and that's all for this edition of "dateline." i'm craig melvin. thank you for watching. [theme music] >> we'll come out on january 31. we have a deal that is off ready. ready to go. >> within two months negotiate an incredible leave option and within six months put that to the british people we are bringing you the latest details from the european central bank stability review. showing weak profitability and increased risk taking among shadow banks showing the risk will exacerbate the build up of vulnerabilities.

merited in several countries talking about public debt positions being manageable despite deteriorating macroenvironment growth is expected to remain subdued longer than expected remaining muted in a low rate environment supports economic activity signs of risk takes need monitoring and indeed action banks in the euro area are all trading negatively there, the swiss banks having resisted. banks renewed cyclical head winds and reviewed progress. euro area banks are adequately capitalized, despite the fact, a lot of those european banks trading lower. my colleague is outside the bank

now, what isdifferent about this report than the one we saw back in may? >> reporter: a little more gloomy, i would say. also the comments on the economic down turn are a little more pronounced also those negative rates to have side effects. i think it is a bit more pronounced than previously it is happening. we are seeing it in certain markets like real estate markets. it will be interesting to see what the vice president of the ecb and who is responsible for the financial stability report is going to say about individual markets. the lower for longer negative rates or zero interest rates is putting an enormous burden on the profitability of the banks

it wasn't clear back six months ago that we got the big bank announcement from the ecb in september. back then, the scenario was a different one. this is weighing on the concerns about the side effects of financial stability. having said that, one clear area is the excessive risk taking of nonfinancial institutions that also pension funds and insurance companies that try to boost their returns because they have to match their liabilities that's one area the ecb is looking at closely because excessive risk taking could lead to serious financial instability in case we had a sudden repricing of those assets. having said that, those areas are the main areas of the

financial stability report the low profitability of the banks is one of the major concerns for the ecb especially because we are at the peek of the cycle and here on, it will only get worse for the banks also because of the economic down turn, even if it is not going to be due to the recession. for that, we are back to you >> you mentioned we look gloomier from may. you mention they are expecting a cyclical recovery. are you seeing any grounds for optimism in this report? >> no. i don't think there is a lot of shared optimism. what they are currently seeing is a more pronounced economic down turn and not something that

looks like a cyclical recovery on the back of the lower for longer economic monetary policy and those hopes that trade conflict will eventually be resolved that is something apparently the ecb is not seeing as a dominant scenario according to that report back to you. >> to discuss this in more detail, managing director and the investment director of aberdeen investments let me start with you, elizabeth. do you think the banking sector here in europe has addressed that effectively so far? >> no. the challenges continue. when you have the low interest rate environment it makes it hard for the banks to adjust.

they've got. we are seeing pressure on the net interest income on the bank side they are making efforts to adjust we are seeing a lot of cost programs and restructuring those have an impact as well even the nordic banks which are generally more profitable. we've seen the costs go up i agree with the conclusions of the report that it is a challenging environment. profitability remains under pressure >> let me ask you, how does that profitability problem get addressed in your view >> it is very difficult. until you get to that point, you can get the normal monetary transformation where they can increase the net interest margins.

getting the top line higher rather than what they are focusing on. they've done a remarkable job for that it leaves me feeling from an equity investor check for credit there is still plenty of opportunities around >> for you as a credit focused investor, what can the ecb do to help banks return to greater levels of profitability? >> i think try and encourage more across border mna would make seps to me. if you want to cut out costs we've seen a number of big names like commerzbank and deutsche bank, a lot of that would be

good from a revenue side, it is really hard for the ecb to do much apart from helping with teltro it would be hard to do much more >> do you agree with what he's saying about consolation. do you thinks that the right approach >> we hear a lot of comments where we see more scope in the in-market consolidation. the italian banking sector is where there is a lot of small banks struggling it generally requires extra capital where mergers work and actually cross border is harder. it is just harder to make a case it is harder for the banks to do a profitable merger or acquisition. different rules require that it

makes it harder to create. >> what about the impact regulation has on the ability of some of these banks in places like sweden for instance to see these cost cuttings work, to see costs come down? >> right that is the business of being a bank today certainly compliance costs, anti-money laundering. these rules are so important that's not going to change other cost areas where they'll have to veinvest in are digital. within the scope of each areas where they can cut costs in the end, there was this sort of challenge that there is a need for strong banks with strong capital basis

