motosport.com. motos start at 1:00 p.m. eastern on peacock next time we race next weekend off, then back for red bud. great day, great crowd treacherous conditions for ricky carmichael and jason thomas ♪ good morning welcome to "street signs." i'm joumanna bercetche and these are your headlines u.s. secretary of state blinken will meet with china's xi jinping as part of the rare trip to beijing and the top diplomat warns relations has hit a low point. goldman sachs is lowering the full-year gdp forecast despite the boost to stimulus. and european equities

kickoff the week to the down side as they unwind last weeks gains ahead of another central bank week. the paris air show returns with airbus and boeing battling it out for new orders and mobility businesses like stellantis is looking to expand. >> looking for more energy and power and less weight and less cost all of this is going to be given to the pay load of the aircraft. we see that what we are doing can benefit the aircraft industry good morning happy monday the u.s. is out for holiday today. we are focusing on geopolitics namely what is happening in china. u.s. secretary of state antony

blinken will meet china president xi jinping this hour relations with the u.s. are at a low point with the root cause is america's incorrect perception of the country wang met blinken on the second day of the trip. this is the first time a u.s. representative has visited in five years blinken held several hours of talks with the foreign minister on sunday with the focus on easing tensions with the world's two largest economies. let's get out to my first guest on the show today. i'm happy to say reid witten is here with us reid, what do you think the purpose of the secretary of state antony blinken's trip is >> i think the main -- first, thank you for having me on the main purpose is to restart communications as you said, no u.s. envoys have

been to china for five years not many people have been traveling for five years for a few reasons. this is an opportunity to restart communications and as you pointed out at the top of the show, some say relations reached a low point. both sides recognize they need each other to succeed together there will be some hesitation to the two sides, but they need to start by open communication. >> i don't know if it was you or somebody else on the show, but they were talking about the fallout from the hot air balloon incident that diplomatic incident which was strange at the time, but really blew up and set the tone for the rapid deteriorations on both sides would you say that incident is mostly behind us as this point >> i think so. i was on cnbc at the time. at the time, i mentioned this was a classic diplomatic

maneuver you have two sides that want to come to stterms to start talking secretary blinken was scheduled to go to china and china tried something that was plausibly d d deniable the folks in the u.s. said we are not going to come and talk there was a lot of noise on social media and a lot of oh, no both sides recognized they would come back to the table eventually i said i think both sides know they need each other to continue economically and especially as the state economic headwinds need to recover. here we are four or five months later looking at that. they know they need to take

these steps and secretary of state in china and now he will meet with the president, it appears. >> it is significant we found out in the last hour that the secretary of state will meet with xi jinping. it is a step forward i want to go back to the u.s. approach to china because since 2018, the trump era, the relationship, as we talked about has been more belligerent. back in 2018, they called it a technology issue now this tends to be swept under the rug. people tondon't take the fact enough of the trade lows the trade deficit with the u.s. and china, it reached a record high in 2022 how is this decoupling going in action there is a lot of talk, but it is not happening on the ground, is it? >> in some ways it is and others

it is not. what happened in 2018 is the u.s. asserted that china would be considered an adversary in the struggle for global technological dominance. that coupled with the national security the u.s. had a bunch of restrictions and wreck legis -- regulations to stop advances in china. that had a knock-on effect of limiting exchange with china the u.s. still needs chinese manufacturing. both sides need each other's markets. i don't think anyone is looking to stop the trade. you heard that in the secretary's comments they want some collaboration and cooperation. they want to make sure they do it in a way that both sides can maintain their interests and especially for the u.s. to maintain national security. >> i feel like we have done a very good job in general when i say we, i talk about western media.

highlights where the u.s. stands and the u.s. is thinking about the approach to china. what about the chinese approach to the u.s. at this point? what do they want to get out of the trip and how would they see the future of the relations with the two? >> that's a really interesting question i spent the last week in china i was in shanghai and i did not get a sense of what the government was thinking, but talking to several of our clients there. the feeling among business is there has to be some connection between the u.s. and china or globally economics will be injured in a severe way. i think businesses just want to get on with business there will be national security concerns and the two sides of the governments of countries will take swipes at one another. the u.s. has targeted chinese

