♪ good morning and welcome to she show i'm joumanna bercetche and these are your headlines oil surging following terror attacks at two of saudi arabia's biggest facilities and cutting the kingdom's production by half. oil and gas stocks buck the wider european selloff as they hit the highest level in over a month but airlines feel the heat from the crude price spike. iran denies culpability as

washington stands by with emergency oil reserves with president trump saying the u.s. is locked and loaded china's industrial output growth slows to more than 17-year low in august and another sign the u.s./china trade war is weighing on the world's second largest economy >> well, our top story this morning, crude prices are trading sharply higher after a series of attacks that shut down output at two of saudi arabia's biggest energy facilities. jones hit the biggest oil producing fields both owned by saudi aramco they account for 5.7 million barrels of daily output around for 5% of daily supply rouhani will not meet with president trump according to iranian foreign ministry spokesperson

they told iranian state tv that, quote, such a meeting will not take place president trump said the u.s. is, quote, lock and loaded depending on verification of who is behind the attack hadley joins us from riyadh, really exciting and really unprecedented 24 hours out of the region, laid what has been the response from saudi authorities and also how likely are we to see a coordinated response out of opec it wasn't that long ago we were talking about production cuts out of that jmmc meeting last week. >> absolutely. the news has been moving at an incredibly rapid pace, bercetche, we saw that following this major series of attacks on two of the kingdom's largest facilities, oil facilities in the eastern province of saudi arabia, i'm here in riyadh waiting to hear directly from the saudi government about their response essentially what we have seen over the last 24 to 48 hours a comment, a statement really from saudi aramco

they talked about what had actually happened about knocking half of their production off online, 5.7 million barrels and said we're kicking this can down the road and do a more thorough, internal investigation before we come out with any more comment about the damage done to output and exactly how quickly we'll bring up all of that back online that's expected just hours from now. a bigger question, though, is why we haven't hear from the saudi foreign ministry because this is no doubt a terrorist attack and some would say even an act of war on the kingdom there's so many unanswered questions, what caused this attack, where this attack came from the hue this claiming the responsibility this was a drone attack, a koord ni nated drone attack what kind of highly so fest indicated equipment they would have needed to pull this off it was a highly sophisticated, highly coordinate aid tack that took out these two facilities and caused these massive

explosions what we have seen the last 24 hours, united states, secretary of state mike pompeo directly blaming iran the president in tweets around 1, 2:00 a.m. essentially saying, we're waiting on saudi arabia to make a statement before we get into action, saying that they're locked and loaded. we have heard the saying from the uk foreign minister saying in the last hour this is something that needs to be brought to the attention of the international community. the iranians said they want to take their case to the u.n., th up, but at the same time, everybody seems to be waiting on some kind of comment from saudi arabia because was this a drone attack, a missile attack did this come from iraq? did it originate from iraq and was iran directly to blame in all these questions are percolating and we haven't heard anything from the foreign ministry and no doubt given the geopolitical situation in this region, the rough situation saudi arabia has found itself in the last couple attacks particularly the attacks on the tankers by iran, it's anybody's

guess what response they can count on from the united states. the language we have seen the u.s. using the last several months they talked about ensuring the security of saudi arabia, but what exactly that might entail in terms of military followup or action is anybody's guess. guys >> hadley, thank you for the breakdown. it will be a crucial 24 hours for geopolitical developments as we await more statements out of saudi arabia let's look at oil and airline stocks performing in europe. brent currently around 8.7% higher, $65. we have come down from where we were earlier in the session. all of the oil majors are trading up in the green. the only bits of green really on the european indexes bp up 3.7% on the ftse 100. a lot of red when it comes to the airlines because the cost input obviously is oil still higher, oil is negative for the

airline's industry ryan air 1.7%. u.s. secretary of state mike pompeo has accused iran of being behind the attacks while houthi rebels claimed responsibility. iran rejected the u.s. blame of the attacks with iranian foreign minister accusing pompeo of deceit saying washington's maximum pressure campaign over teheran has failed saudi arabia republished statements ceo says emergency crews contained the fires at its plants, adding that an update will be provided in around 48 hours. indeed the market is on tinder hooks waiting for the update when it comes to the supply disruption i want to bring in the prang tis head of middle east practice

