they gave tara peace and justice. craig melvin: that's all for this edition of dateline. i'm craig melvin. thanks for watching. ♪♪ good morning. welcome to "street signs." i'm joumanna bercetche. these are your headlines. europe banks enjoy the pick up in investor sentiment in hopes it may have weathered the worst of the crisis with first citizens buying silicon valley bank. a textbook case of mismanagement. a lack of oversight for the collapse of svb and officials prepare to give testimony.

we will bring you governor andrew bailey's remarks this hour. grocery prices in the uk go to a record high this month with grocery inflation rising 17.5% in march adding more than 800 pounds per year to the british consumer's shopping bill. u.s. regulaors go in on binance over the crypto exchange violates rules to attract u.s. users. welcome to "street signs." sentiment has turned more positive over the last 24 hours. you can see the stoxx 600 behind me with a lot of green on the board building opposetive momentum that started yesterday.

the index ended up 1.6% yesterday. we did get a very strong performance from wall street as well. the investment community has taken well to the news that first citizens bank is buying up svb assets. we saw positive reaction in other regional banks in the u.s. as well. some are saying maybe for now we he can put aside the risk of contagion to other parts of the banking system. of course, it is early days. in general, we are definitely a lot more positive than a couple of days ago toward the end of last week when the fears started to ratchet up. the picture today is defendant knit -- definitely positive. let's switch and talk about the individual boardboards. every index is trade in the green. the dax with the focus on deutsche bank and it continues to rebound. up 60 points today.

.40% higher. we continue to see positivity transpire in deutsche bank as well. almost fully recovered from the losses we saw on friday. not quite there yet. cac 40 in france up .50%. this index is struggling from the political back drop uncertainty over the demonstrations in france and the passing of the pension reform. doing well this morning. the ftse 100 is 30 points higher. here, it is worth noting, grocery sales numbers come in showing food prices shot to the annual high adding a big amount of money to people's shopping bills on the annual basis. we got numbers from the retail which have been met positive. also bear in mind the bank of england governor andrew bailey

will speak in front of the treasury select committee in 45 minutes time about the rescue of svb uk. this is the breakdown in europe today. oil and gas with a turn around in sentiment. in line with other high data assets. we saw oil come under selling pressure as recession fears build up. we see a turn around. 1.5%. baic resources up 1.1%. real estate, the last couple weeks talking real estate and specifically commercial real estate and bank expoure to real estate. that is down 1.2%. we have a specialist coming in and the tech sector is down as well. let's turn to the number one story. european banks. they are enjoying the positive spillover from the first

citizens banks buying silicon valley bank. 50% in trade putting the rest of the banking sector in the green. the chief banking regulaor michael barr is talking about the policies. barr branded the svb failure as a textbook case of mismanagement and lender waited too long to address the problems. here is the issue, was this actually an idiosyncratic issue with svb or a sign of further issues in the system as well? we will find out in the next couple months. here in the uk, governor andrew bailey warned that the u.s. bailout could increase the risk of moral hazard. we will have live coverage of the testimony on the collapse

this hour. ubs ceo ralph hamers said the lender did not buy credit suisse only to close it. that is according to reuters which says it has seen an internal memo with the government backed cquisition is a growth opportunity for ubs. we have the stock trading higher today. 1.3%. we have scaled down some of the highs we got to last week. we got to above 20 swiss francs. we scaled back a lot last friday as the market comes to terms with the cheap price that ubs acquired credit suisse. switching to european yields. we see normalization in the stock market and we see normalization in bond yields. the 10-year bund at 2.28. six points higher. almost back to where we were pre-credit suisse bailout.

that is interesting. we've gone full circle with the 10-year bund at 3.44. italy, there are issues with the disbursement of the recovery funds. that is something investors will keep an eye on. extension has been granted to italy. as for u.s. treasuries. massive moves on the front end of the u.s. yield curve. 10-year treasury at 4%. we traded through that last week. we are still 8 basis points leer -- points lower. as for u.s. futures, the stock market. yesterday, we did see a positive session with the eception of the nasdaq. that will continue today as well with the s&p and dow being higher in the open with the nasdaq being weaker as well. happy to say our first guest