companies. there will be those swings back and forth with the two governments, but businesses want to get on. there is planning in china about how they review manufacturing in a way that doesn't violate u.s. controls on technology and how they continue to trade with the u.s. and how they can avoid the u.s. entity list to avoid trade with the u.s the recognition that the two sides need each other. >> need each other, but the same time, there is not alignment of interests whets when it comes t and self sufficient on chip technology i wonder with the u.s. and if they are in a situation where the train has already started moving it is difficult for them to go back and reset relations, so to speak, because we know the biden administration is going huge on a.i. they have launched the massive chips making plan. that is the future of the u.s. economy and focusing a lot on

the instrudustrial policy. whether china likes it, the u.s. is becoming more standalone in that respect >> that's right. i think once in 2018 with national security and technological advancement and anything we can do to raise levels or restrict the chinese levels was seen as an advance for u.s. security. that is the effort to decouple at the same time, no matter how much the chips acts throws out, there is still nothing like china's capacity to manufacture at scale and cost that the u.s. needs. there will be certain lanes. that is what the u.s. diplomatic effort is about. getting the economies to run cooperatively and with a good amount of trade where the u.s. keeps the highest end technology and maintains the advantage and

works on the point of the spear, but can still get the commercial off the shelf and mass produced big market chips and other items that china is just so economically viable at producing. >> reid, i'll leave it there thank you for joining me fascinating to hear your insight especially on the back of your heels coming off the trip from china. reid whitten. goldman sachs is the latest bank to cut the outlook for the chinese economy. trimming the forecast by 0.46% to 0.54. the signs of recovery is hitting a road block with expectations for full read. if you see that, the economic forecast is con contting

forecast is con conttent coming through. the german chancellor olof scholz will meet the premiere and trade delegates in berlin today. this is the first such meeting since the pandemic began and as scholz will look for the derisk from china he will meet with the president before visiting the chancellor let's go to corporate news with china astrazeneca is planning to spinoff the china business according to the financial times. the drugmaker is considering a number of options including a separate listing in hong kong or sha shanghai it could protect china from other nations. you see more companies like

astrazeneca to spin off china economics. the italian government ruled that the top investor cannot choose the ceo despite a 37% stake in the tire maker business the move is part of the plan to protect pirelli. sinochem cannot pick more than 8 of the 15 members. if you want to get involved in anything we discussed this morning, with the u.s. out on holiday, you can engage with us on twitter tweet me @cnbcjou. also coming up on "street signs," a north cew week onheac

foot for the equities. we'll have more when we come back

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welcome back to the show

well, if you heard me, i was hinting we would talk about european markets that is what we will do now. the heat map is mostly red a lot of stocks trading under water. no doubt this is the weak hand over from wall street friday snapping a six-day winning streak, but still showing a 2% rise for the week. overnight, asia pacific with the geopolitical discussions with the secretary of state visiting with xi jinping. investors are hoping for some thawing of relations there as we keep a close eye on the chinese data and impact that it might have on the global economies the hand over from the asia market was weak. the stoxx 600 is pulling back from the gains down .60%. it is a very big week coming up. let's flip over and look at the

indices. a number of central bank meetings with norway and switzerland and my favorite is the bank of england. so much news about the bank of england and what they are expected to do this week a lot of pressure to continue with the hiking cycle. this at a time where we will talk more about this on the show with mortgage rates rising we see softening in house prices and the profile is softening, too. the ftse 100 is in focus in terms of where we are, above 7,600. 30 points weaker cac 40 in france is down .60%. pulling back from the last week's gains dax in germany is down .50%. they are digesting the hawkish ecb meeting from last week and that is impacting sentiment. in terms of sectors, the bit of green on the board is the european banks up .20%.

insurance is up similar at .20%. on the flip side, heavy trading in chemchemicals down 2% on the session this is partly due to weakness from asia. the signals from china are not positive on the data front and chemicals is a exposed to the moves basic resources is down as well. any sector that might have exposure to commodities or china is trading on the back foot today. let's look at dollar i want to start with sterling. we have the big week ahead with the bank of england. 128.20 if you go back to where the pound was trading against the dollar after the mini budget crisis, we are up 20% since then i tweeted this out this morning. sometimes it does pay to be contrarian we have come a long way. a lot of this is on back of the

