tv Street Signs CNBC December 6, 2022 4:00am-5:00am EST
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never got to meet. that's all for this edition of "dateline." i'm craig melvin. thank you for watching. [theme music] good morning welcome to "street signs." i'm julianna tatelbaum and these are your headlines equities pare back losses as investors reckon with the possibility of higher for longer fed rates. beijing officials continue to ease covid restrictions amid a report that china could announce ten new easing measures
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as soon as tomorrow. italy's finance minister adds to the chorus of calls for the european response to america's inflation reduction act. the legislation should provide a catalyst for the eu. >> i think there is room for improvement. we have to foster our european competitiveness and i think the inflation reduction act of the u.s. is the opportunity or invitation to reconsider our competitiveness. the eu and u.s. agree to forge a joint response to the semiconductor shortage, but fears remain any deal could leave europe's tech players at the whim of washington
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good morning warm welcome to "street signs. let's look at the markets. europe equities hovering around the flat line pairing back steeper losses it was a down day yesterday. stoxx 600 was down .6% and it was a difficult day for the wall street. s&p and nasdaq and dow jones industrial average pulling back. there was bright rhetoric coming from china about the possibility of more easing of covid restrictions taking place later this week. despite those positive signals in the path forward for china, the trade was mixed. that is why we see tepid trade in europe. and the breakdown here you see no major moves in either direction. the cac 40 trader higher
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ftse 100 down 11 basis points. ibex in spain is pulling back. germany with a bit of green. we got data from germany orders rose by 0.8% month on month against a forecast of 0.1% let's look at sectors and the breakdown within europe. utilities out performing up .50%. chemicals and media and insurance catching a bid you are seeing a pull back on oil and gas as they look at the price cap of g7 our coverage will continue throughout the week. financial services down .40% autos and retail under performing how is wall street poised? we have all three of the majors
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looking to bounce back at the start of trade bounce back after the weak session yesterday. let me take you to the indices yesterday. s&p dropping 1.8%. dow jones industrial average dropping 1.4%. we had a lot of action in the dollar we rallied 0.7%. that was the dollar index. the strong dollar and weak u.s. equity performance yesterday with strong data u.s. ism services data showing the sector continues to grow in contrast to last week's gloomy outlook. investors questioning with a dovish pivot is on the horizon let's take it to ron here with
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more ron, markets were reassessing whether a fed pivot really is right around the corner after the stronger than expected ism services print what is your take around the path forward for the fed >> clearly there has been a slowdown in rate hikes in the market spin. it was surprised by that and dollar posted the peak and up 20% year to date of hitting the pain threshold and unwound. that continues to be priced into the market here and now and what we are seeing as stabilization and expectation. >> where do you see the u.s. dollar going from here do you think that now is the time for investors to think about shorting the greenback
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>> yes, certainly breaking down the 20-day moving average is key. while we hold below there, we are still testing. it will likely hold at 103 which is the pre-pandemic peak level and 19.9 which is a lower level closer to the 100 psychological p mark it is not the dollar out pe performing, but under performance. and mainly oversold massively and particularly the yen will have received a welcome respite. according to my source, the euro and pound will likely visit extreme lows there will be a break on the yen and an swiss franc and few
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others which will out perform. >> what is the catalyst for the yen? it burned a lot of investors what will turn it around in your view >> purely based on the technical trend has finally reversed and is still showing signs of that given it was massively overextended perhaps half of the macro policy will change as well given that the yen has unwound somewhat certainly, safe haven play going into next year with the yen will be better along with the swiss franc. that's stood the test of time and likely to continue in c complement to the dollar
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gold is still good and holding into the 200-day moving average and likely remain elevated to the upside as the dollar continues to unwind. >> let's talk about the euro we have the ecb next week and the federal reserve and bank of england. as for the euro and ecb it has been hovering around parity level. we are now hovering around 105 you seem to suggest the euro was oversold around the parity level. what is next for the euro? >> parity is still a reality for the euro right now, technical signals as we speak, the resistance level was around the 106 mark and why we are starting to get a bit of unwind it suggests that the latest unwind from over sold conditions
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is temporary part what have we call an abc correction and could revert back lower in line with the down trend. euro under performance against the dollar this may sound a little bit at odds with the weaker dollar picture if we get both sides of the equation moving down at the same time. the key point is different rates of change. euro will likely under perform in the short-term back to parity and maybe lower along with the pound, too there will be others to out perform to give us rotation in the latest move on the dollar. >> where is the euro bound for the down side? >> the down side, parity will remain key in terms of the
