proposed and a surprise appearance by iran it's monday, august 26th, 2019 "squawk box" begins right now. >> announcer: live from new york where business never sleeps this is "squawk box." good morning, everybody, welcome to "squawk box." we're live from market square. joe mentioned, we have been watching the u.s. equity futures very closely they started off overnight negative, down by over 100 points, but then as the president made comments, president trump said china called and is ready to come back to the negotiating table, we saw the futures take off in fact, right now the dow futures are indicated up by 187 points when he was speaking just moments ago with angela merkel said looked like a deal was closer than it had ever been at any point and we saw the futures

swing up to 50 points. this is going to be a bit of a wild roller coaster this morning. we are anticipating more comments coming from the president as he continues to have these meetings at the g7. this can be very far, wide ranging and a lot of things can get comment on you'll see the futures potentially move around on all of this. the nasdaq is up by 82 points. s&p up by 20 coming after a big down day on the markets on friday when the dow was down by 623 points that pushed the major average down for four weeks in a row and you are looking at august being a month where we'll see declines very likely. the only other month we have seen declines is the month of may. ten year looks like 1.49%. the two year 1.45% obviously these markets keying off everything that's happening

out of the g7, too let's get right to aimen javers in france at what has been a wild and memorable meeting aimen, good luck wrapping this all up for us. >> reporter: yeah, absolutely, becky. let me start with the comments the president made about france talking about china making optimistic comments about the state of negotiations. here is what the president had to say >> china called last night, our top trade people, and said let's get back to the table. so we'll be getting back to the table. i think they want to do something. they have been hurt very badly they understand this is the right thing to do. i have great respect for it. i have great respect for it. this is a very positive development for the world. >> reporter: so the president saying it's a very positive development for the world and the chinese side called the u.s. side to go back to the table last night we have been pushing u.s. officials traveling with the president in france for more

detail on what exactly transpired last night. stephanie grisham emailed me saying she has nothing further to add other than what the president said so that's what we got on that for now and it comes after a weekend in which the president sparked a little bit of confusion when he was asked if he had any second thoughts about the china trade war. the president appeared to respond in the affirmative to that over the course of the weekend saying i have second thoughts about everything. of course i do but then almost immediately after that white house aides went out to spin those comments and said, no, no, no the president is not saying he has second thoughts about the china trade war. the president is not weakening he regrets he wasn't even tougher. other officials including larry kudlow suggesting the president misheard that question they spent a good 12 hours or so

over the weekend trying to sort of get their arms around that situation. finally where the white house landed is that the president is not backing down on the trade war with china he regrets not having raised the tariffs higher we'll see the president a few more times here through the course of the day. so be nimble because we will see a few more of those. some has been very spontaneous during the course of this g7 we don't know exactly when we'll see the president throughout the course of the day, guys. >> all right thank you. were you over there for your weekend, right >> you bet >> reporter: yeah, that's right. >> wasn't really a weekend for you, was it? >> reporter: it was a working weekend, but we're here at the beach. it's lovely. can't complain. >> life's a beach. asian markets tumbled overnight closing sharply lower before trump's comments we saw big drop in china us yuan

overnight falling to its weakest level since february of 2008 and that got scary on friday because it looked like totally this was going to be the answer tit for tat that we have going back late yesterday last night i was looking at the futures down over 300 >> yeah. >> then they paired that to 100 this morning next thing you know -- >> i don't know that we have any answers out of any of this this will be more of the same for a while. >> and it's -- we're all -- what are we off the highs, santoli, 3 to 4%? the point moves are big. got a lot of press and everything else. 145 on the ten-year. >> the bond market didn't really respond too much the way the equity futures did the way to read it to me the market was down over 2% on friday because of the signals out of the president, okay, we'll have an open ended escalation here perhaps and we're not really looking for the opportunity. i don't think the good news is there's no deal priced

it's not as if we have to unwind sentiment was already negative people are positioned cautiously i don't think you necessarily have to bleed the market that much in order to account for where we are right now, but it's very telling the way the market responded this morning because the signal from the president is just like, let's just put a brake on this idea that i just want to push, push, push >> if we really took a step back, wouldn't we have said i'll bet we never get to -- i'm going to 40% on everything >> right. >> i'm pulling all the u.s. companies out of china that probably was never going to happen >> well, maybe not just to say it publicly -- >> it's a negotiating style. wouldn't you think that that gets walked back >> businesses were looking how to get out of china from the very get-go as soon as you knew this potential was coming.

they've been looking for ways to get out. >> saying we're going to unwind 30 years of integration with china in attempts to do business there is not necessarily something that takes it off the market's plate. >> or finally you know, start to balance out some of the inequities of the past 30 years that we've just been sort of taking. >> sure. >> just because of -- it was an important relationship the yield curve if we don't care anymore. what's a couple bases points is the latest. >> do we not care or is it just simmering there. we don't know. you know what's funny -- >> it's inverted again. >> remember every tick of the chinese currency above 7 was considered to be crucial and then the market kind of -- fine, this is where we are we can reset for this level as long as it doesn't reset it's similar with the yield curve. >> we'll talk european markets have been trading lower, but

even there pushed higher after president trump said that china wants to get back to the negotiating table. we might be closer than we ever were paul, i think just looking at some of your comments, there's a lot of noise, but you feel like if an investor made some decisions recently about long-term long-term plans and fundamentals you should stick with these >> absolutely. nobody made any money on the tweets it's too hard to do. fundamentals are good. earnings are going to grow consumer is in good shape. stick with your financial plan and don't try to trade on day to day tweets you'll get chopped up. >> that sounds like it came very naturally for you to say that, but with the yield curve and

with so much that something is slowing here we're staring at a real slow down i just read that again how investors should prepare how these financial whatever they are services they got to churn out this content everyday and it drives me nuts because they hang it on nothing half the time but are corporations now looking at how to react to a huge slow down globally? >> i don't think so. we have slowed so the u.s. particularly the biggest economy in the world, we're not really slowing anymore. last year 3% youth we're at 2 we have slowed corporations are responding. big thing is uncertainty they're responding to the uncertainty of the tariff blizzard of tweets, but the reality is as long as consumption holds up, companies have to make things. we're seeing a big gap between consumption and production right now. that gap if it holds up and

consumer holds up, companies have to start producing again and see industrial production rise again and things will be okay. >> we certainly didn't see it in walmart or target results. ryan, what are your viewing? >> joe, very similar let's get some good news here. s&p is down four weeks in a row. that's the bad news. good news, ten years since the bull market started s&p has been down five weeks only once in 2011 future returns after down four weeks in a row not surprisingly really strong one month to three months out but you know, i want to tell you something, 15 years ago today was my first date with my wife anyone been in a 15-year relationship will tell you there's ups and downs. let's look at this bull market up 30% almost from the december 24th lows, up 20% for the year, best start since '97 here comes august. here comes september troublesome months the most s&p has pulled back is 7%

the average year pull backs back 10%. we had two separate 5% corrections. yes these scary headlines and 3% drops on one tweet aggravate everyone, but the bigger perspective of things, things are positive leading economic indicators are strong the consumer is still strong housing stocks 52 week highs you don't see that ahead of a recession. we can have a slow down and volatility this upward trend is still good in your opinion. >> it's not just the tweets. it's the ten year. can you explain that 145 op the ten year. >> truly fascinating everyone expected a higher ten year and everyone has been wrong. the short end has been inverted the belly of the curve is flirting with inversion. the long end it's not broke the recent lows it had this summer nowhere near inversion you need that long end to also invert

yes, the yield curve is concern. our opinion is the market saying hey here comes rate cuts we think that's the case. >> that's getting pretty volatile there, too. >> there's other stuff out there the editor of the global times in china, the editor in chief is saying based on what i know chinese and u.s. top negotiators didn't hold phone talks in recent days. two sides have been keeping contact at a technical level it doesn't have the significance that president trump suggested china won't cave to u.s. pressure that may explain some of the pullback we've seen in the futures since then, too. >> we're still up 250. >> we were up 350 plus. >> it doesn't matter crucially if there was a phone call or high level phone call. it's the messaging that, okay, we're looking to continue this process. >> right >> they were talks scheduled for next month any way it's also hard to see how things have gotten that much easier

how there's a deal that's going to be at hand. >> without a doubt keep in mind the bounce in the futures gets us back to noon friday because 600 points on the dow higher at 10:30 a.m. when all this got going. >> right >> between now and november 20th of next year i'm certain there will be some type of this is the greatest deal we've ever gotten whether it's codified into china law or whatever. china at this point might be -- when you hear, already, better off without china? they would not be better off with the united states. >> no. >> it would be more painful for them you think we get a deal between now and then because president trump won't be able to have some sort of victory? >> both sides. >> they have hong kong. >> at this point they have both been willing to cut off their nose despite their face. >> i'm not saying it's an effort shattering deal. >> tensions ratcheted down.

>> you don't think so, san tolly? >> i just think that every time we had one of those cases made, i think the mistake that wall street professionals have made is assuming that rational outcome for both sides is to come together. and that's been proven wrong successively pretty much every round of this. yes, it's very logical to say that why wouldn't you want to have some kind of progress to show and just sort of break this cycle of mutual pain i don't know how to handicap this. >> stay the course you figure something will get done, don't you? >> stuff will get done it's maybe rational to play this game right now but also rational to not let it get too far out of hand this is posturing. this is position. >> it's reigning in some of the rhetoric we heard last week. >> exactly the fact whether there was a phone call or not, that doesn't agree. he positioned positively

it wasn't like they called me and i hung up. it was they called me and i wanted to talk to them i think that matters and there's no -- it's a no win to let this explode but it's a win to posture and try to get the upper hand. >> do you think it was a coincidence that the president ratcheted down some of the talk. >> he saying nice things about president xi after insulting xi more than he ever could by saying he was like jay powell. that's throwing some shade, saying i'm as mad as you -- >> i forgot about that. >> i'm as mad as you -- >> as much an enemy perhaps. >> thank you, paul thank you, ryan. we'll see you around thanks. when we come back, another big story that's rattled the markets. tension rising in hong kong as demonstrations turned violent and police responded with water cannons. they aimed the weapons at the protesters

we're going to take you there live. right now as we head to a break, let's take a look at the biggest premarket winners and losers with the dow. apple was the big loser because of concerns of the trade talks is now the biggest winner up by about 1.8% ♪ you should be mad they gave this guy a promotion. you should be mad at forced camaraderie. and you should be mad at tech that makes things worse. but you're not mad, because you have e*trade, who's tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. don't get mad. get e*trade's simplified technical analysis.

welcome back, everybody. tensions rising in hong kong demonstrations turned violent over the weekend as police used live ammunition and water cannons. nbc's janis mackey frayer joins us right now with more on this front. what can you tell us >> reporter: it was a serious escalation over a weekend that started with a miles long human chain and then ended with molotov cocktails and gunfire. today police were defending the six officers who drew their pistols. this seems to be the new routine now. it seems like the protests no matter how peacefully or quietly it starts or unfolds ends like this in these clashes between protesters and police. we're in a situation now where each side is obviously testing

the other to see how far they're willing to go. it presents a dilemma. the other question is at what point does china intervene chinese state media today is using its heaviest language yet in talking about these protests in saying that it's now hong kong's government responsibility to stop, quote, rioters and that this is now in the eyes of china a color revolution before they were saying that it only had characteristics of a revolution now they are declaring it to be one. remember, in china's eyes, it's the u.s., uk and oir foreign governments that are behind this accusing them of meddling. so there are a lot of ways that china can exert its force here beyond the para military forces they know are staged about 17 miles down the road from here. there will be more arrests there were dozens over the course of the weekend. the youngest last week was 12. of course we'll see more

pressure on multinational corporations and businesses who are dependent on the mainland to make sure they're towing the party line >> janice, thank you very much janis mackey frayer of nbc. coming up, we'll get back to our big story president trump saying china is ready to get back to the negotiating table. dow up higher after his comments reaction from the ceo of boston consulting group is next who's dog is this? it's my special friend, antonio.