it's great to have you on the show. >> my pleasure what about the geopolitical implications >> well, i think that we're going to have a period of uncertainty in terms of what the u.s. and saudi arabia do in terms of risk against iran i think for now we're looking at some exit strategies trump's tweets i don't think means he wants military action i don't necessarily think the saudis want military action at this stage either, but it's risky. i think the attack probably came from somewhere outside yemen, so we're looking a bit of tensions for the next few weeks. >> they have taken responsibility for the attack, but there are lots of reports over the weekend suggesting it may have come directly from the iranians the secretary of state mike pompeo said there's no evidence the attacks came from yemen, either way obvious links to iran how much of an escalation would

it be if it came directly from iran >> depends on where. iranian territory, we would be looking at a serious risk of escalation in the region i think yemen is within the boundaries of the yemen conflict would be acceptable. iraq would be somewhat problematic in the middle. again, i do not think that saudi arabia or the u.s. necessarily want to see an attack or war in the region. >> earlier there were reports that the u.n. meeting proposed meeting that could have taken place between president rouhani and president trump on the sidelines of the u.n. has now been called off. surely iran, if their sole incentive is to remove sanctions they're just shooting themselves in the foot by increasing the amount of provocative in the region. >> part of the iranian strategy is building leverage, trying to demonstrate they have military power to compensate for some of the economic challenges that they're facing they might have played over their hand in this case.

i think an attack on iran oil facilities is probably that. maximum pressure campaign maybe encouraged the iranians to cross a boundary here. it's not going to lead to more diplomacy and more u.n. sanctions or international sanctions in this case. >> do you still see a possibility of the meeting between the two sides going asned. >> i think it's very difficult to see a meeting between trump and rohuhani at this stage. trump is looking for a foreign policy victory, but the circumstances make it very difficult. >> what about the impact on aramco the largest oil plant in saudi arabia, does that have any knock on effects for this potential ipo we have been talking about for years? >> it's very difficult to proceed with an ipo given the damage they have to fix all this, pushes the ipo into 2020 even on the local stock exchange, definitely has an impact on its valuation. it's something that investors have been ignoring for a while

that there is a geopolitical risk, a geopolitical security risk facing iran oil facilities. >> and the vulnerability to these types of attacks in the future. >> absolutely. it's not an asset in saudi arabia it has geopolitical risk and we're seeing that in markets today, some of the supply outages. we're probably going to end up with a prolonged outage out of aramco and many weeks to fully ramp up to preattack levels. so it will be a bit of volatility for them. >> we'll indeed have many reverberations on markets. thank you for coming in on "street signs" today let me take you to european markets. as we were talking about, it is a tone of risk off, a lot of red. ftse 100 .2% somewhat shielded by some of the oil majors doing well.

bp up 4prgs but the rest of th index does trade pretty heavy. in the uk, you have the meeting between boris johnson today. expectations certainly very high for them to come to some form of an agreement before that eu summit the other indexes also trading very heavy in the red with travel and airlines particularly weak today as well one of the sectors that are exposed to the higher oil prices. now, elsewhere, chinese industrial production data grew at its slowest pace in 17 1/2 years in august. highlighting persistent weakness in the country's factory and consumer sectors production rose 4.4% during the month but missed estimates retail sales and fixed asset investment also mixed expectations chinese premier warns it will be very difficult for the economy to grow by 6% or faster. in an interview with russian media, li said china faces certain downward pressure from

slowing global growth and blamed high base from which china started. the comments come as the country's recent triple r cut comes into effect today. let me bring in society professor of economics from the london school of economics great to have you with us on the show looking at the data this morning, all of this just tells me that china really seems to be hurting from this trade war. >> the hurting is really coming from uncertainty of the trade war but, of course, china has been -- had an on going deleveraging process which is also causing the negative impact, but the direct effects are just a lot smaller than kind of the indirect effects through uncertainty on investment and on consumer sentiment. >> it's interesting what you were saying act the deleveragingesques, right? not many people are aware of this the chinese economy had started slowing before the trade war because of the deleveraging effects and now you have the

