i'm craig melvin. thank you for watching. [theme music] >> good morning and welcome to "street signs. i'm joumanna bercetche >> and i'm julianna tatelbaum. >> the rates peek ahead of the fed's decision projecting an extra $75 million to markets >> the kingdom's oil supply will be back on line by the end of the month. >> where would you find a

company in the whole world that went through this devastating attack and came out like a phoenix from the ashes none by saudi arabia luxury at a tipping point. ubs down grades. airbus brushes aside concerns to raise the forecast for the next 20 years. we'll speak to play maker's chief commercial officer at 12:45 cet. >> good morning and welcome to "street signs. big day today. all eyes are on the feds the market is anticipating a 25 basis point cut. it is about the language that will come out of the committee

remember the term midcycle adjustment didn't go down well last time. we'll see how the language has developed. we'll be looking for potential decenters. watch out for that too also, i want to point your attention to activity that has been going on in the very short term of the interest rate market a bit of volatility there which has caused the fed to cause some liquidity overnight. a lot to look out for. this is the picture for u.s. yields two-year note traiting at 170. a full cut almost baked in another cut. the 10-year around 178 last friday, we were back around 190. given the geopolitical risk out

there. this is a picture for u.s. yields going to european yields we have the bund at minus 49 we have retraced some what but higher than the ecb. 10-year france at minus 20 and gilt as well today, we are looking at the fed. our colleague took a look at the results of cnbc fed survey >> reporter: wall street is expected to cut interest rates 100% of the correspondents see the feds cutting the rates by a quarter point. all expect another quarter point cut by year end. the problem is that forecast

rates come with reduced out looks for u.s. growth and recession. the chance of a recession soared to an 11-year high it was below 20% for most of last year. growth is expected to climb from 2.2% this year to 2.5 in 2018. economist writes in response, quote, a trade war that continues to next spring or summer almost certainly causes a recession that is likely to spread worldwide not everyone agrees senior strategist says recession talk has been overdone. there has been a slow down but the outlet for holiday spending is good based on high level of consumer confidence for now, respond enters see slight gains for stocks but continued low interest rates

the question is whether cuts will be enough to offset the weakness high levels of the stock market and continued forecast suggest the markets betting the fed will win that fight cnbc business news >> let's bring in our first guest of the morning david miles, current professor of economics at imperial economics business school. is there a strong case in your view for more easing from the fed given we've got inflation near targets interest rates really low, unemployment rates really low. >> i think the economic cases are real compelling. you could make a case. i don't thinks it is an overwhelming case.

jobs are still being created and inflation is a little under target not significantly. there is no danger of deflating from the start the fed balance sheet is not running down quickly the case for the easing in policy and continuing easing in policy is far less than compelling but nonetheless, it seems likely this is going to come today. >> on the flip side, what do you think about the risk of going ahead and cutting rates again down the line? what does it mean for them to do this when it is not necessarily the most economic case to do so? >> risk is the one that doesn't play out in the very short term. in one sense, cutting rates is always popular with people and would save you from getting a

tirade of nasty tweets from the president. the short term risk is limited the risk longer term with the policy when you error on the side of too much easing is that a head of steam builds up on inflation. economy runs ahead of its capacity to produce. then it really takes a tightening in policy further down the road to bring it back on to track. the risks aren't immediate ones. the art is to be always thinking about down the road rather than what is the reaction over the next three to six months >> sir, just to pick up on the point, one of the art of central banking is communication one of the key issues was the

midcycle adjustment term do you think that was a wise decision then to infer that this was a one or two custody adjustment because the market didn't like that >> i think the problem is it is am big uous. it sounds like a minor tweak and there are no more adjustments to come we make this move. that is the new normal we don't mean to deviate from the path you can read it that way personally, my own view is central banks are generally better advised to talk about the fundamentals to stress the fact that what they do has to depend on a range of things we are concerned about. that will happen to wage unsettlements and employment

there is always a certain amount of uncertainty there has always been a fortune to say this is what we predict we'll do we'll have to roll back to softer language. people will say, what do you mean by that >> i was reading a comment by a fed watcher. he made this point he said, look, the result is bionary. maybe the fed will cut and then stop or they really see a strong risk of recession and have to cut all the way down to zero do you agree with that >> i don't think it is necessarily binary you could see the outcomes between the two where they cut back to like a year ago or so, they cut back to 1%. it doesn't look like a certainty

