♪ good morning welcome to "street signs." i'm joumanna bercetche >> i'm julianna tatelbaum. these are your headlines >> ecb policymakers forced the hiking path. it would be premature to stop rate hikes yet according to some >> we are reaching restrictive

territory. it is important we don't relax early. >> we need to read the data carefully to understand the monetary mechanisms are at work. they he are bringing inflation down the ftse mib hits the highest level since january of 2022 and equities kickoff with key data and earnings ahead. shares of angry bird maker c catapult higher after an offer to the finnish company. and french president emmanuel macron signs his pension reform bill into law french party members tell cnbc there is a problem with the democratic system. >> the unanimity of the trade union in france.

80% of the population. the parliament opposed to that law. the law adopted without a vote in what democracy do you have a law without a vote >> welcome to street signs joumanna is back from d.c. >> i'm back in one piece it was a busy week it was great to be there we had lots of interesting conversations with the members of the imf the outlook is cautiousness. not a major difference from where we were back in january. i think there is a sense there is a lot of risk facing the global economy right now namely, inflation. i thought it was interesting despite the concerns of stability and banking system and other risks that popped up in

the system and main focus and take away from the imf to policymakers is do not give up the fight against inflation. i think central banks will be res resolute on that point there was talk of rising interest rates and putting a lot of lower-income countries in debt and distress. 60% of low-income countries on the verge of debt distress those are the types of discussions taking place more broadly, there is an existential crisis going on within the imf and world bank about the insurtitutions and revamp the challenges with climate change and help the lower-income countries deal with the debt restructuring generally, on growth, i would

say more cautious. >> interesting you say one of the take aways is the policymakers are resolute in the fight against inflation. it felt like listening to central bankers and there is an element of debate of the right policy path moving forward for the ecb. do you feel like listening to what all of the central bank governors had to say and what is next for the ecb >> i do. we spoke to a lot of them. my feeling the is that they are not done just yet. they still have more to do all of them said that. even the most dovish members of the committee said that. they are nearing the end of the cycle. i think they are watching the core inflation data very, very closely. core inflation in the eurozone has not peaked it is still going up it is not able to justify with the rise there will be one more print between now and the next meeting. that will be key

if it stagnates, that gives them cover to pause or to go for less go for 25 or to pause. my feeling is they are still thinking of 25 or 50 the data between now and then is significant. to that point, ecb policy was in focus at the forum in washington where policymakers told me the crisis in the banking sector complicated the hiking path going forward. alfred kamerer said he has c confidence in the sector. >> we believe the banking sector in europe is actually sound. capitalization is strong liquidity ratios are high. it is well regulated and supervised and can deal with financial stresses which arise during policy tightening

of course, also what we need to take into account with monetary policy is this turbulence which may arise in the tightening cycle will affect financial conditions and the policy needs to take that into account. >> however, the luxembourg finance minister said otherwise. >> i was in the meeting with christine lagarde and in the meeting said banks are solid we have seen what happened in the u.s. and switzerland we can see the regulatory environment around banks is really set up. we have the capital requirements and liquidity in place that really puts us in a position we are, of course, always observing this closely the setup we have and framework

puts us in a good position to not be too worried about this. >> croatia's central bank governor downplayed the role of the issues and talked about the differences with the u.s >> it went up with the crisis particularly with credit suisse and it is now coming down quickly. compared to the u.s., i see less of an effect on the banking sector and turmoil on the financial conditions in europe yes, financial conditions are tightening we see the banks are tightening lending standards. it started before we had the banking turmoil. it has different causes than the banking turmoil itself from the banking system problems, i would not expect for the time being seeing any

evidence of significant tightening of financial conditions let's check on the markets there is a lot of green on the board. stoxx 600 up .30%. building on gains from last week stoxx 600 climbing 1.7% as a whole for the week tapping into the positive momentum we got on friday in the u.s. after strong results from the banking system jpmorgan chase and citi and wells fargo setting the tone jpmorgan chase with the positive hand over as well as asia with a lot of green on the board. stoxx 600 is looking ahead to the start of the evenarnings sen in the u.s so far, the mood is positive up .30%. switching to european index, you see almost every index is