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psychological level. all of us will be watching being beyond that is the euro low at zero and 95 and change. that could be revisited. certainly parity reality and lower to 95 and change at a likelihood going into the new year rate differentials are more of a theme. less so in 2022 as central bank policy deviates. mostly a one-sided trade this year likely get more dispersion that will offer more currency dispersion in terms of performance and rate differential >> on that note, let's move on to steerrling. do you think sterling could hit
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parity with the dollar >> speaking from the uk, it is something i'm reluctant to align within terms of further cheaper currency we had welcome tourism on the back of it parity is a reality. we are not there yet on the pound. i'm looking at the live screen it would need to get to the level of 110 which is the pivot point. midpoint of the mini budget crisis which is the psychological area for the market and if we were to break below that, we head to historic lows than we were recentlyparity that is not all bearish, to make the point clear. i do see a bottom in the bound c pound next year. that worked for the last four
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years. that's a chart i have shared with your audience members to view that suggests a major bottom in the next year or so. it will likely get worse before it gets better as part of the cycle bottom >> ron, i feel your pain as an american living in the uk watching sterling plummet. i guess you have export exposure in the ftse 100. overall, positive impact down the line from weaker currency. let me ask you about china before we let you go we have this momentum building around china reopening and already some covid restrictions easing what would a chaina reopening have on fx markets >> clearly a big event which has been much awaited. not clear in terms of the general signals as to if it will
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happen and when it will happen certainly it is a much awaited surprise if confirmed. interesting point to make. it will have growth return implications it will potentially bring back a little bit more of inflation i think what is interesting in terms of the actual china specific market, china is retesting its 200 day. if you look at the dollar and china currency, that is breaking down with or without a reopening in terms of what is happening currently. >> ron, we will leave it there thank you. ron william at rw advisory let's look at the most recent trade overnight it has been a mixed
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session in asia. shanghai hovering around the flat line. shenzhen higher. nikkei in japan gaining ground we have some red on the board. kospi dropping about 1%. the hang seng index in hong kong dropping 0.4%. relative to some of the moves witwe have seen recently and the relaxing of the strict covid policies could be announced as soon as tomorrow. sources speaking with reuters saying the rules nationwide would allow for a coordinated and widespread reopening across the country. it comes as local officials started to cut back on lockdowns following the last month's historic protests. shanghai confirming it would no longer require covid testing to enter public spaces. beijing also announced it will no longer require people to show a negative covid test to enter a supermarket or office buildings.
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this shift comes as officials soften the tone fueling optimism of a broader reopening of the world's second largest economy it is fast namecinating to see e have seen in countries across the world the psychological impact we should consider. will the public return to normal even if the restrictions are lifted let's look at the minors we have a pull back today. we saw out performance in the minors a bit of profit taking there on to luxury, another china sensitive part of the market muted action today of course, a lot of this momentum has been building in the last week. arguably the china reopening story has already been priced into the stocks. let's look at the chipmakers
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in europe this more ning we have a mixed picture. not hugely exciting day in terms of trade across the sectors. we have ams down 3.5%. asml trading in the green. st micro trading higher. tesla denies it plans to reduce joutput at the shanghai factory. reports citing carmaker would cut production last month. tesla shares closed lower on the news apple is reportedly looking to expand its footprint in india. the giant is now considering moving from pro-dduction of the ipads to the continent
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coming up on the program, eu and u.s. officials agree to forge a joint response to disruption in the semiconductor space. could that put tech players at the whim of lawmakers in washington we'll discuss next has no idea she's sitting on a goldmine. well she doesn't know that if she owns a life insurance policy of $100,000 or more she can sell all or part of it to coventry for cash. even a term policy. even a term policy? even a term policy! find out if you're sitting on a goldmine. call coventry direct today at the number on your screen, or visit coventrydirect.com. when we started our business we were paying an arm and a leg for postage. i remember setting up shipstation. one or two clicks and everything was up and running. i was printing out labels and saving money. shipstation saves us so much time. it makes it really easy and seamless.
