to telling her story. that's all for this edition of "dateline." i'm craig melvin. thank you for watching. ♪ good morning welcome to "street signs." i'm julianna tatelbaum >> and i'm arabile gumede and these are your headlines >> french business activity slow as the pace picks up in germany. we have the latest pmi in a moment. and president biden hails a productive meeting with kevin mccarthy at the white house as

leaders race for a deal before june 1st >> we both agree on the areas we know there's disagreement on, but i think it was productive in the professionalism and honesty with one another and the desire to try to find common ground. the federal reserve's neel kashkari talks about hiking or pausing in june and tells cnbc adjustments in rates will create volatility >> we are now in an normalization of rates we have rates and a lot of capital invested in areas that will not now be as profitable. that will continue to create, you know, volatility julius baer sinks to the bottom with net flows in the first four months of the year challenging it a challenging

year for swiss banking good morning warm welcome to "street signs. we kickoff with the eurozone flash pmi just crossing the wires. the composite number has come in at 53.3. that is down from 54.1 in april. the expectation was 53.3 it looks that is in line p with the forecast in terms of the breakdown between services and manufacturing, there has been a two-speed economy going. as for the month of may, it will continue manufacturing pmi is 44.6. that is down a deceleration from 45.8 in april. slipping further into contraction territory. the services sector pmi at 55.9. firmly in expansion territory, but also marking a slowdown from

what we saw in april those are the headlines. in terms of color, i would throw into the mix the service provider states eurozone gdp is likely to have grown thanks to the services sector. the manufacturing sector is a powerful drag on the momentum of the economy as a whole am arabile, the two-speed economy is persisting. manufacturing is weak. services sector is powering through. >> it is difficult because you had a time where you thought it was going higher april figures were looking to head in a positive direction t initially. the two-prong side is hurting a lot. i think the manufacturing part is one to look at and think it stays in the contraction territory and dipping down

further. hurtful for the overall recovery of the economy >> we got insight into germany and france german business activity grew for may as the flash pmi rose to 54.3 services sector grew since august of 2021 and offset weakness and manufacturing in france, activity grew the slowest in four months eased from april and came in well short of expectations at 52.8 manufacturing picked up, but remains well in contraction territory. let's welcome chris williams to the program who puts together the suce surveys chris, always a pleasure the two-speed economy is continuing in europe manufacturing is weak. services is strong what, in particular, is dragging on the manufacturing sector this time around? it slipped further in

contraction territory as a whole. >> indeed. a few factors dragging on moving one is the switch of spending away from goods to services. post pandemic sector is booming. it is led by consumers and households in particular who are free to travel this year, of course really enjoying that tfreedom. so we are seeing a lot of growth in consumer services that is pulling away from spending on goods. in an dddictioddition to that, d downgrade which is a broader mam malaise. there is a shift to destocking manufacturers have too much and they are unwinding those we are in the process of really getting to the nuts and bolts of

that across europe where there is a big drive as companies are looking to demand being not what they thought and they are unwinding that and you have the spend shift to services. >> looking into the detail of the surveys, there are two pieces that stand out as potentially encouraging to the european central bank. this is the fastest pace in seven years. does this mean the interest rate hikes the ecb has pushed through is working >> there is a big cooling of inflation pressure you say the supply chains are nothing like as constrained as before because you have the weakening of demand. it has taken pressure off the supply chain you have lower energy cost as

well you have the rate down since 2016 they are passing those lower costs on to customers. prices charged for goods and fell at the steepest rate since september of 2020. it is a different story and the ecb will scratch their heads it is different in manufacturing. companies are struggling to service demand there is no surplus supply they don't have enough workers they have to pay more for people to work for them it is not as high as last area's peak for cost flinflation, but is way higher prior to the survey very steep in services which is passed on in the form of higher selling prices for services. the ecb has to be thinking we have a lot of commodity price

kmir pressure coming down that will feed into the services sector how long will this persist if this is a lot of pent-up money for households to sustained through the end of the year, it will ratchet through the sector and managing cpi will be sticky. is this a boon we got post-pandemic spending and it will fade away and the cost of living crisis. this is what we don't know yet that is what ecb is going to be front and mind about >> chris, good morning we will keep looking at the data lot as it continues to flush out exactly where or what the state of the economy currently looks like supply chain clearly is not healing the in the -- not healing in the sense and pushing through manufacturers and producer price as well

