tv Street Signs CNBC October 10, 2022 4:00am-5:00am EDT
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(jay) yeah, and you look very lovely, by the way! you looked quite fetching when you came in, i said, "i'm strangely attracted," and i realized it's the outfit. (jamie) yeah, and the hair. this is pretty out here. where the ... am i? good morning welcome to "street signs." >> and i'm arabile these are your headlines russia accuses ukraine of a terrorist act in the crimea bridge explosion >> translator: as you just reported, it was a terrorist act to the civilian infrastructure
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the perpetrators and those ordered it have special services in ukraine. and a bid to avoid to market dysfunction and daily purchase limit to 210 pounds. investors look ahead to data and earnings. european chip makers come under pressure after the chinese semiconductor market aiming at high tech supplies good morning we are kicking off the show with major political news ukraine's defense ministry vowed revenge after several were killed in kyiv missiles hit critical
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infrastructure objects early monday morning ukrainian foreign minister described president putin as a terrorist who talks with missiles he added that president putin will not break ukraine down. russian president vladimir putin accused ukraine of a quote terrorist act after an explosion at the main bridge linking crimea to russia which disrupted a military supply line ukraine has not claimed responsibility for the attack. however, state institutions were speaking out arabile, this is a severe escalation of events over the weekend starting with the bridge that president putin held in high esteem. it connected crimea to ukraine and russia obviously, the fact it was blown
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up and many says this puts putin on the defensive and a defensive putin is an issue. there were attacks yesterday at zaporizhzhia now we are seeing attacks in kyiv and residential areas and civilians have been targeted this morning this really does mark an escalation we had our correspondent from nbc earlier, cal perry speaking out earlier. >> this is very scary. this comes on the back of russia appointing that new commander to the military the army general who oversees ru russia's air force it is somebody who is close to putin and held ties with putin for a number of years now.
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clearly, you know, this would be something that is close held they probably had a meeting close by and whoever was responsible for the explosion on the bridge to crimea has clearly created this animosity that is now escalated further. it is bound to create worries. >> it is worth pointing out the events last couple weeks don't forget that russia were looking to annex four provinces in ukraine they held illegally they attempted to annex them and followed up by the counter attack by ukraine which was successful and they gained back a good amount of ground that the russians tried to take over from the territories. not only do you have a successful councilter offense since, but the major bridge got blown up anding both of those
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together have president putin in the situation he is in today add to that, arabile, something we have been talking about is the very sheer number of sanctions and the number of universal sanctions agreed and most recently being the latest round from g7 last week to add to the existing sanctions economically and politically on key personnel. > with that, i'm happy to bring from christopher granville christopher, can you talk us through the significance of the bridge that was blown up and why mr. putin holds it in high he seem what is the significance of the crimea bridge? >> the significance is on the level of psychology and morale
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and military operations. i say that as a viewer as almost all of us. i don't want to be the instant expert like the epidemiologist during covid and just applying analytical common sense to what we see the function of the bridge to the logistical supply chain through crimea has not been eliminated the trains are still running even light traffic is running. ferries are looking to move until the road bridge is repaired in terms of psychology and morale, this is a major achievement by the ukrainian operatives who caused the explosion on the bridge and penetrating the entrance to the
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bridge on both sides especially on the mainland russian side this will be, of course, clearly a focus of pretty severe recriminations in moscow how that was allowed to happen the level of psychology, yes in any war, the morale and fighting spirit is important to the outcome. however, i would say as you mentioned the battle front in the ukrainian theater itself and my view is the outcome of the war will depend in the end on what happens on those fronts in the east and donbas and southwest in kherson and in the center and if the forces mount a long offensive from the black