that affects the overall profitability. there is no easy lusolution to broadening that. >> as our colleague was saying, growing a little gloomier. they put this down to things like trade tensions and brexit is there a magic wheel by the ecb or policymakers that will see those down side risks potentially disappear? >> with the next tariffs kicking in against china and trump manages to achieve what he calls his phase one trade deal that gets us around the hump and maybe gets a little confidence we are now in a position where so many chief executives have

lived through a year of uncertainty in 2019. what i've been calling peek uncertainty in 2019, it will take some time before they get their confidence back to vest in cap and stock and growth and new markets drive going forward. they need to because the consumer has already reached a peek in 2019 i am in agreement here growth looks tenuous it's hard to come by and very frag i' fragile going through to 2020. >> we had the greek trading there on the screen. i wonder, the ecb talking about the sovereign debt risk and these conditions, things are all right. if the economy are suddenly sharp and if something triggers

that to happen countries like grease or spain all happen, they come under a due amount of pressure in terms of how you respond to that, what do you think would be the cause. >> so on the banking side. in fact, the banks have had a relatively good run. certainly we've seen even banks accessing the debt market and italian banks. i don't think we see the problem there right now. but you are right that these countries that have got the largest stocks remaining those banking systems remain vulnerable until they manage to get rid of the nonperforming

problem. a lot of the banks are busy getting their loans off the balance sheet. >> if you talk to italian bank ceo, they are very keen to say look at our loan numbers >> which is good >> of course are you seeing that trend outside of italy >> yes there are signs that having even the banking system where even the stocks of nonperformin nonpg loans may go down. there are signs they may even be picking up in the uk and even some nordic countries. still wait and see how the economic back drop develops. >> you have to make the

distinction between these. thank you elizabeth. and luke we'll hear more about the stability report later today when my colleague sits down with the ecb vice president coming up at 13: 15 central european time. unveiling the minutes from the fomc they voted to lower interest rates for the third time this year don't forget there were two members that dissented there will be a pause for a rate cut. you can catch that interview at 16:15 cet. coming up, president trump

threatens more tariffs how will that affect the phase one trade deal more after this break. ocal. ocal. shop small and watch it add up. small business saturday by american express is november 30th. tothe problem is corporationsfix anything. and the people who run and own them have purchased our democracy. here's the difference between me and the other candidates. i don't think we can fix our democracy from the inside. i don't believe washington politicians and big corporations will let that happen. the only way we can make change happen is from the outside. for me, this comes down to whether you trust the politicians or the people. and if you say you trust the people, are you willing to stand up to the insiders and the big corporations, and give the people the tools they need to fix our democracy.

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>> welcome back to the show. hsbc intends to replace the head of vest. banking. the bank is restructuring the unit that has underperformed there is not a named replacement but the move is set to be announced late this year or early next year. in august, the bank saw the chairman resign. at the time they said it was time for a change. shares of swedbank are lower after it is said they may have violated u.s. sanks. they may have facilitated a million euro agreement between the gun maker.

they are still investigating the information. >> shares of wirecard after it was said ey refused to sign off on the singapore audit in a statement, wirecard said it was regulations that prevented them from completing their work. when you look at europe, you can see the stoxx 600 trading down new stories like that one on wirecard clearly a part of that story. we look at the individual markets, you can see the consistent picture across the board across the major indices ftse 100 down almost one percent. the dax trading off around three quarters a percent and the ftse

mib around a percent let's look at the sectors of how they are playing out health care slightly below the flat line, food and beverage down, basic resource coming under pressure as we hear more and more of this tension when it comes to trade oil and gas are also trading down 1.3%. let's dive into some of the banks and how they are trading in response to the report. you can see deutsche down almost 1.5% in spain, trading off 2.5% and down 1.8%. concerns about sovereign debt risks in countries like italy and spain and concern of recession in germany alongside of this when it comes to continued low profitability.