trading nicely in the green. ftse mib in italy is around 28,000 this is the highest level it has been since january of 2022 continuing to make highs on that particular index dax is up .30% i spoken to a bunch of policymakers the last week the messaging is clear they continue to want to fight inflation and keeping a close eye on the core inflations numbers coming out in a couple weeks. keep an eye on that and what it means for the ecb price. cac 40 is up .20%. the constitutional court ruled in favor of mr. macron's pension reform package we will talk more about that and what it means for the country and state. big ramification there uk is shy of 8,000. we continue to move up .50%. big week for uk data

inflation data and wage data and pmi numbers on friday. also something else to watch out for if you are looking at interest rate expectations bank of england in a couple weeks time and a probability of 25 basis point hike there. and this is the basic resources up 1.2%. reacting positively to the information from china overnight. china gdp data tomorrow or overnight or this evening. something to watch out for with basic resources and other cyclical sectors tech is under performing down .90%. and financial services do down .70%. with u.s. futures, all three majors are picking up on the positive sentiment on friday and are seeing it open in positive territory. we continue with the bank

earnings we have schwab reporting datoda. jpmorgan chase and citi and wells fargo all beat expectations for the first quarter when they reported on friday reaping the benefit of higher interest rates jpmorgan chase with a 53% rise in profit. net interest income surging by 4 49%. it saw $37 billion increase in deposits as money moved into the bigger banks following the collapse of silicon valley bank in march jamie dimon said the u.s. economy continues to be on healthy footing despite the turmoil. storm clouds remain on the horizon. citigroup reported $4.6 billion profit in the first quarter. up 7% from the year earlier and ahead of forecast and revenue

jumped 12% the ceo did not see the issues as pervasive in the industry, but did forecast the u.s. would enter a shallow recession by the end of the year. wells fargo reported higher than expected first quarter earnings, but warned of losses in commercial real estate setting aside the money to cover the losses compared to $700 million a year earlier wells fargo cfo spoke to our u.s. colleagues about the fund flight from lenders. >> any time you get a big increase in deposits in a short amount of time, you have to be cautious of how you think about those. it is likely some of that will revert across the board. it will take time to play out. >> blackrock ceo larry fink waved off the u.s. recession

this year, but maintained it will remain sticky speaking with "squawk on the str street," he discussed money flows. >> we are seeing acceleration moving out of the banking system into the capital markets that continues on. you can ask the question if it is good or bad we all raise those questions large banks are benefitting from this large market making banks are be benefitting from this. and janet yellen is telling cnbc that lending standards may continue to tighten. the former fed chair says she has a moderate outlook which is not enough to downgrade her position and goldman sachs and morgan stanley report earnings this week with a host of smaller

lenders closely watched. no doubt in light of the events of what happened last month. >> in terms of the bank earnings season, the focus on deposits is interesting. on the one hand, you have the big banks benefitting from the flight from regionals. you see jpmorgan chase which is impressive with the results. on the flip side, it comes to deposits before svb and the turmoil, you had deposit flight because people were putting it in money market funds. with goldman sachs this week, they will be one of the big beneficiaries of that latter trend of people taking money out of deposits and into money markets because they have the biggest money market business. >> that is a very, very interesting point to pick up on. i think people were surprised of the extent of jpmorgan chase beat on net interest income. they would have thought they would, perhaps, not be able to

lift margins as they did because so many deposits have come in and they have been a beneficiary, they managed to do well overall, deposits have been leaving the system and going to money market funds when it comes to the health of the consumer, interesting comments with citi ceo saying that the bank softening in consumer spending this year. jamie dimon warning about the potential for things to slow down also jamie dimon saying higher interest rates expose vulnerabilities in the system. you have to see what is happening with the regional banks. the interesting one is the regional banks this week. >> you have charles schwab shares down 30% since svb collapse potential to get into the stock. >> for more on the bank earnings stat