how much pressure is this increasing the likelihood of the more difficult recession >> well, the overall picture now is quite hawkish the numbers so far for the second quarter and you are looking at eurozone gdp growth at 4% or 5% depending on what happens next month if you get a strong number, it will be a good quarter further out, there is a drag for manufacturing that will inevitably feed through services the sector is highly related with manufacturing a big question of how long is the household surge in spend will last and with the hiking of interest rates we had and with the cost of living still elevated and savings being e er eroded, we're in for a weak spell as we go into next year.

so the imminent recession hrisk seems to have abated on the upturn in service activity we don't know how long that will last. >> and it lasting that long and has maintained a sense of resilience in the economy. you know, again, it is about how long that resilience lasts for is this, perhaps, beyond monetary policy now? >> is it beyond monetary policy? obviously, if households are showing resilience, there is scope for fiscal policy to be tightened. there is a lot of stimulus in the form of energy subsidies that is falling out of the system now again, this is another reason why we think the big surge we've got in the household sector will lose momentum as we go through

the year i think that is a natural thing that is going to happen. if you look at the future expectation from the indices from the surveys, they are down now. sentiment about the year ahead is starts to wane. if you look at the business inflows in france, especially, they are starting to cool. obviously, a lot of that is manufacturing. service sector is slowing there. there are signs the upturn is losing momentum and it could fade as we go through the middle of the year. that is the most likely scenario the odds are you will see the cooling and that will please the ecb. >> chris, at the start of the conversation, you eluded to vehic weakness in the global trade

what momentum is fading in china? >> china is playing a big part of that. it is more a symptom of the global cycle moving. this is evident across europe, americas and asia. there is an unwinding of excess inventory. you have the build up of inventory and factories struggling to get supplies bought they stocked up on doing that during the pan p dedemic and bu new warehouses that is now unwinding. the other question is how long does this play out for it should play out for another few months that means you could see some manufacturing sectors turn around later on this year as that inventory cycle starts to move in the other direction and firms start to rebuild stocks.

service sector will lose through the year and manufacturing may as we go through the second half of the year and start to turn around again that is the big trade with the inventory reduction. >> chris, thank you for the time good chat as well this morning chris williamson at s&p global market. and high stakes meeting with president biden and kevin mccarthy failed to yield a debt ceiling deal as the pair wrangled over how to raise the country's borrowing limit before a june 1st deadline. the two remained at odds, but fouled to keep negotiating as they met at the white house for more than an hour on monday evening in the first face-to-face meeting since februa february in a statement issued after the meeting, biden said a default is off the table. kevin mccarthy expressed

optimism a deal could be reached within the next ten days. >> i felt we had a productive discussion we don't have an agreement yet,u i feel it was productive in areas of differences of opinion. we will get staffs back together and work on things we talked about. >> in an new letter to congress, janet yellen reiterated her warning it was quote highly likely her department would run out of cash to cover debts by june if congress doesn't compromise to raise or suspend the debt limit let's check on markets we saw the three indices yesterday and little change. nasdaq gained 0.5% s&p closed flat and dow jones industrial average pulled back 0.4% the cautious optimism is circulating around the debt ceiling deal of course, it remains to be seen

if we get a final agreement. we had hawkish fed comments driving the market narrative yesterday. let's go to treasuries we saw u.s. treasuries under pressure on the back of the hawkish comments we saw fed rate expectations dialed up on the back of the comments here is the picture where things stand now. the 10-year treasury is 3.762. we learned st. louis president bullard is a non voting member and he said the fed may need to hike another 50 basis points this year. the comments come as some point for a pause and neel kashkari said this was the kicker as he is open to keeping rates on hold at the next meeting, but it is not an end. >> raising some time in june or