here is with us. the global strategist is with us. a little bit of company for me. that's good. >> good morning. >> i think the first question is whether or not you think the banking crisis or the events of the last couple weeks will derail the fed from their plan with interest rate hikes. >> yes, it is difficult to say exactly how this will pan out. i think the consideration this fed needs to balance now is what the economy can impact as well. the obvious one is it will lead to tighter credit conditions. that, you know, as we see in the u.s. economy going possibly into recession. that alone, will lead them to be cautious in tightening path. we think they manage to squeeze one or two more hikes. for that, you really need, you know, the volatility in the markets and markets generally to calm down for them to be able to

resume that. >> i think one new term that people are getting familiar with is separation of principal. christine lagarde saying that price stability is the focus. we have the tools to deal with financial stability. they can actually separate the two. do you believe that or is it an inherent conflict with central banks who want a hold on inflation and make sure it goes back to target, but not cause the risk? >> i think the problem in order to conduct monetary policy in a quote/unquote normal way, you need a pre-condition of financial stability. when financial instability hits the system, you need to make sure you address that to calm the system. then, proceed with your monetary policy plan. so, you know, they are more intertwined than people think

than the policy measures. >> what you said about the fed, they seem to be taking everything into consideration, even the last press conference, i thought it was notable that fed chair jay powell said there had been discussion about a pause. they did not offer the pause. they went for a 25 point hike. they still sound hawkish. is that going to change, do you think, in the next couple months? >> it is hard to say because in the case of europe, you have bigger inflation problem than in the u.s. there is no inflation. it is just the cycle is more advanced. in the case of the u.s., inflation is starting to turn and there's, i think, good prospects that inflation can be under control. that is how aggressive the fed was in the first place. the bank of england and ecb have been aggressive, but in the case of both, the uk and eurozone,

you still see high inflation. in the case of the eurozone, i argue bigger problems. core inflation seems to rise and we are at the height of the cycle. >> yeah. they started later and hiking more increments. you cannot draw comparisons. let's talk about the u.s. fixed income. we see a huge rally. what do you make of market pricing right now in terms of going for one more rate hike and then starting to cut? >> as you said, when financial stability and instability takes the front seat, markets react to that. that's what dropped the rally at the front end and yield curve. basically, what is happening now is markets calm down a bit. they are starting to correct. front-end yields are stabilizing

and flirting with the idea that the fed can actually continue to hike. i think it is a little bit premature to see how it pans out. the fed will be considering the aftermath of the events and what it means for the output for the economy. >> what is the view of the duration? do you have a view of 3.5%? is that pricing in the negative scenario? >> i think at the moment because we have seen the rally in rates, we think it leads to the market to being exposed to the short-term correction. longer term, you need to factor in what you think happens with growth and inflation expectation and tightening. all in all, i would say it is

neutral on rates in the u.s. at the moment. if anything, there is some potential for upside with the longer end thinking the economies that we are seeing in the future is a more supply con constrained economy. the interest rate is mutual in the long term and a bit higher. that would probably merit higher interest rates. >> what does this mean for the credit spread properties? -- spread products? we have seen tight levels. do you see this as a buying opportunity or not yet? >> i would say short-term we are still a little bit cautious. we never know how the risk is with banks which will pan out. more medium term through long term, we are long-term investors. for us, the interest rates we have seen over the last year or so together with the dislocation

at the moment is actually a very interesting environment. if you choose your spots and exploit the opportunities we see bottom up sector wise, i think for long-term investors, it is an interesting market. >> certainly volatility does create opportunity. you have to pick your timing as ever. guillermo, thank you for joining me. we will see where central banks will go from here. the global investment strategist. i want to bring you lines from the chair of the super advisory board of the ecb. let's start off with a question that he received about the fall in deutsche bank shares. this is a concern for investors. the bank can move shares and deposits. here, it is the direct reference

of deutsche bank and that caused concern in the share price. he is advocating having the central bank cleared. that would involve massive revamp of credit markets and direct exposure to credit suisse is relevant, but manageable. investors did not get rights which business models are similar to credit suisse. there have been fast outflows of deposits in cases. interesting. interesting comments from what he said earlier. current events confirm strong demand and supervision is needed more than ever. advocating more regulation instead of less regulation. banks with adequate risk reporting capabilities is still the exception. some interesting comments coming out of the chair of the supervisory board of the ecb and regulators are the people that investors want to hear from