markets expectations of what the bank of england may do with the hiking cycle and how many more hikes they will go against the other banks like the fed euro trading sideways. we saw the jump to the end of the week with the hawkish ecb and fed hinting to further interest rate hikes. the ecb hawkishness is setting the tone dollar in focus. one area of the market and i mentioned this on the show, u.s. markets are closed for trading i want to point out they are closed the difference with the 2-year treasury trading at 4.72 and the 10-year treasury at 3.76 the curve is the flattest it has been in over 40 years. it is trading at minus 90 basis points this is really quite significant. it does tell you a lot about what the market thinks the fed may do and the impact it will

have on the u.s. economy i thought it was worth hig highl highlighting let's switch over to european yields a quick look there the 10-year bund is two basis points higher. 248. 10-year btp is four basis points higher on the session. europe with the 10-year bund last week is ten basis points higher 2-year yield in germany climbed 20 basis points last week. the largest move since mid-april. we are seeing a lot of action in fixed income as for the uk, the 2-year government bond yield hit a high this morning amid the bank will hike interest rates again. financial markets are pricing in a 70% chance it will reach 5.76

by the end of the year the markets are pricing in 125 basis points worth of hikes. you can see the fallout continues in the gilt curve. the rest up two or three basis points as well as i started off saying, it is set to be a big week for central bank action with the bank of england and swiss bank and norway due to reveal the forecast and decisions on thursday we will also hear from the fed chair jay powell at the senate as investors look for insight into the fed future hiking path. all this alongside key flash pmi from europe and u.s. and japan as well as retail sales and inflation data in the uk the uk inflation data will be key. let's get out to my second guest on the show. niallsullivan in neuberger

berman we have key inflation data on wednesday. so much we can press about the bank of england and what it should be doing and the criticism directed at them what do you think the bank of england will do on thursday? will they go for a 25 basis point hike or could we get a surprise at 50 >> i'm sorry good morning nice to talk to you. our core position is 25. i think there is a lot of work to do. i think the first thing you have to say in the uk, the economy has been stronger than pa lot of people have been expecting in a sense, that is part of the problem. in particular, labor has been able to rehe anrecertificate -- reassert strength. i think the problem the bank of england faces is you have a

very, very strong economy. there is also some other things. a lot of noise with mortgage rates and what it will mean. the thing people miss, people in the uk have house stock by people without mortgages and those with mortgages, those people have been figuxing that means things will have to hike to bring things under control. >> i remember the bank of england and the last pollicy report and we had a session of the state of the housing market today is different from the early '90s which is why they seem blaise about it i want to go back to what is priced into the market here. it is astonishing that the market is pricing in a terminal rate of 5.75% from the bank of england in february. when i talked about the reaction in pound/sterling, i noted if you bought the pound back in

october post the mini budget crisis, you would have made 20%. sometimes it pace ys to be contrarian >> it is a tricky one. a lot is priced in we have been in a number of our solutions under weight rates it is less obvious now than it was before i think the focus may be on the longer end where we think things are interesting. the way we are looking at our portfolios is cautious enough on the rate side. maybe short particular looking even inflation it is higher there than many other economies. it is still predicting break even that is the potential for the ability to play the curve in a more interesting way >> i want to broaden this out

and ask about your view of risk parity strategy here is this an environment where those types of strategies can work it is surprising the s&p is actually sitting at a owone-year high there may be a ripe opportunity to get involved on the long side >> i think generally one of the big issues is being a look at the reasons why you expect markets to be weaker, the broader equity markets have been doing very well. i talked about this recently in the blog between tactics and strategy i think it remains the fact we look at things and see the equity markets are ulnerable there are strong forces in the shorter term in particular and that is the a.i. growth story. you have to position on a shorter term

i think your position on the interest rates is reflected in our positioning as well. i think we have seen interest rates as range bound over the last number of months. we are certainly moving to the upper ends where we see it makes sense to position long duration or owning bonds on a relative basis. what i think is interesting to say around that, that is probably more a comment on government bonds and innvestment grade duration if you note the risk appetite, high yield bonds have done well in the last few months we have been looking at that wearily and wondering to increase the allocations. >> if you are an equity investor, can you still make the returns and not buy in the a.i. at these valuations? >> i think implicit in the question is are you buying the

