i love you so much, and will love you forever." that's all for this edition of dateline. i'm craig melvin. thank you for watching. [music playing] welcome to the third and final hour of "squawk box" here in europe. equity markets are opening now welcome to viewers in the united states just joining us what we have on the market open here are significant concerns with the banking p ssystem the selling stepped up many of the european names under pressure yesterday a couple of specific ones from

commerz bank to credit suisse over stability in the financial system despite big news in the u.s. markets are not calm indices stateside underlining the banking system and bond markets. as we begin the trade, we are moving higher in contrast to yesterday. we saw steep declines of 2.4% on the benchmark. we are clawing back the territory. it is modest to the upside .20% the rest in range as we talk about the gain this morning. let's dive into what we are seeing in terms of sectors and what we are experiencing with the red ink. we have real estate at the top and at the bottom is banks the fears from investors have not been apart from the market open .80% open. every basket is trading in the red. lloyds barclays is the

exception. the bank in spain, a smaller bank, is under pressure. you have bbva in the spanish market with concentration of selling. other major baskets are down hsbc, of course, the bank at the front of the rescue yesterday of silicon valley bank uk the market still seeing losses in the banks at this stage oil and gas has a reversreversal this is a concern of the economic cycle if we have default tightening in the banking system, that means the uninsured deposits will turn and tighten conditions which poses a challenge for the economic story that is why we have seen oil and gas down .40%. financials are a number of names with ubs in that basket and all of those stocks, istodown .40%.

and from there we start to trade green. the balance of baskets high. industry is .30% up. and healthcare is .60% higher. technology is the stronger perform they are morning we were just exploring earlier in the show the links to the tech sector with the fall youth -- fallout on silicon valley bank it is technology bouncing with the nasdaq yesterday utilities is .70% higher now questions for the central banks are tightening from here let's look at the major boards we have given up .10% on the ftse 100 declining again. we were down 2.6% as we wrapped up the trade that is another week for the uk stock market the french market has

gainegai gained .20%. a gain on the dax. italy has picked up steam with the zurich market up .10%. still a patch of weakness with the ibex let's look at the european banks. you see modest range with the exception of hsbc. the bank which stepped in yesterday to soothe concerns to technology companies in the uk credit suisse is another concern over default swaps 3.4% down on credit suisse at this stage that is the bank we watch closely. santander in spain is down as well as commerz bank it is falling by .75%. let's move on to earnings.

volkswagen reported 22.5 billion euro in the annual profits with special items up 13% this year this is despite the 7% decline in deliveries. the cfo has told annette, our colleague, that 2022 was a decent year for the automaker. >> you have a big oversight in 2022 and profitability improving and the delivery of 70,000 electric vehicles. if you look at details on the kpi with the supply chain issues and semiconductor supplies, sales were down to 8.3 million the turnover, on the other hand, increased by 12% to 279 billion euro and our operating for special items increased to 22.5 billion euro

net cash flow in the auto business achieved 43 billion which was driven by the successful of ipo of porsche it was a successful year for volkswagen let's look at credit suisse. it confirmed the financial results for 2022 and released the delayed annual report. the swiss lender said there would be no proposal following the compensation with the disappointing results. the check on u.s. futures this hour has green with 50 points higher for the dow it does indicate some caution on the back of yesterday. shares of several banks suffered the worst rout in

years. its worst weekly performance since the start of the global financial crisis this despite to backstop all customer deposits at silicon valley bank and signature bank the offer of additional liquidity to others. however, fears remain over smaller banks less diversified around the threat of customer deposits markets are betting that the collapse of silicon valley bank and banking stocks will force the fed to rethink the hike pathway. goldman sachs believes it will cut rates by 25 basis points and put an end to qt investors are still pricing in 50% of hiking of 50 basis points next week, but expects to cut by june on bunds, it is yielding 2.21.