trade war. isn't it a convenient pretext for xi jinping to say the reason the economy is slowing not because of the deleveraging, because of the trade war and external uncertainty >> the goal of the government for a long period of time is kind of to reduce the fie dillty of the financial system. so the really ramped up efforts in terms of cutting down the detd in multiple sectors and that has worked. of course, the by-product of that is slowing growth and that's when the liquidity started drawing the economy and of course now added uncertainty in trade war and the hurting of the chinese economy bids the authorities say, it's about time we need to inject more liquidity into the real economy. >> the conventional wisdom is that china are just going to sit this one out they accept there's going to be a degree of pain the economy is still tracking around 6% growth as long as they can hold on for the next year or five years, depending on whether president trump gets re-elected or not, they're in it for the

long game. do you agree with that assessment >> i think there's plenty of policy room and quite a few levers the government can pull to stabilize the economy and that's what we're seeing expansion of fiscal policy, expansion of monetary policy allowing the local governments to increase the infrastructure spending and be able to borrow again. we have to be reminded of the fact that shadow banking activities is firmly linked to local government projects. so we're going to see a revision of that, but i think the chinese economy will hold up if they put the target at that kind of rate. i think we have to understand the chie neesz economy is really going through a transition, a structural change. we're in the middle of a transition, so it will take time before we really see more energy. >> but yet you talk about the response this time we had a monetary response, the triple r cuts and so forth, extra liquidity in the system and the fiscal response the fiscal response this time around hasn't been as robust as

previous episodes because they can't, because of the deleveraging efforts is that going to somehow stymy their efforts to stimulate the economy as much as they want >> the overall goal this time around is to lower the cost of capital and lower borrowing costs for firms. and particular, they want small and medium enterprises to obtain the financing. let's not forget, they are now the majority contributing to the majority of chinese industrial output, not soes if the chinese economy wants to be boosted i t has to be through them but the financial system, of course, doesn't allow for that as easily so this round of rate cuts is to kind of allow for smoother conduit of getting liquid into the real economy fiscal capacity is a bit con trained but it's up to the local governments again to start these projects and of course they have to roll over long-term infrastructure projects and just need more credit. >> the other side of this sofbly the tech war, not just about tariffs on goods and soy bean,

pork, et cetera but also the capacity to use foreign technology as well and you have seen that with huawei. do you see a change of narrative internally and understanding, look, we need to transition away from reliance on overseas tech nothing and create our own faster so we can complete this made in china 2025. >> it's already happening. this round of kind of u.s./china tension has accelerated that kind of endeavor to be technologically independent and we're seeing a complete change in i.t. system in the governments to rely less on the american system. trade war is really about the near term. china is prepared for much longer struggle with the u.s., even if trump doesn't ge re-elected, there will be more trouble coming ahead. >> all right we'll pause it there and continue the conversation. associate professor of economics at the london school of economics. we certainly discuss a lot already in the first 15 minutes

of this show, follow us on twitte @streetsignscnbc or tweet me directly also coming up on the show, you wouldn't like him when he's angry, british prime minister boris johnson compares himself to the incredible hulk we're in luxembourg ahead of his meeting. that's coming up next. (danny) let me get this straight. after a long day of hard work... ...you have to do more work? (vo) automatically sort your expenses and save over 40 hours a month. (danny) every day you're nearly fried to a crisp, professionally! (vo) you earned it, we're here to make sure you get it. quickbooks. backing you. it's how we care for our patients- like job. his team at ctca treated his cancer and side effects. so job can stay strong for his family. cancer treatment centers of america. appointments available now.