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welcome back to "street signs. the united states and european union agreed on the semiconductor supply the two sides pledge to implement a warning system to address the disruption in the chip space looking to expand the program to like-minded countries with a slight towards china. top officials in u.s. and brussels stress the importance of working on a strategy >> we mark able agreement on semiconductors on how to address shortages and we have an overview as to what is to come and also on transparency
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>> we want to get ahead of the issues on the areas of merging technology i think some of the most important impactful work from the ttc relates to how we are aligning the semiconductors. >> when we work together, to build greater convergence on some of the critical issues of our time, we can do that in a way that will benefit people on both sides of the atlantic and benefit people around the world. >> the world's largest chipmaker tsmc will announce a new arizona plant when it opens in 2024. that is according to bloomberg it comes ahead of president biden's planned visit to the plant later today along with u.s. commerce secretary gina raimondo apple and nvidia are the first
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two customers. arjun is here on set with more arjun, the u.s. has been vocal about wanting to shore up its own manufacturing and supply of semiconductors to avoid a crisis like we saw during the pandemic. talk about how this new plant falls with that strategy >> on the one hand, they are looking to attract foreign companies to set up shop on u.s. o soil tsmc makes the world's most advanced chips on a huge scale apple and nvidia are customers the second strategy is to hamper chin china's progress that is where you see the tension with what the u.s. is
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doing and european allies. they talk about cooperation, but u.s. is moving to attract companies with billions of dollars of investment to the u.s. it proves competition to the eu. the export controls on china and specific equipment to china and u.s. persons working in china on chipmaking is stressed across the world with you see asml in europe they cannot service chinese clients and netherlands and asml is the poster child with the tension with the u.s. and eu with chips asml makes the machines which are required to make the most advanced chips if those chips got in the hands of the chinese companies, china can catch up with tsmc and samsung and intel. that is why you have seen in the last four or five years, the
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u.s. lobbying netherlands to not allow them to ship to china. the dutch government is trying to weigh the economic interests of trading with china and its companies along with national securities and political concerns and partnership with the u.s. it is complicated. a lot of parts of the puzzle. the chip making is at the center >> the dynamic is fascinating. it is clear how you layout what is at stage for the regions involved when it comes to manufacturing chip notice u.s., how is the price or cost likely to compare to the chips in taiwan >> it will be more expensive the cost of labor would be more expensive and materials that mm tsmc is using in the plant the other is access to talent?