we have julio with us now. i'm stunned by that. we have the market saying this is a u-turn and questions with the fed over 50 or 25. ecb or deutsche bank has not thought? >> it is changing by the hour. we are reacting to the news coming in and what we know right now. i think we don't have to forget what some of the fundamentals are. the thing is central banks are struggling with inflation and fighting inflation they will look at core inflation. the number that comes up today with the u.s. cpi is the key figure that the fed will look at in order to understand and to decide what to do next despite the ecb in february, the number on inflation was not as good we are higher than what analysts were expecting

we don't have to forget that the fight against inflation is still on the way they want central banks to stay credible i wouldn't be surprised if you see the hikes stay the course. >> you said the fed would keep on going until it broke something. what it broke was growth or unemployment rate, not the banks or smaller lenders is something broken now and does that cause the pause to stop contagion? >> i think there is a risk with financial stability. it is that tradeoff with monetary policy and financial stability. based on what we know and what we can see, i think that is market reaction to risk and contagion risk in europe and u.s. which is a bit an

overreaction we don't necessarily see that process of having an impact on the financial system as a whole playing out in the days and weeks to come. the question is there more instances like silicon valley bank more regional banks independent of how they are set up, they may fall into the trap >> what is the correlation with the u.s. and europe at this sta stage? in contrast to the gfc with the party risk involved which made the links so strong across the global banking system, those are not here with the issue at silicon valley bank and the issue with the maturity mismatch in the u.s. with the regional banks and holding of government securities with all of that in mind, how should we think about the european banking system versus the u.s. and in turning banking stocks >> financial markets are highly

interconnected what we see in the asian markets yesterday and today is, in ef effect, fears panning through the equity sector. i think the situation in europe is a little bit different. this has been said by different analysts across the hours. the regulations also are different in europe. i think what we are seeing with the big names and big banks in europe is a little bit of overreaction based on what we know right now, they are probably discounting and saying let me look at the balance sheet and do due diligence on the european banks. that may be why investors may be concerned for the european names we have which is not really specific to the silicon valley bank applied to the european

sector. >> they have had time to do due diligence on credit suisse we have the statement out this morning credit suisse is developing a plan to address the material weaknesses it says it could require significant resources to correct the material resources or deficiencies that is extraordinary. one would beg the question or ask the question where do the significant resources come from? it has been out there trying to find anchor investors and step in and shore up the bank what are the ramifications here? i know you are broadly speaking to the head of asset allocation, but if we have a problem in the bank in europe, what does that mean >> well, that can mean many things it is very hard to tell at the moment what the implications might be for investors or us managers at the banks and how they are linked and the

counterpart with the names we are looking at here. >> there are no buyers at this point when it comes to banks we have seen how aggressively banks have been sold off if you have a problem, this is the worst possible time? >> yes and no. i think investors are pricing in the additional risk of this not be an isolated case. it is really about that. i think that in europe, we are in a slightly different situation. i currently discount that risk to be lower than the u.s again, we also don't have to forget one element here which is what we have seen with svb is the demand side shock. since you mentioned asset allocation more in general, this is a good example to take this in the direction of equity markets have been flashing red and dragged by the performance of the financials. look at what happened at yields.

yields went down boosting prices until the returns for bonds. that is a negative equity bond relation for years and that's what investors would like to see for now which is back. >> i suppose the narrative running through markets is why would the fed do anything to change the direction of travel for yields which we have seen over last couple days. the lower of yields is what is helping these banks remediate the risks associated with the loans on the balance sheet when it comes to the policy path moving forward, before last week, before everything went down with svb we had investors coming on saying ecb would raise. where does the ecb go from here and what happens to the ecb if the fed ultimately pauses the rate hiking path >> the ecb i think, is in that

sweet spot in the sense by lagging a little bit and having that situation where they come after what the fed might do, that is a privilege of understanding and seeing what the fed might be doing i think they are a -- the little bit for the fed and ecb. they are in situation where fighting inflation is paramount. they will be careful making decisions that contradict that mandate. again, here is the situation which is trying to understand how fast they can change the monetary policy and what the implications are as you said with higher rates for financials for banks is good news in 2022, we already had rate hikes. financials and banks have done very well. it is more situation, in my opinion, that svb was in a fairly peculiar specific