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our top story, president trump says china called and is ready to come back to the negotiating table. president trump's message to american companies to start looking for alternatives to china. joining us with more on this is rich lesser the ceo of the boston consulting group and member of the business round table or the brt you guys don't have delusions

like you're in camelot or something, right >> no. we sit in a room -- >> there's no king really? >> there's for sure no king. >> you show everybody is equal >> it is possible for the president to declare some type of emergency and say get the hell out of china, right >> i don't know. i think that's what the lawyers and the politicians will have to sort through, but it certainly raises great concerns. there's no question when he says that it causes a reaction on friday. >> do you think it's a negotiating ploy was it said for china's benefit? >> we'll see when it first started a year ago or when ever people assumed this was all about negotiations, it's gone on quite a long time. you see the uncertainty playing through and plays through how business leaders view it and how they think about investment. >> what impact is it having to this point >> i think we have to separate short-term and long-term short-term we have two concerns. one is if the tariffs really play through, then we really are talking something ekwif tent to

a tax effect consumer behavior which has been the strength propelling the economy is a factor we see investment already not at the level we like it to be and the longer this uncertainty plays through the more we're seeing for most companies. you can bet if there's a huge amount of uncertainty for something as big as the relationship with china, that will play through. that's the short-term. then you have two longer term effects. one is really the comments strongly made on friday encouraging decoupling of the global economy china is the second biggest economy of the world, growing fast decoupling cannot serve either the global or the u.s. in the long-term. second the implications of how china views this in the long-term. if you don't know where the u.s. is coming from or trustworthy partner, it encourages you the invest faster that the u.s. has been so focussed on negotiating

on >> clients of boston consulting at this point elevated this to a level where you're work for them is really focussed on this or is it a background issue? >> i think for most companies up until now this is not a background issue it's a front and center issue but it's one of many at the point when it looks like major tariffs are actually in place where things have completely broken down, then it really becomes one of the top issues for so many companies where china, second biggest economy in the world for many companies this is integral to their business then it's a bigger issue. >> have you consulting on companies how to change their supply chain >> yes companies are looking at what to do. >> they're trying to do this. >> actually they're hoping this gets resolved so they don't have to do this but the longer the conversation -- >> difficult. >> in some industries these supply chains have been built over decades china's built remarkably effected integrated structures to produce quality and low cost. this is not easy to do but the longer this goes on, of

course we have been arguing for over a year you have to build contingencies. the longer it goes on, the more the probability goes up it could really happen. >> people understand that china doesn't play fair, right your companies, or do they have problem with intellectual property, not being able to operate on a fair playing field on china they want to go back to status quo? >> i think there was an understanding on both sides on the u.s. side and on the china side that the relationship, which was formed by wto rules 20 years ago was a very different time had to be reset i think that going into the negotiation you saw the brt statement early on was we need a reset in the relationship and i think china entered believing that it's proven harder and more volatile with much more uncertainty to get to a good

answer. >> we also want to talk about the role of corporations after the business round table's change in language that said the purpose of a company is about more than maximizing shareholder value. here is brt ceo cbs's "fact the nation" yesterday. >> the purpose of a corporation is to serve all of its stake holders, its customers, its employees, its communities and its shareholders but it means taking care of all of your stake holders because in the very long run you can't take care of your shareholders unless you've taken care of your customers, employees and communities as well. these -- i don't know. is this new? that's a new concept that ceos should think about customers, should think about communities what have they been doing all along? greedy profit mongers? >> i don't think it's a new

concept but articulating from the brt when the statement was so sharply focussed just on shareholders before was a big change and important to what you just said go back to someone like andrew sets performance with purpose is the underlying direction for pepsico, delivers excellent performance over more than a decade but does it in a fundamental way that connects to other stake holders. i think we have seen ceo after ceo over many years and particularly in recent years recognize that articulating purpose clearly, framing it against a multistake holder creates more shareholder value in the long-term. >> what if xi not had good shareholder performance and it had lagged, how would pepsi be positioned to fulfill its social responsibilities if it wasn't as profitable >> i think this discussion this wasn't an or statement you can either do this or. it's an and statement. if i said to you should you have profits or growth, to any ceo,

they would say that's a false statement. you need profits and you need growth my job as ceo is to lead my o to deliver both this is an acknowledgment not about do you get to focus on shareholders or on other stake holders, you need to focus on -- >> it doesn't apply there's a problem with just purely profit incentives and shareholder value? let me ask you, do you think the profit incentive runs counter to communities and counterto employees and counter to these other parties you're talking about? do you think the profit incentive is actually a negative for them >> i think that the profit incentive was single-minded focus and not recognizing the interest of other stake holders can run counter, and i think it can lead to very much a short-term attitude? >> it was hard for milton freeman to convince people how

important it was and you've got an entire party in far left pointing fingers at these greedy ceos. this just -- you're almost saying you're right. we have been single mindedly seeking profits. that's wrong let's say that you have a company that has a bloated structure, too many employees, right? and then there's a business turn down a slow down in the economy. they need rationalize some of their operations, i need to shrink their work force, become more competitive globally, do they now have to think about layoffs and how it affects the community so they can compete globally, they need to keep their workers. they need to make less profits and then they need to close down certain plants and 100% of the employees lose there >> so, joe, i would start by saying the first line or the first paragraph of the statement

from the brt re-enforced the importance of free markets as the best way to create value for society in the long term you have a group of 180 ceos around the table i think we deep pli believe that but there is a recognition that the best way to do that in the long-term is to recognize that we serve multiple stake holders. we get freedom to operate from society and that the best way to build value in the long-term is to understand and focus on the needs of other shareholders. we have seen it that companies that perform well on measures around esg actually outperform in the market for the long-term. it gets always framed as a tradeoff do you do a or b it's not just an and it's re-enforcing. companies that do good strategy around esg and other things and has a purpose that goes beyond just energize their employees, goes beyond profit, deliver more value in the long-term and of course in difficult times companies need to recognize they're going to have to change operations. >> if the company has a ceo who

is unethical or if they're big polluters or if they do all these egregious things, the stock goes down. you don't have the long-term performers it sort of takes care of itself. and if you hire a decent person as a ceo, you're not hiring martin shkreli >> do you have to buy some cover from the attacks from the left >> that's the thing. if you're afraid of the barbarians at the gate and figure this is a way of getting out in front of it, you can view it more cynically. we learned our lesson. we were pretty bad before. now we learned our lesson. >> i don't think this is being done out of fear most ceos, 180 ceos to sign this is because the vast majority of ceos recognize the purpose is more than just shareholders, this multistake holder mindset and but the brt statement which was representing misrepresenting. >> can we get it down to instead

of 100 times the lowest employee, five times do you think the ceos would sign on for that, rich? >> i don't think that's the intent of the statement. that question is to -- this is about serving multiple stake holders as a re-enforcement to creating value and as a clear understanding of the role the business expects to play and the leadership that we want to show in society can build the economy and build opportunity. >> we don't -- i don't go into it thinking corporation. >> i believe you see it that way. but many peoplrehee ad t brt statement before these people only think about making money through the at&t network, edge-to-edge intelligence gives you the power to see every corner of your growing business. from managing inventory... to detecting and preventing threats... to scaling up your production.

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♪ good morning, everybody. u.s. equity futures at this hour are inindicated sharply higher dow futures up by 210 points but we have been all over the map this morning already we had seen that the futures were down pretty sharply originally when they opened up they were down by over 100 points when president trump first spoke at that point when he talked about receiving a phone call from the chinese and saying that we look like we're in a better position for a deal than we have

been to this point, you saw the futures up by as much as 350 points those gains have tempered a little bit, but you're still looking at the dow up by more than 200 points. we're continuing to monitor coverage of the g7 meeting president trump is now speaking with india's prime minister and let's listen in. >> we have the elections recently where 700 those their government and president trump had telephoned me to congratulate me. again, today he has conveyed his congratulations. i would like to thank him for that india and the united states are countries who have -- which have shared democratic values, and we work for the benefit of the world and whatever contribution we can make in which ever way we

have these common values and we work toward the progress of humanity for the continuous progress we have continuous discussions on these issues. india and the united states, we have been discussing on a continuous basis trade issues and on many of these issues we have -- together we're working in the area of trade we're making efforts to take this forward the indian community in the united states has made substantial investments over the years. they have taken apart very actively in the development path of the united states and the united states has showered love and has embraced them as their own. for that i would like to thank president trump whose administration and the people of the united states.

>> mr. president, can you clarify your position on whether you will be -- >> well, we spoke last night and the prime minister really feels he has it under control. they speak with pakistan i'm sure they will be able to do something that will be very good we spoke about it last night at great length. >> more you want to add? [ speaking in foreign language ]

[ speaking in foreign language ] >> translator: between india and pakistan, there are many bilateral issues and after he became the prime minister of pakistan, i called him up to congratulate him and i told him that pakistan needs to fight -- >> again, that's president trump and the prime minister of india who are sitting down right now taking some questions. we're going to continue to monitor this and we will bring you updates if they mention anything that may impact the markets as well. in the meantime, let's get

to eunice yoon and has reaction to president trump's comments that moved the market. when president trump spoke he said he had gotten a call from the chinese top negotiators or they reached out to his top negotiators and that they were willing to do a deal we did see futures pick up sharply. >> that's not exactly what the chinese have been saying the chinese foreign ministry said they are not aware of any weekend phone calls between the trade negotiators and the spokesperson added he had not heard of a call by china to restart the talks. so, that said, china's chief negotiator, the vice premier had earlier in the day indicated that china was willing to resolve the trade dispute with what he had described as calm negotiations whether or not if there's a phone call or not a phone call, there's probably reason not to get overly excited because for one thing, the discussions on

trade talks were expected in september. china has not formally pulled out of those discussions and then on top of that, there's been a feeling here that the chinese are becoming much more hard line in their approach. the way it was explained to me that chinese officials are worried about the economic impact of a trade war but they're even more concerned about the idea of pushing through economic reforms that the u.s. wants the way that the trump administration wants and being zsupervised by the u.s. because of the economic fallout that could have for them potentially politically but also because of the political damage it could cause if it were to be seen that china was being pushed or forced into something by an outside power. so that's seen as intolerable. another point that i'm hearing a lot is that the chinese officials are fed up with dealing with the trumped a min igs stra from their perspective

the situation and relationship is worse after the crackdown of tiananmen square in 1989 because at that time the u.s. was discussing whether or not they were going to take away china's most favored nation status and because of the escalation of tariffs the way it was explained to me is that that escalation where now the u.s. would be taxing pretty much everything that is coming out of china effectively cancels china's most favored nation status. so there's been a lot of frustration on the part of the chinese and so what i'm told is that the tactic would be to not openly confront the trump administration, not provoke president trump but at the same time wait for a better moment when china would have beater opportunity to get the best outcome for the chinese. guys >> eunice, thank you very much obviously a lot that's going into this trying to figure out where we stand on these negotiations right now for more on the u.s./china trade