skipping it is important not signaling that we're done. if we were to skip in june, it does not mean we're done with the tightening cycle it means we are getting more information. do we raise in july potentially? that is the most important thing, we are not taking it off the table. >> we had the reshaping of the fed narrative in the last 24 hours on the back of the comments from kashkari that if we do see a pause at the june meeting, it could be interpreted as skipping a rate hike. not necessarily an end to the rate hiking cycle. that is the re-pricing yesterday. in terms of dollar trade this morning, we are seeing the dollar gain versus sterling. sterling down below 124. we will see if the flash pmi for the uk will change the direction for travel for sterling which is on a downward trajectory also weak with the recent low

against the greenback. oil markets with the debt ceiling talks. wti price is down .25% $ $71.80 as for u.s. futures. similar to europe, we are looking at a mixed picture we have the dow jones industrial average and s&p looking to open slightly lower nasdaq slightly higher fairly muted start indicated from the u.s. futures. coming up on the show, tiktok strikes back suing the u.s. state that is trying to ban the app. more on that just ahead. plus, a mega fine for meta as the social media giant goes head-to-head with the eu over data protection rules. we'll have more after the break.

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welcome back to "street signs. we have been taking a look at the market picture yesterday just managed to get

gains from the market in europe. today? not so much. down .25%. the stoxx 600 does continue this way today and it will actually break a three-day winning streak for it lvmh is down 2% today. and julius baer which we will unpack in a moment look at the markets. we saw the ftse 100 as well with some gains today if it was to drop off today, it would follow on the stoxx 600 having its first negative session in three a general sense of negativity. the ftse mib with the worst day yesterday since the 2nd of may yesterday was the second worst day. today is down .25% so far. that is the picture the telecoms fared well on the back of the uk

the investment group is increasing stake in bt from 25% up from 18%. it offers enough to go back into the share just a little bit. you see the telecoms up a bit. bt with gains and share price up 1.5% monde is out performing the market yesterday and managing gains today. on the other side, you have rs group which has declined over 4% julius baer showed a rise in inflows and assets and mana management totaling 3.5 billion swiss francs that is less than the last two months of 2022 falling short of forecasts assets under management rose 1% from the end of last year.

here is an interesting story that is taking spotlight stateside. tiktok sued the u.s. state of montana after it passed a law banning the social media platform citing fears of chinese access to data tiktok says it violates its first amendment rights and breaks constitutional rules on interstate commerce. under the law, planned to be in effect next year, tiktok and app stores hosting the platform could be fined up to $10,000 a day for not complying with ban. meta has been handed a $1.2 billion fine for not complying with privacy rules over transfers of data. the fine was warranted because of systemic and repetitive transfers taking data from the ireland commission from 2.5

billion euro meta says it will appeal the decision arjun is joining us with the decision arjun, this is not the first time surely one would have thought a steeper punishment be in place. >> this is a decade long story it started in 2013 with the whistleblower edward snowden regarding the u.s. surveillance practices from the nsa and other agencies following that, we had a case from the austrian privacy campaign who effectively said any data transferred between eu and u.s. was not safe because in the u.s., the safeguards were not in place to protect the data then the eu and u.s. had these legal mechanisms in place to allow the data transfer to allow between the eu and u.s

the latest was privacy shield. that was struck down in 2020 by the european court of justice which said a similar argument. eu data goes to u.s. was not subject to strict enough privacy laws after that, facebook used a different mechanimechanism. what the irish commission said, who is in charge of the case, did not address the fundamental rights and risks that were in that original court decision that is why they have come to the decision of $1.2 billion fine they want to suspend and within six months to seize processing and storage of the eu data in the u.s. that is how we go to the place for meta, there is no legal framework with the eu and the u.s. for transfer of data between the eu and u.s. which is int integral. >> we know meta is looking to appeal we will take a quick break when we come back, we have the