instance that at the moment, it is hard to tell whether it will have more are severe re repercussions as a whole >> would you buy u.s. or european banks today >> at the moment, i think european banks are fairly cheap. >> thank you so much for joining us today i appreciate the time. head of asset allocation at vanguard a quick look at first republic bank. it seems to be flat lines at this point no, up 20% we just flipped up 14% at this point. i think we were up 20% before. at this point, there is more appetite coming back in pre-market a big question mark again for investors about whether you are seeing the end of the contagion

risk or early morning stability or whether this just rolls on further. >> reuters is saying the company is meeting demands with jpmorgan chase. we don't have confirmation that is part of the reason we see that bounce in pre-market trade. coming up on "squawk box," we have more from the cfo of volkswagen the automaker posted a 13% jump in operating profit for the year we will be right back.

volkswagen has reported 22.5 billion euro in annual operating profit before special items. that is up 13% for the year despite the 7% decline in overall delivery ev delivery grew 26% over strong demand in chaiina. let's get to annette who has more >> reporter: thank you so much volkswagen had a successful year financially despite the reduction in sales when it comes to unit sales. that is like with porsche which

they managed to sell higher priced vehicles and at the same time, employ cost discipline in the company. it is crucial what will happen during the course of this year that is one of my main questions to the cfo with whom i spoke with earlier today let's see what they have to say about the outlook for this year. >> if you look at 2023, the economic environment is challenging. we have interest rates increasing and the overall demand is slightly coming down from the customer perspective. on the other hand, we are still operating in the environment in the economy that is still not sufficient we have the under supply of semico

semiconductors we have auto book of 1.8 million cars based on strong products and brands we are confident with that in 2023 >> let's look at the bottlenecks with the semiconductors. when do you see the re-balancing of the markets >> you are right this issue is now almost like for two years in our industry. we expect that q3 and q4 in 2023 demand and supply is converging. that means everybody in the industry has then more semiconductors that also leads to increased competition. we are preparing for that. >> the increased competition is more price pressure on your product? >> you are right there will be more pressure. we work in an environment which a lot of price increase inflation and raw material price increase and on the other hand, we could compensate for that in

2022 specifically with the better pricing and our customers ordered higher and better cars in 2023, as i said, the competition will be more challenging. based on that, it will be more difficult to pass on this higher price to the consumer. that means we have to compensate more on the costs side by fixed cost reduction and productivity. this is what we are preparing for in 2023. >> let's look at regional markets. china is an important market you have faced a lot of difficulties there now there is new regional china strategy what will you make different and what will that mean for sales? >> you are right china is very important. if you look at china, china is a challenging market you ask what we are making different with our board member for china.

also doing more local for local. we are doing more local r&d and more local production. it will be on the driving and assistance function and car interior opening up a branch in china and doing more locally >> reporter: so to diversify volkswagen away from china, volkswagen is also investing a lot of money into the united states they have a five-year investment plan of 180 million euro and 60% of that in electronic. among others is battery fac factories which is crucial here. we have heard that volkswagen decided to build another battery factory in canada which through the nafta free trade act and the

inflictflaflation reduction acte united states. as americans buyas well it is still interesting. the pe is still low compared to others they look into the potential strategy to get re-valuation of the volkswagen share by so-called digital ipo or virtual ipo strategy for the individual brands what that means for the future remains to be seen they have seen that the porsche ipo was very successful. that could be an idea also to liberate and free some of their brands as well to give them mom more leeway and leverage their

balance sheet. the virtual ipo of volkswagen is opaque it remains to be seen what they mean with that whether it means the def facto ipo on the market or what it means for the individual brands. they want to have more of a share price policy in place. only share buybacks and higher dividends seem not to do the r terrific >> annette, putting that share price move, volkswagen is down 3.3% right now the fourth worst performer in ftse 100 on to porsche, as comparison, the ceo said the luxury carmaker will ramp up

electric vehicles in years with the 37 billion this year porsche shares trading higher this early trade today annette spokes to the ceo oliver blume and asked what made it successful >> it was record numbers in sales and revenue operating profit with very strong figures and profit of 6.8 billion euro with the profit margin of 18%. looking back to the last year, i think main effects with the positive product mix our cost work is very, very efficient and on the other hand, we had currency effects at the