turmoil, let's welcome former assistant secretary of commerce in the obama administration. she's now a duff and phelps institute fellow and dean pinkert. he is now a partner this hughes hub bard international trade practice nicole and dean, welcome it's good to see both of you. >> good to see you. >> good to see you. >> nicole what do you think after all the back and forth we have heard this weekend? >> well, it creates uncertainty. market uncertainty according to our clients is worse than the tariffs themselves i think that this is a situation where the folly of going alone, the u.s. going alone and not being part of tpp or working with our g7 allies to isolate china on issues that quite frankly are entrenched and deep. like ip protection and access to the market that are often intractable and effect both the

provin shall states as well as the national government of china, so it's really tough. the uncertainty is tough and we really need to come to a point where we can pressure china into abiding by global trading status or trading standards as opposed to going it alone. >> dean, that's been the big issue trying to get china to conform, to come in and deal with things on an equal playing field. we haven't made much progress in a lot of decades president trump has been trying to change some of that, but do you think you would be willing to follow through with the pain that that could lead to? >> well, as riveting as the day to day gyrations have been, i think it's worthwhile for all of us to take the long view on what's happening with china. and i do believe that there's a win/win deal to be had with china if not today or tomorrow certainly in the foreseeable future and when i say that i mean that

intellectual property protection is in china's interest, not just in the u.s. interest the technology transfer issue and reform of that is in china's interest, not just the u.s. interest the same goes for empowering the chinese consumer so i think that we can take the long view and see that eventually there's a deal to be had here. >> nicole, very quickly, do you think there is a win/win situation in this? >> i think so. the trade war hurts both countries. certainly china needs access to our lucrative market, our inputs for manufacturing largely come from china and it's really hurting manufacturing companies, the fact that we have this trade war. so i think that if we can come to a common ground and understanding of the economic harm that faces both countries maybe that will lead us to a deal the apec leaders meeting in november may be a point where the leaders can come together. president xi and president trump to try to come to a deal >> nicole and dean, i want to thank you both for your time

today. we're monitoring what's happening at the g7. folks, we will bring you up to speed on that as well. coming up, boeing's stealth rally the plane maker was one bright spot in a rough week, pushing higher as most other dow stocks sank. we'll talk about what's driving those gains next as we head to break, there's a quick check on what's happening in european markets right now. mostly green coming right back. - in the last year, there were three victims of cybercrime every second. when a criminal has your personal information, they can do all sorts of things in your name. criminals can use ransomware, spyware, or malware to gain access to information like your name, your birthday, and even your social security number. - [announcer] that's why norton and lifelock are now part of one company, providing an all in one membership for your cyber safety that gives you identify theft protection, device security, a vpn for online privacy, and more. and if you have an identity theft problem, we'll work to fix it with our million dollar protection package.

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♪ president trump is speaking now at the g7 summit in france let's listen in. >> just so we get our reporting right, when you were referring earlier to the statement which we all saw, did you mean to say there was a call last night or was there a call last night. >> there were discussions that went back and forth. let's leave it at that. >> last night and before last night. and before last night.

numerous look, they want to get something done why wouldn't they? they want to get something done. they have lost millions of jobs. their supply chains are being hurt once those supply chains go, we can develop new supply chains you can't get them back into china. so china is run by really a great leader i think this is a great leader he wants to do something we lost 3 million jobs in a short period of time a lot of companies left china and are leaving china. if we don't make a deal, i would like to see them leave china if we make a deal, i would like to see them stay there and do a great job. >> no time line. whatever it is no rush. we're there. we're really a police keeping

force than anything else frankly. and we can win that war in the very short period of time. but i'm not looking to kill 10 billion people okay and we are working along with the taliban with the government and other people, too. we'll see what happens no time line thank you very much. we're going to be doing a news conference in a little while, so if you need one -- do you need one? i don't think you need one i mean, i can't imagine any other question i just want to thank, though the prime minister this is a great leader right here a great leader with a great election result. >> thank you. >> mr. president >> all right listening to president trump clarifying some of the recent back and forth about whether there really was or wasn't a phone call from china. the chinese ministry said we

don't know of any phone call asked again specifically was there a phone call you heard sec stair mnuchin chime in and say almost speaking for the president to make it more clear that there were discussion is yesterday and discussions going on. >> clear intent to refocus on the prospect of a negotiation as opposed to the tone from friday. that's the take away from the markets. >> didn't call him chairman xi called him president xi. i watched the future s closely. >> not much. >> we should point out that overnight futures were down pretty significantly heading into this before president trump started making some of these comments. >> at this point on track to regain about a third of friday's decline. meantime, boeing one of the few bright spots in the dow during the rough week last week you have 8 1/2% in that time so what is behind the rally?

let's bring in sheila kalou and john reviv stock has been mostly in a range, sheila, although outperformed last week seems the market is reading whatever clues it can about prospects for the 737 max to get back in the air, staffing issues and things like that does the market have this right? what are your current expectations >> i honestly think there's an overfocus on the max i think the max they're working on the latest software update, black and blue testing which means they're partially done with it essentially. but i think the bigger focus is china and wide body orders. >> the focus is on that meaning that they're going to actually come through >> once the max is off the ground, the focus might shift to the wide bodies and people might be focussing on the max. >> where do you sit with regard to what the stock currently is building in with regard to all

these issues >> well, a lot of issues certainly to deal with i think what's currently sbilt into this stock is more focussed on max right now with this underlying patina of china right now there's an expectation the max will probably re-enter service around 4q. >> so if those are reasonable expectations, does that mean the stock is on a path back towards the highs or is it going to churn and this level >> no. i think with the focus on the max right now, whether you're someone who has been looking at boeing for a long time or got involved recently a max return to service is going to be a positive, something back in the 400s is probably likely, but from there i think i want to start thinking about some of the ore bigger, long-term issues assuming the max is something that does come back. >> we have to run, she larks but where are you on the stock >> we have a buy rating with 420. >> that is back to the highs. >> elon musk 420.

>> let's take another look at the futures this morning we've been watching up about 215 points right now for the dow it started seeing that upward momentum after comments from president trump saying china was ready to negotiate the comments from president trump aren't over. we're going to hear more from him late they are morning. unfortunately our guest host is hoemd el-erian we'll be right back. memory support brand. you can find it in the vitamin aisle in stores everywhere. prevagen. healthier brain. better life.

breaking news this morning, president trump says china is ready to come back to the

negotiating table. futures up sharply on his comments we'll break down with guest host mohammed el-eria next. abandon china. what ceos are saying about the president's comments on friday that sent the markets into a tail spin. and violence in hong kong erupting over the weekend. what it all means for asia's financial hub as the second hour of "squawk box" begins right now. ♪ >> announcer: live from the beating heart of business, new york this is "squawk box. good morning welcome back to "squawk box" here on cnbc i'm joe kerning along with becky quick and mike santoli. a lot of breaking news everyday it's kind of been like this, hasn't it? mostly coming from president trump. today saying that china is ready to come back to the negotiating

table. u.s. equity futures at this hour indicated up over 200 points before the comments we were down about 100. last night, getting ready for this session, we were down about 300 points so that would have been a quick 900-point loss since friday morning, but that turned around and you can see now getting back about a third of what we lost on friday but the day is young the president has more opportunities to make more comments for what he said to this point, let's get over to aimen javers in france covering the g7 meetings go ahead, take it away try to wrap this all up for us. good luck. >> sure, thanks, becky earlier this morning the president made headlines by saying that the chinese side had called the u.s. side over night in phone calls saying they wanted to restart negotiations over trade that got the financial market's attention around the world then we heard these denials, though, from the chinese government our eunice yoon in

beijing reporting that officials there suggesting to her they didn't know what the president was talking about, what calls was he referring to. just within the past 15 minutes or so, we've seen the president with mr. modi at a bilateral session. the reporters in the room pressed the president on what exactly he was talking about in terms with these calls on the chinese side, whether or not they happened and asked him about that chinese denial. here is how the president responded. >> i don't know what you mean by that, low level. the vice premier low level i don't think so i mean, in your mind the low level. what is the position of the gentleman that we quoted in the newspaper? >> he's the vice premier of china. that's not low level >> there was a statement that they weren't aware of the calls happening. >> there's been communication

going on. >> at the highest level. >> reporter: so, the president there asked about the chinese denial he said secretary mnuchin then jumps in and says there's been communication going back and forth. the president insisting it's at the highest level. reporter jeff jason, i believe it was, from reuters asking the president if there were calls. the president suggesting here he doesn't want to talk about these calls. we're not getting a lot of specifics from the u.s. side officials we have been communicating with have not offered any details of this calls. you saw the president's explanation for who it was he's suggesting he talked to overnight. so we're left with a little bit of a murky picture here in terms of what actually happened overnight. we'll wait and see if u.s. officials traveling with the president here in france can offer any specifics or details about what was said and who said it back over to you. >> all right, eamon. not sure how to read it. does an email count? is it not a call

accuse of being low level. it was the vice premier. >> which was public comments that had happened during the weekend as opposed to the call. >> right semantics. >> maybe but we had a lot of fits and starts any way look, either side can say the other side is not negotiating good faith and will be back where we started for more on this morning's market move and remark from the president, we're joined by dan clifton our guest-host mohammed el-erian mohammed, welcome. we have gone to you many times about the chance for something significant between the united states and china at first i think the outcome

that you expected most was sort of an average deal that would get ut where we wanted to go but nothing significant. a 10% chance of something really good, right? something almost reaganesque and then what was your downside? 20% or so that it would just blow up into some horrible trade war. all those numbers still consistent with your thinking? >> no. so for the last year, joe, i have been increasing the probability of escalation, escalation, escalation i was with you last time i say that i had is where we're going. the chinese made a fundamental mistake strategically at the beginning, not realizing that they should have followed the path of mexico and canada in making concessions quickly now, on both sides it's much harder to get to an agreement. so the best we can hope for is not even a truce it's a cease fire. what we saw today is somewhat of a cease fire i think there's a much deeper message if i may going on here which is not only i went to bed

last night dow was down 300, swung 600 points look what happened to the ten year, 144, now 151, even the fixed income market has become jittery to the extent that shows you that we are now lacking not just the fundamentals which we lacked for a long time, but we're lacking the anchor of central banks. people no longer have confidence in the ability of central banks. i think that is the regime shift going on we are going to become very sensitive to every single bit of signal coming out on the trade issue. >> i guess if we could get a cease fire, that would allay some fears do you think that's still likely >> i don't think it holds. fundamentally in the u.s. it's about national security not just the economy. in china, it's very hard to walk back the corner in which the

chinese put themselves in many. >> they're not going to bend. >> not that easy >> for them this is a longer term let's wait for the elections i see a series of cease fires as leaders try to deescalate the volatility in markets but it's not going to hold. >> how does the business community respond in the meantime they've been looking for a long time for ways to kind of diversify their supply chains. >> i think phase one is they responded by waiting and seeing. but like you say, they are starting to diversify their supply chains. now, it's not easy to rewire something that has taken decades to put in place. so it takes time but it will be very difficult for me not to see a cig inform kant rewiring of supply chains around the world >> dan, in terms of listening to mohammed. >> yeah. >> are you there do you differ? can you augment what he's saying >> yeah. well, i don't think i can be any clearer than he was.

i think that was a great analysis but let me just take this a little bit of a step further we saw an escalation last week that is going to be really hard to walk back the president is saying that he was willing to take a recession for the larger fight on national security you had -- mike pompeo on your show last week who also echoed those comments and so even if you get a de-escalation here, that tension is there and that tension is not going away and that raises the stakes for the central banks. each time the ten-year yield has gotten this low in this recovery, 2012, 2016, the central bank forcefully responded with qe-3 slowing down the interest rate increases in 2016 and so we're going to need to see a forceful response from the central banks and we're not there yet. i didn't think powell's comments were that bad on friday, but the trade developments are happening faster than the central banks can respond to it.

