♪ good morning welcome to "street signs." i'm julianna tatelbaum and these are your headlines monday morning. european equities track in the green after the stocks close out a banner day one with the nasdaq surges 30% which is the best half in 40 years. and shares of tesla post record production numbers in the seconds quarter and deliveries surge for the year

and apple reportedly slashing production forecast for the pro headset amid design and manufacturing challenges after closing friday's first $3 trillion company. and president emmanuel macron postponed a visit to germany to deal with the domestic crisis. warm welcome to "street signs. we kickoff the show with the fresh pmi numbers. these are the final manufacturing pmi for the eurozone for the month of june, it has come in at 43.4. a touch light versus the flash of 43.6. the key, of course, it is well into contraction territory that line 50 is well below that.

in terms of the comments out of s&p global and hamburg commercial bank, there is growing evidence of the industrial sector is reacting negatively to the ecb interest rate hikes demands weakened at the fastest pace in six months despite prices of manufactured goods that is part of the survey that results which have come through today. employment index fell to 49.8 from 51.5. factories reduce work force for the first time since 2021. that is interesting because the wage pressure picture is of key focus for the european central bank you can see the euro is trading lower against the dollar we are down .30% that is more of a dollar story given the euro story with the dollar showing strength after an

unchanged set of sessions last week let's check on the broader markets. european equities trading higher a further .30% last week was strong for equities on both sides of the atlantic stoxx 600 gaining 2% over the week which was in line with wall street a touch light, but broadly in line the gains come after a strong session in asia despite the factory activity growth slowing in june with the pmi slipping to 50.5 over the course of the month. now in terms of regional performance, here is the split from the market perspective. you very broad based gains this morning. ftse 100 is up .20%. dax up .30%. cac 40 in france with a bid this morning. smi, the defensive part of the market, performing well.

ftse mib up .9%. you have basic resources putting in a strong performance up 1.5% this despite the china factory growth activity slowing in june. oil and gas catching a bid this morning up 1.2%. banks performing well as is banks. travel is down .50%. household goods under performing astrazeneca is a key under former on the back of the lung cancer trial data this morning it has concerns floating around the investment community now back to the macro. inflation and labor and rising interest rates will continue to loom over markets for the rest of the year. that is according to vanguard which has raised a number of its forecasts recently on the back of improved performance in the global economy the senior economist from

vanguard is jaoining me on the desk with his views on the global economy let's kickoff with europe. the final pmi data coming through for the month of june. we're in contraction territory it seems the european central bank interest rate hikes are having an impact on factory activity what is your take on the latest numbers? >> thanks, julianna. a great question clearly, the data is turning in the urozone. we had technical recession at t the start of the year. now with the pmi, it means germany will continue to be in recession for the rest of the year there is a high chance the eurozone would be dragged with it in terms of the technical, that means it was rate hiking

as we get into the second half of the year, probably the policy ind induced. >> what does this mean for policy if that is essentially the trigger for further worsening of the downturn? >> i think the key point is getting inflation back down is not going to be a sprint it is a marathon it is easy to get from 8% to 4%. that is what we have seen in the eurozone to get from 4% to 2% takes a longer time. that requires policy to be in a stricter territory for longer. we expect one or two rate hikes from the ecb and i think july is now done at the moment at 25 september will probably be hit or miss. then rates stay at that level a a at3.75 until 2024. >> higher for longer that's essentially the name of the game for the ecb

what if the services sector is garnering more attention lately with the slowdown in services and in france in particular where the service sector has been particularly strong what should we read into that? >> this is the key focus for the ecb to get inflation down. that second leg from 4% to 2%. you need a hit to services and the wage growth and labor market we are finally seeing snipits of that in france, but more on a realistic picture. are y you are not getting enough that will happen in the second half of the year the risk, obviously, on the upside rather than the down side. >> let me take it to the markets, although you are an economist, but what are you seeing that justifies the strength in equity markets this year

you look at bond markets and recession warnings flashing all over the place equity markets continue higher, especially u.s. tech we have seen a strong bid there, but also in europe which has been resilient is there cause or justification for that strength in your view >> i think markets are pricing in a soft landing. maybe they had better conviction given what happened earlier in the year you had the collapse in wholesale energy prices and china reopening story. clearly, you are not getting rewarded for risk in the short-term the pass rate is 5%. there is not much of the premium in the bond situation or equity. if you have the view, which most people will do, that cash rate will be lower than they are now. you will get a positive risk premium. the idea is if you are strategic, stay invested and continue to take risks