china's central bank has cut its lending rate in a bid to boost now at 4.15% the third time that lpr has been cut. president trump has threatened to hike tariffs on chinese imports again in december if beijing does not agree to the trade deal phase one has taken the last few weeks of back and forth. trump was not all doom and gloom when it came to the relationship >> china will have to make a deal that i like that's it. i'm happy with china right now it will be over a hundred billion dollars. china never gave us ten cents. i gave a lot of money to the farmers. i'm helping people that need help

they are paying for it those tariffs are paid because they devalue their economy they had the worst year in 57 years. with that being said, i have a good relationship with china we'll see what happens i'm very happy right now if we don't make a deal with china, i'll just raise the tariffs even higher. >> going to our guest still with us i want to ask you in terms of the rhetoric and also from the u.s. congress, we've heard from the senate about their views on hong kong protesters, how does that poison the well when it comes to negotiations? >> it could make things very difficult if it gets all the way through the senate and gets to the president's desk as a bill for him to sign or not sign. let's say he decides to sign it, that makes it very difficult

barring in mind the rhetoric we've had from china about the u.s. not interfering with hong kong whatever their plans might be for the long term, that would make the trade deal increasingly distance especially in the short. we could get to trump's desk he could say, no i'm not going to sign this right now. we could see exactly the opposite this is the problem with the whole trade situation. it is really bifurcated outcome. it happens or it doesn't the outcome is so big it really pushes equity, bond and credit markets around >> a trade happens or doesn't happen but if it doesn't happen in a few weeks, we'll see the tariffs kick in mid-december how are you positioning for that is how should people position

for that possibility >> i think that is getting towards my base case right now i think there are risks all around that gets delayed china could take time to get ahead of this whole thing. trump throwing the whole deal out. the more recent trend for people to be looking for better growth next year could get disappointed quickly. a lot of that is around the trade deal getting done. i remain skeptical about that. we are longer duration as long as i can remember in some of our bond funds and have started to pair back some of the riskier parts where we've had good profits so turning more defensive as we get closer and closer to december >> luke, i want to tie this on comments of trade to the u.s. president. do you think the banks

assessment that its risks by 2020, do you think investors have priced that sufficiently? >> if we are thinking about the eurozone as a whole, that does sound reasonable there is a chance the whole quarter will get revised down. if you look at the pattern,it is increasing steadily at the moment for the whole of europe, i'm likely a little bit skinning a stone across the water for the next 10 years in europe, beyond the recession and very low growth will never really take off and the risks that it sinks and we go into that session are increasing it is a pretty narrow path to

think they've fallowed frollowem here >> we'll get those fomc minutes in a short time, do you expect them to be as pessimistic on that part of the atlantic? >> the fomc is pretty conflicted at the moment. i think jay powell has taken them to more of a dovish tilt for now. let's see what happens this is a midcycle correction. i think he's wrong i think we are in an end cycle in the u.s the curve back in august told you that we'll be living with that inversion the next six to 18 months it may be into next year before the fed realizes that the risks are still very, very high aroun that for now, i think we'll be on

pause for the next quarter or two. the minutes are going to show the employment is okay, consumers is great >> thank you for that at the moment joining us live in the next half an hour, we'll cross live to moscow for comments from vladimir putin that will be at 10:45 central european time. coming up, the leaders of the uk's two major parties they faced off against each other. we'll bring you the details of that debate after this break it was sophie's big day. by the way, she's the next mozart. as usual we were behind schedule. but sophie's enthusiasm cannot be dampened. not even by a run-away donut.

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>> welcome back to "street signs. i'm willem marx. the stoxx 600 slumps to a two-week low after a down day in asia the ecb says key profits are a

risk we'll hear from the central bank's vice president at 13:15 president trump threatens to increase tariffs on china. >> i have a good relationship with china we'll see what happens i'm happy right now. if we don't make a deal, i'll raise the tariffs even higher. >> leaders face off with brexit at the center of their first tv debate >> we certainly will come out on january 31st because we have a deal that is ready to go >> within three months, negotiate a credible leave option and within six months, put that as a referendum to the british people let's check on how european

markets are doing. the italian ftse mib has recovered slightly we've had that financial stability review from the ecb that has been a bit of a drag. the cac down almost three percent. let's check on the currency market as well we'll seen the dollar weakening. down around a tenth a percent. the euro weaker against the dollar and the pound trading slightly weaker against the dollar and so often a marker of the political sector here in particular looking at the u.s. futures, the nasdaq hit a high yesterday and s&p 500 andown trading at record lower. the dow jones off more than 100

points at this stage the nasdaq looking to open lower by 35 points russia is unlikely to commit to oil production cuts. arguing that siberian oil wells will explode if they are halted during winter conditions russia is expected to back existing agreements with the demand waning over the next year brent prices are down almost four percent since the start of the week dan joins me from moscow you've been speaking to russian head there's what have they been saying to you? >> this is really interesting isn't it, willem, because oil is critical to the russian economy. a great opportunity here to

check the pulse on russian business heading into 2020 and beyond one interview we've done is with the chairman and president of etb. the second largest russian bank. he said the biggest risk heading into 2020 is weak oil. that is something weighing on their mind at the same time, look at the state of russia's economy as well oil is important we saw growth at 1.7%. it is the most we've seen throughout the most of the year. the russian central bank has been very proactive. they've cut interest rates four times bringing the rate down to