of a really sharp slow down. so you don't go right back to zero i am not sure about the buy farry outcome. >> how does it fall to bpray wit criticism from trump amid the issue with china >> that's a tough one. the fed saying to the extent there are problems being generated by a trade war, it is not easy a trade shock is in some sense a shock to the real economy. it is not obvious that moving interest rates up or down, you

could see a permanent supply shot i think they are well advised to follow the strategy which historically the fed has followed, which is focus on inflation. output pressures and make adjustments in the light of that >> thank you for your thoughts that's david miles let's get to you mania for an update on the markets. >> all of the four majors in europe are trading with a slightly green slant the ftse 100 are up and those supreme court hearings are still going on we have inflation data coming out and mpc team there is a bank of england decision coming out. we'll discuss that with mr.

miles shortly. in germany trading up slightly the italian index is surprisingly the outperformer there. the former prime minister breaking away from pd now setting up his own party called italy lives and taking about 40 with him raises a lot of questions about the future of that government. certainly something to keep in mind i want to keep you in one sector today. that is the luxury sector. we are seeing a lot of stocks come under pressure. this after ubs published a barish note on the sector. analysts say earnings are about to slow down and they put a sell

rating here. swatch there and todds is also one of the names they have put a sell rating on that is one of the reasons luxury trade is there in europe. and looking at auto sales. slowing about 9% for august. that is according to the automobile association key brands were hit hard with sales at volkswagen, renault and fiat all dropping by double digits last year, carmakers ramped up sales ahead of new emissions rules. generally, we are seeing a little weakness transpire in these sectors for today. >> thank you for that update

airbus has revised the 20-year forecast the french play maker has trimmed its out look charlotte joins us around the desk with more 20 years, that is quite an ambitious forecast airbus doesn't always get it right. should we put a lot of emphasis on these numbers today >> the airline industry is -- the airline making industry is one that needs to do this sort of long-term forecast. if you just look at their backlog, they have about seven years of production. they need to look further down the line they have not affected as much they need to look at five to 10 years. they said the jet forecast going

up they are seeing traffic growth and going up more by fleet renewals wra renewals rather than traffic they see china becoming the largest market for an industry like this, they need to predict trends sometimes they need to get it wrong like the a 380 then they have to adjust according to what they think it will be in 5, 10, 20 years >> the stock is trading down today by and large because in general airlines have come under pressure with the move higher to oil prices for investors, how significant is a day like this when understanding what airbus plans are for the future will they make big decisions on the aircraft they build based on

these type of assumptions? is. >> yes they make the planes according to the supply they think it will be they are going more towards narrow planes with less people and fuel efficient they give some hints on the kind of planes they will actually target >> harlotte, thank you for joining us i believe you have a special interview coming up. >> yes i will speak to the chief commercial officer of airbus at 12:45. >> we'll take a quick break. coming up, apple takes the eu to court over a $13 billion euro tax bill more on that ahead (client's voice) remember that degree you got in taxation?

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>> welcome back to "street

signs. got some central bank comments from you he's saying monetary policy can't be the only tool he's calling for risk palsy. he sees them tilted to the down side core inflation in the eurozone still muted. and says interest rates won't rise so interesting comments there from the european central bank member >> some dovish comments yesterday also indicating they may have to cut interest rates further if the situation continues to deteriorate dovish kom dovish comments out of two key figures. >> moving on one of the key focal points brexit a warning the threat of a

no-deal brexit is, quote, very real following his meeting with prime minister johnson on monday he once again stressed the uk must present realistic alternatives meanwhile, the block's negotiator has warned both sides not to under estimate the consequences of no-deal. >> carney is asked to extend his term he isn't expected to be appointed until after the next general election, which is now expected to take place by the end of the year. carney's current term is expected to end on january 1 coming as the uk recorded an up tick over the summer brexit uncertainties still

persist. let's get to david miles mpc member and professor great to have you with us. to get your thoughts on the mpc. do you think the mpc would be hiking if it weren't for brexit? >> i don't think they would be in a serious hurry to do that. the inflation rate now is pretty much right on the target level unemployment is low the economy is growing at a sustainable rate we could make the case after brexit after a normal long-term sustainable rate who knows where it is. maybe 2% maybe 1.5 in the absence of brexit, there might be a pretty serious