>> do you think the fed is headed for a hard landing? >> i think markets are pricing in a soft landing right now. i would say the longer the strength in the economy continues, probably the higher the fed will have to go. the higher they will go, the more likely a hard landing takes place. whether it happens this year or next year is up for debate the hard landing is the risk to that point >> the fed is key to emphasize they will continue raising rates although they are data de dependant. two more rate hikes are projected this year. they believe the rate hikes are coming versus trying to control the exuberance the markets feel at the end of the hiking cycle do you think they will get those rate hikes in? >> i think it is part of push-pull.

markets will probably pull in one more rate hike dot plots skew to two. i think the main point and the fed will have to convey to the market is when we get to the peak, it stays there for som extended period of time. the price cuts are extending to 2024, but that won't happen until the second half of next year >> let's turn to the uk. everybody's favorite target with inflation problems uk assets have struggled in h-1 relative to other parts of europe how bad is the inflation problem in your view >> i think it is pretty bad. we are not a central bank that is stepping down, but stepping up that is a big concern.

core diverging the uk we had this story before a u.s. labor market shock and the long-time sickness implying the labor there and the energy issue with the war in ukraine. the energy shock in the uk was larger than mainland europe. policymakers are a bit too slow to step in when they stepped in, they capped energy prices at a higher level than other markets it takes a while for that to feed through to the end consumer there is an issue here because the economy is over resilient. the transmission to mortgages is a bit slower and less effective in the past. clearly, the bank has to do more >> when you look at uk assets,

the argument is valuations are depressed and attractive from the valuation perspective. given the headwinds ahead for the uk economy, does that necessarily make the uk market attractive because valuations are more palatable >> when the equity markets had a terrible time in 2022, the ftse 100 did pretty well. part of that was sterling depreciating against the dollar which helped that reversed in the first half this year. the uk rates out performing which has been troubling for uk assets appreciated against the dollar it is a challenging market for sure >> thank you for joining us.

senior economist from vanguard now let's zoom in on one major corporate story in focus this morning tesla. tesla delivered a record number of deliveries in the second quarter and beating estimates with over 460,000 cars delivered from april to june it slashed prices to boost demand in key markets, including the u.s. and china second quarter deliveries were up 10% from the previous months and 81% on the year while production increased to 480,000 cars elon musk previously told cnbc that dynamic pricing is a critical part of strategy. >> we adjust pricing to match demand we did a big price drop in q1. january is a terrible time for car buying

it is seasonality for car buying january is the worst month we did a price drop and then recently price increases as i mentioned to the audience, the reality is that all companies do significant -- all car companies make adjustments to price because the msrp number and if demand is high, dealers will try premium over msrp if demand is lower, they will have incentives. you can see a very big difference over the course of six months between the peak to trough of all cars it is tesla is so immediate and transparent. it is not a question of msrp and markups or discounts >> a record number of deliveries for tesla. arjun, glad you are hear to help us judging by the tesla share price reaction this morning, what is

indicated is investors are impressed by the result. is this validation that the strategy on pricing over margin is actually the right one? >> elon musk said sacrificing margin for a short-term for market share gain. we saw price cuts last year in key markets like china and the u.s. that is paying dividends for the company. they have been able to ramp up production when the factories show all of the growing pains tesla had in the early years are really working out. the question here is for investors is how long does elon musk persist with the strategy of margin pressure in the goal for market share gains i think for that to continue for the rest of the year, particularly in a tougher macro environment, they have happy with that. as things get better and

competition increases, they will look to see how much share tesla has in the key markets and if they ramp up the prices. the other thing is what are the new models ahead we have not had a new testla model in the next last few years. those are the questions that are swirling in the longer-term tesla story. >> when it comes to china, analysts say this is make or break for tesla over the coming years. i saw at the same time that tesla reported record delivers, byd posted record sales. how is tesla actually doing in the chinese market >> byd is an interesting company. it has groan sown so quickly ant has a diverse portfolio of cars that hits various price points that is why it has the scale it has.