end to come to such a positive result >> one of the drivers as well is you could realize higher prices. unit sales were more or less flat what is the outlook for this year >> pricing is important for porsche and because of the luxury positioning, we are able to go to the pricing level we are increasing prices continuously we are not jumping up and down and have a clear pricing strategy porsche is evaluated from many agencies of the most luxury company of the world that brings us in the position of the fantastic products and fulfill dreams for customers >> what is the outlook for this year >> we expect a very strong year,

annette, for 2023. we are continuing our path we have already had reviewed the last few years we expect a profit margin range between 17% and 19%. on revenue, it would be 40 and 42 billion euro. what is more important for us at the end is 75 years of porsche a lot of surprise for fans a look at how u.s. markets are shaping up we have a sell yesterday early indications is snapping the red ink. nasdaq was firmer yesterday. it looks like we will reach further green today. the question is what happens to the banks. another 90% in stock market value shed yesterday will the contagion and selling fears with the uninsured

deposits and profitability continue for the banks after this it is a big day for cpi numbers. that should be important for the fed, but the bond market has been reacting as well. we will have the latest after this

european equity markets tread water after the collapse of silicon valley bank credit suisse bonds tumble after it concludes talks with the u.s. s.e.c. and publishes the delayed annual report marking weakness in the financial reporting. investors hit the brakes on volkswagen as they report a 7% drop in sales. the cfo tells cnbc u.s. inn fl -- inflation reduction act will help volkswagen targets. >> it will help ramp up electrification in the u.s i think look at the i.r.a.

it helps the supplier there and overall economy move to electric and boone for crypto measures to buck up the financial system by exposures higher >> the risk of contagion in the financial system appear to have been systemic. i think president biden and secretary yellen had made a good set of decisions there european stocks have been trading for a half hour so far we are seen green on the stoxx 600. we have been given back territory from the start if you look at the french

market, it was higher. now flat lining. still seeing early gains on the dax in germany there is weakness elsewhere. uk stocks trading down we see banking stocks under pressure some of the concerns have not dissipated at this hour as we move through the early trading session. let's look at sectors. you see the red ink in the banking sector that space is down .40%. it was down .80% it has picked up autos are down oil and gas at the bottom. this goes to the heart of the concerns of the economy now and whether we have tightening taking place in the financial system because of the uninsured deposits and the question where they go in the financial system and what it means for the outlook for oil and gas and concerns of monetary policy and whether we have been steered off course with inflation. better ones this morning

real estate and bond markets. technology managed to withstand the red ink yesterday. we see technology is out in front this morning stocks on the move let's look at the down ones. volkswagen on the back of the update today credit situation is one we are watching down 2.6% flagging the material weaknesses in the financial reporting after stopped by the s.e.c. and having to press pause on its release. still some concerns around the bond prices which have tumbled still some concerns in that stock in particular. better performance you see u.s. futures here. we are watching the u.s. market closely. early indications look positive.

95 points on dow jones industrial average at this stage. a lockstep across the board. the dow may snap the red ink five sessions in the red the banks this morning and cpi were meant to be laser focused on the cpi today i wonder what is more important. the banks or cpi. >> it begs the question what would you need to see in the cpi to give the fed conviction to push ahead with more rate hikes. global financial stocks lost 100. frank holland is joining us this morning. thank you for joining us >> good morning, julianna and karen. after a five-day selloff at silicon valley bank, there were questions of all regional banks. a bounce back of sorts the kre etf is still down 25% over the last week we are looking at some of the

names in the etf first republic catered to a simil similar clientele to svb with. pacwest is up 9% we are watching the 2-year tre treasury investors continue to run to bonds for safety a week ago, the 2-year treasury closed above 5%. this morning, that has fallen below 4% prices and yields move inversely. we are watching the yield curve. it is seen as a recession indicator. we have seen reversal. the spread now 46 basis points it is shaping up to be a very interesting morning here on wall street as you were talk about it, the inflation gauge cpi is a data point. jay powell said the fed is watching as they make decision of rate hikes this month