that's why you're seeing this anxiety and this kind of regime change going on. >> the concessions you wish china had offered early on, mohammed, if they were to offer the same ones now, would that do it or the bar has been set higher now? >> so i think the bar has been set higher because now it's not just about concessions it's about verification as well. so when you look at things like intellectual property theft, forced transfers of technology, subsidization, the u.s. will say i just don't -- i want more than initial move i want a process where i can verify you continue to implement. i think that is critical it's about national security as well as economics. when you break it down in game theory terms, you realize it's very hard to get to an agreement unless both sides feel -- >> at this point, what is china's main problem with agreeing to some of those things that they don't want to be bullied into it or that they don't want to change their business practices because they won't be able to succeed to the same extent that they have

>> they want their own timetable because they are in the midst of a major reform remember, the middle income transition which they're going through is one of the hardest transition developments. so you have to be very careful how quickly you do things and coordinate that's the first thing second is national pride it's very hard, okay, to walk back. >> is their conscientious bothered at all by any of the things that they do, any of the trade processes, the intellectual property theft? or are they like, yeah, well we're china. that's the way we operate. >> the view there, okay, and it's important for us to remember that is the view there is that the u.s. has dominated the system for too long. the currency the reserve currency which means that we exchange bits of paper for their goods and services the u.s. has the ability to appoint the head of the world bank unquestioned. the u.s. has de facto veto power

on every big decision. from their point of view this has been an unlevel playing field far long time. >> it's okay to steal all the technology >> they're doing what they got to do? >> cost of participating in their economy. >> yeah. they say if it's unfair system we'll play unfairly, too this is deep and it's not easy to resolve in the old days you had rules, you had respect for a rule-based system you had the notion that trade is a voluntary game now -- >> so we make a mistake by letting them into the wto to begin with >> i think the assumption at the time -- and i certainly had that assumption -- was that china was on a path and let it time -- >> it will start to behave more normally >> i think the mistake that was made was not recognizing early on that that change wasn't happening. >> mohammed, do you think the markets correct in really doubting in a serious way that central banks can have control or effectiveness at these levels we were talking about these previous episodes, 2011 and '12,

'16 the market had a similar concern i guess was disproven, at least in the short term. >> mike, i wrote a book about this in 2016 saying look at the next five years. the equation that ben bernanke set out was about benefit, cost and risks. when you play that equation over time with solery lines on central banks, the benefits come down and the cost and risks go up and at some point you get to a tipping point. is it no u i'm not sure but my gut feeling says we're very close to the tipping point. >> dan, i don't know why this has to be sort of a win/lose it just seems like it could be a symbiotic thing. china needs us we need china. is there any way we finally get to something like that or is it always going to be if we win they lose or vice versa. >> joe, i believe it's in everybody's best interests to do a deal and that's always been the case mohammed is right that as the escalation goes on it becomes harder and harder to do but the

key is the u.s. willing to accept a deal that doesn't have a full enforcement mechanism in place that would get rid of all the tariffs? i don't think the u.s. is there. and is the chinese hardliners who hijack this process in mid april, are they willing to make changes to their laws? and i don't think we're there yet. so there's got to be more pain before both sides see it in their best interests. >> dan, thank you. mohammed is sticking around. you could be at a mets game, it could be worse. >> what a painful weekend. what a painful weekend. >> i told you that. >> i told you on friday. >> friday's game devastate med 14 innings, devastated me. >> it's a crowded race. >> they're acting like they're going to get in in the wild card. >> we play the phillies, the nationals and the phillies >> we have to go. a check on other corporate headlines. later, nick pinchuk is on.

stay tuned you're watching "squawk box" on cnbc i consulted with your grandmother's doctor. we can do the screening at her house. hi. this is the man that's going to check your eyes grandma. cognizant ai solutions are helping healthcare companies advance diagnostics and prevent blindness in patients with diabetes. everything looks good. you have beautiful eyes.

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and planning to open 40 more by october of 2020. gasoline prices are falling as crude oil prices decline and supplies increase. the latest lundberg survey says the average price of gasoline has fallen 8 cents to an average of 2.66a gallon, 25 cents lower a year ago a multibillion dollar pharma industry tractinsaction is in te news this morning. bristol meyers agreed to die vest otesla. bristol meyers shares up by 2.42%. >> i think we see ads for that, don't we >> i think so, too either that or i'm thinking -- >> song. i don't know i don't know what any of them do, i want them, though. the advertisement. i don't know what -- they just make you better.

>> ask your doctor. >> yeah. >> that's what they hope you will do. >> irritating. coming up, the ceo of snap-on tools reacts to the president's calls for companies to abandon china his comments in reaction to this market moving news straight ahead. here are the futures up right about where they have been since those 218 points we're coming right back.

♪ all day cnbc will be checking on the sectors hit by the trade war with china and what companies are going to try to adjust to the challenges. cnbc phil la lebeau with a lookt the auto sector. >> the number one auto market in the world while this trade dispute only has a tangential effect in terms of vehicles built here shipped there, there aren't many that come from china to the united states the real concern for the auto makers is what's happening as this trade war drags on and the chinese economy slows down that's why general motors this stock is really under pressure when ever you see the trade tensions increase because the concern is number one market for

gm, you'll see that market slow down even more for general motors tesla, news out today that tesla on friday -- these are according to wire reports -- on friday will raise prices in china that was expected to happen in september and perhaps again in december the stock moving higher along with the rest of the market. we have not been able to get a comment from tesla confirming that is, in fact, the case look at the parts suppliers. we'll show these in succession, what you're looking at are two part suppliers that are dramatically impacted because of the potential for tariffs from sub suppliers out of china and that's why you see close to a ten-year low, ten koe is under pressure toyota and honda the reason we're showing you these, you heard the reports of u.s. and japan reaching a new trade deal and no change in terms of what's happening with auto tariffs, that doesn't mean they're covered under this new agreement, it simply means they're not part of this

agreement and there's still concern there that the trump administration at some point could say, you know what, anything coming from japan we'll slap a tariff on it. guys, back to you. >> phil, thank you for the clarification on that. been wondering about that myself great to see you this morning and we'll check in with you later today. in the meantime u.s. businesses in the crosshairs of the u.s. china trade tensions all happening as president trump said earlier today that china wants to come back to the table and negotiate a deal >> china called last night our top trade people and said let's get back to the table, so we'll be getting back to the table i think they want to do something. they have been hurt very badly but they understand this is the right thing to do. and i have great respect for it. i want great respect for it. this is a very positive development for the world. >> for reaction to president's comments, let's welcome nick pinchuk. they have two manufacturing facilities in china. thankings for being here this

morning, nick. >> sure. my pleasure. >> there was back and forth. what we can say is that tensions seem to have ratcheted down from where we were on friday at this point. maybe the two sides sit down you're in a little bit of a unique position. you have manufacturing plants in china, but a lot of this rolls off your shoulders you don't care so much about this because you're selling the stuff where you make it. >> right we don't really react to that too much when i look at this, i kind of think about it i'm not sure the president made a change over the weekend. even when he said in very strong language i order the companies to look at china since the beginning when tariffs were announced, i think most companies, most manufacturing companies have been looking at ways to mitigate them in varying ways it's not so easy but on the other hand people have been working on that and i don't know how that changes things >> i think what changed, even if you weren't looking at the i here be order you to move your

manufacturing from there, what changed was there was so much kind of pressure that was coming on this and things looked pretty bleak in terms of the two sides walking away and potentially not getting together to talk next month as had been originally planned. does it matter to you? does it matter to the global economy if the two sides aren't talking or if they are working towards some sort of a deal? >> i think it matters if they're working towards it, of course. i think people -- i lived 11 years in asia and i said on this show i don't expect any movement until after the first of october when the chinese celebrate the 70 anniversary of the founding of the people's republic the local situation -- that's what the south china morning post is saying so i think you got to get by that to have political cover in china to have meaningful negotiations as it gets closer to the election, of course, we have more motivation here i think you're going to see it as it goes in that situation i think that's a reasonable way to look at it. this idea of bringing things back to the united states is another question i mean, manufacturers would say that 500,000 jobs are still open

in the united states and we can't fill them so when you bring back jobs, you're going to have to fill them for our factories, our factories have never had more hours, as far as i know. i've been ceo for 12 years sort of pounding sfuf out, so they're moving well. >> nick. >> yeah. >> if tomorrow we get a major de-escalation of the trade tensions. >> yes. >> do you think business rethinks whether they should diversify their supply chain or is this permanent change doing business in china is riskier so regardless of what the outcome is we will see diversify indication. >> this is one thing this interrupted the upward trend of sourcing in china there's a reason why china is the primary source, they have a great supply chain also for our situation here, we have five factories and 1,500 people in china who are accessing that market. the real discussion here is around the china market. really it's not about what's coming into the united states, in my view it's the idea of intellectual property, you know, the stealing -- the transfer of

intellectual property, the forced transfer of intellectual property and the competition with state owned industries. that really is the axis of conflict here. i think the real prize is china market i think people will still keep trying to invest in the china market also, i was there during tee enman square. >> because the chinese wouldn't let them back in. >> not the chinese government, the chinese people one of the great books in the cannon of chinese literature is called the three kingdoms. starts with the empire long divided must unite so it has ever been. the idea of this kind of constant change is axiomatic every educated chinese reads this the other thing is in this book says trust in loyalty must transcend that chinese people from accountants to factory borworkers look at ts

and think, if you abandon this because of turmoil you have trouble recruiting those people in the future. for us, we managed that fairly well we're looking at mitigating tariffs but we have to think about the local market as well because it's very important to us. >> how is the local market performing in your china business >> i think the local market is -- they're pretty shocked china has been like this two years ago 27 million vehicles this year it will be down. you talk to car dealers they have never seen a down market. they don't know what to do about it there's a lot of uncertainty floating through this. for us in china it's a time of kind of uncertainty there because they don't know how to react to this thing. they have never known how to react to a down market in the u.s. our market is doing pretty well. i was just with our franchisees to talk about consumer spending. these guys are calling on almost a million technicians. in you were with them, you wouldn't think there's any recession.

