can get companies through the economic uncertainties ahead. ♪ good morning welcome to "street signs." i'm julianna tatelbaum >> i'm arabile gumede. these are your headlines >> european equity markets are muted in the final session of july, by firmly higher for the month as earnings season kicks in full year while friday's s&p print is on the fifth straight month

heineken cuts profit forecast for the year. vietnam poses a particular challenge. >> we had a big de-stocking effect in the vietnamese market. in the second quarter, our sktok levels normalized in line with the mark pearson shares topple as they beat the first half outlook. the ceo andy bird outlines a.i. >> i see yoa.i. as a net positie the data set with the textbooks or data that we have in our skill space is only going to increase with time china state council on pledges stimulus measures aimed

at consuming at autos and real estate this after the data for july showing factory contracting for the fourth straight month. economic data that we are following across the days with the trading picture. italian gdp numbers for the second quarter are out preliminary gdp number for the second quarter is a negative 0.3% youquarter on quarter 0.6% year on year. it is an expectation of 9% with the quarter on quarter figure down 0.3% is worse than 0% anticipated for the italian gdp number that is preliminary reading of

the second quarter from italy. 0.6% year on year and minu minus 0.3% julianna. arabile, thank you for the information. we have a number of corporate earnings coming into focus we have big releases on the data front stateside. u.s. payrolls and jolts and services pmi due out we have the eurozone gdp print due out and bank of england decision on thursday a reason why we see a muted start to trade this morning. ftse 100 is down .20%. ftse mib in italy adding .30%. ibex below the flat line

dax trading higher we have one big mover. heineken shares plunging as we mentioned in the headlines after the slash of the full year outlook. we will look at what is happening with the beermaker later in the program we approaching the end of the month of july and beginning the month of august. let's look at how the european equities performed over the month. here is the picture. it is a positive month for european equities. we have underperformed green acrossed board italian market gaining 5%. the swiss market is gai gaining .50% the ibex gaining .90%. let's get over to arabile to walk through the latest trade in the u.s.

>> thank you, julianna s that -- it has been the u.s. picture which has been good. the year to date picture where we saw look looking positive we saw the 13-day streak for the dow jones industrial average pick up. it did pick up 1% in the session on friday. 3% up in the month of july as well as i said, 1% up for the s&p dow jones industrial average is .50%. the month to date data, the within that we have been focusing on u, is for june with almost 50% of the companies will report so far, earnings have been go enough to push index up in july. for july, the s&p is higher and

nasdaq with nearly 3%. let's show you the dow jones industrial average picture this is what it looks like with the 3% gain. really moving higher toward the close of the month as that earnings picture really picked up we have a host of bank numbers coming out the tech giants anticipated and we got the likes of meta pushing through the numbers. u.s. banks is interesting to note this is a flat stance at pr present. more than 16% is where that graph sits these are the big gainers. citi moving up 3%.

that change for the kcompany ha been good. jpmorgan chase pushing up 8% and bank of america over 11% to the good here is the tech count which we have been following. those have been the shining light, shall we say, for the u.s. markets some feel they have run a little bit hot. so far, apple still managing to gain 1% in that picture. microsoft and netflix losing a touch. down 3%. in fact, 13% gain so far for meta they did launch threads not so long ago more than 100 million users on the front. we have yet to get an update tesla is 1.9%. alpha bet is 10% to the good julianna >> what a month for u.s. equities defying so many bears

one factor investors are putting weight into this morning is the latest from china activity has contracted with pmi at 41.3 for july it support fro-- is it up from . in june. the deputy director of the chinese state planner will improve to expand household consumption after new measures to promote auto and real estate sectors. the government iss expecting to improve ev charging a check on asia markets in response to the stimulus measures from the chinese government the shanghai trading .50% higher hang seng has been a star performer of late is up

anothano another .80% and an the news with the bank of england would tweak the policy and sending the nikkei in focus in the aftermath of that policy change from a month-to-date pers perspective, here is how the asian markets look the hang seng is up more than 6% we have seen strong demand for those hong kong tech stocks because of the pollicy support put forward and the chinese government nearing the end of the crackdown on the tech sector the knikkei 225 has had a stron run p for the last several mont. looking to end the month flat. sh shanghai is up 2% for the month. shifting to commodities, it

is a monster month for oil brent and wti up 14% and 13% a piece on base for the best community performance in a year and a half after a weekly gain week arabile. julianna, let's unpack the movement we have seen not just across the month, but the year which has been p fairly positive on the equity front. daniel morris here from bnp paribas joins us have we reached pullback we have just seen the dow do the work to the latter part of the month. pullback as some point >> at least on a relative basis. we had very good returns this year especially how depressed we looked with the bulls and bears.