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sea coast and try to cut off the russian occupied terroritories n the middle what happens will be decisive and one side or the other will prevail. one side will lose the ability to fight on. scenarios for both are realistic. that is the outcome. we're beyond any compromise or diplomatic talks it is a fight toward collapse on either side on the battle front. >> as you were speaking, we got lines from the ukrainian pres president zelenskyy. clearly it has been quite the morning in ukraine with the residential targets being the subject to the missile attacks i want to come back to the
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potential off-ramp this is what president biden said last week he said we need to find a way to provide president putin with an off-ramp where would that come from how would that materialize >> well, i may have misread the quote from president biden or misunderstood it if i recall correctly, he said he cannot see whether the off-ramp for president biden lies or something to that effect now by implication, i think you are right. he and his team are thinking about where that off-ramp may lie. the quote is he can't see it if he can't see it, certainly neither can i. i guess the only angle i would mention if only to demonstrate the difficulty of finding an off-ramp, difficulty referred to
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by president biden, is the statement by the head of the house of the russian parliament. last week, she indicated after the annexation of the four territories that russia would de defend the territories the cooperation was non negotiable on the other hand, russia would not go further that was the unmistakable essence of her statement of course, that is no kind of basis for any type of negotiations which would be acceptable to ukraine or the united states and other western countries supporting ukraine i mention that just as a sense of where the sides are and thinking, also to try to undermine my point of i don't see any scope of negotiations or discussion this is a fight until collapse >> christopher, a note from
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president volodymyr zelenskyy with the infrastructure statement and the second target was people he says russians strike for maximum losses deliberately. i suppose that goes to your point with regards to this is not necessarily being just the call to the end, but really a note of what feels in some ways of an all-in attack now because this is still an area that was attacked in june does it give a sense that it is now about all or nothing >> i think so. whatever it takes as someone said in the financial atmosphere applies how to the military atmosphere these retaliatory missile strikes overnight on a number of ukraine cities which the ukrainian president is referring to following the attack on the
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crimea bridge. we have seen this pattern before we saw part of the similar pattern after the assassination of the daughter of a russian nationalist philosopher back in july alexandria duggan we saw the underlying goal will be the russian side to try to i incapacitate the ukrainian side and to erode the will and ability of the ukrainian people to fight on. and so that is the agenda as you say my refrain fight until collapse >> we will see how it continues. we will continue to get as much
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as possible on the story as the day continues. christopher granville. joumanna turning to market news the bank of england is looking to launch a bid to buy more gilts. the bank of england launched a temporary collateral to help lenders ease liquidity strain. obviously those are right at the center of the storm that emerged a couple weeks ago many pension funds struggling to meet margin calls at the time gilt prices started collapsing a reminder that operation is set to end on friday there are lots of questions going forward as to the shape of the gilt market as a lot of the
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pension funds are still under pressure this is the pick oture of the pn today. we are proposing .30% weaker in terms of uk banks you see barclays and out per fermers and under performers lloyds down 1.1% as for the reaction in gilt, this is what we are seeing today. we are moving lower across the board. 2-year at 4.23%. we have started moving higher again. that could potentially be problematic. something to watch. and for european equities.
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the picture is negative. you see the stoxx 600 down .60%. a lot of focus on the political tensions with rurssia and ukraie this morning we reached an escalation between the two sides. markets are focused on non-farm payrolls from the u.s. the number came in strong. unemployment rate lower than market expectations. all pointing to further action from the fed more hawkishness mounting the case for a 75 basis point hike as for european markets as a whole. this is what we look like with individual indexes dax is down. and cac 40 in france is d down .90%. renault is doing well today.