right now as to what they know and what they are seeing on the bank's balance sheet here. elsewhere, morgan stanley chief investment officer mike wilson has his picks on cnbc pro. uk grocery inflation came in higher than ever in march. prices rose 17.5% on average on the year. the reading follows similar data from the british retail consortium which put it at 15%. the highest in yearly 18 years. a 3.4% increase in retail revenue for okado. the british group has seen an increase in customers, but average basket value remains flat. the company maintains guidance adding it expects a positive ebita this year. after trading positive, the

stock is now down 1%. the ceo will leave his role after 10 years at the end of june. it will be the eighth female ceo of the ftse 100 company. coming up on "street signs," could commercial real estate be the next sector hit by the the next sector hit by the banking when we started our business

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welcome back to "street signs." the recent turmoil added risk and exposure to the commercial real estate space and proxy loans. amid the rising rates and credit crunch and weakening valuations. arabile is talking about the next big risk with the banking sector. >> good morning, joumanna.

we have to look at this sector. the sector has been reeling from the silicon valley bank collapse. the next big test for america's regional lenders could be around the corner as regulaors and investors grow concerned about the real estate housed by the smaller banks. that is beginning to focus through. let's unpack it. according to data from goldman sachs and morgan data group, small-to-mid sized banked, banks with less than $250 billion of assets, hold $2.3 trillion in commercial real estate debt. that makes up 80% of all commercial mortgages held by banks. this, as commercial real estate faces the double whamwhammy. declining valuations and rising interest rates which are impacting things heavily. you are seeing the interest

rates stay or continue to rise depending on inflation. by contrast, larger u.s. lenders hold 20% of the commercial mortgages. that is this over here. these are the rest of the regional small-to-mid sized banks. for the lenders, it makes up 6% of total credit portfolio. it shouldn't be something they worry about, per se, but with banks lending more, more real estate groups will crunch as they look to refinance the expiring mortgages. $270 billion of commercial mortgage loans are due this year. $1.4 trillion of that is due in the next five years. with the sharp slowdown in the mortgage backed security markets, these loans remain stuck. particularly on those banks books. let's head to the european aspect. we said u.s. regional lenders

are facing the greatest exposure in this regard, but it could spill over to europe. large fears to deutsche bank exposure to commercial real estate in the u.s. was cited in the factor last week according to data compiled by citi. one of the european lenders with the lowest provision coverage for real estate expoure at the 20% mark. 50% of that in the united states. if deutsche bank was to raise provision to the average rate at 54%, they would only need to add 300 million euro to the balance sheet, joumanna. >> arabile, it is good to look at the actual numbers. one take away from me as a percentage of the total loan book, commercial real estate exposure is small for the banks. it tends to be concentrated among smaller banks. that is what they need to worry

about. small bank exposure and extent of loan-to-value of how much they borrowed against some of the real estate loans. that's really going to be the smoking gun going forward. >> that is why you are getting murmur with first republic bank in the united states and other lenders. the worry was around the exposure that deutsche bank had. that is why you had the drawdown as well as the cds which went sky high from deutsche bank. that seemed to fall off. the question is the regional banks and exposure to the market is massive and if they don't have the right provision, they could be impacted quite heavily. >> arabile, thank you very much for that. certainly a story we will watch closely. i want to highlight that as of now, the stoxx 600 real estate index, the index that tracks

real estate companies within the euro stocks, has fallen 1.5% today. it is now the lowest level since last october. you see it clearly in the chart. probably about to break through the lows. something to keep an eye on. happy to say the director of research from green street joins us to discuss all things real estate. i'm sure you were listening to my colleague, arabile, breakdown the bank exposure to the real estate sector. how about you give us the real estate sector view? how bad is the situation? what price pull back can we expect in that space? >> thank you very much for having me. the context here is a little longer range. still back to how banks and investors have been encouraged to do things the last couple years. rates were close to zero. 1 to 2% range. the rates have moved up to 4.5%

to 6%. the cost of capital for the industry focused on consuming capital is particularly important. as a result, we are seeing decreased value. the public market in europe in particular is nervous about real estate. real estate under performed by 40% over the last few years. in the u.s., the difference is much less marked. it is under performing as well. one reason for that is the cost of capital is higher and that means values are coming down. assets down in europe are 20%. it is more run of the mill and down 20%. i'm talking industrial and office and residential. retail business is down recently, but only because of the prices have come down so