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building up the huge capabilities in taiwan talent andexpertise is at focu there. do they move talent from taiwan to the u.s.? what is the impact on apple? it relies heavily on tsmc for the chips for all of the iphones and apple products they may be able to swallow the costs with the price being so high for other companies, they may not have that luxury that apple does >> as we saw during the pandemic, it is amazing the industries and how many rely on chips. arjun, thank you for all of the details. you can find out more on how the semiconductor industry is caught in the middle of the u.s. and china chip crunch by reading
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arjun's piece on cnbc.com. the round table is making a return in washington "squawk box" will be on-site with a slew of c-suites from united and gm and walmart among others and italy is calling for an approach in competitiveness in the response to the u.s. inflation reduction act. this after the eu commissioner announced it would modify rules to help cushion the blow of the domestic u.s. subsidies. sylvia joins us now. i know our u.s. team was doing a lot on the washington side of things looking at the response from europe. what are you hearing on the ground about how the eu is poised to respond? >> reporter: in essence, julianna, i was here four weeks
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ago for another meeting of finance ministers of the eu. i was telling you at the time how worried they were about these concerns regarding the u.s. inflation reduction act the eu has been clear it has issues with the subsidies within the legislation meant to support the u.s. industries. this is a threat to many european carmakers within the context, we are starting to hear comments on how the eu should essentially address the problem. over the weekend, as you mentioned, we heard from the president of the european commission suggesting that state aid rules should be relaxed and new funding should be put on the eu table to support european firms in the context i have to say the comments were received by the german finance
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minister with skepticism if the commissioner's idea is to raise new money, we should forget about it because he is not supportive of the idea >> we have to be more agile. i think there is room for improvement when it comes to state aid. we have to foster our european competitiveness. i think the inflation reduction act is the opportunity or invitation to reconsider our compe competitiveness. there are some parts of the initiative which need to be further debated, especially her proposal of european funds if this means rebranding of existing tools, i'm open for suggestion this means new common european
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debt, then this will not be an improvement, but be a threat for competitiveness and stability. >> reporter: earlier, i had a chance to speak to the president of the euro group. he told me using taxpayer money to make european companies more competitive in this context is perhaps not the best way to essentially work around the american subsidies. >> we all hope, member states, that this type of engagement has the effect we want and cooperation with the u.s. and many area nots in the eu could be stronger. this policy in america and what it means for europe could be serious for us we want dialogue and cooperation to diffuse and diminish this
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issue. europe needs to consider to protect the economy in light of the development. >> many say what they favor is using current funds rather than coming up with further subsidies. >> that's are the issues that need consideration it goes without saying it is a lose-lose if we were all using the taxpayer money in different parts of the world to compete with each other. i really hope we can get to a point that that scenario is avoided because what we want to do instead is support investment in those parts of the economy that really will matter in the future to deal with climate change and moving to a more secure world obviously to avoid doing that in which partners are competing at
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the cost of the taxpayer and cost of jobs >> reporter: so it is still early to understand how to boost the competitiveness in the industry to make it more competitive against american subsidies. julianna, it is important to note these discussions that are already taking place between european and american officials to see how the u.s. might adapt the inflation reduction ability to address the european concerns >> sylvia, thank you for bringing us the story. i want to take your attention to the ecb. we have lines coming from the governor i don't see a hard landing in the eurozone economy no inflation expectation there will be another hike in rates, but we are very near the neutral rate tag n fascinating comments ahead of
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the ecb meeting. if you are just tuning in, i don't see a hard landing in the eurozone economy no material deanchoring in the material expectations. there will be another rate hike in rates, but we are very near the neutral rate there is a look at the euro. we trading marginally lower versus the dollar. the germany court lawsuit brought by the founder for the party challenges the legality of the fund known as next generation eu. it was agreed two years ago. coming up on the program, private equities investors favor uk over other markets despite recent turmoil we will discuss the findings after the break.
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fed rates. beijing officials continue to ease covid restrictions amid a report that china could announce ten new easing measures as soon as tomorrow after last month's historic demonstrations. italy's finance minister is adding to the chorus of calls over the u.s. inflation reduction act. it should provide a catalyst for the eu. >> there is room for improvement when it comes to state aid we have to foster our european competitiveness and i think the inflation reduction act of the u.s. is the invitation to reconsider our competitiveness and the eu and u.s. agree to forge a joint response to the semiconductor shortage fears remain it could leave europe's tech players to the whim of washington