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we will talk to charlotte about that later on. we will talk more about how that alliance is looking ahead. and ftse 100 in the uk is down 50 points today. .70% weaker. we got the bank of england announcement we will see how it plays to the broader gilt market. a lot of red on the board. technology and utilities lagging today. tech down 1.5% we have retail up .70% the defensive sector telco up 4% thanks for that, joumanna. as you noted, coming up, renault and nissan reshape their alliance we will discuss more after this. we planned well for retirement, but i wish we had more cash. they have no idea
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considering the investment in the ev business. that stock is up 4% today. a big outlying in the spectrum of things. cac 40 is down and this stock is moving higher. charlotte is joining us with more i suppose the question from me, charlotte, why is this put on the table? the revamp of alliance which is 20 years old why would nissan want renault to bring down the stake to 15%? >> what is interesting in the statement as you said earlier is trustful trustful discussion. it has been a tricky relationship with the alliance it was a brainchild of carlos ghosn and his arrest in 2018 and then they committed to the
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alliance there are questions of how much leverage they were getting from the alliance. the question is the structure of the alliance with renault owning 40% of voting rights and nissan with no voting rights. that has been problematic. this report that nissan was changing the structure of the alliance the statement confirming they are looking potentially for agreement and changing the strategy nissan was considering investing in renault's ev. that is something that renault announced a few months ago and potentially split the business with ev on one side and combustion engine on the other side the questions are not answered in the statement one is whether renault would sell some of the stake in nissan and bringing down closer to the 15% and putting more on equal footing. that is not answer in the
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statement. renault is keen on it and it is positive for renault because it would free up almost 4 billion euro to invest further in the ev strategy there is the question of the french government. it is the main shareholder which owns 15% stake and it has caused problems in the past renault was looking at fiat and the french government would want that to happen fiat moved on with peugot. we don't know if the french government is standing with that issue. and the other issue is the combustion engine. renault is looking at gv and with china and they are not keen on this happening because there would be sharing of technology that they are not keen on. that is why these talks are not
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confirmed. the group said apparently they want to have a solution by the market on november 8th that is when the new structure is announced the industry is going and we will see the merger or tieups with the carmakers to have the funds and investment for electric vehicle and they need to show further leverage of the alliance that they have not used the change of structure could happen and the market is looking at this positively we see renault shares up on top of cac 40 this morning guys >> they would take kindly to the reduction of the stake we will see how it plays out the reaction has been positive today on reports that they will look to reshift the nature of the deal china will hold twice decade communicst party congress and xi jinping is looking for an
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unprecedented third term the confirmation comes amid growing criticism of the zero covid policy breaking through on the social media app wechat now china's zero covid policy hurt the economy and the 5.5% growth target for 2022 now the u.s. has announced a slew of restrictions on chinese access to the semiconductor technology this limits the ability to manufacture or obtain computer chips and cuts it from chips made from the u.s. anywhere in the world. the move will hurt china's ability to develop military technology and build on restrictions already applied early this year.
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a look at the european chipmakers which are down today. a fall for ams down 6.76% a drop of more than 1% for st micro. let's get to our guest who will chat to us about this. winnie wu joining us from bank of america securities. this bleak holiday spending and then you get these restrictions coming from the u.s. it does all seem to be perhaps not getting to the trough we thought we would with regards to the chinese market >> yeah, certainly the china market has been suffering year to date that is on top of the challenging year in 2021
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you know, by now, a lot of investors are frustrated in our recent market interests said we try to be bullish on china several times in the past two years. now we are waiting for the real catalyst to really pull the trigger and buy the dip. i think the key trigger people are looking for is number one, reopening the economy and relaxing the covid controls. i guess number two is related to the party congress which is more pro-economy policies or leadership i guess we will find out more clarity on those fronts in the coming few weeks >> will that offer the surety that if you get a sense from xi that they will re-look with the zero covid policy? would that change things from the consumer level, that could ramp up spending a little bit. you have the restrictions. will those just hurt things
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dramatically you know, a continued depression when it comes to the market? >> yeah. i think there are, you know, again in our recent mrkarketing trips, people care about five things number one is reopening. number two is the profit market. is it too late to save consumer confidence will it lead to long-term slower growth of the economy? the third question is about geopolitical tensions and u.s. sanctions and what do they mean for the chinese economy in the medium to long term and the fourth is about internet sector. potential risk from the adr listing and is that de-listed? and then the long h-term outloo for the sector and the finally issue is depreciation. there is geopolitical tension
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and we don't think it will see any immediate turn around in the near term. on the other side, those political tensions and u.s. sanctions and trade events have an impact on the short-term. one year or quarter is limited the world cut china off in the next 12 months the long term issues, but probably matters less for the immediate market outlook there are factors such as reopening the economy and stabilizing in the next six months and if they see stabilization and turn around in property related activities, i think investor confidence will come back the depressed market will see a trading bounce >> winnie, what do you think the congress will do from here and what are you looking for if not the easing of the covid
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restrictions >> i think, you know, the party congress in itself is a focus more on party building ideology. it doesn't necessarily focus on the economic with the next year gdp target any signs or signals where china wants to go from here in terms of covid strategy is really the market focus many investors who don't have to be in china, hedge funds, for them, reopening is the number one pre-requisite for them to invest in china. if in the party congress, there is a statement regarding zero covid will remain as medium to long-term policy, this will have profound implications to investors in how they think about china. on the other side, it is an indication to a gradual normalization or gradual
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reopening. the execution will take time china will take a gradual approach the indication to the direction of reopening, i think, will be encouraging enough for many people to expect for a cyclical upturn in the demand in the economy. >> very clear, winnie, thank you for joining us winnie wu from bofa securities. coming up on "street signs." we have the latest from kyiv after they withstood the first cttres in months we will be right back. our shipping process was painfully slow. then we found shipstation. now we're shipping out orders 5 times faster and we're saving a ton. go to shipstation.com /tv and get 2 months free.