stateside, check out cnbc.com. and merck will buy prometheus bio-sciences. merck is expected to pay $200 per share for the firm a 75% premium to the friday closing price. i believe we have a pre-market indication for prometheus. this is a huge deal around $11 billion. merck market cap is $300 billion. it is a huge deal. we knew merck was out there looking for a target they were trying to diversify the portfolio in losing the cancer drug coming up. this was expected by the market. we didn't know where they would land >> it is building on growth. >> exactly. we have more deal news to

highlight. video game company sega offered to buy rovio entertainment the company behind angry birds it would help sega expand to europe and sales s rose 9% from renault. the automakers said worldwide sales increased 350,000 units. we will look to see if the restructuring is paying off after declining revenue. coming up, president macron signs the controversial pension reform into law, but at what cost we will have details next.

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welcome back to the program. french president emmanuel macron signed the pension reform bill into law raising the age from 62 to 64. it comes after the council largely approved the legislation and rejected calls for a

referendum speaking to cnbc, the lawmaker for the party and european parliament member said the reforms do not have legitimacy >> it has been the largest and longest social movement we had in france since 1968 you know the biggest social movement in france in the history. the anger of the people is still the same the opposition of the people is still the same in the polls, it is roughly 80% of the french population which opposes that bill. you know, macron is kind of locked in the palace he cannot goanywhere in the streets or around france >> charlotte joins us at the desk with more charlotte, what does this mean for the protesters what is poised to happen next? where does it leave them >> that is the question whether the movement will fizzle out after the decision of the council validated the decision

which is validated in the parliament the bulk of it was approved and from september, the minimum retirement age raises from 62 to 64 the prime minister tweeted over the weekend. now we reached the end of the democratic process there were neither winners or losers what now with the far left position it was a democratic holdup with the legitlegitimacy marine le pen would with appeal the decision they will rejected the invitation and they want to speak to the president before the enactment of the law now they are focusing on may 1st. labor day protest.

a tsunami of protests. the president is addressing the nation tonight he will speak at 8:00 p.m. european time. he wants to turn the page and talk about what happens now. whether legal deadlock is over after this decision of the council and the political and social deadlock is very much in place. that is leaving the question now of will it fizzle out or not he was reelected a year ago. next week is marking one year of being reelected. looking over the last few weeks, it is difficult. we are looking at the next four weeks of the mandate and damage to the political capital all eyes on the speech tonight and on the may 1st protest >> charlotte, thank you for the analysis antonio joins us now to talk through the implications further.

professor, thank you for being with us. it is interesting to note that president macron is not seeking re-election. take that off the table with the implications of what has taken place here how has this episode poised to change the political landscape we have seen marine le pen benefitting from the pension reform >> i think it will be complicated and polarization in the political spectrum his re-election a year ago was already difficult. there were questions whether marine le pen would be the president and not macron i think, of course, going forward, he is using political capital in the reform. i think it is great if you think about it he didn't need to do this. he could have just sailed through the last years of his mandate. he has decided this is necessary. again, out of the reform, you get polarization and more p

populism it comes from the right and left in france. >> why did macron decide it was necessary and what would make it a success in what he was trying to achieve in pushing it forward? >> i think from the beginning of the first mandate, i think macron has been driven by the idea of reform i think there were certain things in the french economy needed to reform and change. he has been one of the bravest presidents in recent times we saw in the first mandate where he had issues with the street and he had a lot of social revolt through reforms. he did reforms that were small, but he kept going. he has been someone who has never stopped reforming. when you hear him and the prime minister who would say we will

keep going we will keep reforming the company -- country if he is motivated and he truly believes in this or there is something else, but he is being consistent i don't see a surprise here. >> he has been consistent. let me ask you this. what are the protesters continuing to dedemand the constitutional court ruled in favor of the pension reform put forward by the president it seems unlikely at this point that any element will be repealed what are the protesters looking to get out of the continued demonstrations >> what you see here is an interpretation of democracy. there is the government interpretation which said we proved it in the parliament. the constitutional core said this is legal. people who are supporting the protests on the streets say we are not done the street is saying this is not right.