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♪ welcome back to "street signs. uk prime minister boris johnson will make his case for a new brexit deal when he travels to luxembourg to hold talks with european commission president. the meeting comes after johnson again vowed to deliver brexit by october 31st with or without a deal the pm told the mail on sunday newspaper that the uk will break free from the eu like the incredible hulk. elsewhere, stephen barkley admitted an agreement could see the uk remain in an extended transition period until 2022 willem joins us with more. the fact that this meeting is actually taking place could be a positive signal, perhap assign that there may be still hope for

a deal >> reporter: it certainly is a signal that the european commission in the form of its president is prepared to listen to proposals from the british side the members of boris johnson's conservative party i have spoken to over the weekend says it doesn't represent a concerted effort by the uk to try to push through these changes despite what the prime minister has repeatedly said he would prefer a deal they say this is political theater, that he can point to in the future and say, look, i tried the europeans weren't prepared to play ball and therefore it's not my fault. in terms of the substance of this meeting, he is expected, according to remarks released by his office ahead of this meeting to talk about his willingness to defy parliament and push forward with the possibility of no-deal brexit on october 31st even though majority of parliament in the uk said they have very, very clearly said i should add they don't want that to happen.

they passed legislation. we heard from his foreign secretary this morning that there are flaws to use his language in that legislation and they will seek to exploit those flaws to flout the new law in terms of the european commission, though, they've said they're not particularly optimistic we heard that he saw no reason for optimism based on what they've heard so far from the british side when it comes to this northern irish backstop how goods and services are traded between the northern ireland and republic of ireland the uk seemingly ready to talk about regulatory divergence between northern ireland and the rest of the uk that upsets the d.u.p., the small northern irish party, it's something they're talking about very, very clearly and it's something that might, might provide some kind of a breakthrough. >> well, we await with deep

anticipation there, willem live from luxembourg ahead of that meeting between boris johnson. well, is boris johnson serious about leaving the eu without a deal or is it just political theater? more of willem's coverage, head online to cnbc.com ♪ and finland's prime minister has told cnbc exclusive that a no deal brexit is likely no interest in an extension past october 31st without a new solution from boris johnson. sylvia joins us in the studio. you know, again the conventional wisdom when it comes to the uk is that it will be easy to get an extension if the uk put their hand up and ask for it, though it seems not everyone is on board in the eu. >> absolutely. the 27 european leaders agree they don't want to extend article 50 beyond 31st of october. they might be forced to do it, but there's no willingness to do

it so i can the finnish prime minister in helsinki last friday, if boris johnson has a request for extension whether he would say yes. let's take a listen. >> inside this eu 27, the discussion is quite clear and if there is no possibility new situation, it seems there is no interest to get more extension to this situation. and i hope that if he's going to ask more time it means that he has something to say how we can solve the situation after this time. that's a big question for us all in the eu 27. >> so in the interview, how much

probability would you assign to a no-deal brexit >> i must say that now it seems that it's going to happen, and we need to accept that it's going to happen, but i hope that reach the situation where we can together with british and eu 27 create a better world when we think about climate issues and that kind of things. and i hope that we have a good company together after this situation where britain is going away >> so you heard it there the finnish prime minister making it clear there's very little willingness to grant another

extension to the article 50 process, that is the way that the uk will leave the european union. let's remind our viewers about what donald tusk said, the president of the council made it clear to the uk, don't waste the next six months. yet here we are, the deadline is about a month to go until the exit date, very little, if anything, has changed. let me say as well, the finnish prime minister he at the moment holds the rotating presidency of the european council and he said he would like the climate policies, security and worker's rights are actually the priority for the next six months, but he's afraid that brexit will dominate the agenda. >> will overshadow everything else which has actually been a fair point, it's been the case and that has been the way for the last couple years. excellent, sylvia, thank you for

bringing us that interview with the prime minister of finland there. also coming up on the show, hong kong exchange presses ahead with its approach for the lse raising the prospect of a hostile takeover. plus, thousands of pro-democracy demonstrators defy a police ban and return to the streets of hong kong market impact with mark mobius is coming up next