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welcome to "street signs." >> these are your headlines. >> explosions rock the ukrainian capital for the first time in months and president volodymyr zelenskyy saying it was to inflict maximum damage this as they accuse ukraine of a terrorist act on the bridge explosion. >> translator: as you reported,
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no doubt it was a terrorist attack in the infrastructure of the russian federation the authors and perpetrators have special services in ukraine. and the bank of england is looking to avoid market dysfunction. doubling the daily purchase limit today of gilts to 10 billion pounds. european index falling as investors look ahead to a crucial week to data and earnings. and renault trade near the top of the stoxx 600 after the french automaker confirms it is in trustful talks with nissan over the future of the two decade alliance. major geopolitical news this morning. vladimir putin accused ukraine
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of the quote terrorist act after the explosion of the bridge to crimea which disrupted the supply lane. ukraine has not claimed responsibility for the attack. several mocked moscow on social media. the defense ministry vowed revenge after several people were killed in kyiv according to officials. the mayor says missiles hit critical infrastructure objects early monday morning ukrainian foreign minister kuleba described putin as a terrorist who talks with missiles nbc's cal perry is joining us with more. he is in kyiv. cal, significant issues in the last 48 hours. you are in kyiv. talk what has gone down. >> reporter: good morning, joumanna it really was 8:15 in the
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morning when we heard a series of loud explosions we knew immediately it was coming from the downtown area. that was just the first of what we think were three waves here in the capital in the last 30 minutes, we heard fresh explosions at least 75 rockets were fired across the country 41 intercepted i can give you the breakdown these are the early numbers. two people killed and two dozen wounded in kharkiv explosions to the western part of the country in lviv infrastructure targets and nothing out the power in that city we had power flicker on and off this morning as the rockets fell the consensus here, if it you listen to the mayor of kyiv, these are ongoing strikes. these are clearly coordinated strikes hitting across the country. one of the things expected here is it would come in waves.