broad index or looking for opportunities around the index a lot of people are talked about this point the difference with the equal weight index is index is looking for value in names priced relative to the broader index. if you can find a broadening out of the marketplace, there will be opportunities for other names. that actually feeds true to the private market asset class you see a narrow leadership which is a signal in the round that is not necessarily the signal to the individual names >> i would conquer niall, thank you for joining me. niall o'sullivan from neuberger. and ubs ceo seeks to ease concerns after the credit suisse takeover he says the prospects for the

bank are better than ever. he did also warn of the down sizing saying there would be strategic adjustments to reduce the risks of the combined bank with the difficult decisions ahead. it is worth noting that ubs pushed back the timing of the second quarter earnings to later in august. namely because they are dealing with the fallout from the integration and how that will impact the balance sheet. switching to france. the best known running employer has joined the cac 40 replacing vivendi. the stock is up 20% for the year as rising living costs boosts appeal the ceo told cnbc the firm is uniquely suited to weather challenging economic conditions can. >> look at the performance during the covid isolation in fact, our revenue in 2020

went down by 1.6%. so we really demonstrated we are strongly recession proof the question is why. we are serving essential needs and we are doing well in 35 countries. when you have recession, but inflation, you have a purchasing power issue for the employees. the employers see it difficult to follow the pace of inflation. if you are an employer and inflation in your country is 10%, you raise the salaries by 5% and here we come to make the bridge between the 5 and 10. we propose the portfolio the benefits that are exempxempted. it is a good way to wage inflation and purchasing power of the needs of employees. coming up on "street signs,"

emmanuel macron arrives at the paris air show we will have the latest when we come back. ah, these bills are ce has no idea she's sitting on ae goldmine. well she doesn't know that if she owns a life insurance policy of $100,000 or more she can sell all or part of it to coventry for cash. even a term policy. even a term policy? even a term policy! find out if you're sitting on a goldmine. call coventry direct today at the number on your screen, or visit coventrydirect.com.

good morning welcome to "street signs." i'm joumanna bercetche and these are your headlines u.s. secretary of state blinken will meet with china's xi jinping as part of the rare tri to beijing. goldman sachs is the latest investment bank to go bearish on china citing limited options. european equities on the down side ahead of another busy central bank week. and the paris air show returns after a four-year pandemic grounding with airbus and boeing battling it out for orders and stellantis is looking to expand. >> everybody is looking for more efficient sales and less weight and less cost. all of this will be given to the

payload of the aircraft. we see that what we are doing can benefit the aircraft industry a bit of a down trade for european indices every market is trading under water. we had a mixed hand over from asian equities overnight this hasn't been super well for european markets u.s. markets are closed for public holiday the theme is china with the data coming out with whhich is disappointing to the down side many have been trimming the forecast for the year with gdp that is having an knock-on effect with all exposed to china. basic resources and chemicals are trading to the down side let's get to it. the only bit of green we have is

in banks up 2% insurance marginally so. the cyclical sectors are trading under water. chemicals is under performing down more than 2%. let's take a look at how the asian markets have been faring you can see with the exception of the australian index up .60%, we have the rest trading weaker. shanghai down .50% this despite the pboc cut rates as we saw last week by 10 basis points it is a strong signal that authorities are looking to get a grip on the liquidity situation. hang seng down .60%. nikkei which is a bright spot the last couple weeks with the index at the three-decade high, has pulled back 1% today this is probably a little bit of position trimming because it has

done so well for the last couple months morgan stanley expects five of the top asia picks to rise 50% in the next year japan will be a standout performer with china in second place. check out analysis on cnbc.com. airlines are placing big orders for new aircraft as the demand for travel increases. we have been speaking to executives from the aviation sector and beyond at the paris air show this morning. >> everybody is looking for more efficient sales and less weight andless less cost and all of thi given to the payload of the aircraft we see what we are doing can benefit the industry >> i don't know anybody who

wants to spend more time on airplanes. especially living through the pandemic and being able to do some things on zoom, the passenger appetite for faster flights is bigger than it has been >> i have never seen this before quantities have grown. it used to be a 50 or 100 airplane order would be landmark now it is 400 or 500 to deliver over a long period of time of time starting in 2028 and into 2030 it is fascinating. >> for more on the aviation sector, let's get to phil lebeau at the paris air show. you are in good company. president macron just showed up at the air show as well. >> reporter: there is the european fire jet performing man maneuvers. you are familiar with what's going on there

