares gaining 10% marking the best day in about 11 years courtney reagan, cnbc business news well, this week we have been looking at the future of education. so far we have assessed the role technology can play in our learning experience and how we can upscale young people so they can perform the jobs of the future today we will discuss what the job market looks like today. china looks to transform it's work force for the jobs of the future eunice filed this report. >> china is famous for its vast work force and it wants to be known for its automated labor too. the country has the largest market for robots and hopes to use that to produce advanced

robots for the world. >> human labor will be replaced by machines in the long run like in the cartoons and comic books we have watched and read from childhood, however that will be a very long process. >> chinese businesses see the potential for robotics technology cheeta has the robot meant to replace an office receptionist and an automated arm engineers foresee serving customers at coffee shops here. beijing is pushing home grown robotics as part of the strategy to become a global tech leader by 2025. >> it's very easy to receive support from the government if you work in a.i. all the government funds and industrial policies have been supportive local governments will even

invest in you directly china still lags behind other companies. most companies importing automation gear from sweden, germany and japan. beijing also lacks a robust social security net and training to support workers that could lose their jobs in the automation drive which could weigh the industry down. even so, that's unlikely to curtail beijing's long-term ambitions. cnbc business news, beijing. >> meanwhile, the bank ubs estimates the education services market is worth $6 trillion and is set to grow by high single digits thanks to a growing middle class and emerging markets and increased

urbanization one of the things that struck out to me is that education has been the largest spending item by china's government since 2010 who would have thought they were spending so much on education here is it fair to say the biggest opportunities in the education space are from emerging market economies particularly lead by china? >> you're definitely on to something and the long-term theme that we're looking at involves an increasing transition of workers from lower skilled jobs into higher skilled jobs which requires education. lower class individuals moving to the middle class means that a greater and greater supply of resources and funding needs to go into the area in 2009, 1.9 billion people were in the middle class and that is

supposed to go to 5 billion in 2030 and just the primary school education jump required for that middle class segment is enormous of course secondary education probably what it would take to program a robot like that, those levels are, you know, college educations, those are still very low in the developing world and as those increase that takes resources and of course the public sector, despite the spending placed on it and the emphasis placed on it by some governments, the public sector alone can't fill that gap and that creates enormous investment opportunity. >> i was going to ask you on that point, is that a reflection of just government budgets being constrained and given the growing demand that's out there and that in itself creates the opportunity for the private side to get involved? >> well, certainly you could

have a situation where governments prioritize education in a way they never have before and yet the enormous rise of the middle class just creates almost exponential demands on the need for education services so i think it's both factors, actually. >> now at the beginning of this, you said that the global market for education is about $6 trillion that's a huge number and you see it growing in single digits over the coming years how does an investor get exposure to that >> well, i think we would recommend a broad basket of exposure diversify through a series of different ways but one of the key focuses that we have is on the education technology to serve more people with higher quality education through new technologies. >> what would you think is the big establish risk for people to

invest in tech going forward is it exposure to emerging markets or other risks that one needs to think about as well >> the biggest risk to investing in education is investor education. realizing that this is a long-term theme. one of the things investors will make a bet on are demographic trends that we see playing out in the education space because they're unlikely to change so sticking with the course is probably the biggest concern while this is enabling more and better education through investment is important, but as a former teacher i'd also say that individuals matter and for us we're proud to partner around

the global teachers prize both with it's founder and it's sponsor. >> excellent that's the cio of ubs global health managements the only index in the green today is the italian index up .4% optimism that we may see a deal inked in the coming weeks. that's a positive sign for investors. other indices are trading in the red. a quick look at u.s. futures as well jackson hole coming up the next couple of days as well as the pmi manufacturing numbers to look out for all of them were seen slightly in the red that is it for the show today. worldwide exchange is coming up ne xt

it is 5:00 a.m. at cnbc global headquaters and here is your 5 at 5:00 rally ahead, u.s. futures searching for some direction as the dow and the s&p 500 look to break three week losing streaks. a retail rebound the consumer sector coming off it's best day in nearly two weeks. but it's not all sunshine and lollipops. the bond markets once again flashing that ominous recession warning signal could the fed have done too little too late to