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if you fire rockets in waves, dozens at a time, close to 100 at a time, you can overwhelm the air defense systems. that's part of what is going on here the other thing happening are the use of drones by the russian military drones fly slower and lower. they have civilian components. it is harder for air defenses to knock them out of the sky. the situation according to the mayor and officials, they want everybody to hunker down the subways are used as bomb shelters you noted this is the first time we had strikes in this city since june it has been a while. certainly this is now a country that is bracing for further attacks. these seem like coordinated strikes across the country >> cal, thank you for the reporting in kyiv. as ever, stay safe we look forward to further comments in the next couple days as well as we keep a close eye
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on ukraine. we are just getting some flashes out of the german gas commission expert and he is talking specifically about the german stabilization measures. they released 200 billion euro of measures a week ago here the expert is saying the first relief measure should be in place by the end of the year. the supply situation remains tense despite full storage this is something julianna and i have been talking about last week with the stabilization package. here is interesting to hear that the supply situation does still remain tense although the storage levels are looking 90% now. he is adding ideally the relief packages will reduce inflation we know that the capping of energy bills will help bring down some of the headline
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inflation levels in germany. final comment. we do not want europe to think germany is going alone we should show solidarity. this in direct response to the criticism that the german government got after going ahead with the 200 billion euro stabilization package on a stand alone businesses rather than eu level. shifting to the market picture which has been negative this morning it has seen a big retreat tracking negative global sentiment. investors still betting the jobs number will keep the federal reserve on an aggressive path with the interest rate hikes the cac 40 down .10% key to note is the renault and nissan talks have kept renault up 4% this morning still up although the cac 40 is down more than 1% lower across the aex and smi. boe is set to release further
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measures for stability ftse 100 is down .80%. that is the look at the markets. all right. let's get into some deal activity jpmorgan chase head of equity capital warns that volumes in the ip market could remain low for a period of time of time this following a slow period over the summer amid market volatility and geopolitical tensions issuance in the third quarter fell 55% in deal value from the second quarter the porsche listing a rare highlight in the europe ipo market we have the global head of ecm at jpmorgan chase with us now. head of the annual jpmorgan chase annual tech conference in london thank you so much for the time how likely is it that porsche
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ipo could at some stage spur the market even if it is a little bit to get back into ipo is this a sense of instability too much for the market to handle >> good morning. thank you for having us. thank you for helping us kickoff the inaugural leadership forum i think the porsche ipo was one-of-a-kind. it is an amazing asset and brand and equity story which is unparalleled given the uncertainties that exist today and volatility that exists in the political arena and economically, this will remain subdued for a while we have to prepare for a few quarters of subdued ipo activity >> being in the ecm business, that gets tougher to time like this how do you look to spearhead and how do you find different avenues to move forward when it is such a pressed market to move forward on >> i think it is a great
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question two things one, why for the large listed p cans, there are a few strategic decisions to take. capital expenses and cost of equity is high nevertheless, it remains an important tool in the kit. there could be companies that could carve-outs equity for some will remain an option to remove and be on the defensive side or pursue further. really, second is why we are here at the forum. we believe in the years to come, irrespective of the valuation framework and what is undisputable, we think technology is moving forward it will be stronger and more sustainable with profitable growth what we are doing is spending a lot of time with our clients in the energy space clean energy, healthcare and
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tech that is an area of growth where you will come out stronger on the other side. >> interesting to hear you break it down by sector like that. we talked about volumes up this year and a massive relating with the valuations is it your expectation that we may ever go back and visit the valuations on the other side before the massive re-pricing? or are those days long gone? >> i think i fear it is still out there. i don't foresee the valuations going back again the reality is the last couple years with the combination of very low cost of capital valuing cash flows at high levels and u infoeuphoria we will not test new highs that is all right. what matters most is more sustainable models over the long term
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>> we talked about the exception of the porsche listing it is an exception because it performed well sur passpassing the parent compy the mood is hesitancy to bring new ipos to the market what is the effort for this to come back again? >> stability is the key here on two fronts. the world needs to see some evidence of peak inflation and rates. having that stability is important to put risk on the table. the second issue is geopolitical in addition to the war, people are looking at china closely and after the national congress and if it gradually opens up you need stability for the ipo market to pick up and investors putting risk on the table again. >> thank you so much for the
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time interesting space. i think one to look out for with the valuations set to certainly be interesting as well good luck with that. >> thank you for having us >> the global head of ecm at jpmorgan chase speaking of jpmorgan chase we will have more on the outlook for u.s. markets and the economy with jpmorgan chase's ceo jamie dimon tomorrow coming up on the show, global markets gear up for a key week for data and earnings we will bring you a preview next