now after svb could a hike be off the table? our fed watch tool has even odds, ladies >> frank, thank you for breaking it down. it is remarkable looking at the analyst comments coming through today with the fmoc expectations it feels not a lot of people have conviction as to where the fed goes from here thank you, frank, for joining us this morning. circle says $3.3 billion of u.s. dc stablecoin risk has been removed. the treasury and federal reserve announced a backstop on the billions in deposits the stable coin issuer hadn't held more cash reserves at the defunct signature bank let's look at how the trade is right now.

arjun has been all over this story. publishing a piece yesterday regains $1 after circle says the $3.3 billion held with silicon valley bank will be available. the chaos in the wake of the week's bank failures emphasizes a new approach for stablecoin. >> the s.e.c. made it clear that products held out and products incentivized with deposit and earning yield products and products that are fundamentally brokerage products, stablecoin specifically, but at the same time we heard from congress and fed and treasury and chair gensler said that payment stablecoins that are designed as mediums of exchange and held to

the appropriate standards should be regulated as that payment technology that is where policymakers everywhere seem to be going. regulators and assupervising. we are expecting to see it here in the uk. there are proposals making its way through congress in the ideal world, these are full reserve with cash held at the fed and in short duration t-bills. we have been advocating that for a long time. we think now in recent days and weeks, et cetera, really puts more urgency on that need for stablecoin legislation >> arjun joins us around the desk what did you make of the comments >> it is interesting of what is going on behind-the-scenes circle had $3.3 billion of the reserves that backed the u.s. dc

stablecoin at silicon valley bank the fear at that point when the bank went under is the stablecoin could collapse if you couldn't fill the hole you saw the move away from the dollar it was only when the u.s. regulators came out and credited that backstop and guaranteeing the deposits the $3.3 billion it had would be fully available. it was the first major test for circle it is interesting to hear jeremy's comments behind the scenes and what they were thinking if the government did not step in to backstop. let's listen in. >> we made a commitment that using our corporate balance sheet and external capital if needed, we would fully backstop that there was a lot of discussion about, you know, is that immediately available and over what period of time? we are confident in our ability

to do that which is great. we didn't need to do that. we took a lot of precautions late last week really starting thursday as we started to see a lot of things unfold we moved all of our reserve assets to bank of new york mellon as well as the circle reserve fund which is short-term t-bills managed by blackrock we are making sure to have the most solid infrastructure for the digital dollar i suspect it is eironic a lot o talk of protecting the banking industry from crypto now we are trying to protect a digital dollar from the digital banking system >> jeremy was saying they were confident they would fulfill the $3.3 billion hole. he was talking about external

funding. it could have been a different story had the government not stepped in >> it was a great sound bite of protecting the crypto industry from the banking system. after ftx, the concern of crypto to the broader system. i still think there is a big concern down the track for regulators and wash up of silicon valley bank. the speed and how swiftly people executing bank accounts because they could do it digitally they have a system that is created for speed with digital transfers and digital money. sh surely down the track, regulators take stock and make changes. >> you talk about systemic risk. when you look at the stablecoin space from academics and analysts, two areas where they see systemic risk. one, if the stablecoin market grows and it is worth $135

billion and it continues to grow at this trajectory and becomes a significant entity that touches the real economy and all of these stablecoins are buying up short-term treasuries and there is a run on the stablecoin and they have to sell off the bonds, there could be issues in the bonds market they don't feel that systemic risk is big enough yet the second is the concentration of power one interesting thing is investors flocked from usdc intinto tether that concentration of risk if it grows and one or two players in stablecoins and this touches the real economy, it is the backbone of crypto trading, then that is an issue regulators will look at this and try to figure out a way to make this safer they feel this is something here to stay. >> the irony here, the believers