much pre-covid and during covid as well. the real estate at this point is pricing in some level of decline associated primarily with the higher cost of capital. it is important to note that it is not so much about the operations on the ground. when you look at what real estate is doing on the ground in general, cash flow is the expectation is decent for the next few years. we expect capital growth in the 3% to 6% range in the next few years. the question is not operational, but cost of capital itself. >> what about non performing loans? if you look at the recent data, the number is pretty low. i was looking at european data in germany, for example, it is around 2%. that is still low given what you hear with commercial real estate. it is a ton of debt that needs to be refinanced in the next

couple years. >> it would be logical to expect it to go up. we will draw parallels to something that happened in the past. '08 is not it. we have to look at the environment where credit has become less available, but not entirely curtailed. the price has increased, but not dramatically enough to create a tsunami of problems. we have to look at property values five years ago. we have look at them to being similar or a little bit higher. the need for additional equity certainly will be there. there will be a range of outcomes. you have more risk with the office business. you have less risk when it comes to logistics business whereas set value is more comfortable versus five years ago and demand

for space is more notable than office. it is a question of choosing the sector. retail has to be a sector where a lot of challenges could come up. it has declined in value, but the sector like retail will do better versus other sectors. some are not pricing in the pain or the challenges in the environment. >> and for our audience, can you say where the financing is coming from for real estate companies? is it primarily through banks or could there potentially be other investors exposed as well? >> so it depends on the companies. often secured financing. normal loan market.

corporates in europe make use of it. for a lot of the private investors, banks play an important role. another number of other capital sources also available to the businesses. think about the insurance business and lenders that are non-traditional banks that play in the real estate business. there is a range of possibilities. i think the investors that generally have the most ease of going through the cap environment are those with relationships with the broadest group possible of lenders. >> you did say something positive a few moments ago about some parts of the business being cash flow positive the next couple years. which part of commercial real estate are you more positive on? is it retail, warehousing, office space? >> retail is the one simply

because it has been written up by most players in the real estate business with and as a result, they are going on yields that are said to be above average. you can buy 6% or 7%. you can enjoy cash flow growth. a couple of other sectors that are interesting tend to be a little bit less at risk of changes in the economy. if you think about the student housing business, it is an environment we find interesting as well. counter cyclical in many ways. everyone needs to go to school to upgrade skills. the self storage business we find interesting. business has boomed in the u.s. over 25 years. it is starting to take place in europe. in the european context, we have little supply with what should become the demand over time. the ability is okay in that business and you can go in at

attractive yield. >> thank you. fascinating discussion. hopefully viewers benefitted from the information you have given us on the space. the director of research from greenstreet. also coming up on "street signs," looking at the exposure in the

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welcome back to "street signs." i'm joumanna bercetche. these are the headlines. european banks enjoy the pickup of sentiment as hopes the sector weathered the worst of the crisis following the first citizens buyout of silicon valley bank. the textbook case of mismanagement. regulator blamed lack of oversight for the collapse of svb. we will bring you bank of england governor andrew bailey's remarks this hour. grocery prices in the uk

grow to the record high with grocery inflation rising 17.5% in march adding more than 800 pounds per year to the shopping bill. and filing a lawsuit on the accusation the crypto exchange binance failed to report to regulators. welcome back. positive sentiment prevailing in european and u.s. markets. wall street was positive with the exception of the s&p as investors put aside the fears of the banking sector. all of the indexes in the green. we had just in the headlines

with a quick summary of what happened with european banks. for the most part, they are trading positive. deutsche bank slipped back actually in negative territory. dax is up .40%. cac 40 is up .50%. ftse 100 is up .40%. in terms of u.s. futures, this is the picture for wall street. s&p is flat. the dow is up 80 points. nasdaq also opening up weaker today down 30 points. again, continuation of the weakness that transpired in yesterday's session as well. russia has failed to get the united nations to investigate last year's nord stream pipeline explosions. the kremlin stated three council members voted in favor. sweden and denmark and germany