i want to talk about your perspective. air traffic management systems. is the market there? how quickly is it growing because of all of the traffic coming in? >> as you see the increase in the number of commercial aircraft is driving a need for expanded air traffic management. what we also see is a need to refresh air traffic management especially in countries like the united states. on top of that, all of the drones and unmanned aircraft with potentially advanced air moi mobility wi will add another complex portfolio. we will see the growth and expansion along all three segments >> you have the technology

do you regulators have the system in place around the world to handle that increased traffic that we are seeing whether at airports or systems overall? >> a couple of things need to happen it needs to be prioritized as an investment the infrastructure requires investment in the u.s., it requires congress to agree to fund the faa initiatives. then it also requires -- it also requires that the regulatory agencies like the faa work to establish the policies and how unmanned air traffic is going to engage in this commercial air space environment and military air space environment. that is being worked now real-time. it involves states and other

local governments as well. >> sure. i would ask about the defense side of this as these budgets keep climbing, how long is the runway how far outdo you say we think military and defense budgets continue to increase >> i think the war in the ukraine, unfortunately, has -- has forced the european governments to come to grips with the fact they need to invest more for a sustained period of time it was a wake-up call. we expect budgets to be higher and extend into the next decade. of course, countries like the u.s. and other allies around the world like australia and the uk, are also preparing to de-risk the potential conflict with china. there is investment in peer-to-peer conflict. we think the markets will be

robust for the next ten years. >> reporter: you get the gold star for the interview of the day. bad timing, but graeat intervie. guys, back to you. >> phil, thank you for that. i have to say, it was the most dramatic interview i've seen a case of maverick and goose at the paris air show thank you for the interview. early on in the show, we were talking about the focus on geopolitics and the fact that the u.s. secretary of state made a trip to china. he met with the foreign counterpart for a meeting which lasted five hours long now chinese state media report that he has already met with the chinese president xi jinping that meeting has already taken place. earlier on, we reported that we were looking ahead for the two of them to meet. chinese state media reporting they have already met. we do not have a lot of

indication as to what went down within that meeting, but certainly a positive step that secretary of state blinken has met with the president the next step, of course, is to see whether president biden would have a meeting with his counterpart. that is the latest from china. with the u.s. markets -- while the u.s. markets are closed today, the cnbc's brian g g g gomez filed this report. >> reporter: we are headed into the three-day weekend. the day president lincoln freed e enslaved african americans a majority of americans believe the top ways corporations can help is through pay equity based on the public data they collected, here is what they found. 4% of america's largest

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steps in the right direction. also coming up on "street signs," sterling notches the best week in six months. what can we expect from the bank of england this week we will discuss coming up next

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welcome back to the show uk lawmakers are expected to support recommendations for sanctions against former prime minister boris johnson today when they reviewed the report when they said he deliberately misled them over partygate the vote is expected to show divisions within the party ahead of the national election next year and turning to financial markets. the bank of england launched the first financial system wide stress test in a bid to improve an understanding of how firms respond to market shocks with the gilt crisis. large banks ensures clearing houses and investment funds are included in the test and the uk home builder index has fallen to the lowest

level since march. asking prices eased as mortgage rates rose, as demand from new buyers remained unchanged. mortgage payments to the uk are set to rise by 3,000 pounds next year according to the think tank resolution. 1.6 million uk fixed rate mortgages are set to expire next year the average two-year fixed mortgage at 6.5% by the end of the year and above 4.5% for more than four years. some of the uk biggest lenders raised mortgage rates last week after inflation data spurred expectations of the bank of england rate hike this week. arabile has been reviewing this. a lot of questions people are asking, arabile, is why housing prices are so resilient despite

the bank of england hikes rates more than 400 basis points in the last 18 months >> it is a pent-up situation from the covid-19 crisis we saw consumers with many to really layout with savings maintained a lot of stimulus put back into the market plus, you still had savings in place by the uk government with energy prices. there were factors that helped consumers slightly that is beginning to wear off as you noted with 1.6 million fixed rate mortgages set to expire by the end of 2024. the mortgage situation for consumers is getting worse and more difficult you just pointed out to the index falling down to the lowest level since march 20th it gives a sense of how difficult this is becoming as mortgage rates increase by that