discussion even at the meeting tomorrow about the small adjustment up in rates. that is almost off the table >> the uk is a very good example of the phillips curve being alive and well unemployment at 50/60 year lows. is that a template for the rest of the world uk is a good example of an economy where the curve is doing what it is supposed to be doing. >> you are right wage growth has picked up. until recently, it has been a puzzle it has been extraordinarily low. wage settlements until recently running at extremely low levels. maybe the curve is coming back from the dead or maybe just the

twitch of a corpse that just twitches >> that is horrible. >> at least it is not the incredible hulk. it may be that there is a more reliable relationship and very low unemployment rates very early to tell yet >> clearly brexit will have some impact on the economy. we can debate that impact. i'm curious in terms of the currency, to what case does having a floating currency, the pound better able versus if they had a shared currency. having a shared currency would mean you had no independent policy that would be pretty

disasterous. you could paint two different scenarios. you could take the more optimistic view and say, it will be helpful and help create a greater competitiveness to offset whatever negative impact you think comes from the trade that is an optimistic line you could be more pessimistic. i'm not sure where i sit about the short-term impact. if there were to be a panic response, suppose they fall to less than parity with the euro, that is probably far more than is warranted by the underlying long-term economics of beg outside the european union

that would, if it were to happen, generate a spike that would be more of a problem than less of a response to the exchange rate. >> so we'll have to leave it there. thank you for taking the time to speak with us. david miles, former mpc member and professor of economics saudi arabia says output will be fully restored by the end of the month. mike pompeo prepares to land in the kingdom. stay with us for more. ♪ the amount of student loan debt i have i'm embarrassed to even say i felt like i was going to spend my whole adult life

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>> i'm joumanna bercetche. >> and i'm julianna tatelbaum. rate cut expectations as they prepare to inject an extra $75 billion to sooth markets >> the saudi minister says the kingdom's oil supply will be fully back on line by the end of the month. >> where would you find a

company in the whole world that went through this devastating attack and came out like a phoenix from the ashes none by saudi arabia luxury at a tipping point. ubc slaps a sell rating saying brands will struggle to produce growth they expect and airbus raises concern for the next 20 years. we'll speak to the play maker's chief commercial officer at 12:45 cet. we are just getting inflation data out of the uk let me bring you numbers we have the august core cpi.

alcohol and tobacco coming in lower than the forecast of 1.8%. we also had the rpi number come in at 2.6%, so in line with expectations the rpix coming in there at 2.6% it seems the cpi number is a little less than the market had been anticipating. for the headline cpi at 1.7% versus inspectatio versus expectations of 1.9%. that is the year-on-year data. coming after headline and core you are seeing the pound is dipping a little bit we are about .4% weaker. >> the dollar, of course, firmly in focus today. all eyes on that fed meeting later today.

the decision will be released. the euro trading about 2% down versus the dollar. yesterday, the index fell. the dollar just retracing some of those losses. the pound down by .4%. of course widely overshadowed, we have the uk meeting coming up tomorrow let's look at european markets and see where things stand in terms of stocks. we started out a little directionless this morning the fed holding power ahead of that fed meeting now in positive territory in terms of the outperformance, it is coming from the italian index. just remembering yesterday, that was under.

ftse up as well. looking at u.s. futures. a muted open for wall street all eyes on that fed meeting this comes after yesterday when all of those edged in market territory. despite a substantial fall for fedex. we are looking at a fairly muted start to trade on wall street today. >> going back to the middle east israel's election is too close to call. the blue and white party is tied with netanyahu the results show neither would have a point to form a party dan, i looked at the major numbers. it looks like neither one of these has a majority how are these different than the result we got back in april?

>> reporter: the situation is still very fluid israel going to the polls a second time and delivering a result that is still too close to call. this is a stunning blow for the long-serving prime minister benjamin netanyahu essential i will asking the people of israel to give him another vote of confidence at a time when he is facing multiple corrupt charges at home and criticism with a campaign that directly align him with the u.s. president trump and russian president putin. it has been a disappointment for the chief rival who also only received 32 of the necessary 61 seats in this 120 seat parliament it is up to the two to begin the negotiation process trying to negotiate with more religious

and smaller parties to form a majority both leaders spoke saying they are confident they can do so >> translator: there will not be a party that leans on the party. the parties in israel is a jewish and democratic state. we'll begin gaining a anti-zionist government. >> translator: i've already spoken to parties ahead of the party. we've arranged to meet in the coming days. i intend to speak in coming days with other partiers. i intend to speak with everyone. starting tonight, we'll work to form a unity government that will address the need of the people and society >> reporter: at this point, 90%