said their separate investigations into what caused the leaks were still ongoing. let's take a quick look at how the price of oil is trading today. we are seeing a bit of a bounce here up about .70%. we have crude up .60%. what a year for the oil coming -- complex. we have the state ministry joining us from the sideline of the berlin energy conference. good morning, sir. it has been more than one year since the beginning of the russian invasion of ukraine. as a consequence of that, many european countries reassessed energy security and energy independence. how well, do you think, the europeans have done or how good of a job have they done in diversifying away from russian oil and gas in the last 12 months? >> i think europe has responded

tremendously. the amount of measures taken and put in place has been extraordinary and unprecedented. lng port terminals in germany developed quicker than anyone thought possible. we see consumption measures put into place. we see a ramp up of solar and wind power. still the challenge is and also going forward and we need to work together to limit the consequences of the energy crisis as much as possible. >> norway has emerged as a top supply of gas. the major supplier of crude oil. has this crisis prevented an opportunity for norway? >> i think i want to be clear on the fact that the energy crisis is not a good thing for norway. it hits our neighbors, our

allies, extremely hard. it effects the system with the effects on electricity prices with houses and businesses in norway. we want to work together with our neighbors and allies to limit the consequences of the crisis and bring back prices to normal as soon as possible. it is important to note that the energy landscape in europe will never been the same. that continental shelf has become important for the european energy system in the situation here and now and will be important for many years going forward because it will be one of the primary resources for oil and gas into the european energy system also going forward. >> that echos what other people tell us in the space. the landscape has permanently changed. a lot of concern, say, around october or november last year,

that this would be a tricky winter for europe and european consumers struggled to get the energy they needed and at an affordable price. here we are almost april. europe managed to make it through the winter without a serious strain or serious speed bump along the way. there is concern that next winter that things will start arising again because more competition over the same sources of energy. what is your read as to how next winter could look like for the european economy? >> i think you are absolutely right. i mean, what this winter has shown is that if we prepare together, we can do a lot. we can fill european gas storage. on the norwegian side, we can deliver extra energy into the european system. at the same time, we have been a little lucky with regard to

weather. the weather being warmer than what it often is during winter. laying demand the consumption which has helped. if we get a colder winter next year, we need to be more prepared. we need to put into place additional measures. next year can be a tougher year than this one. at the same time, we have shown we can together put in place measures quickly when needed. now we have extra time to put additional measures into place so we can do as the best extent possible fill gas storages again and make plans for the tougher winter next year. >> regarding the issue of refilling storages. is there likely going to be a lot of demand coming from asia and china going forward?

>> i mean, on the price side, the price of lng in the market and an the market price of lng will be crucial to determine the cost of which europe can buy gas. so to that extent, the global market for lng and asian demand will have an effect on prices. at the same time, it is important that europe has put into place the coordinated buying mechanism so they can get better coordinated buying strategy in place to fill storage levels to dampen the price a bit. the global demand situation will be crucial for the determining prices for lng and at what cost european gas storages can be filled. >> i thought it was notable that the german vice chancellor came to talk about the opening of the

pipeline. this was a hydrogen pipeline. how quickly can it be scaled up with the needs required? >> the energy crisis we now see contains a lot of challenges. it contains a few opportunities as well. several areas where we have closed dialogue with offshore winds and now as you mentioned regarding hydrogen. what we have started doing now is conducting a joint study between gas norwegian operator and german counterparts to look into how quickly an infrastructure realistically can be put in place. whether it is a pipeline or other potential structures such as maritime transportation structure for example. what will be crucial in the speed is the speed of supply and

demand. how quickly can we build a realistic demand in europe for hydrogen and how fast can european industries transition and how quickly can we build up both blue and green hydrogen production in norway and other european countries. >> definitely a big question going forward. thank you very much for your time today. the state secretary of the ministry of energy from norway. coming up on "street signs," governor andrew bailey is giving us details on his press us details on his press conference. hi. i'm shannon storms bador. when we started selling my health products online our shipping process was painfully slow. then we found shipstation. now we're shipping out orders 5 times faster and thanks to shipstation's discounted rates