in crypto have been justified. you had concerns in the crypto space. the reality is the central bank is printing more money this was the argument. putting your money in crypto that was the original cause for some people to strip money out of the traditional banking system. >> yeah. the other point to that is bitcoin has rallied overnight and over the past couple days. the nasdaq was also up yesterday versus the dow and s&p you have seen the nasdaq and bitcoin work in lockstep there is another side of it. people say this will slow down rate hikes and lead to a cut in rates. that is giving bitcoin the risk-on mentality. it is people saying it is moving into crypto and moving away from traditional banking and finance. you also are seeing risk-on as a result of the idea that we could have looser monetary policy as

well >> and at circle, the crypto ecosystem and the smaller players could be impacted by silicon valley bank and we may not have seen the last of it. coming up on the show, february cpi print is due out in the united states in a few hours after president biden said he is confident it will be in good shape.

it's not just the fed pathway investors are reassess thing. now a 40% chance the bank of england will not hike interest rates this month there was a 50% chance when markets opened this morning and now bets of the 25% hike started at 50% before silicon valley bank collapse. now a 10% chance that the boe would pause rate hikes markets are betting the collapse of silicon valley bank and rout on global banking stocks will force the fed to rethink the pat way. nomura expects the fed to cut

rates by 25 basis points and put an end to quantitative tigh tightening investors are pricing in a 60% probability of 25 points, but expecting to cut in june the fed is expected to stick to the hiking path next week raising rates by 25 basis points, but that would be the wrong move >> the fed will raise 25 basis points i would say at this point, the chance and things are happening so quickly, although it is a week away, anything can happen things are happening so quickly and i think the fed is not going to go 50 i would think 25 and i know people are wondering if they go up at all. i think to save the program and credibility, they will raise rates 25 basis points. >> investors will look for signs

u.s. inflation may have cooled when the data is released in a few hours. it is expected to rise 0.4% per month. and 6% cpi year over year is the number and this is the main driver ahead of the fed rate decision next week. the collapse of svb and threat in the banking system has raised the possibility the fed could reverse course sooner than thought. i know there is a huge debate raging if monetary policy should be taken off course by silicon valley bank and others the reality here is if you look at the inflation print and 6% handle today and still far above 2% level the fed is aiming for the question is how quickly do we get back to 2%?

the fear is tightening in the financial system depositors are not confident to leave funds uninsured in banks and an they move to larger bank and that means that lending is compromised. that, by default, starts the down turn. we are back to recession risk in the economy that many had started to park the beginning of the year a dominant threat in 2022 and less of a threat this year >> could the collapse of svb speed up the recession timing if we see a pull back in lending? listening to analysts over the last 48 hours, the jury is still out if they prove to be inflationary or deinflationary the best line we have seen and we flagged it.

deutsche bank's note to investors this morning with jim reed says i have no idea what the fed and ecb will do at the meetings in the next week. it is not just the fed up for grabs here on policy the european central bank as well they have the luxury of waiting to see what the fed does first. >> the system is now broken. they are not fit around the banks because you see yields start decline rapidly in a short space of time as bond prices are pushed higher. the question is if we don't get a reversal from the fed and they don't pull back on monetary policy, what happens to the yields the emergency facility to try on help out to-- to try to help ou

some of the banks. >> especially with the bond yields in the last 24 hours is helping to remediate the problem that caused the svb decline in the first place? we see the move lower. >> as we talk about trades today and what happens to the treasury market and as a result, if we get a number that is slightly hot or slightly cooler, what reaction do we get, if anything? if we get a firm cpi, what does that mean for the greenback? as yields are lower, then dollars come back. >> earlier on the program, we had the first guest called the peak in the dollar if you are looking at the federal reserve taking its foot off the gas with the rate hikes, could that prove true? is dollar no longer king

>> watching the banks to see if there is any respite from the selling taking place we will hand you over to "worldwide exchange" stateside thank you for watching "squawk box" this morning.

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it is 5:00 a.m. here at cnbc global headquarters. here is the top "five@5. the banking stocks are catching a bid, but the fallout from silicon valley bank is far from over. and federal regulators trying again to selloff svb. why jim cramer says if it fails again, it could spell big trouble. and bill ackman may be sharing the rescue, but not everyone what citadel is saying. and the rate hiking cycle now in doubt and the