of the votes have been counted it is still unclear. those negotiations will be crucial going forward. this was an election that wasn't necessarily run on a traditional platform as well the economy not necessarily center stage rather security and defense were the key focal points as this election campaign got under way. in the lead up to the polls, we saw the prime minister netanyahu really leaning to his far right base promising to an ex key parts of the west bank as israeli territory and that angered the palestine authority and arabs who describe that as a dramatic escalation. he could have the potential to seriously change the relationship israel has with the united states. u.s. has long supported israel and in particular, this prime

minister looking for a two-state solution whether that will be achieved and all of this hanging in the balance given the uncertainty the country faces. all eyes on this negotiation as they get underway from this point on back to you. >> a fluid situation there, dan. thank you for your reporting there. in election news elsewhere, spain's caretaker has announced the country will hold a fresh round of elections on november 10 they failed to form a government following a break down in talks with other parties it will be spain's fourth in many years in the tech space, u.s. antitrust regulators have admitted wasting time arguing over how to diffy up legislation between facebook, amazon and google overlapping on the probes.

one senator accused the ftc of a, quote, culture of paralysis in a fight, apple's lawyers are making arguments in court challenging an eu order back in 2016 that requires the iphone maker to pay massive back taxes to ireland now joining us around the desk with more. this is fascinating. it is not only apple appealing here by ireland is against the eu's ruling. give us a sense of the argument. >> we are seeing this fight over apple and ireland over this 2016 order from the eu that apple needed to pay ireland back $14 billion euros in taxes apple is appealing saying it has paid its fair share of taxes it remains the largest taxpayer

in the world the eu is saying it is our place to step in and play this out we likely won't get a decision for a couple of months it could be appealed to the european court of justice. this decision could be dragged on for a while currently tbd, what will happen with that man. >> market investor just got reelected. how much does a story like this set the tone for the beginning of her next term >> very big part of the agenda we saw her taking on many of these tech companies, many of them u.s. tech companies she's also taken antitrust action against google.

we've seen an antitrust probe launched this remains an important part of her agenda as competition and wants to retain her stance of being tough cop on these companies. >> we've heard trump and he's been critical in the past. these companies are very close to the president's heart should we expect to see him and the administration touch in. >> absolutely. what the u.s. did in 2016 saying they didn't agree with the order, they have said this isn't a fair justification from the eu they tried to intervene but were denied the ability to do so. hopefully this will play out for now and it looks like a little while to come. >> thank you, elizabeth. we'll take a quick break

coming up, we'll look to the fed's decision and why the central bank could have more than a rate cut up its sleeve. wanna see something... amazing? olay body wash visibly transforms your skin from dry and dull, to strong and healthy, in just 14s. better believe it, with olay body.

>> welcome back to "street signs. the top stories we've been following are the attacks on the saudi oil facilities on sunday we are just geditting headlines now that say the attacks will have a short-term impact but will affect crude prices this is a comment from the iranian oil minister for anyone following this story, all signs and evidence have pointed either to the original nation of the attack coming from iran directly or indirectly. hear the iranian oil ministry saying it may cause some price disruption initially, we saw brent and we are seeing that trade up >> a lot of that came yesterday

after we heard from the saudis themselves the energy minister says the kingdom will return to full output by the end of december. that drop in oil price came with those comments the facility was knocked off line the chairman hailed the fortitude of the company following the strikes. >> w demonstrated, it is so resilient in a matter of 48 hours, we went back to operations by the end of september as mentioned we will restore the whole capacity if you want to put one of these into perspective this is one of the most resilient companies in oil business >> iranian president rouhani has

blamed the u.s. for conflict in the region in comments, he argued u.s. accusations that iran was involved are designed to heap further pressure and said tehran didn't want further conflict in the region >> we did hear from rouhani saying no one believes u.s. accusations that iran was behind the saudi attack that is to pick up there in the last couple of minutes, we've heard from the saudi finance minister who said he expects nonoil economy to continue to grow growth expected to be in the region of 2.9% overall gdp growth expected to be significantly less than estimates. saudi producing below opec quota that will influence theoverall gdp. just to pick up on those comments from the finance

minister, saudi were overclie overcompliant with those opec cuts and producing even less than they were supposed to these developments add pressure when it comes to their overall output >> reporter: the agreement to make the production cuts or keep the production cuts as agreed. it will be interesting to keep a close eye on the next 24 hours the next few hours, they'll hold a press conference they'll see the evidence the saudis clamt t saudis claim that they tie this attack directly. waiting to hear from the u.s. secretary of state that will be right here and