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♪ welcome to "street signs" i'm joumanna bercetche and these your headlines oil prices surge following a attacks on two of saudi arabia's biggest oil facilities, cutting the kingdom's production in half. oil and gas stucks buck the wider european selloff as the sector hits the highest level in over a month but airlines feel the heat from the crude price spike. iran denies culpability as washington blames them for the attack and stands by with emergency oil reserves with president trump saying the u.s. is locked and loaded. and china's industrial output growth slows to more than 17-year low in august, another

sign the u.s./china trade war is weighing on the world's second largest economy. well, the disappointing china data and geopolitical risks are weighing on european markets this year. all three major indexes in the red. ftse 100 down .2, buoyed by the oil stocks at the top of the index, bp is up 4% one of the few bits of green on the european indexes today there are some of the chemicals that bsf are having good day today, benefitting from the partial shutdown out of aramco, but generally speaking the mood is pretty negative the ftse mib, the italian index down more than 1% and banks are also trading in the red this morning as well as we see a renewed bid for fixed income a lot of red on the board. let me take you to u.s. futures as well.

we had somewhat of a lukewarm session towards the end of the week last week with the majors now about .5, .6% away from record hies, but as i mentioned overnight, we have the heightened geopolitical concerns, the spike in the price of oil, so this market -- these markets are also being gripped by little bit of negativity as we head towards the u.s. open. all of the three majors are seen opening up in the red later today. now, crude prices are trading sharply higher after a series of attacks shut downout put at two of saudi arabia's biggest energy facilities jones hit the world's biggest oil processing plants both owned by saudi aramco. the two sites account for 5.7 million barrels of daily output which is around 5% of global supply now russian energy minister says he will speak to his saudi arabian counterpart today following attacks on the

kingdom. he said there are enough stockpiles to cover the short fall from riyadh new uae energy said there is spare capacity to meet supply in the event of a shortage but oil doesn't trade like that's the case we have oil up 8% and brent just shy of that $66 handle let's take a look at other safe havens as well heightened geopolitical risks we have gold trading through 1,500 now .9% firmer on day. yen trades a little firmer versus the u.s. dollar to the tune of .51% very happy to say that mark mobius joins us on the show. so much going on today i just want to ask you your take on safe havens i believe not so long ago you told us at cnbc that you like holding gold positions here. so i'm guessing with the

gentlemen owe political developments overnight you feel even more emboldened with that view. >> exactly this really underlines the importance of having some safe haven and gold is one of them. the other is basically emerging markets generally have not really had a big negative reaction on this news. and it's very interesting to see because i think people are beginning to think, maybe we should be looking to brazil, for example, to their oil supply, to max k mexico and other countries in terms of where oil can come from. >> those emerging market economies could be seen as a marginal positive. >> exactly you look t a the reserves that brazil has, you'll see they can produce quite a lot of oil. >> when you think about the geopolitical risk on the rise, but mostly for the most part of the last year, the markets have just shrugged that off clearly this incident is different because it's directly targeting aramco and overall 5%

of the world's global supply why is it for the large part markets tend to be generally quite resistant to geopolitical developments the reason i say this, stock markets in the u.s. are .5% away from record highs but all of this has been going on in the background. >> exactly i think people are numb frankly. there's so many things going on. just the china/u.s. trade dispute and all the other things happening around there, there's strategic issues you realize that people are not thinking, i have to accept the risk and just like goes on that's really what's happening. >> but as an em investor, how do you think about accounting for that additional risk premium and it's not just geopolitical risk premium, you also have political risk premium you think about it, emerging markets are no stranger to turnover in the political situation, populus movements on the right and the left, but now we also see that in advanced economies. in europe, u.s. you could say president trump is a populist

president and therefore it makes the traditional alliances and behavioral patterns a lot more unexpected, an additional layer of uncertainty "squawk" do you think as an em investor, you have additional political concerns because you just don't know how whether or not the traditional alliances are going to hold in the future? >> absolutely. the advent of millions and millions of cell phones or smart phones is creating a completely different equation in emerging markets as it is in developed countries. now people can get information much quicker and can organize themselves you can see what's happening in hong kong. it's an incredible development as a result of the smart phones. >> we'll get to that and one thing that ms. jen was saying earlier as a function of this trade war you do expect to see the supply chains being shifted there's an actual change taking place within the chinese