recently it released a cares in of the market. that is why there is the growth for byd. tesla has the premium brand already in china models are some of the best selling models in china amid the competition. it has brand recognition an apple iphone. the premium end of the scale aspirational product they feel the quality. that is the ev leader in the market in china, it will be the make or break for the tesla story. it is 30% to 40% of global sales for the company. it is a big chunk of the pie for tesla. they have to do well there that is why it was the fuirst market the price cuts came into for tesla. that is why they are strategic for china.

they don't want to be too cheap or expensive that is the balance that elon musk is trying to find. >> i did not realize it was big. 30% to 40% arjun, stick with us we have a few tech stories swirling around. twitter introduced limits on the number of posts users can view due to extreme level of data scraping the daily view limits set at 6,000 posts and 600 for verified and unverified accounts. some users speculated the decision could be related to other technical issues after outages were reported before the new rules were put in place. now on to apple making headlines. it is making significant cuts to its production forecast for augmented reality head helicopter vi-- headset the viso

pro. according to sources at the financial times, chinese manufacturer lux share is prepared to make 4,000 units the only assembler of the new device for apple apple has become the first company with a $3 trillion market value the tech giant touched the level in 2022, but friday is the first time it closed at that level you can see the companies on the screen there exxon, walmart, johnson & johnson and jp morgan. arjun, investors are not bothered about the cuts for vision pro why is that? >> the reason for the cuts is incredibly complex device to

make various different components some first of the kind components we have seeing apple is finding this hard to scale these are growing pains. nobody really expected this to be a massive, mass market product in the near term there were lofty analyst forecasts for the next five years. this is not a product that when it is released next yearat is w. the markets know the heart and lungs of apple it's the iphone and products and services that is the apple story for this year definitely through to next year and beyond that. this is a new device the reason it has a lot of

attention is because this is the first major device apple la launched in a long time. what is the next big thing we know when apple jumps into the market, that market changes. it almost becomes more commer comm commercialized it has appeal. it has a strong ecosystem of app store developers for the product and will develop new users and apps as answer experiences we have been speaking about augmented reality for some time, but apple has jumped in and investors in apple will hope for a similar thing and thist they e future. >> a long way off. arjun, thank you great to speak with you this morning. coming up on the show, days

of riots rock france forcing president macron to cancel a key state visit. we'll have more after the break.

i'm andrea, founder of a boutique handbag brand - andi - and this is why i switched to shopify. it's the challenges that we don't expect, like a site going down or the checkout wouldn't work. what's nice about shopify is when i'm with my family, when i'm taking time off, knowing that i have a site up and running and our business is moving forward because we have a platform that we can rely on. that is gold to us. start your free trial at shopify today. sleepovers just aren't what they used to be. a house full of screens? basically no hiccups? you guys have no idea how good you've got it. how old are you? like, 80? back in my day, it was scary stories and flashlights. we don't get scared. oh, really? mom can see your search history.

that's what i thought. introducing the next generation 10g network. only from xfinity.

welcome back to "street signs. france has faced days of pr protests and riots triggered by a shooting of a 17-year-old by police the teen's grandmother called for an end to the violence on sunday while tens of thousands of police were deployed in the attempt to deter clashes the riots forced president macron to cancel a state visit to germany which would have been the first by a french president in 23 years. macron will meet with parliament leaders today. let's get out to charlotte who give us more insight into what is motivating the protesters charlotte, how is macron responding >> reporter: good morning, julianna it looks like the tension seems to be calming down after six days of riots and looting and

violence you had 17 arrests over 700 a couple of days ago the family of the teen who was killed and buried on friday is calling for calm 45,000 police called up over the weekend and they will keep mobilizing them over the next few days from the authorities and president macron had to leave early on friday toattend a special cabinet meeting. he held another one sunday night and meeting with the head of the national assembly and senate as well with 200 mayors at the front of the unrest. the authorities are trying to come with the message and be firm against the violence and also try to appease the country. these events have been reopening old wounds and raising questions on racism in the country