>> in 2018 your two chinese manufacturing facilities had net sells $3.7 billion what are you on track to do this year if the market is slowed. >> that's our total sales. sorry. i think this is actually our china sales are up somewhat because china market is going like this actually they're up somewhat. our indians sales are up more which is a nice offset the china sales is getting tougher to make those gains and seeing the margins get pushed because you're discounting somewhat and bringing in new products and not getting quite the premium. but still it's moving upwards for us because we're in the auto repair sector which tends not to be so moving but in general, when you talk to people in china, they are more concerned than i've heard them in a long time i was there like i said 11 years i have been in china more than 100 times. >> looking at the long game, there are some people here who say china is better positioned for the long game they would be willing to tolerate more pain. do you think that's the case having lived there, having seen what's happening >> i think that's an

oversimplification of the situation. if you want to understand any diplomacy, trade or strategy, look at the local situation. i think right now the chinese are trying to manage over this celebration. they don't want to kowtow to americans. i don't think they're going to do that under any circumstances because it tends to undermine the position of the leadership there. but after that, they tend to find a solution quietly. i think that's what the president is going to do >> nick. >> yeah. >> earlier today the chinese currency was at an 11-year low. >> yes. >> em currencies in general have been hit hard. >> yes. >> how do you think about currency risk? >> well, currency risk is already upon us. in the last 18 months the pound is pound -- sorry for the pound, pound has pounded us worse than the chinese currency. >> what do you do about it >> well, we're certainly trying to price, trying to reduce our costs in that market that's what i said all along on this show and others. that tariffs is just another element of turbulence. we're going to have 50% more impact from currency unfavorable

transaction to making in the united states, selling into a place like the uk or selling to australia, it's a head wind in terms of our business. but this is usual business we have had years when we had 50 cents of currency impact >> can i -- >> per share what >> can i go back to what you were thinking about in terms of chinese wants to come to a quiet agreement. >> yes. >> maybe that's one of the biggest problems with these two sides negotiating at this point. the chinese would come to a deal they would do quietly to save face i can't think of president trump reaching any deal and keeping quiet about it. >> yeah. i suppose you can think that but you have the real experts soon jeff son feld will be on here who analyzes their proclivities. that'll sbeek more authority than i could it certainly doesn't seem to line up that way if you say you're a deal maker, if you say you're a deal maker, any ceo or any businessman will say that you know you rattle your saber and also you concede

sometimes as well. you can't say you're a deal maker and not be doing that. i'm sure president trump has done some cquiet concessions in the real estate market from time to time. i assume he's capable of doing that now i think whatever happens now, like i said, that great american philosophy aaron rodgers, people should relax because i'm not so sure that right now there's going to be any deal any way because you have to get into later part of the year, early next year to expect any reasonable progress. >> we really appreciate your per spiskt great to hear from you. still to come on "squawk box," names that are rebounding this morning after president trump's comments about china coming back to the table, negotiating table. we head to break, look at the equity futures these are some of the best levels we have seen up 265 points on the dow. nasdaq up 95 s&p 25 we're coming right back. such a.

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box" today, u.s. equity futures swinging from down about 300 points to up almost 300 points over night after the president made comments about negotiations with china and saying that it looked like a deal was more likely than it may have ever been in the past right now dow futures up by almost 300 s&p futures up by 29 we'll have more on this morning's market moves straight ahead. plus, what a trade deal means for american businesses after friday's comments by the president to abandon china a check on what executives are thinking is also coming up. hong kong protests turned violent over the weekend the late fres the financial hub of asia in just a bit. quk x"ilbeig bk."sawbo wl rhtac excuse me, where is gate 87? you should be mad at non-seasoned travelers. and they took my toothpaste away. and you should be mad at people who take unnecessary risks. how dare you, he's my emotional support snake. but you're not mad, because you have e*trade, whose tech helps you understand the risk and reward potential on an options trade it's a paste. it's not liquid or a gel.

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♪ time for a look at some morning movers for that we turn to dom chu. good morning. >> good morning. let's take a look at some of the future's actions so far you have been mentioning the dow opening up by just about 300 points if these futures gains hold opening bell for regular cash equities trading. to put it in perspective over the course of the last couple days we have seen a move lower here in the futures market at one point to the downside we saw 1.5% decline in those futures

markets between friday and then the early start of today but you can see here after those positive trade comments from president trump the futures are up pretty marketedly now, if you take a look at some of the biggest decliners in friday's trade in the dow, apple, intel, nike and caterpillar each down between 3 and 5% in trading on friday. apple market up 2% intel up 1%. nike up 1% and caterpillar up 1.5% a bit of a rebound trying to get back again, 3 to 5% declines in those stocks in the dow from trading on friday. taking a look at some of the other parts of the market we're watching with regard to whether or not the trade for low volatility has been playing out versus the s&p 500 it turns out so far this year on a year to date basis, the s&p 500 is up about 15%. meanwhile, low volatility stocks those are viewed as more perhaps safe up about 19% so we'll see if that trend plays out. one more place to watch, gold futures did at least spike on

some of the negativity going around friday. and fallen off you can see since then that gold trade coming up a bit just about flat so far, mike, on the day. back over to you. >> dom, thank you very much. let's get more perspective on the markets from our guest host, mohammed el-erian with us for the rest of the show mohammed, we have this trade standstill it's at the foreground right now in terms of the back and forth but it strikes a market that's already kind of clenching up concerned about a slow-down of some character in the globe and then just what bond yields are doing being compressed so low. is it a scare? do you think that we are on a slide toward a recession or a brush with recession in this country? or how do you think the markets have it right or wrong about all this >> so had we not heard the comments from the president, let me guess what we would be talking about. >> yeah. >> weakest german business confidence in seven years. confirming that europe's

strongest economy is slowing down significantly and going into recession secondly, china's currency decoupling from the fix. so the fix was stronger than expected, but at one point this morning the currency on an offshore market was weakening beyond what you expect after the comments have come back third, em currencies at the weakest level for 11 years we know that that tends to break something. so if you look away from the u.s., the global economy is not only weakening but becoming more fragile. i think that's a reality now, does it matter for the u.s. economy, not as much as it matters for markets. that's a distinction people have to realize which is a lot of what they see in terms of fixed income et cetera reflects what's happening in the rest of the world and we shouldn't automatically extrapolate to the u.s. economy but should worry about the markets that are more open than the economy is. >> people made the case that the

u.s. economy, at least in terms of the marginal unit of growth in the economy, is more sensitive to what markets do than it has been in previous cycles is that a fair statement >> it's most sensitive to consumer as long as the labor market stays relatively strong, then from an economic perspective you don't have to worry. there's a feedback we benefit from the wealth on the way up, we can get hurt by that yes there's a possibility that the tail finance shakes the whole body, but keep an eye on the labor. the labor market is critical and so far there hasn't been a significant weakening of the labor market. >> indicators were strong friday you see this story of decoupling, economic decoupling playing out. i guess the question is -- >> we should be focussing to the extent that we have influence on the rest of the world to get them to do more. now, there was a bit of a --

>> from fiscal perspective >> so germany from fiscal perspective. it's interesting that you got some encouraging signs and immediately the bank came out and said, hey, wait a minute we don't have a crisis let's not overworry. but also from pro-growth structural reforms. >> you can't get the central banks to do much more. >> no, they will do much more but ironically the more they do the more the markets will push them to do more. they are held hos tang by the market deep inside they know that they're not going to have an influence. chairman powell's comments on friday the most notable thing is explicit acknowledgment there isn't much they can do to counter uncertainty. that's a very strong statement the market is right. >> you think that was a message that he was just saying, hey, we can't do much more or is that a message he was targeting to president trump? >> i think both. i think the central banks want to tell the politicians, hey, look, we can't be the only game in town forever.

we are becoming less effective in our credibility is starting to be eroded and you need our credibility in future because if we -- in the u.s. if we do hit a major economic recession, you need the central banks to have forward guidance that has an impact to markets. >> mohammed, we spoke with brian moynihan from bank of america last week and he's pretty adamant the consumer looks great. everything he is seeing shows all kinds of positive news and traditionally a banker can see out 12 to 18 months, right >> they have very comprehensive data that comes from the credit card and other things. so i always listen to what they have to say. but remember the consumer is as good as sentiment is right? so it's really important to keep an eye the thing i worry about most is that we talk ourselves into a recession. that's what i worry about most. >> brian moynihan seemed to suggest the same sort of situation. we really can do that. people stop spending if they get worried about things. >> that's how recessions start in a sense it isn't always some kind of true shock that hits the

economy. >> yeah. i remember when we first inverted the amount of emails and phone calms i got, are we going to recession, are we going to recession from people i hardly know wanted to know are we going into a recession. >> what did you tell them? >> i told them, no i think the economy is sound i understand why you're worried, but understand that financial markets are capturing what's happening in the rest of the world. >> and the fed, of course, is right on the frontier of this conversation, right? because they should be responding to domestic economic conditions and that's why they're not perhaps doing enough for markets in the markets perspective. >> yeah. but ultimately they're going to have no choice i think that this notion that they can ignore -- if you look at type 1, type 2 errors type 1 error is you look just at the economic data and you do nothing. what do you risk there do you risk market disruption that then weakens the economy that forces you to do something in a lag fashion type 2 is you do something now that you don't need and you risk financial stability down the road the down the rhodamines you're

going to go for minimizing type 1 error. i think the fed is going to cut and i think there's a serious conversation, a difficult one not whether they should cut but whether it's 25 or 50 bases points in september. >> mohammed, thank you here for the rest of the show. coming up, the president's order for u.s. companies to abandon china rocking wall street on friday this morning, reports from the g7 say china could come to the table for a deal so what should ceos be thinking about in the coming weeks. we'll discuss that after the break. check out the futures this morning. we are continuing to trade solidly higher, 263 on the dow we're coming back. possible every single day. with technology that helps you offer shoppers a better experience. take your company's app. we can add in all sorts of capabilities, which help your customers manage rewards, offers, and payments on the fly. and now, applying for credit

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excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass. for an alternative to china. >> i think this idea of bringing things back to the united states is another question. i mean, manufacturers would say that 500,000 jobs are still open in the united states and we can't fill them so when you bring back jobs, you're going to have to be able to fill them for our factories, our factories have never had more hours, as far as i know. i've been ceo for 12 years and pounding stuff out so they're moving pretty well. >> let's bring in senior associate dean for leadership studies at yale. he's also a senior cbs

contributor and jeff, nick himself said we should be listening to you how would you deconstruct it >> thanks. i did notice that it was met with stone silence from everybody on the set and went to a break after he said that and was doing so well. i think there were some important nuances to what nick had to say one of them is that he doesn't see china as stealing our jobs, which is the way the administration and many have been positioning things. but he is concerned about china. but he says we have a half million unfilled jobs here now he's very concerned about properly so about technical training lord knows we don't need free college education for everybody in the country the way some in democratic party are arguing we need to focus on vocational technical training nick has championed that at the same breath, though, nick says there is a great concern about intellectual property theft, about unfair trading practices that mohammed was talking about before about tech

transfer and other issues. so, that really is a complex portrait you know, becky, the american business community has a very complicated relationship with president trump. here he is our first ceo commander in chief herbert hoover was a mining consultant and harry truman was a hafr dasher this is the first ceo. he's not part of their club. he didn't run a major global public company he knows that. they know that and he kind of resents them chiding him. there are certain things they not on trade, on concerns that bother him but he does have issues they like tax cuts and they do like the regulatory roll backs and the economic growth. but they don't like the divisiveness, the insults, they don't like the sense of if there's a race baiting out there. but they don't know how to correct him on it because he champions these one-offs what you saw on the apprentice

is what he does now and did in the republican primaries is income who is a critic can be isolated and that's a hard way to do it we saw thursday tim cook a path how to do it, meet privately with the president and jamie diamond has done that well and i think a number of ceos lock heed has done that well to talk quietly with the president but he's very sensitive to criticism if you haven't noticed it. >> what can we expect more volatility from here, jeff >> ceos hate the uncertainty they hate the volatility that's the problem what's interesting is as nick mentioned is the ceos are changing while ceos are upset on china, it wasn't until trump surfaced these china issues peter navarro is not completely wrong. there are been unfair practices but they haven't been public through the bush and obama administration trump has gotten important issues out on the surface as a

bipartisan concern ceos we heard u.s. chamber of commerce 30% were trying to shift their supply chains away from china six months later it's up to 45%. interestingly historically the republicans despite people on this show presuming that the ideology was there's always free traders. 1950 republicans are democrats are free traders it's very confusing. if they want to influence the president it has to be through quiet but collective action so they don't get one offed that's what we're looking to see the business community can organize itself to confront the president but confront him constructively but they have to confront him in -- as a unified voice. >> jeff, what would you tell ceos who ask you if i'm positioning my business for what china looks like in three years time, how should i be positioning for the domestic demand there, how should i position for the supply chains and what do you think they will

be doing >> mohammed, that's great question is china for china is what you hear a lot of ceos whispering privately is basically the chinese middle class, which is an increasingly pro-consumer middle class, is larger than the entire population of the united states nobody wants to step away from that market. and that's a nuance that has to be explained in these white house negotiations however, in terms of what is part of a supply chain outsourced for here and serving the rest of the world, that's what's changing. so, you see that there are some industries say garments and shoes and textiles it's easier to move out. electronics they can't flip a switch and move out overnight. we're seeing more diversify indication away from china i can tell you just among we close friends here on the show since nobody else is listening to us, one very large ceo

hypothetically call him a shoe maker since he is told me that he moved the production out of maine to south carolina when he was a vice president of manufacturing. as ceo, he moved to brazil was president of brazil. ceo to china and now as he tried to move out of china, he's been threatened he'll be shut down if he ramps up in vietnam. it's very hard to figure out how they do this gracefully. >> jeff, great to see you today. thank you for your time. >> thanks. coming up, it's already been a wild morning for the markets big swings in the futures. comments from president trump and the g7 moving the markets. next we get ready for the trading day wase count down to the opening bell "squawk box" will be right back.