economy to be less reliant on overall foreign input going into the way they construct their own industries. >> chie is certainly going to work closer with asian countries inside that region so, rebuilding supply chains will happen but boost kind of its relations with the neighboring countries, but still china is becoming more and more independent even despite this in terms of producing its own high-tech components. >> all right we'll pick up the conversation in a little while, but i also want to take your attention to something that mr. mobius just mentioned the protests once again turned violent in hong kong over the weekend. police used a water cannon and fired tear gas to break up protesters the unrest erupted aphthouses of pro-democracy protesters marched

through hong kong defying a police ban hong kong exchange vowed to press ahead. despite lse rejecting the offer and refusing to engage with the hong kong exchange we are joined from the lse and we just had some comments from andrew bailey saying that britain must not start from position where it is a taker of eu rules a different headline says he is listening to and observing hong kong exchange offer for the london stock exchange but they have taken no position so those are comments out of the uk markets watchdog, but it seems as though all of the information over the weekend sin creasingly pointing towards the possibility of a potential hostile takeover. >> well, joumanna, the hong kong exchange has left the door open to go down that path should they choose to. at this stage they have until october 9 to the formally launch an offer for the lse or they will have to walk away now we know over the next few

weeks that hong kong exchange management team plans to meet with lse shareholders the try to push this deal we could see them try to sweeten the offer, so they could raise the cash component, for example, or they could offer some assurances around governance, which is one of the key concerns politically for this deal. the fact that nearly half of the board members on the hong kong exchange are appointed by the hong kong government and the hong kong government is the number one shareholder in the company. lse shareholders will be faced with the question do we continue to support the refintive deal, $27 billion deal agreed back in august which has received a widespread praise from lse shareholders or opt to go down this politically sensitive, riskier route of the hong kong deal now, one thing i want to highlight are some comments over the weekend from china and this came through in the people's daily that official newspaper. they effectively applauded lse's rejection of hong kong exchanges offer and praised their

preference to access china through shanghai now, this comes after in their rejection letter the lse effectively said their shanghai stock exchanges are preferred and direct channel to access the many opportunities with china. and of course the reason these comments are interesting is from political perspective it's difficult to see a hong kong getting this deal across the line without support from beijing. then of course from a deal perspective, it raises the complication of hong kong getting this deal across the line so a lot for ls-e shareholders to consider and this is one development we'll be watching closely over the coming weeks as hong kong exchange engages with those lse shareholders joumanna >> certainly a story we're watching closely i want to bring back in mark mobius and the professor from lse. were you surprised at this hong kong exchange offer to take over the lse? >> yeah, i was kind of surprised

but in a way it was in line with what they've been doing. they've been making acquisitions and they probably want to expand further so that they can call themselves more global rather than just hong kong oriented interesting aspect of this is in some ways it's kind of a statement of independence on the part of the hong kong people saying, look, we can do our own thing. and we can do it without china and it's interesting that the reaction of china has been negative in other words, seems that china wants to diminish the role of hong kong and increase the role of shanghai. >> professor, do you want to weigh? >> you know, china has made a serious commitment we're already seeing that open financial services and i think that is a very momentous change going forward and i think in general consolidation trends and exchanges hong kong and the mainland are still differentiating themselves in

terms of their respective advantages, so not surprised by the reaction but in terms of where china is going in terms of welcoming more participants, it's -- we're not surprised that china the mainland wants to push for more focus on shanghai. >> let's talk about their relationship between china and hong kong because a lot of damage has been done over the last four months and even though the extradition bill has formally been withdrawn, that still doesn't satisfy the four other demands from the demonstrators. do you see a resolution in sight? or is this a problem that's going to linger for a very long time >> well, we got a look at what is it a symptom of i think the problems are deep seeded root problems in hong kong, especially the really bad inequality and the fact that the prospects for the young generation snot so rosy. that's a big difference from the young generation in the mainland it's a fragile situation the chinese government has