we'll bring all of that to you live one of the things i've been hearing from sources in washington, this is all part of the attempt to build the international consensus and talk about this as not only a problem for saudi arabia but in the community of keeping oil and gas production save. they have tried so diligently to diversify in the face of vision 2030 and according to the crowned prince's plan to do that at the same point, in terms of tackling what they call iran's ma lined behavior in the region. all of this ahead of the un assembly meeting coming up >> i want to touch on where things stand with the u.s./china deal president trump says he may

strike a trade deal before or after the election saying if he's elected, any deal would be far worse than what beijing could achieve now. >> and the fed is likely to inject $75 billion into the market today the fed provided a $53 million cash boost in a bid to ease pressures. the operation allows banks to borrow cash using treasuries and other securities as capital. >> meanwhile, the repoe market squeeze makes it more likely the fed will expand. saying he expects the central bank to embark on qelite

>> bold calls as usual let's bring in another voice qe, how bad does the situation need to be economically for the fed to restart a version called qe lite? >> i think we are in that situation from a global perspective. it's likely they'll restart it if you look at the rate cuts, i see the market pricing in here at 50 basis points we could go as far as 75 just trying to keep the fine line of doing what it wants but not overdoing. as long as the macroeconomic back drop remains weak and mixed. on the one hand. you have consumption doing well. you are starting to see other areas faulter. the fed will try to support the

economy. certainly the out look for commercial outlook globally has deteriorated these trade wars are taking long tore solve the longer it takes, you see the impact on company earnings that is what really drive equity markets. from that point of view, it has deteriorated clearly advancing what has happened with the saudi oil market do not help that clearly has an impact on septemberment in markets >> to your point about how long trade issues can last. president trump sulgting we may not get a resolution until after the election if we do see the fed go ahead and engage in more easing now, what are the chances we have more on trade and hes tenitatinn

the business community >> they are caught between a rock and a hard place. the reason they are not doing more, if you remember, it calls for 50 basis points in july. they did not go that far they just cannot not act at this point. there is really no room for tinkering about it >> maybe just drawing us now into markets and the trading here we have seen some reversal of the trade in the growth end of the market where they were outperforming value. we have seen a little bit of a shift there now. do you think they have legs if the fed cuts the basis points

today. that kind of shift to growth values is the interesting thing in the market. that will be the trigor for that what will make it continue is if we see the continue in the macroback drop if there is no improvement, value will not outperform growth and callity. >> -- quality. >> internally, you lift up and you are seeing rotation take place going into some of the more defensive stocks. can the market continue to perform if we continue to see that trend >> i think it depends on the markets. the u.s. has gone very far earnings growth has already started to slow down unless you have an extra leg in

this growth, there is a limit to how much upset it can have unless something happens to trigger growth across the markets. >> so heading into this meeting, how are you advising people to position themselves? >> same as we have been advising them the whole time. look at the structural trends. keep your eyes pealed on what can go well independently of what the fed does and does not do clear the trade talks now in my own opinion of what happens with the fed. 25 basis points does not rock the boat >> let me ask you one final question the strength of the u.s. dollar, does that concern you when you think about out looks for next year >> the strength hasn't been that excessive if that point of view.

being surprised more no, i don't think so until we have a real panic in the markets whereby it goes back to the u.s. market and then you get significant rise in thosemarkets, we are fine very interesting take. that is the global head of equities going back to comments from saudi arabia he was talking about the downward projection. we are also getting comments from aramco. he said the aramco listing will still be on the local saudi stock exchange and are considering a secondary listing, ie an international listing. the final decision depends on the share holders. they say the aramco ipo is

moving as planned, most likely to happen in the next 12 months. saying what we heard yesterday showing how resilient the company is to be able to deal with a crisis. >> very interesting comments one last line, he said saudi is in discussions with the lebanon government about financial support. interesting comment there. >> coming at a time when lebanon needs it let's take a quick look at u.s. futures. we are talking about the fed s&p, nasdaq, still early that is it for our show. i'm joumanna bercetche >> and i'm julianna tatelbaum. "worldwide exchange" is up next.

>> it is 5:00 a.m. at cnbc here is your five at 5 show time for powell the central bank prepares to release the latest decision. >> also today, saudi arabia set to hold a news conference following those devastating attacks on two of the largest oil processing facilities in the world. and return to sender shares of fedex sinking. warning on everything. and the ceo of wework laying i