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welcome to "street signs." i'm arabile gumede >> i'm julianna tatelbaum. these are your headlines. >> european business growth is solid in may and french activity grows to the slowest pace in four months. we have the latest reading on uk pmi out in a bit president biden hails a productive meeting with house p speaker mccarthy at the white house as negotiators race to get a deal before sqjune 1st. >> we both agree on the areas that we know there's disagreement on, but i think it was productive in the professionalism and honesty and desire to find common ground. the fed's neel kashkari toes

the line with the pause or hike. >> we are in the era of normalization of rates we had normal rates. a lot of capital inn p vested i areas that are not as pro profitable that will continue to create volatility julius baer sinks to the bottom of the stoxx 600 and calling it a challenging period for swiss banking. we have been continuing to take a look at pmi data cross europe and taking note now with the uk flash pmi numbers which are looking downbeat

you look at the composite number at 53.9 against the 54.9 from may to april the consensus was 54.6 that i look at the manufacturing number,dropping off. that is in contractary territory. 46.9 in manufacturing and 46.81 recorded in the month of april services dipped below the previous number 55.9 now 55.1 is the flash services pmi. down across the board when it comes to the uk manufacturing and services number. that data is 53.9 overall. weakness and worry for the boe here >> similar story to what we are

seeing in the eurozone p with te weakness in manufacturing. chris williamson raised an interesting comment on the services sector in the uk. the growth spurt is driving inflation pressure what the boe doesn't want to hear they struggled to meet demand and offered higher wages to attract staff and find themselves charging more for services a tricky dynamic they are seeing on the one hand, positive momentum with the services and growth, but it is a negative for inflation services and we are trading lower on the dollar against the sterling. that is the picture for the uk we will do a bit of a deep dive in the uk. let's highlight what the imf said it avoids recession with the

growth of 0.4% the fund sees the number remaining above the 2% target until the middle of 2025 with high price pressures and wage setting posing a short risk. right in line with the pmi data, arabile. the uk finances are worse with the data showing the second highest april borrowing since records began. energy price support payments and near 50% jump in debt jump to 25 billion pounds for the month. just over 99% of gdp britain is among the countries least confident that inflation will fall to regular levels this year with 6 in 10 people say they believe it will take 12 months for prices to stabilize benjamin toms is with us from

rbc. benjamin, thank you for being with us. that data could be a little bit worrisome. cpi to stay higher for longer. boe can't be happy with that is this now just becoming a more difficult situation for them and stuck between a rock and hard place and keep increasing rates? >> i think it is important to unwind and think about where we were in november if we compare, we are in a better place and for uk banks particularly, they model the macroro assumptions. they keep their asset quality benign as to the rates outlook, there is a possibility the rates will have to go higher. from the bank perspective, what you are worried about is the cost of asset quality and do

impairments go up? you are looking at the cost basis. those are made of 50% of wages if inflation stays high, there is a risk to do top ups through half year and that is where we may see a miss >> if you see that is the way to reduce vulnerabilities in the market with the hiking cycle is that the best way to ensure the vulnerabilities done rear up as in the united states for example? >> i think banks expect one or two more rate rises still to come i think everyone wants to see inflation fall back down to more normalized levels. there is a risk you could increase the amount of non performing loans in the sector i think it is necessary to get the inflation back down. let's see what happens with cost

price pressure. >>ing inter-- >> interesting you point to the uk banks and the numbers over the last couple weeks and there were no surprises from the uk banks. is that because they were so well prepared and had already taken the measures to prepare for an increase in impairments and setting aside money in case things deteriorated versus things being better than expected >> i think there are a couple of things here. firstly, the banks were co conservative coali gcoming into year that helped. they negotiated with the unions. that helps with the fixed costs. thirdly, if you think about net interest margin, we're at a stage at the moment where there are pressures on net interest margins and investors are weighing those in terms of regulation, you had

a situation in the u.s. with regional banks struggling and the volatility there probably regulation will have to increase when you look in the uk, it was untouched by the situation silicon valley bank uk was dealt with swiftly over the weekend. regulation is starting out from a higher base. the uk is better placed. >> where do you stand on the outlook for the nims on the uk you talk about the structural tailwinds against the banks under pressure to raise rates to keep customers >> i think you can split by different banks. some banks will have slightly large hedges which we price quicker. for them, the direction of travel is the net margin increase through the year. the other is not so large which is a tailwind. you have a lumpy extra --

direction. >> what about the mortgage market 7 75% have held fixed rates. to what extent is that a concern moving forward >> we think 60% of fixed rate mortgages have not rolled over there is a big number of customers yet to see the high rates. rates are better than they were post the budget toward the end of last year of that will be helpful employment stays low in the uk that helps the customers afford the new mortgages. it will be a defining feature over the next 12 months. remember, the amount of deposits are higher customers are more liquid. the mortgage market is vastly