exercised maximal restraint, which is in its position the right thing to do. but i think they're just waiting for it to kind of play out over time >> and mr. mobius, when you think of hong kong and investing opportunities, are you worried about the disruption this has caused, economically, sociosickically and long-term prospects especially when it raises the question over sovereignty and the hong kong links to c s ts to china >> it's a real problem, definitely the longer it goes on the worse it will get, i believe, because the pressure on the leadership in beijing to act will grow and grow so, it's really a worry. it's something that we have to watch very, very carefully because in a way we look at the prospect of losing hong kong as a major financial incentive for the rest of the world. this is a big, big, big change. >> what type of ramifications do you think that would have on the global economy as you mentioned hong kong is a major financial

exchange. >> unless china can open up more in terms of allowing foreigners to invest, then china will lose. because a lot of the investments going to china go through hong kong so this is something that i'm sure they're looking at very, very carefully and have to consider >> more broadly speaking, have you changed your allocation and your focus of where you want to be invested because of the developments not only between china and hong kong over the last couple months but also due to the trade war >> well, because of the trade war, we obviously didn't want to put too much into china although china is still big in the portfolio and want to increase more in india and other parts of the world, so diversify indication is the name of the game, even though if you're an index provider or index investor, then china, of course, is number one. it's the biggest part of the waiting, but in our case, since we're active investors we don't have to follow that index.

we decided to move away from china and reduce the amount we have there, although it's still large in the portfolio >> and i just want to bring it back to you as well. we talked about the monetary and fiscal responses out of china, we haven't talked about their response with the currency how much of a weapon do you think that is when it comes to settling these trade disputes and for china to apply further leverage over the u.s. here? >> i wouldn't call it a weapon there are lots of levers the chinese government is pulling to help smooth the economy. look, they're bad news the exchange rate response you have more flexibility in the exchange rate response to things like a tariff increase, depreciation being a natural i wouldn't say that's a weapon that they will actively use because it will backfire. >> there's been talk of more dollar intervention. we'll leave it there associate professor of economics from lse, thank you for taking the time to chat with us on "street signs" today and mark

mobius, stay with us for another chat. president trump is reportedly getting ready to stop tariffs on european products that could exceed 5 billion euros according to political siting for eu officials who say the wto has sided with the u.s. in a long-running dispute over eu subsidies given to air bus. the media company reports a confidential decision was sent to brussels and washington on friday air bus is down 3% but also luxury stocks are also selling off on concerns it could be one of the sectors targeted by tariffs as well. so some of the big names in luxury are coming under pressure you can see lvmh down 2.2% burrberry down and gucci down .6 percentage point as well definitely in the line of fine if there is another round of tariffs. get involved in the conferring, tweet us or tweet me directly.

definitely a lot going on this monday morning in europe. also coming up on the show, president trump calls the fed bone heads and demands a rate cut, but will chair jerome powell oblige? more on that coming up in a little bit at cdw we get you want happy, productive employees. well we've made our office pet friendly. [ bleat ] [ cooing ] maybe a little too pet friendly. well you know cdw can design a mobility solution with light powerful devices from lenovo to make your people more productive in or out of the office. anyone have any questions before we go? that's great cause i really need to get out of here. snake people are freaking me out. hey sheryl, you have a sec? -nuh, uh. for work place productivity you need lenovo, and it orchestration by cdw. people who get it. doprevagen is the number oneild mempharmacist-recommendeding? memory support brand. you can find it in the vitamin aisle in stores everywhere. prevagen. healthier brain. better life.

♪ welcome back to "street signs. the federal reserve is widely expected to cut interest rates on wednesday let's get back to mark mobius. the market is expecting the fed to cut interest rates by 25 bases points and certainly they want even more out of the feds, but should the fed be cutting in your view? >> actually if you look at it from a strict financial, economic point of view, they probably should not be cutting. >> right. >> and that's true for the other central banks around the world we're all headed down to crazy low levels and negative interest rates and that sort of thing, so from a strictly economic point of view probably not, but i think the pressure will be too great and they'll probably want to reduce. >> what about the concerns abou