breaking news from the g7 summit in france, president trump says china wants to get back to the negotiating table on trade. and futures responding in a big way. navigating through the storm. the fed under fire from the oval office so what can jay powell do to keep the economy on course guest host mohammed el-erian weighs in. >> what happens when i know tariffs hit home the end of the year could get ugly for consumers and retailers alike. we'll tell you who is most exposed as the final hour of

"squawk box" begins right now. ♪ >> announcer: live from the most powerful city in the world, new york this is "squawk box." good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square i'm joe kernen along with becky quick and joe san tolly. the futures right now up about 250. i don't have to see them 238. 240. but anywhere from 200 to 265 or so after an abrupt reversal this morning. we were down about 100 and then the president made some conciliatory comments about what's going on with china and they turned around we'll see he's still talking still awake other there in france >> lots of opportunities. treasuries the ten year was all the way down to 144.

and at the same time that we saw some of these other things happening, we did see a backup in yields, at least a little and we now after being inverted with the two-year, we're now back to. >> even steven >> 30 year was 2% it was significantly below that this morning. as joe mentioned, it's been a pretty busy morning trying to follow all the headlines coming out of the g7 summit in france and the new twist in the u.s./china trade war after friday's ratcheting up of tensions it's up to spark the pre-market rally on wall street. we are joined with the latest. good to see you again, eamon. >> good morning again, becky a lot of twists here in france the president making headlines around the world this morning by suggesting that the chinese side had called the u.s. side on the phone last night to say that they want to get back to the negotiating table in terms of trade overall. but then we got some skepticism. our eunice yoon in beijing reported that officials telling her they weren't aware of what the president was talking about

and we saw this tweet from an editor of a chinese publication who is viewed as widely as connected with the chinese government he says based on what i know, chinese and top u.s. officials didn't hold phone calls in recent days the two sides have been keeping contact at technical level it doesn't have the significance that president trump suggested china didn't change its position china won't cave to u.s. pressure so that set off an effort by reporters here when we're able to see the president to press him on exactly what he's talk about in terms of these calls back and forth did they happen or did they not. the president was asked to clarify what he was saying about those calls. here is how he responded >> i don't want to talk about calls. we've had calls. we've had calls at the highest levels but i don't want to talk about that but the vice chairman put out a statement last night that was a statement and saying that he wants to make a deal >> reporter: so the president there offering no additional details on these calls but saying that he does like the tone of the statements that are coming out of the chinese

leadership now so we'll watch and wait through the rest of the day. we should see the president a little bit more today. these events have been unpredictable. bringing reporters in without much notice. not clear exactly when we'll see the president throughout the day but you be sure this will be topic number one for the rest of the day here in france, guys. >> all right eamon, do you have a bathing suit on underneath that? if you wanted to, could you go out there sfl. >> i do not. i did go swimming in this ocean yesterday. it's fabfabulous there's a beautiful diving dock just off the beach here. swim out, climb up, go to the high dive, dive in. >> you went swimming yesterday but your bathing suit is in your suitcase. >> is that kind of beach, eamon? >> it is wait, wait, wait i'm not going swimming today that's why i don't have my bathing suit i want to be very clear on that point. >> please, do. >> i don't want to muddy the waters >> so to speak. >> no, no. this is a lovely beach very family oriented, very

family tourist town. it's beautiful here. >> i think i understand what you're saying. >> he didn't have a bathing suit on >> right >> reporter: i'm wearing pants, as always, in a live shot. >> let's get right to the big market moves from the g7 summit, our guest host is mohammed el-erian. we're joined by jim urio he's also a cnbc contributor we've seen you a few times recently, jim. and what do you have a moral -- what's the moral of the story? we can't ignore things that the president says or tweets about or it seems like things get walked back. the pendulum swings and we're responding to all these things and i don't know if it's worth it to try to catch every move. >> i'm amazed that we plooumovee

way we move. there's a couple take aways from me when china's comments came out, they were pretty concrete when they accused us of unilateralism and protectionism. those are harsh language we broke on that that's understandable. now trump says they called we're talking on the phone don't worry about it the market is really quick to believe that on the upside now, there's -- i know when we start to talk about technicals you don't put as much faith in them as we do. 2,800 level in the s&p is a very big level psychologically. we were around there last night. i think the market was looking for a reason to bounce off it and we got it. the broader take away from me this goes back a whole year and a half, these big up moves that began with these big up and down moves, they tend to shake out the weak hands i think it leaves us with a stronger market, medium and longer term if we can finally get your footing under us. if you caught me last night, gone below that 2,800 level, my tune would have changed, too, because i fall victim to

psychological effect of it as well right now i think we're fine it seems like we want to rally off of this. >> there's other markets that do crazy stuff too, jim 144 on the 10-year and the way the yuan reacted on friday these are moves that take things very, very seriously for things we're trying to blow off, right? >> amen. >> oh, there's no question about it i still look at it to me just the risk assets and the risk off assets i see people flocking to our ten-year and driving it down to 1.43 or 1.42 that's amazing to me i look why shouldn't that be the case considering that is a fat and sexy yield compared to the rest of the world which is trading at negative yields so to me that's pretty understandable if we're on a march to zero, i'm starting to believe that's probably what's going on in the ten year just because of the way the globe is to me it's all the same move gold as well gold shot higher on the move lore and as soon as we came back, gold has gone down to steady >> so, jim, two things

one there's a view which i share the reason why we're seeing a lot more volatility across all markets is that markets have less confidence in the ability of central banks which leads to the second question you said when we regain our footing in markets. what does that mean in your world regaining our footing? and how do we do it? >> to me, the second question first. to me it's a technical level that draws people back in. 2950 if we get above that in the s&p futures and we seem comfortable there, i think that will be a renewed confidence, too. have we lost faith in central banks. i think of course we have. i think the only thing we think central banks can really effect are pushing money into risk assets and even more specifically pushing money into u.s. risk assets because i think the rest of the world is clearly seems to be flocking here, not just for the yields but almost for the safe haven effect of the u.s. stock market granted, i think it's far down on the list of safe havens but i think it makes the cut >> august is not been august

do you still think that some of these moves are exacerbated by so many people not being in, jim? >> sure. >> because this has been the craziest august i can remember in a while >> no doubt. i think some of the moves are bad. there was a couple dom moves in the last few weeks that had extremely low volume, but all i'm left with there is wondering and scratching my head what would it look like if there were more participants. all i have to is tease that out. you know what i mean >> it's not like there's crazy headlines to go along with it. >> there sure is but the one thing that i want to stress is that these moves lately have just been dominated strictly by this one particular headline going back in and out it's not -- if there was huge market positions and complacency, i think these moves would be bigger to the downside. now maybe the fact that there's not many participants makes -- people less likely to get margin calls and take things off. i don't know again, i can't produce that

counterfactual. >> mohammed, we talked earlier about other periods during this expansion during this bull market where you did a long period of sideways u.s. stock markets, very, very low bond yield, very cautious investor positioning and a fear that we were tipping back to recession whether you want to talk about 2011, 2016, is it wrong to consider those reasonable analogies for what we're going through right now? >> i think there's one big difference that the rest of the world wasn't in the mess it's in right now. that is the fundamental difference we're seeing technical levels elsewhere. it's interesting because the temptation right now is to fade the u.s. market in relative terms because the outperformers of the u.s. markets has been so large but everything that jim says and i look at says be careful, don't do that in relative terms it's the overall call getting harder and harder. >> i'm allowed to bet on college games in new jersey? >> because you live in new jersey, yes. >> in college -- sorry, jim.

i don't know if you're paying attention. college football has started. >> yeah, i know. i watched a game, florida/miami. >> you need a pass time? >> i'm just wondering -- when you have money on the line it's for money to watch the games do you want to get involved with that santoli >> i consider it a voluntary tax on the overconfident >> kind of like lottery tickets are a tax on the stupid. >> exactly. >> serena plays -- >> have fun. >> there's other things besides -- i guess i'm trying to broaden our view out a little bit for what's important in life you've got the mets. >> and the jets coming up. >> 4-12 season. >> my point exactly. >> thank you >> bye, jim. coming um, retail in the crosshairs spared some of the tariff pain until now. the industry could get hit hard if the u.s./china trade war escalates. we'll talk who is most at risk

and who stands to benefit if a deal gets done stay tuned you're watching sh"squawk box" cnbc

welcome back to "squawk box" everybody. we have been watching the futures this morning if you're just waking up, you missed a lot of action dow futures right in and out

indicated up by about 220 point. we have been as high as up maybe 350. we had been done as much as 300 points, too. so a lot of action, all related to the trade talks with china and the comments coming out of the president about all of those situations from the g7 right now, traders and the markets looking at this pretty optimistically, we're better off than we were friday before we heard a lot of this rhetoric. also news just in from kraft heines former cfo is resuming his role as chief financial officer current cfo is returning to a 3 g capital where he is a partner. he was serving at other executive roles by kraft hines that stock up by 1%. the escalating tariffs between the u.s. and china left many american industries on edge on the last year one that is starting to sweat with the latest threats retail courtney reagan joins us now with more. hi, courtney. >> good morning, mike. researchers explaining your mitigation strategies and also

the risk that tariff pose for sales and profit ultimately many said look, we have plans we can handle 10% without too much pain. but friday the trade war escala escalated. retaliatory tariffs in the morning. so retail trade groups now speaking out footwear distributors and retailers of america there's zero doubt shoe sales will rise. this nay plunge into recessions. the retail industry leaders association said, quote, the united states has created record expansion built on a confident and empowered consumer, protracted and costly trade war is the one thing that can shatter consumer confidence and ground this economic high. so even as retail has moved manufacturing out of china more u.s.-sold shoes and clothes are made there than anywhere else. growing middle class, china is a key global market for brands to sell to local consumers.