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welcome back to the show. let's talk crypto. binance has been accused of violating rules to attract users. the ftc said the company and ceo subverted their own compliance

program in a bid to gain users. binance said it made significant investments to ensure no active u.s. users on the platform. arjun is here with us. why are they going after binance? >> binance is not the entity in question. the binance broader organization. the ftc is alleging that binance is trying to get u.s. users on to its international platform in violation of u.s. rules because that platform is not registered. they take issue with a number of things. one is the know your customer process. verification process for people to trade on the platform. they allege that binance did not require customers to verify identity. they help u.s. customers to get on the platform offering vpn and

evade compliance control. there is an issue with, they say, vip customers. binance helping high net worth individuals to evade sanctions and giving them a head's up to enforcement actions if they were coming. a number of allegations in the suit at this point. >> a couple of questions. why were binance trying to lure customers to the u.s. exchange? the second is talk about the significance it has on the exchange as a whole? we talked about the demise of ftx. binance was the last man standing. >> with binance, they were trying to get a bigger customer base on the international platform. that was the big motivation behind that. the issue here is how many u.s. customers were on the international platform. if it is a significant amount and the u.s. regulators say you really have to stamp this out.

we can't have any american users on the international platform. that could take a lot of liquidity out of the market potentially and put a damper on what we have seen at the start of the year which is a rally at this point. there are implications for the industry here. one of the pictures the ftc is painting is opaqueness. they are registered here and registered there. we don't know how they act. although the ceo is at the head of those and a really interesting anecdote in the allegations. they allege in january of 2021, he approved a $60 expense for office furniture in a month the company made $700 million. they are trying to say this ceo is really at the heart of it all. even down to the minuta. >> and thinking what office

furniture cost $60? arjun, thank you for the story. we can looked your stories on the dot-com web site as well. the bank of england governor andrew bailey is giving evidence on the collapse of the uk arm of svb. he is speaking out. let's take a listen in. >> you mentioned credit suisse, their governor, and obviously quite a few banking stocks. regional banks in the u.s. we heard in recent days pressure on the share price of deutsche bank and so on. you probably won't want to comment on areas outside the uk, but i just wondered whether you think today that these individual idiosyncratic events

are in the past and things have settled down and we see this turmoil of the banking sector in march? >> obviously, we would be happy to discuss any points you wanted to discuss as to that. i think the u.s. is still dealing with some of the consequences of the issue in the regional banks that manifested itself in silicon valley bank. i think credit suisse, i would say, should come on and talk about that and that is a rather specific institutional story. my view of the uk banking system is it is in a strong position with capital and liquidity. it is not showing signs of problems in that respect. we tested it extensively. i also think that what we saw at

the tail end of last week, the sharp market movements. i think to test out firms. i would not want to say those in my estimate are based on identified weaknesses more than testing out. there is a bit of testing out going on at the moment. >> last september, we see the stress test of the liability driven investing which was outside of the parameters of the stress test you have one. have any of the vestme developm been outside the stress test? >> it was a relevant factor in the demise of the parent bank silicon valley bank. we do capitalize that risk thoroughly or the uk bank and silicon bank uk.

i'm seeing the stresses. where i think there may be more of a policy question which will be interesting of the calibration of the coverage ratio. that is the one month liquidity of the banks. as andrew was just mentioning, the striking feature of the silicon valley bank run, not so much of liquidity, but the speed with which it took place. you see $3 billion in deposits going out in a day on friday the 9th of march. the outflows we have with the percentage of deposits seem to run out. some actually are 100%. operational deposits are less than that. i think there will be a question for all of us. the question of the outflow

rates are high enough. >> i think it is much easier now to move your deposits electrically. you don't have the queue around the block to take your money out of the bank. you can move it out in seconds. >> that is the bank of england governor andrew testifying at the committee over the acquisition of silicon valley bank uk and the ramifications of the banking sector and reassuring and people asking questions that the banking sector is well capitalized. that committee hearing continues. that is it for the show. i'm joumanna bercetche. "worldwide exchange" is coming up next. my name is ashley cortez and i'm the founder of the stay beautiful foundation when i started in 2016 i would go to the post office and literally fill out each person's name on a label and now with shipstation we are shipping 500 beauty boxes a month

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it is 5:00 a.m. at cnbc global headquarters. here is the top "five@5." stocks looking to gain on the issues of buying silicon valley bank. to capitol hill. regulators in the hot seat today to face questions of the lead up of the collapse of silicon valley bank and signature bank. what could have been done to avoid it and what is done to prevent the next crisis. details on the disney layoff plans and one area of the company bob iger is looking to