the warning signs in the industry there are a few warning signs out there. so the rational is they just want to get ahead of the curve >> well, that's right. they're looking at the trade war, tim pact that's having. there's no question there will be some economic impact in the u.s. in the short-term at least. and therefore they probably are going to react to those numbers and say, well, maybe we better move and get ahead of the curve. but don't forget there's another aspect to that all the other central banks around the world reducing, lowering interest rates the u.s. can't be left standing you have a problem of the u.s. dollar getting too strong against the other currencies, so that's another part of the equation that they should be looking at, whether they are or not, that's another question >> so let's talk about that. there are reports over the weekend saying that the trump administration is actively considering intervening in

currency markets how much of a big step would that be if the u.s. really did start to do that >> it would be a big step but it would be very difficult for the u.s. to do that because the u.s. dollar, unlike all the other currencies, is a global currency so it would be very difficult for them to do unless they really brought down interest rates to negative levels then you can see a weakening of the u.s. dollar, but right now people are saying, look, i'm getting negative interest rates in euro, swiss francs, forget about it let me go into u.s. dollars. >> the rational for the president to put pressure on the feds is correct. it's in the right place. essentially if you want to get a weaker dollar, then you have to slash rates and take them to lower levels speaking of this lower interest rate environment globally, cutting to record negative rates of minus that's

raging is whornt these negative rates are actually having a positive impact on thee you stt debate >> i think the whole theory of lowering interest rates is insane and it really doesn't achieve the purpose that they're trying to achieve they're talking about getting 2% inflation, well, that itself is a crazy theory, in my view they should be reacting to what happens to the economy and let the economy decide what interest rates should be prevailing that's the problem with the central banks they're not listening to the markets and really allowing the market to determine the interest rate and what the value of money is. >> and it has huge repercussions on emerging narcote ining marke there are bonds you wouldn't expect trading at tight yield levels are because everything else is trading at negative. how do you think about valuation in that environment where everything seems to be overvalued >> that's the reason why you

have the situation where the market is not able to properly assess risk, so you have a situation where people are getting negative interest rates in euro, let me go into u.s. dollars and let me put some money into argentine bond because it's paying much higher rate and i'll take that chance because i'm getting negative with my currency right now so you have a situation where risk is not properly assessed. >> quick comment on argentina since you mentioned it and given your background in em investing, do you think the imf made a mistake by going for such a big package there? >> of course they made a big mistake. it's not so much giving the package but not properly assessing whether the government in argentina was doing the proper thing in tightening up on all of the give aways that the government had. and that was the problem that they're having they're always going to have this problem because they want the government to tighten up on these spending patterns, but

then at the same time that creates political risk. >> exactly when ever things go wrong, they reintroduce the subsidies. we have talked a lobt about the downside risks of the economy. where are you looking to put your money >> we're looking at places like brazil i mentioned brazil is really moving forward on reform we like looking at turkey now, believe it or not, we had a massive devaluation of the currency, but at the end of the day there are some very good companies there, southeast asia, indonesia, korea in many cases there are a number of very good companies in korea, taiwan, vietnam as a frontier market looks attractive and thailand. so these are the economies that look quite interesting at this stage. >> even within the backdrop of a trade war there are still areas and geographies you can still get exposure to that actually could benefit. >> definitely. there is a lot of manufacturing

that's moving to these other countries. >> sir, i'll leave it there. thank you very much for taking the time to speak with us today. mark mobius founding partner of mobius capital partners. before we head out, another reminder of where brent is trading this morning after the news over the weekend, brent has shot 8% higher about $5 higher from where we were on friday wti just shy of $60 as well but also up a similar amount and having knock-on effects everywhere quick look at u.s. futures all the major indexes seen opening up in negative that's joumanna bercetche. "worldwide exchange" is coming up next. the rich, hydrating cream is formulated with vitamin b3 and peptides to plump skin cells, brighten, and visibly smooth wrinkles.

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♪ it is 5:00 a.m. at cnbc global headquarters and here is your five at 5 aramco attacked. saudi arabia shutting down half of its oil production after a series of strikes at two of the largest oil processing facilities in the world. and locked and loaded. president trump says the u.s. is prepared to respond to those attacks once the true culprit is revealed oil, yes, is surging on those attacks. brent crude seeing its biggest intraday rise on record. then u.s. equity futures pulling back as the major averages remain just a poin