retailers with a decent percentage of chinese manufacturing under pressure of late steve madden, g3, american eagle and gap. brands that count on sales in mainland china, retaliatory tariffs make those items more expensive. 16% of nike and tiffany sales are generated out of china 13% for estee lauder and 10% for walmart. joe? >> courtney, thanks. for more on the u.s./china trade fight, let's bring in our guest melanie heart director of china policy and anna ashton with the u.s./china business council. melanie, where do you stand? i hear the same thing from a lot of people that maybe come from your side of things, and that is that, yeah, china has done some things in the past but we should be addressing it through tpp or addressing it through our allies and we're doing it the wrong

way. but then again you have schumer saying stay tough. where are you on this, melanie >> look, we can be tough with china without holding a gun to our own heads and forcing american consumers to pay, american households to pay up to $1,000 a year to cover these trump tariffs. we can be tough standing together with other countries that share our trade concerns, our ipr concerns, our industrial policy concerns with china and the g7 is exactly the kind of forum where the u.s. should be bringing other leaders together on this issue and unfortunately we see president trump just driving everyone apart >> anna, we tried stuff in the past, obviously. do you think it was finally time for tougher action, ie tariffs or this confrontation we had >> the entire community wanted to see more productive talks than the talks we had under previous administration but the entire business community also said right from the start

tariffs are the not appropriate tool for introducing intellectual property protection, and tariffs are ultimately going to do more damage to us than help us resolve this conflict. that's what we're seeing the tariffs really hijacked the talks. >> if we eventually arrive at some type of deal, the one that we are talking about in april that does address ip and does address state-owned enterprises, things like that, the only thing that got us there, anna, would have been the tariffs. if we finally get something that is favorable, would you still say it wasn't worth it to do it? >> i think if we finally got something that was favorable, if the tariffs turned out to really work to bring china to the table and make the changes that were needed, then we would have to, of course, concede that, okay, tariffs worked, but to what extent do they work and at what cost i think now we're starting to see the costs really pile up and are those costs worth it >> you're talking about what, where are we starting to see it? >> well, i mean, we've got

tariffs on almost every single thing that we import from china coming into place by the end of the year that affects all sorts of business commodities that are used to manufacture final goods. it hurts the ability to manufacture in the united states for china. it hurts the ability to manufacture in china for the united states. we're going to see those costs trickle down to consumers in every sector of the retail market from, you know, school supplies and school clothes to toys for christmas and electronics. this is going to hurt everyone >> going to but we really haven't seen necessarily the evidence yet as evidenced by how strong the consumer is the low inflation number the walmart report the target report. it just even the stock market off 3 to 4%. the worst case scenario could still come to pass

i was just wondering what evidence you were talking about now. frankly it hasn't been nearly bad enough -- do you have a comment, mohammed? >> i was going to ask anna and melanie, i agree getting europe on board early on would have been a better strategy, if you are aiming for a regime change that is going to change behaviors that have been entrenched for such a long time in china and looking forward the next three to five years, is there a way to do it without disrupting existing -- the existing program i don't see it i agree it would have been better to have europe on board but we still have this seeming break in the existing relationship >> are we aiming for a regime change that's what's happening? because that kind of makes sense, you know, this -- >> trade regime change let me be clear. i'm talking about a trade regime change with respect to intellectual property, with respect to forced transfers of technology, so a trade regime change the notion we have to level the playing field at some point. >> one problem we have to talk about is the fact that as

everything that i understand about the deal the administration was negotiating with china is that it doesn't actually address our fundamental problems with china. it didn't, as i understood, go into the weeds on industrial policy it focussed more on trying to get china to throw a couple billion dollars our way and do some big purchase deals that would run only for the next five to six years, through a potential second trump term, and not in any way focus on the things that make the u.s. stronger over the longer term and able to compete against china and have a level playing field. that is where we have a compete failure here. >> but if that's the case, why didn't china just concede early on if it's a couple billion here and there why not concede early on and get involved in a trade fight that hurts its economy >> that's the ironic thing we have a situation where we're trying to get china to spend a few billion dollars on products that it was buying before.

the only reason that it stopped buying things like american soy beans is because this whole situation was approached tariffs as the main tool tariffs have hijacked american agricultural and hijacked farmer's ability to do their jobs and sell their crops. so now we're in a situation where the president's unorthodox trade ideology is being placed ahead of economic realities and he's asking business to sacrifice themselves of that, asking consumers to sacrifice themselves at that alter and ask that of farmers. farmers did it and now for two years we have been bailing them out. taxpayer dollars have been bailing them out because they can't sell their crops so far we spent $28 billion on that how many billions of dollars of crops does china need to buy to make up for the fact that china would have to buy? that doesn't sound like a plan working. >> we didn't invent the tariffs. that's for sure. if we get to a point where we don't have tariffs and tariffs

that have been slapped, as we always like to say, slapped on us over the years, those go away, maybe we can get something out of all this. any way, melanie, anna, thank you. lucky we didn't have anyone on the other side we have to do that we appreciate it thank you. >> thank you coming up, the latest read on the industrial economy is 15 minutes away wall street is watching closely. ideas on where you can put your money as volatility continues to rage on wall street. as we head to a break, take a look at the futures. s&p 500 due to rise 21 it was down 75 on friday the dow up 230 not too far off the highs of the morning and nasdaq set to open up about 77 points stay tuned "squawk box" will be right back. fun fact: 1 in 4 of us millennials have debt we might die with. and most of that debt is actually from credit cards. it's just not right. but with sofi, you can get your credit cards right -

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right now the dow futures indicated up by 227 points this comes after the dow lost more than 620 points on friday we have seen the futures swinging quite a bit this morning. we were down by as much as 300 points in the very early trading on this overnight. then the president made some comments about china it sounded like things were more positive than they did on friday and that's why you have seen the markets move up 230 points nasdaq up by 75 and s&p up by 2. coming up, breaking economic data from the industrial sector. the latest read is first thing when "squawk box" returns.

we are just seconds away from the latest data on durable goods. rick santelli is standing by rick, take it away. our july read on durable goods headlines up 2.1 solid. we were looking for a number just north of 1%, 1.1, 1.2 a slight revision from minus -- excuse me from positive 1.9 to 1.8. we minus .1 of 1%. now x transportation, big ding here, down .4. down .4. rear-view mirror up .8 that was a slightry vision many like to look at durable goods orders, proxy for capital spending a big question mark of

late, up .4. we were expecting a goose egg on that one finally, if we switch from orders to shipments, it deteriorates to minus .7 so we can see there's definitely issues going on. this is trade affected i'm sure. it's always volatile and it's a preliminary read certain aspects were okay. the market responds not very much, hovering just about 150 and a ten-year note, of course, which is also one bases point now above a two-year note as we continue to monitor the yield curve and of course acknowledge the notion that many of the up and down issues with trade ended up as purchases on the long end of many sovereign yield curves mike, back to you. >> rick, thank you very much. for more on this data as well as the president's response to last week's fed gathering in jackson hole, let's bring in chief economist and founding partner at rdg economics and senior economist at wells fargo

and our guest host mohammed el-erian welcome to everyone. john, put this durable goods number in context of what we're seeing in terms of trying to engage how much of a slow down in the industrial economy in the u.s. is being felt against a pretty strong consumer what do you expect >> yeah. well, you put your finger on it. the areas of economy that are struggling the manufacturer sector and capital goods these numbers weren't that good although you had a slight increase in the orders numbers, they were revised for june we don't see at the moment any traction in capital spending despite the fact we have tax cuts it has to come down to trade uncertainty to me as the factor that's holding back capital spending and that's not only important for the balance of the economy, it's important for getting productivity growth higher essential given the demographics

of the u.s. slowing labor force growth we're just not seeing what the vitality that we really would have hoped to have seen from the manufacturing economy. >> mark, given that, what do you expect the fed to do in september and will it be effective in trying to support this expansion and revive certain parts of the economy >> well, we expect them to cut a quarter point at the september meeting. i think the language will remain in pretty much as it is, that they're prepared to do more given the uncertain circumstances that are ahead of them i don't know that we're going to get resolution and trade before september. who knows. it swings a lot from day to day. but we do know we have brexit the end of the october, which is looking like it's going to be a hard brexit, or a no deal type brexit but that unleashes a whole lot of uncertainty the fed meets october 29th and october 30th do they want to cut ahead of

that or wait and see how things unfold i don't know i really think that if powell's notion is that an ounce of prevention is worth a pound of cure, then there's probably more than 50 bases points in cuts in an ounce of prevention. >> mohammed, you were talking earlier, just siting the weak german manufacturing number overnight, emerging markets, currency is under a lot of pressure is this now -- do we have downside momentum in global growth there has been some indications that some of the economic surprise indexes have curled higher, maybe we were bottoming out in terms of global activity, trade escalation not with standing >> i think undoubtedly the momentum is still to slow further. and at some point, we can be talking about tipping points and stall speed especially in europe but i'm -- now that we have drawn on set, we have seen two major decoupling, business versus the consumer.

>> right. >> and then manufacturing or what i like to put tradeable versus nontradeable. so take us through the next 12 months how long in that decoupling go on in how long can the u.s. economy rely on the nontradeable sector to more than compensate what's happening to business and what's happening to manufacturing? >> well, as you forecast in timelines is hard, but let's talk about what we can look at to me, the crucial indicator is the share of profits in the domestic economy and after we got the second quarter gdp data, we had revisions that showed the profit margins hadn't stabilized but have continued to be squeezed. and so what is the glue that holds the economy together is the job creation the job creation has decoupled from capital spending. but in that job creation machine really begins to stumble and interestingly it hasn't slowed as much this year as we would have thought because we had these large revisions that are going to come in in march of

next year for march of this year, the revision downgrade last year to around 160, 170,000 jobs a month so that's the key thing for me is if profit margins can stabilize, then we can limp through. if profit margins continue to contract, then at some point that undermines employment growth, that undermines income growth and that undermines consumer spending. and it's very little the fed can do the idea the fed can cut interest rates -- and to powell's own admission at the press conference, my anecdotal comments the cost of funding is holding back capital spending. so the policy will be better in my opinion saving its bullets and being a bystander and responding as that timeline underfolds if finally the capital spending drags the consumer down. >> mark said 25 bases points in september. i fundamentally agree as to what will happen. >> they will cut 25 bases

points. >> what's the probably to you and mark 50 bases points cut >> i don't think they can or will do 50 because they do have to keep one eye on the inflation story. and one of the things we talked about and the fed started talking about it again is their trimmed means and the median inflation numbers have been running around 2%. over the last 3 months their own favorite inflation measure has been running at 2% so i think they just keep cutting. remember, right now they're still signaling it's a mid course correction. it's a recalibration of policy 50 bases points is no longer recalibration. i think would have a negative impact on risk assets because then the fed is now really fighting recession they must presume is coming. >> mark, do you think there is a possibility of 50 bases points i guess just a broader question, do bond yields make sense here given this setup that we have all described in terms of 150 for the ten year notes about the same for the two year and the

market implicitly demanding more from the fed. >> i don't think 50 is on the table. i think the fed president made that clear that a lot of them are not on board for another cut. i kind of think that's a little bit of talk. a little bit of overreaction it's also the role that fed presidents have traditionally played i think if they went 50, i think people would feel that there was the fed senses more risk in the economy and that they would have less -- fewer bases points to deal with any contingency down the road in terms of bond yields at their current levels, it really flies in the face with the economic data which suggests the economy is continuing to grow around 2% annual rate. we're expecting 2.3% growth this year i think that's a very reasonable forecast where we're almost through the third quarter. it looks like we'll have 2.2 or 2.1% growth somewhere in that ballpark bond yields below 2% don't make sense at an economy growing 2%. >> all right they certainly have gotten stretched to the downside.

we'll see if that changes any time soon. mark, john, thank you very much. mohammed will stick around. coming up, your biggest market movers ahead of the opening bell plus, what investors need to know as wall street gets ready for what looks like it could be a business is monday morning jim paulsen joinusext s nwhen "squawk box" returns stay tuned when i called usaa, it was that voice asking me, "is your daughter ok?" that's where i felt relief. we're the rivera family and we plan to be with usaa for life. see how much you can save with usaa insurance. see how much you can save ♪ i planned each charted course ♪ ♪ each careful step ♪ along the byway ♪ much more ♪ much more than this ♪ i did it my way (announcer) verizon is america's most awarded network and the only one with the galaxy note10 5g.