60% or 70% or 80% are against it and these people should be heard in a democracy these are trying to bring their voice to the street. unfort unfortunately, these voices come with violence which is not good. their idea is this is part of what the democratic process looks like if we continue pto profit, we ma see macron step back i'm not sure that will happen. that is the logic they have. >> one thing which is interesting is in all of this, we have been focused on the political and social dimensions as less on the economic i implications of the retirement age. on on back of the reforms, it is expected the structural deficit of france will be reduced of 1% of gdp in the next ten years that is significant in the country which has seen larger deficits in the last few years

this is one of the reasons the motivation for the president to put forward the plan to begin with my question is why has this not resonated with the public? why does the public not care this is a good decision for france's public finances going forward? >> i think when we talk about pol politics, whether france or anywhere else, rationality doesn't always win i think in france, there is a strong belief of retiring early is part of the french lifestyle. it is almost like a right people acquired over time if you try to bring those numbers, they say what about the deficit and sustainability of the pension system people who report the process say there is an alternative. why don't we raise taxes whether or not that works is a complicated question they do acknowledge the instability of the pension

system the question is how do you fix it do you make people retire later or raise taxes that is an open debate i have my own views. i can also see people say something needs to change. whether it is change the tax rate or retirement age, one of the things has to happen. >> very fair professor, thank you professor of economics for more on the pension reforms, check out cnbc.com. also coming up on the show, march's banking crisis weighs on the ecb as they consider their next steps we'll be right back.

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welcome back to "street signs. i'm julianna tatelbaum >> i'm joumanna bercetche and these are your headlines >> the ecb admits they are forced to rethink the banking crisis it would be premature to stop rate hikes just yet.

>> it is reaching restrictive territory. it is important we don't relax early. >> we need to read the data carefully to understand the monetary mechanism is at work and it is bringing inflation down ftse mib hits the highest level since january of 2022. key date a and earnings ahead. and shares of rovio after sega launches an offer for the finnish company. and french president emmanuel macron signs the pension reform into law following the top court decision to back the bill and reject referendum the party member tells cnbc there is a problem with the country's democratic system. >> the unanimity of the trade

union in france and parliament all opposed to that law. this law being adopted without a vote in what democracy do you have a law without a vote we're about an hour and a half into the first trading session of the week. we have green in europe. european equities following the strong session in asia overnight. the only sector that is lagging behind in the red is the swiss market smi down 10 basis points in terms of where we stand coming into the fresh session of the week, the stoxx 600 out performed the u.s. market last week advancing 1.7% for the week overall. it is a big week this week for investors. we have a number of data points to look for here with china first quarter gdp and flash

points chinese production and uk inflation on wednesday which could be critical in determining where the bank of england goes next all of that as bank earnings get under way. a number of banks to look out for. bank of america and goldman sachs and charles schwab morgan stanley as well this week is reporting we have weak trade this week down 25 basis points against the dollar right now, $109.74 the dollar index hit the lowest level since april of 2022. we have seen a decent amount of action that as futures price in a more than 80% chance of may rate hike from the federal reserve as for u.s. futures, green on the board

it looks like investors are taking a bit of a pause. we have positive indication for all three of the major indices stateside. >> let's bring in our next guest from goldman sachs james, thank you for joining us. >> pleasure. >> i don't know if you were listening to us earlier. i was at the imf conference last week we had a wide range of conversations with a number of policymakers one question is major advanced economies will manage to achieve a soft landing, but they highlight risk to the down side which feels like we are in a more optimistic, but less pessimistic vienvironment today. is that where you are sitting? >> we are more cautious. what i hope is europe and the

u.s. can avoid recession we still think that prior to the financial market turmoil the last few weeks that a shallow recession is going to happen what is important is to reflect some degree of divergence. china is one economy in acceleration growth this year. it is not one size fits all message. >> true. i should mention at the imf, the risks were flagged credit and lending standards something all central bankers are watching closely we are in an era of higher interest rates and higher interest rates are exposing vulnerabilities in the system which were hidden because of liquidity. you are starting to see situations like svb and certain companies come under pressure because of higher interest rates or sovereign rates with lower

income countries where are the vulnerabilities? >> i think you are right we have moved into a world in which nominal interest rates are likely to be structurally higher yes, some degree of easing over the course of 2024 as we go back to more knew r-- neutral we will not go back to the rates from the past 10 or 15 years that highlights risks within the financial sector those higher nominal interest rates creates opportunities for investors looking at core fixed income >> let me pick up on the response to the first question from joumanna if you are optimistic or pessimistic. against the back drop, do you think earnings look too optimistic here? >> i make no note for the immediate earnings outlook if you take that outlook for