growing issues with the youth and we have seen events in 2005 with a couple of teenagers dying while running away from the police both of those events triggered three weeks of riots which ended with a state of emergency declared and curfews this time, six days in, things seem to be calming down. authorities are coming up with a message and take stock of how to go forward from the economy view the finance minister said 200 supermarkets have been be damaged or burns large stores by nike or others have been damaged. libraries and schools and buses, et cetera. the authorities are counting the damage over the past days events the head of the hotel industry is seeing cancellations for tourists for the summer which is expected to be a record tourism

summer post covid. now we are seeing cancellations coming in. the concert at large stadiums had to be canceled we are just a year before the 2024 olympics in paris and questions of security potentially. from the foreign point of view, that trip to germany was canceled by president emmanuel macron the first state visit in 23 years. chancellor scholz and president macron were trying to iron out the defense and energy and if this had to be postponed on the back of the king's visit. this is after weeks and months of protests. this is all on the table while president macron was hoping to have a 100 days reflection and

get the country back together with the events derailing this prime minister modi is supposed to be here on july 14th, bastille day certainly another crisis that president macron has to deal with in his presidency and try to come up with the message at the same time firm against the violence and take stock of the reasons of the issues and problems particularly with part of the youth julianna >> charlotte, thank you so much for the breakdown of what is happening in france. we will continue to cover the story over the coming days coming up on the program, it's the dax's 35th birthday today. annette is there to celebrate the headquarters we'll le xt beivne

welcome back to "street signs. i'm julianna tatelbaum and these are your headlines european equities tracking gains in asia to start the second half in the green as the manufacturing deepens in the month of june. tesla shares pop pre-market

after the ev maker posts record production numbers in the second quarter and deliveries surge 83% in the year as the price cuts from elon musk payoff. apple slashes forecast for the vision pro headset amid decision and production challenges this after the friday close of the first $3 trillion company. and france sees the sixth night of riots as president macron postpones a long planned trip to germany to deal with the state crisis it is final pmi day. the uk numbers crossing for the month of june. manufacturing at 46.5 according to the final figures that is a touch higher than the flash figure of 46.2 a little bit of color for you from the institute that puts

surveys together the producers in the uk are hit by weak domestic and export market conditions with the clients showing a greater reluctance to commit to spending due to uncertainty and increased competition and elevated costs in terms of costs, costs paid by factories for materials and energy did fall by the most since february of 2016 prices charged by manufacturers dropped for the first time since april of 2016. some progress on costs there now, the other thing to note here, although some respite is covered in the short-term by pressure on supply chains and costs, these remain the symptom of theweakness in the role in moving forward uk factory downturn deepening in june despite lower costs you se you see sterling on the back

f foot this is a story of dollar strength this morning. in terms of equities, gains are holding on to the advance. ftse 100 is up .20%. ftse mib is up 1%. dax is up .30% overall, a strong start to the week in terms of the single stocks, tesla is in focus. shares higher. on the down side, astrazeneca in the healthcare space the stock is down 4% astrazeneca reported the drug dse significantly improved a condition related to lung cancer in a trial with patients adding it will continue to assess the medication in trial. why is this stock down this morning? the results hit a couple of key milestones in the trial, but they observed fatal adverse

events in the trial. we have limited details, but it has investors concerned about the future of the drug being tested that's why the shares are selling off this morning in france, shares of casino are sharply lower today. down 11% the company set a deadline to boost the equity offer base while working on the debt restructuring which means earnings the investors agreed to waive any default. that means casino could be in default by the end of august. over in currency markets, it is the morning of dollar strength dollar trading firmly against the euro and sterling and yen at the 145 mark sterling at 126.66 against the dollar dollar holding up against the swiss franc. up .30% to just under the 90 mark it is all about the dollar

today. u.s. futures, what is in store? a mixed muted start today after a strong close to a solid week stateside. all 11 sector nos in the u.s. a s&p were led by technology the sector rallied 1.8%. the short day because of independence day tomorrow. all of the barbecues getting ready. we will strtrade for a few hour. founder and ceo told cnbc how you should be positioned for the second half of the year. >> if you have technology with earnings, not the unicorns or start-ups and you combine it with the names that did well last year, which are more staple names, you will use the barbella