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welcome back to "squawk box. the futures right now heading

toward pretty decent gains if they hold here by the open dow up 258 right now the s&p 500 up 25 points just under 1% that's about a third of what was lost on friday the nasdaq set for a higher open by about 89 points to the positive side right now. under an hour now until the opening bell on wall street. dom chu joins with us the biggest premarket movers dom, hello good to see you. >> good to see you happy monday, joe. let's talk about what's bouncing today because we have seen a move higher in the overall markets but semiconductor stocks don't be a battleground when it comes to u.s./china trade relations. one that tracks that smh is up a 1.5% but still not close to getting back what it lost on friday's trade we are now just about 11% to the downside from those recent highs and that etf along that theme, the individual component stocks are going to be

in focus today as well for semiconductors, advanced micro up 2.75% sky works 2% gains micron 1.5% and nvidia 1.5% as well those are what we're watching. also what's happening right now, some of the trade-centric names outside of semiconductors farmed equipment maker deere, up 1.5% wynn up significant. on the toy side, hasbro up 1% and best buy on the electronics retail side up 1.5 to the upside as well. some of the names that are bouncing more today we'll see if they can get back more than what they lost on friday, becky back over to you. >> dom, thank you. joining us for more on the markets ahead of the opening bell and where investors can find opportunities is jim paulsen the chief investment strategist jim, everybody is worried about the trade talks, at least that's what the markets have been reflecting kind of moving with every tweet, with every comment from the

president. you say that you don't think the trade war could really have as much direct impact on the economy as some are believing at this point why is that? >> well, i don't know if that's true for sure, becky, but i kind of think that the trade war is definitely a negative. and it's much more a negative for china than it is for us. no doubt about that. but i think we're talking about, you know, even if we eliminated trade with china, might be a half percent off our gdp a lot of that would go elsewhere as some of it already is around the world. and eventually reoccur i think the trade war is not -- i'm not saying it's not a negative, but i think it's being outsized in terms of its negative impact. and i'm -- i think if you take the negative of a trade war against all the policy stimulus we have where we have dropped the ten-year yield by more than one half since october, increased money supplies, we're juicing with fiscal juice, i go -- i think the policy juice

with appropriate lag is going to overwhelm negative from the trade flow. >> so you think people should stay bullish here? >> i do, becky i'm worried. i think the biggest risk we have is a confidence freeze, not fundamental. i think fundamentals are okay. i think if we fear ourselves into a recession, we could do that that's a real risk and if the president keeps pushing this, that could happen. also with the inverted curve, scaring people but if we avoid that, i think there could be big upside here look, i think maybe what we have is a fear bubble and if we pop that and some grieve returns, earnings estimates will start going up from a 1.5% treasury ten year yield, we're trading below average since 1990, we've got full-on policy support and we're climbing a wall of worry there could be a lot of upside potential here if the fear

bubble goes away maybe as much as or more than the downside if we have a recession. >> what has to happen to pop the fear bubble? >> well, i think we can do it a couple ways. we certainly could have a trade agreement announcement we could have the fed cut 50 and take the curve inversion out of the picture. i don't think that's most likely, but it's possible. either of those could certainly help or we could just have data get better and look, some of the data has been really good here, becky. the citi group economic surprise index was minus 70 at the end of june it's now like minus 15 in the united states. and you look at retail sales, look at the leading indicator last week, look at unemployment claims, a lot of good data is going under the bridge so, it wouldn't take a lot more if there's any upturn in manufacturing data, suddenly the whole economy would look pretty good and i think the fear bubble could dissipate. >> mohammed, what do you think about that >> jim, i'm with you in the

sense that the economy is in a better place than what the markets and certainly what the fixed income market would suggest. i'm with you that the two tales of distribution are confidence based. one is popping the fear bubble, as you said. that's the positive one. but the negative one is that we talk ourselves into recession. my concern is that the shape of this distribution is shifting where as you got to pay much more attention to the tails than to the belly of the curve. and if that's the case, it puts the retail investor in a really hard position. so what do you tell the retail investor >> i totally agree with you, mohammed i think there's big moves probably in this market on both sides of the distribution. we could have a big downside or we could have a big upside i don't think we're going to have a dull market in the next 12 months. so it does put you in a tough position you have to make a bet i'm tilted more bullishly, but i wouldn't be max bullish today because of the risk of a big

downside event i would be somewhere between neutral to half way towards my maximum risk on position today and in that i would take advantage of like friday when it declines, i would sell some of my more defensive stocks that everyone seems to love right now, that helps them sleep good at night and i would start picking away at some of the areas that have been hit hardest like the emerging markets or like industrials, like financials right now i would have a tilt on towards cyclicality but a mild tilt. we're late in the cycle. we do have the chance of big downside risk, but i don't think that means you want to bury your head in the sand because i think the more likely outcome is we go up rather than down. >> so i understand that with one exception, which is the emerging market one undoubtedly the valuations look really compelling there. i remind people since 2012 em equities have gone nowhere while the s&p is up more than 150% i can see the valuation argument, but they are really

the high beta ones if you look at the two sides of the distribution, do you really want to fade the u.s. in favor of em equities at this stage >> well, i wouldn't say i put all my eggs in that basket, but i would have a little bit of that i think with the fear right now at fever pitch, i think there's a good bet that a lot of the cyclical parts of the market are overdone on the sodownside and e defensive parts, utility staples, real estate are overdone and there probably comes a period if we don't have an imminent recession where some of that gap is closed, i think, mohammed and i'm not saying you might ride with it forever, but i think off of where we are right now having some exposure to those areas makes some sense >> jim, it's good to see you thank you for joining us on this monday morning >> thanks for having me. let's get down to the new york stocks ek change and cramer joins us now anything not g7 or trump related

that you're seeing this morning, jim, that you base anything on >> not really. remember how as you talked about at the beginning of the show, joe, futures were down 300 last night. people felt there's no hope. i think the predominance of of coverage this morning is that the president is lying i'm not willing to say he's lying. i think that's a bad call. if he decides to hold the tariff increases, that's different from what we thought about on friday. i think the president's mercurial by design and we can doubt him, but in the end, you're doubting a guy who didn't want the market to crash and that's a dangerous thing to take on >> if you took everything literally, jim, you would be -- i don't know where we would be might be committed, i think, really you would be so worried about everything if we did -- i don't like to try to enable the president with -- because i think sometimes he does go too far as i think we both thought that on friday.

but better to take him seriously than literally and, you know, someone said that a while ago, right >> yes, unless, look, he makes the chosen one comment, don't have to take him literally trying to joke, but, yeah, i think you have to take him seriously. he can walk back anything he says you can have chinese officially denying -- the chinese haven't necessarily been square and honest, have they? suddenly we believe the chinese are honest. >> kind of weird that -- >> i'm not going there. >> so many people would rather take the word of the chinese communist party than our -- >> do you think the prc is the one we should list be to and the president of the united states is a liar and the prc is honest as all get out has that ever happened since '47, have we ever decided that mao was honest? i'm aghast that we trust the prc more than we trust the white house. i'm not going to do that. >> people would say that there has been precedent for why you would get to that point. lindsey graham who at this point

i don't know what -- he became a lion of the saying, he's, like, yeah, i heard what he said, he said -- don't you understand bluster yet? haven't you seen this guy in action for the past two and a half years where you just -- he's not going to forbid everyone to ever go into china, but he was mad, when they did the tariffs on friday, that set him off, right >> who is he >> what's that >> who the hell is he? what does he matter? i know he's a senator, 100 of them, feel bad but what matters to meis you can trade the futures all day long betting the president is a lie, but the futures are up. i don't really care. >> all right >> by the way, i want to reiterate again if we start to trust the prc and distrust our president, that's fine but i would like to have some evidence that the prc tells the truth. some evidence since '47 that the

prc tells the truth. >> right then where do we go? either there is -- >> how about we buy good quality stocks anything matter with that? let's just be like warren buffett, buy good quality stocks on weakness. i'm cynical about this the idea that the president's a lie and the prc tells the truth is too hard for next i think it is probably somewhere in the middle. >> right like so many things. >> yeah. >> when you and i know that. >> right. >> you and i agree with that, don't we >> yes we do. we do. and 600 points isn't what it used to be, though we were up -- >> up by 10. >> yeah, right divide by 10 kind of aing in d nothing day. >> i remember 28 points on the dow. >> he said sell, sell, sell. that was a suboptimal quote. that's like taking andrew luck in the draft, you know >> oh, man o.j. so mad.

>> wow >> as mike said, that guy can't get a break. >> yeah. >> it is true. >> we'll see you in a couple of minutes. >> don't miss an exclusive interview tonight on "mad money" with kevin johnson stay tuned "sawbo wl rhtac quk x"ilbeig bk) that was awful. why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade.

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some of the best levels we have seen on the futures, welcome back to "squawk box. let's get a check on the markets. 280 now. seen on the dow. the nasdaq indicated up about 90 91 the s&p indicated up 27. here is europe, which should -- one boerse was down, the other was up europe now same as it was, ftse down a little. the ten year got as low as 144 before the yield backed up now 154. and finally take a quick look at the dollar dollar as you can see against the euro, the yen, and the pound, got a little more time. >> mohammad is here. mohammad, okay, a little bit of

a roller coaster ride this morning. do you feel like you understand things better three hours later having kind of watched what they all said and see how the markets reacted? >> what i do understand is that these markets don't have a solid anchor so we will be taking all over the place by comments and everything else and that's the reality and we have to realize that's the world we're looking at, so fluid, economically, socially, institutionally. >> how much of that do you think is, i guess, exaggerated by the idea that there is not many people around, the liquidity is low or do you think it would be heavier if you had everything back here. >> over the last few years, because we have been able to rely on ample and predictable liquidity from banks, the system has oversold liquidity we have promised too much liquidity to end users what i worry about is when we get to major adjustments, you won't have it, you see it

already in emerging markets, positive high yield, there isn't as much depth liquiditiwise as before i would say something, this is a better market for the professional investor than the retail investor. >> what do you mean? >> the the professional investor can focus on things like dislocated areas they can complete market and private credit. >> or move in and out more quickly. >> they can move and out more quickly. most important, they can go where markets have broken down and certain areas of private credit where that's really attractive for the retail investors, it is about, i think, don't fade the u.s., be careful of people saying go into emerging markets, it is too early, and secondly i think importantly don't just chase the darlings of the market if we're truly entering a period of globalization, the leaders of the next phase will be very different from where we have come from. >> mohammad, always a pleasure to have you with us on set thank you for your time today. >> thank you >> really been great. >> mohammad el-erian you see, 311 points, the dow is

trading up, that's near the higher levels we have seen through the course of the morning. right now up 305 with the s&p up 30 the nasdaq up by 99. mike santoli, thank you for being here today we'll see you on "closing bell" later today. all right. that does it for us today. join us tomorrow right now time for "squawk on the street." >> grn monood morning, welcome "squawk on the street. we're live from the new york stock exchange carl quintanilla has the morning off. we get started with what promises to be an interesting week aren't they all? look at futures as we open for trading half hour from now those futures have erased big losses overnight and as you can see, the market is looking higher, of course this in part on news out of the g7 summit. president trump saying china called u.s. trade reps and asked to get back to the table for talks. that said, the editor of china's global times, who is fairly in