2023, our sense is equity markets is ahead of itself if you look at the equity market, it is difficult to reconcile. you look at u.s. fixed income and the fed is cutting three times over the second half of the year the equity market is pricing in a robust outlook with solid earnings numbers i fail to see how those both can be correct and the fed won't be cutting as aggressively, but earnings is not as resilient. >> on that point, s&p up 8%. nasdaq up 20% this year. we had a good run for the u.s. stocks. >> indeed. our question is whether or not it is sustained or based on fundamentals if we are right, if it is short and shallow, that situation with n nominal interest rates provide two powerful headwinds. >> what about the parts of the market exposed to china? you mentioned china as a bright

spot luxury earnings were blowout with lvmh and hermes were brokbr blownout in china. >> back to the first question, there are parts of the developed world that will benefit. export companies to europe were beneficiaries of that. we are not saying this is about being active and thoughtful of position, but aggregate, we start to see some cause for concern. >> how are you feeling about fixed income here? i feel the investment community caught themselves a month ago and they now feel the turbulence of march is this a buying point >> i think so. the market is over its ski tips. i think the magnitude of the adjustmentm went too far.

you announced that give back and now core fixed income rates are looking attractive again. >> do you not worry about potentially rising default rates? we talk about the possibility of the hard landing or recession >> if that happens, it will happen >> we are not saying that is a hard landing we are saying a risk of recession. we are not talking about a deep or protracted recession. we are talking short and shallow. you could see increase in default rates. if you saw a modest increase in default rates, that is consistent with high quality markets delivering concerns. >> let me tie commodities in in europe, we are in the amazin situation with the supply gut with natural gas after the efforts taken by european countries to shore up supply after the wake of the war in

ukraine. you believe in the case for higher commodity prices moving forward. give us more color on your thesis and what it means for the market >> you mentioned the structure the cyclical end as well and if we are right about the u.s. and europe potentially having the short and shallow recession, the increase demand from china coming back online is dominant that provides for high prices. the move to the decarbonization economy is priced in that goes back to what we were saying earlier inflation is sticky and that is why central banks will not reverse course as early as anticipated. >> to tie that back to oil because we were all astonished with the opec plus decision to

cut output dramatically. we have seen oil climb on the back of that do you have the view >> that's a really important point. everything i said is about gdp and the demand for oil the supply side is equally as important. you see calibrations in terms of that to push oil prices as well, it forces the same direction and you see oil prices north of $90. not dramatic upside, but $100 a barrel shift would be inflationary in nature which would tip to recession in the second half of the year. >> fine line to balance. james, thank you for joining us. james ashley, head of advisory solutions at goldman sachs asset mana management. ecb is calling for the central bank to end reinvestment

of the asset purchase program in the effort to accelerate the balance sheet according to reuters which reports five people familiar with the matter and said all reinvestment should stop in the second half in the bid to fight inflation ecb policymakers are hiking the policy path and the central bank would stick to the dguidance council members are dealing with conflicting data after headline inflation fell to 6.9% the core rose to 5.9%. the finnish central bank governor said price pressure are actually still a concern. >> you place the number too high and i'm concern about core inflation and underline inflation from energy and food prices we have been constantly and

firmly normalizing monetary policy we have taken steps to raise rates over the past period firmly consistent since last july core inflation is still rising or has been rising therefore, it is important we carry on and act consistently in the future in my view, with regard to the decisions, we have to practice what we preach which is data depe dependence there are two key factors here one is the question of evolution of core inflation until may and the other one is to assess