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let's look at european equities we have been trading for over an hour and a half. we have red across the board we had seen fluctuation a bit of green. the dax is popping slightly. extending losses the stoxx 600 pulled back 0.4% the second negative session in a row. from a sector perspective, here is the split utilities and insurance and chemicals on the down side pull back on oil and gas as investors continue to digest the impact of the latest moves around oil with the sanctions in europe coming into effect yesterday on the russian oil and g7 price cap monthly uk grocery inflation fell for the first time in
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nearly two years in november according to data group kantar, prices slid to 0.1% from october's record high. aldi was again the fastest growing grocers with sales up 21% over the period of 12 weeks. 91% of private equities investors believe the uk is a more attractive market than others despite turmoil and volatile macroeconomics back drop our next guest is head of m&a. stewart, i'm sure that is music to many companies. the uk is an attractive destination for private equities why is pe so interested in the uk >> thanks for having me, julianna the uk is very attractive as a
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market right now there is a lot of rotation with brexit and valuations of the companies which are quality companies on the uk stock exchange which have fallen looking for quality companies and businesses to payoff the debt survey has shown the european countries and most of the survey responses are looking for deals and the uk is the more attractive one that is one of the larger makt s have >> it would be a real destination. it hasn't come to fruition the way many investors and public market had hoped what is likely to change what is going to catalyze another pe activity wave >> we have not seen lots of activity and lots of large pe
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activity because they can't finance it on the survey itself, it talks over 80% view the debt market challenging which is no surprise interestingly, they think 12 months out they believe it will be better i think those days of cheap debt and private equity deals are behind us. private equity is revolving and as access to capital opens up with the banks or debt funds which are taking a lot of the load at the moment and that is one. big changes. m&s a m&sa is a big investment you need to generate the cash flow to pay down the leverage you put on private equity is waiting for the market to normalize. how long will the recession be how deep will the recession about? y we have results coming out for
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year end in q1 there is a lot of screening for public to private and focus on uk listed companies. the market will be receptive to bids when they come. for now, it is assessing the opportunity and getting ready to strike in q2 when valuations have settled and outlook is more favorable and certain and debt markets are accessible at whatever price that may be >> how is the higher rate environment changing the profile of what makes a company an attractive target? >> i mean, private equity are looking at things. it is a financial returns model el if you put in a higher rate of debt compared to the last year or two years ago, obviously it is harder to generate returns. it is not changing, but making people double down and focus on
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the ones that work ones that can generate regular cash flows to pay down that debt it is the certainty of cash flow which is important, julianna if a business is going to get hit with consumer focus and less certain to deliver the cash flow, people will be wary of it. >> do you have any insight sectors pe investors like most in the uk? >> we do we are speaking to people all the time as i've just said, consumer retail environment is the one that causes the greatest concern. i don't know we will see too much focus on that from private equity community services business services. people generating cash flow to pay things down. we have seen the waste management business occurred in the last six months. >> we talked about the attractive targets and what is attractive from the investment
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perspective for pe what about the exit routes how are private equity firms thinking about exit opportunities in the current environment? >> i think it is difficult as a private equity company, you can exit exit via an exit compar ipo. s that ipo is not relevant at the moment they don't expect it to open up in the 2023 at the earliest. it is difficult if you are trying to generate the return and get value on the exit if you are not able to get that at the end. i think some people will avoid pri private processes for a while.
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we need willing buyers and sellers. at the time of the survey, there was an issue in the uk and that caused the process to be put on hold the private equity will be buying and they need financing goes to my earlier point of the debt market. >> diplomatic way to put what was happening here in the politics over the autumn months. just in the interest of competition, how is it likely to shape between strategic buyers and m&a and private equity buyers clearly public companies are under stain at the moment. will we see m&a fall from strategic buyers >> overseas strategic buyers and
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normally north america is looking at businesses and a number of processes going through as we speak. they are relatively more active than private equity. if you are private equity with the u.s. dollar fund, you are more active. if you are uk corporate, you are not looking at m&a at the moment you think how do i weather the storm and make sure i'm okay before i move. obviously some are well capitalized and some will do something. by and large, it is the overseas bidders are most active. we will see that going through next year and hopefully in the second half, private equity will be more active they are not have the impetus to move from screening to making a bid. we will see that in financial institutions and health care we have seen a lot of tech valuations are down there. it will depend on a willing seller and buyer there >> that makes sense.