more resilient than we expected coming into the year that is because the first time buy market held up well. those buyers are shying away from the market. actually, they continue to buy properties because rents have gone up. we talk about rental inflation running into the low teens those customers are still buying mortgages. >> stuck between a rock and hard place when you think about the potential renter or buyer in the uk ben benjamin, thank you for being with us. ben benjamin toms. more than 230 claims against swiss banking regulator finma have been received by the swiss court after the regulator's decision to write down the at-1 bonds and prioritize equity holders. european banking authority

chairperson told cnbc the higher rate environment boosted valuation, but could be a double-edged sword. >> it has been across the board. that's why we are seeing improvements which is what we discussed before that is good as interest rates filter into the economy, the interest rate increase will have an impact on asset valuations and economic act activity the activity deteriorates and that is bad for credit calquali. something we have not seen yet our move going forward is the banks need to be assessing the performance as we see interest rates improve through the economy and particularly in the sectors that are highly leverage santander chair told cnbc

the banking sector is prepared for challenges caused by higher rates. >> we are now in an era of normal rates we had normal rates and there was a lot of capital invested in areas that will not be as profitable that will continue to create volatility the important point is this is not 2008 what has happened is it is not systemic crisis or banking crisis it is specific banks that were badly managed. the key point is what is it we need from banks once we have trouble. trouble in the banking system and we have a resilient banking system and they are in a strong position what we need is a rethink of what we want banks to be in the new economy.

finding that balance is important between being prudent and finance growth this is the key point that we are making here at the ief >> that is a great opportunity to talk about the smaller banks and regional banks given what spain also witnessed in recent years. it was the smaller lenders with a problem with debts in the european financial crisis why is it important to ensure santander doesn't get bigger and bigger as the expense of the smaller lenders? >> you know, europe and the u.s. are different banking markets. in 2008, the biggest bank in the u.s. and europe were the same. today, the biggest bank in the u.s. is worth the top nine or ten in europe. among other things, we had less growth you mentioned spain. in spain, the banks saved the

savings banks which intervened it is really important that banks have the ability to compete with high levels of capital and supervision of the this is important to be able to compete in a global economy. in europe, we need to get banking union and capital markets union to be able to get that scale that we need to be able to support our customers and our economies. uk chancellor jeremy hunt will meet food manufacturing as food inflation hits the highest level in 45 years. explicit action on prices won't feature on the agenda. unlike in france, where retailers agreed to cap food prices speaking of food prices. soaring pasta prices in italy

has forced meetings. this story, arabile, is attention grabbing it is not something to joke about. pasta is a stable of the italian diet price increases of nearly 18%. 17.5% in march and 16.5% in april. that is a bruising price hike if you eat pasta acouple of times a week it is because producers are selling the pasta they made using inputs when prices were very high. when raw materials were super high, there is a lag to when the pasta comes to market. it takes a long time for the decline in those raw materials to filter to lower prices. >> the international pasta organization saying italians consumes 23 kilograms of pasta

per year that tells you the price of wheat and pasta which becomes so important and critical to the economy. pasta dishes rising 6.1% year on year that is a clear sign of how high prices are for a side note, julianna, i have a pasta namesake dish. >> do tell. >> it is always there. it was named specifically for me it is the arabile. >> it will set you back some if you try to get it now. >> it will >> i'm gjealous. we'll see if those leaower wheat prices filter through. it takes time. as we talked about it in many

economies, price hikes tend to be sticky. they tend to rise easily and stay there they don't come down as easily as they go up. w we have an article on cnbc.com pasta prices surged prompting prices in illtaly and calling fr a strike. coming up on the show, jamie dimon says he is not going anywhere not yet at least we'll discuss the ceo of the biggest bank next.