app barbarbella -- barbell approach you don't with a to chase all of the high flyerflyers you have to have your risk spread out germany's dax turns 35 having launched july 1st, 1988 it is now trading north of 16,000 11 companies have featured in the index without interruption in the period. what a momentous day for the german market. annette is joining us live annette, talk through the environment today for the german financial markets given the macro uncertainty that exists for germany. >> reporter: exactly it is key to talk about the

macro uncertainty. early on, i spoke to some who see yields in the pipeline for the second half of the year and also 2024. everything hinges on the macro outlook and on inflation path. there is interest to go public also on the german market. i caught up with a board member responsible for pre- and post rate i asked how the dax changed over the years. listen in. >> the dax has changed on the one side and on the other side, it kept constant for that time for example, the industrial composition has changed, but it is still representing very much the german economy

35% is the industrials as well as the auto environment. banks, for example, reduced from 16% of the index and now just 2% the index doesn't only develop in the terms of the competition, but develops how it is analyzed and calculated the dax has prided itself of being transparent and rule-based index. that hasn't changed. the major change that happened was in 2020, it turned from 30 to 40 companies. it is more diversified and even better representation of the german economy >> how does it compare to the dow jones industrial average >> the dax, overall, is a dramatic index in the world with a different environment. the dax started at 1,000 points

and today in the last few days, it was above 16,000. the annual return that investors could get from the dax is 8.6% that is a strong indication of what returns can be achieved in the german economy and also the german stock market. >> you hinted at the fact that the german industries represented here we need to talk about the car space space. there are car companies in the space. is that prone to volatility because of that specification? >> not really. it represents germany. germany is a more industrial composition. the consider companies represented 14% in 1988 and they represent 16% today. it hasn't really changed in that what has gone down is some very cyclical sectors chemicals which used to be significantly above 10% and

today is only 2% at the same time, banks have been 16% to 17% and now down to 2% to 3%. the broader diversification has helped to make it more stable. >> there is a bit of concern if you talk about the markets and capital markets here and they are not as deep as the united states in your view as the representative of deutsche, what do you need to do to attract more investors >> the european capital markets, not just german, is the topic. a lot has been achieved in the last few years a lot remains to do. the initiatives in the german government to improve the german market is a key next step to take the same is true for the european level creating european structures to

make it more attractive. on the other side, let me emphasize it is a cyclical environment. meaning, investors will go a lot of talk of investing out of europe and in the u.s. we have seen a reversal of that. i don't think there is an overall attractiveness for europe it is more structure point of deepening and driving the integration of european capital markets. >> reporter: so, of course, the key take is if you buy the dax, you actually get a fair representation of the german economy with the strong buyers into industrials the car companies do represent huge chunks of the german dax index. the leading indicator. the german economy is dependent on the auto industry the outlook depends on the macro picture and how that is

developing, especially china we have been talking about the interactions with china and germany or europe. if you talk to dax ceos as well, the deglobalization or decoupling thing is not going to happen at least to an extreme end because there is so much interi inn -- interconnections which is not favorable for the german outlook. >> annette, thank you for that story. that makes tesla more prominent and how the german automakers evolve from here thank you. coming up on "street signs," summer travel is taking off and tourists flock to europe in

record numbers we'll discuss the surge next

bridgett is here. she has no clue that i'm here. she has no clue who's in the helmet. are you ready? -i'm ready! alright. xfinity rewards creates experiences big and small,

and once-in-a-lifetime. welcome back to the program.

u.s. treasury secretary janet yellen will head to beijing this week becoming the second member of the biden administration cabinet to visit this month. china factory activity has grown into june. pmi came in at 50.5 compared to 50.9 in may. the expansion echos the data released last week sam filed this report. >> a private manufacturing survey shown factory activity slowed last month in chinea. evidence the economy is continuing to lose steam the pmi eased to 50.5 in june. higher for the market, but worse than may the output of new orders was softening which was due to weak

economic conditions weighing on foreign demand employment index fell as factories remain cautious of hiring more people and business confidence and optimism around the 12-month outlook fell to an eight-month low. the survey looks at smaller and private firms in china and the growing share of exporters show it held upp better. the trend showing struggles and keeping up with the pace of the rebound on the services side we will get a read of how services activity is holding up later in the week. the services sector pmi reading have been comfortable at the line of the expansion from contraction, but started to slow as pent-up demand start to wane. this reinforces the need for stimulus and investors are waiting for specific steps to shore up economic growth in singapore, i'm sam baddas