6,000 pounds it will be very difficult to maintain over that time. as you can tell, this graph is giving a clear sense of how the uk mortgage situation is at pres present. if we move on to the uk economy, this is the state of play. 8.7% cpi number which dipped off from the double digit numbers we saw where it stayed at around 10%. it is expected now to hit 8.5% which is expected on wednesday even so, the core cpi number is the one we will look at more that remains sticky. it is anticipated to remain unchanged at 6.8% which is the question of the one that the bank of england will look at more and say the only tool we continue to have is to hike interest rates another 25 basis point hike could certainly be in the offing

on thursday. the question does become how much vary is there will they vote for a flat stance or unchanged stance with the interest rate hikes or will there be some on the other end of the spectrum with a 50 basis point hike you may keep moving and ensure inflation comes down as substantially as possible. that is a question questto point when you look at sterling, this is one to look at. 128.12 is where we are sitting last week, we saw the sterling hit the best week in six months. you did see broader weakness for the u.s. dollar in particular on the back of the u.s. deciding to halt interest rates and maintain the wait-and-see approach. the uk unable to do the same jobless n llessness remains at %

january to april is 7.2% for the public sector. 7.6% for the private sector. that is outside of normal crisis situations there that is certainly one thing to look at. what has been interesting is andrew bailey is saying the uk is recovering slowly, but he is also noting that things in this model at present are not working and very big lessons need to learned. restructuring of the model and what to do in crises as they face them now, is one thing they are looking at here. this is the uk inflation situation. expectations when the may meeting had come forward and that anticipation of inflation dipping to 5% by the end of the year and 2% by the end of 2024 that doesn't look to be headed in the direction

still remaining stricky at core cpi with the central stability at the 2% mark which is where they would like things to be peak rate at 4.75% that shifted, joumanna 5.7% may be the figure for those peak rates according to some >> 5.75 is priced into the market you know, arabile, if you go back and read a lot of the press over weekend, there has been criticismed ed -- criticism levelled at the bank of england. they underestimated inflation pressure and the second is they were too late to embark on the aggressive monetary tightening although the bank of england started hiking in increments of 25 basis points when others were hiking in clips of 50 to 75.

they are receiving criticism one thing i want to share in that i think is important for viewers to get a handle on is back at the may policy report, the bank reported the housing market and page 66, the proportion of mortgages on fixed rate has risen from under 30% in the early 20dol00 to 85%. the length of time that people are in fixed mortgages are longer this is telling you the higher interest rates to the final consumer is taking a lot more time to pan out. i think that is one of the reasons why we're not seeing distress in the housing market yet, arabile >> yes when andrew bailey took over three years ago, he did not anticipate the situation to have gone through this.

you have the covid-19 crisis which they had to filter through and making the wrong decision considering or thinking it would be similar or same to 2008 and 2009 financial crisis. the kind of stimulus they tried to put into the market wasn't as necessary as perhaps was put in back then. then you had russia invading ukraine as well as the situation we saw politically in september last year. a lot to consider for bailey and the mpc. >> big week. inflation data and the monetary policy decision. let's wrap up the show looking back at the main story the secretary of state of the u.s. blinken has been in china meeting his counterpart and also a meeting has taken place between himself and president xi jinping. now we are getting comments from the china president xi jinping saying he hopes the visit that blinken will make more positive

contributions to stabilize the u.s. and china relations we have been talking about the u.s. and china relations were at a record low this is the chance to reset and the fact that blinken made the visit and a long visit with the foreign minister and grabbed time with the chinese president are all positive signals quick look at european markets. all trading under water. a day of negativity across the board. remember, the u.s. is out for public holiday that is it for the show. i'm joumanna bercetche stay with cnbc

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narrator: tonight, on "american greed: bonus edition"... run away, buddy boy, run away. leave it to the real men. narrator: scott menaged is a trash-talking star... go [bleep] yourself! narrator: ...of a fix-it-and-flip-it tv show. menaged: i love buying properties in this area. rentals equal cash flow. cash flow makes me very happy. narrator: menaged parlays his reality fame into a house-flipping and furniture-store empire in the valley of the sun, where scott menaged always comes first. he was an arrogant person, very pushy, very demanding. ajamie: he was having a lot of fun, taking a lot of money, jetting around, living a high lifestyle, gambling in vegas, flying over to israel. he was enjoying himself.