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we are now a couple of hours into the european trading session or just about and it is shaping up to be a downbeat trade. cac 40 is down .30%. and bit of red on the board for the dax and swiss. julius baer is trading low after the slow start to the year vendi is slow as well. one patch of green on the board

is the ftse 100 is up 8 points something to do with the pound let's look at sterling the inverse relationship front and center sterling down .30% against the dollar we bounced off the lows. we were trading below 124. this sell off was under way before the flash pmi and continued after. the services sector missing on the pmi front. we are in expansion territory. outside of the uk, euro is steady against the dollar. 108. we bounced off the low as well in terms of bonds, let's look at yields in europe outside of greece, where bonds fell on the back of the elections, yields rose we have yields moving higher again. the bund is trading at 2.68% 10-year gilt is 4.1% italian btb is 4.14%

and we have action in t-bills. one-month yield with a fresh record high. up 25 basis points on the day to 5. 5.88% as investors watch the debt ceiling that one-month t-bill has seen the latest in the talks. this is the picture. you see the u.s. futures on the screen the nasdaq looking to open higher the s&p and dow looking at a pull back when trade begins when investors ticcontinue to keep a eye on the debt ceiling talks and look out for u.s. flash pmi and the home sales minneapolis fed president neel kashkari says he is open to holding rates next month, but warned it may not be the end of the hiking cycle kashkari is seen as the most hawkish member of the fmoc and

one of the 11 members who will vote at next month's policy meeting. there have been signed of mixed views in recent weeks. fed governor bowman said fed tightening is likely appropriate if inflation stays high while chairman jay powell said tighter credit conditions could reduce the need to hike rates on the dovish end of the spectrum, jefferson said it is too soon to judge the impact of tighter policy and chicago fed president austan goolsbee told cnbc his vote to support the hike last month was a close call jpmorgan chase's ceo jamie dimon said we should expect higher rates. >> the easier way to retain capital is not to make the next loan i think you will see that. i think everyone should prepare for rates going higher from

here if 5% is not enough and fed funds, you should prepare for 6% or 7%. >> jpmorgan chase will increase to $15.7 billion in 2023 and focus on hiring and marketing. c cnbc's leslie picker has more. >> reporter: jamie dimon going straight to q&a yesterday. >> you are seeing credit tightening up. the easy way for the bank to retain capital is not to make the next loan. i think you are going to see that i think everyone should prepare for rates going higher from here if 5% is not enough and fed funds and i have been advising this to clients and banks.

prepare for 6% or 7% >> reporter: dimon said the credit cycle will be normal and will probably be real estate he also spoke about the impact of more strict capital rules and monetary policy. >> we haven't been through quantitative tightening. we don't know what will happen to deposits. i have been concerned about that i'm more concerned about quantitative tightening than anybody in the room. we never had qe or qt. it just started. >> reporter: he was asked how much longer he plans to be ceo he said 3.5 years. he added when he lacks intensity to the position, he should leave. for cnbc business news, i'm leslie picker. >> arabile, it is interesting to hear what jamie dimon has to say. we talked about this yesterday

on succession, smooth as ever. deflecting the question as we heard there. saying i can't do this forever, i know that. my intensity is the same when i don't have the intensity, i should leave 67 years old and he has that intensity. >> he threw out 3.5 years. the last time they spoke about the five-year period which would get him to 70. it would be interesting where he had been doing this for 20 years. very interesting to note that level of intensity, but where he sees things going and he has, of course, been very important in the recent crisis that we saw in the banking crisis and expecting interest rates to go higher from here or maybe higher from here very interesting notes i think the market license to that. >> they certainly do it is interesting if the market

licens listens to the warning of the real estate market and commercial especialliy especialy let's look at the european picture. cac 40 down 1.4% the ftse 100 is trading on the weak pound which is trading lower. miss on the services side and signs we could see further inflation pressure building in the sector as it struggles to meet demand. the picture of the u.s. future muted start indicated for strtrade stateside. that is it for "street snsig." i'm julianna tatelbaum >> i'm arabile gumede. "worldwide exchange" is up next.

it is 5:00 a.m. here at cnbc global headquarters. here is the "five@5. we begin with progress from washington after the latest round of debt ceiling talks with biden and mccarthy however, no deal on wall street, recession warning signs growing louder and doing something for the first time in four decades. and speaking of red flags, why the bullish trend in big tech may be coming to an end. the streaming wars heating up this morning courtesy o