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now set to be a busy week stateside with economic data set to be released this week the bureau of labor will publish the inflation print on thursday and forecast expected to slow to 1.4% on the corporate front, banks are kicking off earnings on friday jpmorgan chase, citi, wells fargo and morgan stanley releasing the latest numbers
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the u.s. unemployment rate fell to 3.5% in september. non-farm payroll increased by 263,000 for the month. falling short of forecast. average hourly erpgarnings increased 0.3%. the fed president john williams warned the unemployment rate will rise as the central bank is fighting inflation williams said the fed will need to keep hiking rates until it is reaching a target of 4.5%. he added the job market may be impacted, price pressure should come down significantly next year we will have more on the rate hiking path when we speak to charles evans later today. i'm happy to bring in our next guest which is head of global
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strategies of citi it's nice to see your face gain an again a lot of people are concerned with europe. we hear many countries coming up with the stabilization packages. what is your assessment of how bad things could get in europe this winter? >> good morning, joumanna. i think the problem is the uneven distribution of gas reserves across the eu you have to make the assumption the winter will be mildish to avoid cuts we will be good until january. that's when it becomes more complicated. we have seen in the past few weeks that we still have geopolitical risk hanging over
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us any disruption to the energy grid, infrastructure, pipelines, would complicate matters the reduction in the levels for natural gas because of the price signal makes us more confident that we might be able to scrape through. the bigger problem will be how do we start replenishing after this winter when there will be very little russian gas available. >> many people are saying it is not just about this winter, but coming winters and where the alternative sources of supply can come through in years ahead. what are you advising clients to do european equities are in a difficult position to hold this year we are not seeing a lot of love for fixed income either. where do clients put their money? >> fixed income. european fixed income is one of the biggest under weights in
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asset allocation 10% under weight with the short positions in japanese bonds. i think it has been very difficult to feel optimistic about the european fixed income space until we have more clarity on really how restrictive the central bank might be from the ecb standpoint also politics which might interfere in italy it would be good news to have the current central bank governor of italy change his role and take a position in the italian treasury european equities are very cheap. we are still under weight. we don't think there is enough visibility for investors to try and pick some pretty good companies at a time when there is still uncertainty about how strong the dollar might be and how long this dollar overshoot
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might last the longer term, yes, europe will fix its problems with energy and the winter of 2024 will be more manageable than the current one because of renewables and lng, et cetera. the political situation makes fixed incomes some of the key under weights. >> guillemo, this means this would be helpful to get inflation story under check would help the equity front. is that the base case here >> we have with european inflation is that it is exacerbated by a very cheap currency historically. the risk is somewhat higher than
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perhaps expected given the disruption and sheer scale of the cpi. yes, you know, energy contributes to half or 40% of what we see with headline inflation in europe which is around 10% core inflation starting to rise. central bank has to do more. they have to get to neutral which is around 2% by the end of the year after, that the calculus would be 25 or 50 more at the same time, we are looking at recession in europe it will be difficult to see the timing of inflation. i think it will be late spring situation for the ecb and they might have to continue hiking beyond the fed the economy undoubtedly can bottom out i would say late spring or early summer we have difficulty because of the single monetary policy and
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the fiscal responses individually germany being the case in point. europe has to address and slow down a bit more widely to reassure investors they have the right template for the recovery story. >> thank you for the time this morning. i really appreciate it this is a conversation to look out for. we have been following the geopolitical situation very closely this morning with russian attacks on kyiv. the first time the capital has been targeted in months. just a few more comments here. the foreign minister of ukraine said on twitter, i'm cutting my africa tour short. i'm heading back to ukraine. no surprise there. the foreign minister returning back to ukraine. we also have comments out of the british foreign minister he says that he has communicated with the ukraine foreign minister this morning to
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reinforce the uk ongoing moral and practical support. russians firing missiles into ukraine is unacceptable. investors are watching develop m mentes closely we are seeing the down trend today. we spoke with our guest on the show as this marks an escalation in the conflict. >> continue with the comments by the uk foreign minister saying as well this is a demonstration of weakness by putin, not strength it tells you a sense of where things are headed here all right. stay tuned we are going to have more on the economic outlook when julianna sits down with jamie dimon join us tomorrow for her interview. that is it for the show today. >> i'm arabile. >> i'm joumanna bercetche. "worldwide exchange" is coming up next.
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it is 5:00 a.m. at cnbc global headquarters. here is your top "five@5." stocks looking to start the week in the red after the friday selloff. investors bracing for a possible one-two punch ahead of the thursday inflation report. the bank of england steps in again to soothe sinking sentiment in the region as the bond buying program gets set to end. china's chip sector hit hard overnight as the industry grapples with geopolitical risk. the name
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