6.75% to drive growth and improve the economy. i asked him to characterize the state of the russian economy today. this is the boss of the etb. listen in. >> that will be the fast economic growth. the forecast is around 1.3%. russia is an open economy. what is happening in the world and slower economic growth in china and the world affect russian economy. we also have our domestic problems with the lack of investments and lower domestic demands. >> weighing in on the state of the economy today. a lot operating under u.s. and european sanctions also just had the opportunity to speak with the boss of reif, russia's sovereign wealth fund

interestingly, he told me that united states is actually undermining its long term influence. according to those sanctions facing those from the united states and the trade dispute he said a resumption in economic dialogue is essential in maintaining economic stability >> we have to keep in point the u.s./russia relations. they are at the worst point ever we need to step up and show solutions. we've done it with saudi and japan. we are working quite a bit with u.s. businesses. we expect the delegation at the economic forum and the dialogue will be one of the pillars to start moving to a good zone.

that's important >> so the message from the rdif is clearly let's take the focus off the politics and return the ownness of responsibility of reestablishing ties with the united states on the business front. whether you look at the overall equity market. those have out perform that is up about 35% financial stability is pouring through here and dividends have paid out as well whether it continues in 2020 has remained to be seen tying it back to the energy picture. up more than 15% and a little

bit of pressure to not necessarily deepen those production cuts because russia is relying on more export as it works through the transition a number of interesting stories to unpack here we are going to hear from russian president vladimir putin. we'll bring you those headlines. back over to you >> thank you for those comments. moving back to the uk, boris johnson and jeremy corbyn have clashed over brexit. the prime minister insisted he would break the current dead lock to deliver a current exit while the labor leader delivered a plan that included negotiation of a new deal and referendum keen to execute their plan immediately. >> we certainly will come out on

january 31st because we have a deal that is oven ready. it's arready to go. it is approved by everyone of the 635 conservative candidates and delivers everything we wanted from brexit our whole country comes out entire and perfect all together >> jeremy corbyn on the other hand promised a new deal and new vote >> we will negotiate a credible leave option and within six months p months put that to the people to decide whether leaving or remaining. that will be the choice put before the british people. the idea that prime minister's deal can be dealt with and finishes by the end of january is nonsense.

he's proposing a trade deal with the united states that would take at least seven years to negotiate. to our guest now a professor from london. thank you for being with us. do these debates make any difference in voting >> unless something went very wrong for the candidates i think these kind of debates we didn't used to have probably don't have that much effect. they do without question influence the way the election is covered by journalists from here on. all the papers are trying to analyze it and see who won or lost in that sense, they might look at the way things are described early on

just to talk about the details of the conversation between the two men, johnson repeatedly pointed to the fact that jeremy corbyn did not vote on the deal whether remaining in the eu or competing. corbyn asserted that johnson as part of any trade agreement with the u.s. would open the british national health service up to u.s. pharmaceutical firms. these are put through focus groups, do they have any impact on voters, do you think? >> it was a great deal of repetition from both you are right. boris johnson saying get brexit done and corbyn saying, if you vote for that deal, it will indeed privatize the nhs

you are right. these are standard lines used again and again. >> does that repeated messaging. does it work >> there is some evidence. in the past, we've had elections where leaders of the party have worn hard hats seen on building sites. they are designed to get through from reputation. they probably do get through, yes. >> jeremy corbyn said if he were to get close to a majority, he would do a deal with the scottish do you think that is an absolute certainty that the s&p strike a

deal with them >> if labor were the biggest party but they are not if labor ended up with an agreement, as day follows night, they would insist on the referendum of the position coming forth in the government they wouldn't have much argument about that >> interesting we've seen video thereof jeremy corbyn that would undercut him there. on the conservative side, boris johnson said he wouldn't make any deals with the brexit party. the brexit party has decided not to stand constituents. even ifs that the case, do you think their presence where they may win seats or potentially