tightening of the financial conditions with the banking turmoil and the tightening of the monetary policy which is passing through the economy. these are the critical elements of our decision making in my view, it is important we carry on and calibrate our decision on the basis of the approach the data. >> should the core inflation number come in flat versus last month -- not decelerating, but staying where it is or higher -- would that prompt you to go for a 50 basis point hike? >> it is not about one figure or one yardstick. it is a comprehensive assessment we look at several indicators. you are right. core inflation is a key

indicator. we look at that carefully before may. this should be by our may meeting figures. oil prices rose for a fourth week the prices are due to the output from the opec plus decision. and hedge funds cut bearish on the wti prices it is getting more costly at the pump which is a factor in how u.s. consumers feel about their wallets and the economic outlook. >> gas prices. not natural gas prices petrol the european commission has criticized poland and hungary for banning food products.

describing these steps as unacceptable the move is needed to protect the counctrycountry's agricultue for stabilization. speaking to me before the official announcement, the polish finance minister spoke out. >> this is another shock which we have to face. the way to solve it is first of all to find a solution with european commission and how to protect the europe single market it effects other countries bordering ukraine like romania and slovakia european union needs to find a solution on the way to deal with these crops like the original destination to help other

countries because they are in need and crops also subsidizing and buying the crops from the farmers just to export where it should go to the african countries. coming up on the program, cheaper cars and content will it reduce profit? we look ahead to the big tech earnings due out later this week

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welcome back to "street signs. shares in xpeng are up stateside after the carmaker revealed a platform to reduce costs the company's president said there is now a greater focus on affordability across the sector. it is not just xpeng trading higher pre-market. up 12% there we are up more than 2% or 3% for alibaba and bilibili optimism in the china recovery

those are names to watch at the u.s. open. >> we have china gdp out as well. earnings season kicks off with big tech names. netflix on tuesday and followed by tesla on wednesday afternoon reporting. investors will look to see how the price cuts at both companies are impacting growth and profits. arjun is joining us with more. netflix? >> a couple of things for netflix is about the ad supported tier the first quarter where we see the impact of that it has the questions swirling around the $6.99 option for consumers. the question is how much is it stabilizing for those looking at the expensive platform are they seeing a boost in subscribers? the second side is password sharing. the company vowed to crackdown and introduce ways for people to

get their own accounts the question is what is the uptick like? are they managing to crackdown and boosting the individual numbers? >> what is the calculus there? is the thinking they will attract new subscribers by introducing the new ad level not that people switch out of the more expensive option and downsize >> content is strong enough to convince those are the other platforms to stay there. this is the gateway to get into the netflix world. if you want to watch this in 4k, you want more features, you have to pay more for it >> let's switch to tesla what is happening in the investment community >> price cuts and more price cuts the question is what is the impact of the price cuts and the

key china market and u.s.,e et s set -- et cetera the debate playing out here is what impact has the price cuts had on one, sales of tesla vehicles, and second, margin they need to strike that balance. they need to put a car out here in what is a competitive market. the traditional automakers in the space and china startups as well everybody will have a focus on this category. >> something to watch out for as well as the delivery targets is an issue for tesla arjun, thank you. european markets are trading into the green and building on the positive week from last week the stoxx 600 up 1.7%.

positive earnings coming out of u.s. banks on friday the likes of jpmorgan chase and citi performing very well. wells fargo less so. we have more banks to watch out this week with charles schwab today and morgan stanley on wednesday. the set up is positive we have other data to watch out for. including flash pmi. >> absolutely. uk inflation a lot to play for when it comes to both the data and the earnings we have charles schwab kicking off the earnings space today that is it for joumanna and myself thank you for watching i'm julianna tatelbaum >> "worldwide exchange" is coming up next

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it is 5:00 a.m. at cnbc global headquarters. here is the top "five@5. futures pointing to a higher open hear why tom lee says this is a good sign for your money. also, earnings season kicking in high gear as investors brace for a big week tesla and goldman sachs and netflix ahead this week. stand by for the preview. appearing a distant second in the a.i. race alphabet ceo goes on the record of what google hopes t