back to you. we are seeing reaction in the u.s. listed companies on the back of what sam was talking about. hope of policy support from chinese authorities on the back of the slowing momentum we're seeing in manufacturing in the country. alibaba and baidu and jd.com are set to open 2% to 3% higher pre-market stateside now on to the travel sector. travel season is in full swing for the summer after three years ofrestrictions, travelers are flocking to europe despite higher airfares and crowds s&p global rating has raised the travel forecast anticipating a return to the pre-pandemic levels with a jump of 85% from 2019 levels this year. fortunately, alexander is joining us to talk through the sector in more detail. alexander, great to have you with us.

anecdotally, if you traveled anywhere in europe the last few months, you likely have experienced or at least observed major numbers of delays to flights and cancellations to flights. how are the european airlines coping with the leisure travel in europe? >> a lot better than they were compared 2022 to 2023. you don't have the queues stacked up planes are operating smoothly. there are a couple of bottlenecks here and there that is part of the nature of aviation largely speaking, airline has been ready for a surge in demand >> how is the recovery doing in leisure travel over business travel >> leisure is strong some of the pent-up demand you have been talking about for the couple of years now has not been

fully served in 2022 you are seeing that increasing in 2023. you see that with the rise of numbers which is 50% bigger than pre-pandemic the planes are full and the fares are good corporate is worse corporate has been slower to recover. what is interesting is that it is starting to look like that corporate demand is going through good particularly in short-haul corporate travel over long-haul corporate travel despite being out of covid for a year, some networks are seeing traffic up 15% for corporate business >> you raise an interesting point in a research note that hotels, it is more business as usual when it comes to business travel why are you seeing a difference in the recovery patterns with hotels versus air? >> a couple of reasons

i draw it to cost and carbon on the cost side, attention to budgets. the business day trips to see one client or supplier is harder to justify than it was it play ns into carbon. you see 2/3 or 3/4 was airline travel pre-pandemic. you give that you to emission targets and you have to cut air travel >> certainly anybody who works in a corporate environment relates to the trends you described. you mentioned a few times that fares have been strong again, anybody watching this who booked airfares in the last few months will know that is the case it is extraordinary relative to what we have become used to in europe what is the outlook for fares in terms of travel on the continent? >> everybody wants to tell you how much they paid for the last

flight of flight fares are a function of supply and demand balance demand is strong supply is barely at 2019 levels depending on the travel you are looking at here. demand is relative to supply right now. that will probably go away you have high prices and demand remains strong and airlines will put more planes in the sky first of all, airlines have to pay more carbon emissions in europe and then they are dealing with the inflation element which will resonate through with airport charges and navigation pilots and cabin crew and ground staff are asking for higher wages and they have to serve that and that ends up in the fare eventually. >> alexander, let's wrap up with

the top picks. >> i focus on the ultra low-cost carriers ryanair and wiz air. and you see down trading with the ultra low-cost carriers benef benefitting. >> makes sense alexander, thank you for joining us director of european transport at bernstein a busy week ahead. let's run through the agenda retail is a big theme for the earnings reports we have sainsbury with the statement tomorrow after having to defend itself in the uk last week of accusations of pr profiteering of food inflation and we have the fed minutes on wednesday and the germany factory orders on thursday then on friday, the u.s.

non-farm payroll report on friday then we get the may jolts and weekly jobless claims. an appetizer when it comes to the latest in the u.s. jobs market let's look at wall street and futures ahead of the shortened trading day as the americans get ready to celebrate the fourth of july tomorrow. the s&p and nasdaq opening higher and the dow closing lower. that it is for "street signs." i'm julianna tatelbaum "worldwide exchange" is coming your way next.

it is 5:00 a.m. at cnbc global headquarters of here are the "five@5." new quarter and half of the year after one batch of stocks hits a first time in 40 years ach achie achievement. apple becomes the first company ever to begin with a $3 trillion market cap it is dealing with new concerns over plans and propjections for the vi