take seats away will act as a barrier? >> it is certainly the biggest threat the brexit party where they might sigh fon off conservative votes is probably an advantage to labor having said all of this, conservatives are well ahead in opinion poles. hovering around 30 it would require an enormous amount of damage in these kind of seats it is clear that this general election is one where presenting any constituent results is going to be clear >> given one final question for investors and business owners and citizens watching this

election, not which should they follow closely but what kind of constituency could be a bellweather? >> you are looking at the midlands famously place where it could be imagined to be one in the part key to the manufacturing economy. now, if the conservatives are making head way in seats they didn't hold before that is and indicator that they are doing well as a whole. >> the poe fesrofessor from then school coming up, the u.s. senate angers china with new action it has taken over hong kong we'll have more details in a moment's time.

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>> welcome back to the program investor concerns were compounded when the u.s. senate

passed a bill that supported human rights in hong kong. china condemned the deal it comes as the polytech university is crippled for the fourth day >> this monster used to be the hong kong tunnel the main artery by which millions would get to and from hong kong island every single day. it has been closed for weeks or months now i don't want to use the word vandalized by certainly trashed by protesters here that could change soon road repair crews have been very busy about half, seven of the 14 lanes have been cleared of debris

hong kong officials said earlier today that they want tunnels like this that have been closed reopened as soon as possible it begs the question, what about the protesters including the kids stuck behind the walls of the polytech by our count, there is probably less than 50 left. the siege could be withering the broader crisis may have more to run because hong kong now officially is caught stuck smack in the middle of the u.s./china trade war. china acting angry over the u.s. discussion to pass the act because it would ensure if it becomes law that hong kong

retain its privileged trading with the u.s. and continues to be insurance insulated from tar. the broader crisis on hong kong may have room to run and its city and economy and people could continue to suffer cnbc, hong kong. >> the u.s. house of representatives has passed a temporary spending bill that postpones a shut down. they've been locked in a stand off on the budget but president trump came secure a border wall with mexico. democrats opposed that and that has been sent to the senate. the former treasury secretary is calling for tax reform saying that funding needs to be restored to the internal revenue

service. >> i think there are probably too many voices in congress that the idea that low taxes is enable people not to pay taxes they legally owe and want to have an irs that is ineffective of enforcing that's unfortunate will this happen i can't predict. i certainly think it should happen with the right president with the office in management and budget prepare to make the case this seems to me to be the lowest hanging fruit in terms of raising taxes from a high income >> let's stick with taxes.

reacting to the views of elizabeth warren on billionaires and says her wealth tax cannot work >> the problem is that it is completely unworkable. to settle an estate could take many years to settle estate. how do you mark to market your entire wealth every year farmers who own farms, people who own homes. it is not just fancy people with art collections. anybody with a farm or home would have to establish what that home is worth every year. you spend years fighting about it and next year, you have to do it again >> finding out how he might be able to make peace with elizabeth warren and any interpretation of his comments is like looking at an immist

painting >> testifying that they saw efforts of president trump to pressure ukraine one official called the move his worst fear >> adding an oath to tell the truth to one to defend the country, the lieutenant testified today about the july call between president trump and the leader of the ukraine and what he considered an improper demand to investigate joe biden and the democrats. >> i couldn't believe what i was hearing. my worse fear of how our ukraine policy could play out was playing out. >> he was on the call along with jennifer williams. a top state department advisio to vice president mike pence found it unusual and inappropriate. later in the day, the committee questions the ambassador and former advisor, volker changing

his testimony to say he didn't know it at the time, he realizes people around him did tell ukraine to announce investigations in exchange for military aid and to investigate the ukrainian gas company was more about targeting the bidens than rooting out corruption. >> i should have seen that differently and should have raised my own suspensions. in hopes of getting military aid released without entangling foreign policy and politics. he said he worried the july call could play into partisan politics >> my fears have been realized >> he was not keconcerned the t leaders discussed anything illegal. all are looking ahead to tomorrow when the ambassador

gordon sondland is set to testify. he changed his one-time closed door deposition to say there was a quid pro quo let's look at how us futures are opening up you can see after a down day for thedown dow and the s&p. stay tuned the interview coming at 1:15 cet. that's it for today. "worldwide exchange" is up next.

>> it is 5:00 here at cnbc china responds and what it means for the trade talks. boeing inking another deal at the dubai air show after a crushing call from regulators to redesign an engine component the new numbers behind ali baba's offering. president cook -- maybe. president trump and tim cook meet