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the impact of weaker sterling. stuart, thank you. could gold prices climb as high as $3,000 will the bank of japan fix its economy? saxo's predictions look at a series of unlikely scenarios occasionally, they do come true like in 2015 when it included the uk future exit from the eu steve jacobson explained some of those outrageous predictions starting with gold at $3,000. >> think about gold. the dollar that happened after ukraine forces a lot of countries to reconsider what goes on. if you are on the side where crypto is not the alternative, you see gold swing back in as a
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currency don't forget 70% of the world is in the dollar. we are not surprised to see commodity driven economies to go to gold. you have that as we talk about in terms of the macro scenario most likely we will see a huge fiscal expansion if energy takes high this increases the net demand. you will see the hope for 2.5% inflation in 2024. it is unlikely we are at 5%, 7%. it is driven by gold the rates by the federal reserve has been coming off dram dramatically >> can i pick up on the predictions of emmanuel macron resigning which has been in paris this year.
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at times, he was wound out this presidency means a lot to him. why would he resign? >> he is a lame duck he just passed twhich allows vey he is doing laws without having the majority of the voters behind him i think he will find that he is becoming a lame duck he will do like he did previously what we are saying, at least my french colleague is saying, the inability of him to move the needle and what he needs to do for france and he feels he needs to step back he hopes the recall is the savior of the politics
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you know the french special interest groups is dominating the headlines in france. we need to be more in the middle if you want to go to the agenda which is dear to his heart which is further european unification. >> some of those predictions sound outrageous never say never. coming up on the show, candidates make a final push in the senate runoff race in georgia. we have the latest from washington, d.c. when "street signs" returns
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welcome back to the program. let's look at u.s. futures all three majors pointing to a stronger start after the down day when all three indices ended lower. a surge in bond yields and on the back of the strong ism services index it is still growing and dampening expectations of a fed pivot. voters in georgia will head to the polls again to decide the
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final seat in the u.s. senate. this pits raphael warnock against herschel walker. a victory for warnock could help end the current 50/50 split. nbc's brie jackson has more. brie, spell it out why this election matters? >> reporter: this election has national i mplicatmplications. they want to break the 50/50 split in the senate. democrats already have 50 seats. will it be 51 and give a little leeway to president biden's agenda or could republicans have an opportunity to block legislation or block president
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biden's judicial picks when it comes to legislation with any 50/50 split, you have vice president kamala harris break that tie with the race in georgia, everyone knows the respimportane we have seen record number of voters come out in georgia when they made the final pitches yesterday, the two candidates did not hold back. warnock called his challenger herschel walker unfit to serve then when it came to herschel walker's final pitch, he tried to paint warnock as a rubber stamp. voting with president biden 96% of the time. a lot is at stake here candidates are makingthe final pitch and this comes down to the national implications and how it will play out in congress. >> in terms of the implications, brie, how should we think about
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the results of the vote potentially affecting trump's presidential bid in 2024 >> reporter: this will give people a gauge i think the republican party is still trying to figure out the role that president biden or former president trump will play moving forward when it comes to endorsing candidates fo former president trump endorsed herschel walker. he did hold a rally in support of herschel walker keep in mind, some of the former president's endorsements lost. mehmet oz or blake masters they were endorsed by former president trump. they lost the close elections. so that's how trump plays into this moving forward, does he still have the grip on the republican party and how much will candidates go to him to have him
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endorse him moving forward when we go not only into the 2024 presidential race, but senate seats up for grabs in 2024 >> brie, thank you for the analysis and keeping us up to speed. brie jackson from nbc. you have all three of the majors pointing to a strong start. looking to bounce back from yesterday's down session all 11 s&p sectors closed lower. wall street had been steadily marching higher the last couple weeks on hopes that inflation peaked and a dovish fed was around the corner. the services index changed that yesterday. that is it for "street signs." i'm julianna tatelbaum "worldwide exchange" is up next. has no idea she's sitting on a goldmine. well she doesn't know that if she owns a life insurance policy of $100,000 or more she can sell all or part of it to coventry for
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it is 5:00 a.m. at cnbc global headquarters. here is your top "five@5." stocks surging for direction after the worst day in a month technology coming off a 2% loss on its own. call it peak inflation a new note from goldman sachs says the worst is behind us, but that does not mean the fed is about to slow down any time soon. breaking this morning. breaking news from the largest chip maker in the world on the multibillion dollar investment
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