they were not optimistic it is contrarian with equities we had the really good returns everyone is saying let's pile in that's where you get disappointed >> the s&p has reported and we thought earnings would take a bit of a hit and maybe the banks with regards to loan losses and that being a big hit because we have higher interest rates seemingly doing very well. >> going into the earnings season, we thought it would be strong we thought surprises would be positive that is not a bold call. it is not a negative surprise in that way more importantly, i think, with the outlook and what they say about the future and what you are getting is a higher percentage than average of positive guidance against history. from what they are seeing today,

things look good >> it is extra ordinary for bears to hold up if i look at the macro data, the u.s. is more resiliresilient. data is strong in europe, we have seen weakness in the industrial sector industrial growth to the down side what is your view on europe and u.s. markets >> more underweight europe than u.s. the macro back drop. if you look at the last year, you have similar inflation rates in both markets and change of the level of interest rates has been similar you had a distinct performance with the macro that explains the fiscal stimulus $2 trillion of stimulus with biden in office. the reduction act. that is a lot of money that is

support in the u.s. economy that you did not have in the continent. >> underweight against the european and u.s are we going to see the european market pull back versus under perform wall street? >> on the absolute basis, not necessarily. the outlook should be for modest appreciation if you look at earnings growth forecast, it is 8% year on year. that is a bit high for europe. we think expectations are high that is one reason the price appreciation will be modest. if you manage to avoid serious recession as opposed to a weak quarter or two, you know, rising earnings, assuming valuations don't change should rise we see better opportunities

elsewhere. >> what? i would touch on cyclicals if we with touch europe and if there is a continued downturn, which cyclical would you look into to try to de-risk as much as possible >> we think of the cyclicals orientation, we would be more cyclical over the defensive stocks asking the question of how much further appreciation can you get from here? ecb? okay, maybe we won't get a few more hikes the challenge is for the central bank to assess we moved a long way. we know mondetary policy works with a lag how long can we work with that level? impact on growth a year from now is a hard question to answer >> you put out a teaser, daniel, you see opportunities elsewhere. talk about which markets pose a

better opportunity >> good timing for me to be here today. we are overweight on asia and china. it is after we had a very good week in china and we are looking forward to that continuing to some degree and what we have been missing so far is a sign from the government that they need to do a bit more. and what is crucial about the headline you showed is the government talking about supporting consumer demanded again, we talk about the fiscal stimulus in u.s. and europe. that is more in china through the three years of lockdowns the government almost did very little for household consumption. that's a reason the recovery is weak they are sending signals to support consumer demand impacts the market >> is this priced in at all? >> if you look at the relative valuation in absolute valuation, chinese equities don't want to

use the word cheap, but less expe expensive. >> daniel, i appreciate the time really appreciate it daniel morris at bnp paribas citi raised the 2023 and 2024 price targets for the year for s&p. you can read the latest forecast and why it is betting on the fed achieving a soft landing on the premium service cnbc pro scan the qr code on the screen now. earnings season shifts into high gear this week with apple and amazon and qualcomm reporting stateside. find out more on cnbc pro. coming up on "street signs," bottoms down

heineken shares sink after they cut the full year outlook. we'll discuss next

welcome back

heineken's profit fell to 1.6 billion euro in the first half of the year with weak demand in asia this led the dutch brewer to cut outlook in 2023 and growth operating in the zero to mid 1% range. the ceo said growth is strong in other regionregions. >> we knew the first half would be the input costs in europe which is a important region to us we floated with pricing surge and we expected volume softness in the beginning of the year also, we are happy with the strong revenue growth. we grew revenue between 9% and 10% in three of four regions strong growth in africa and softness in stvietnam.

un underlining the trading and the portfolio outside of vietnam is growing in absolute terms. heineken is up 10% than overall volume trend we are not getting the first half of the year off pretty well, but the situation in asia and vietnam is different >> julianna, this is a stock where one would think the resilience in the weak environment would hold up better. this has a keen focus on the asian print. 5% less beer sold from a year ago tells you consumers are looking in other areas may not be quitting alcohol, per se, but actually looking for cheaper alternatives

you can tell revenue has gone up and that is inflationary, but operating profit down 8.8% that is a big fall for heineken. >> they have pushed through the higher prices and reality is volumes are suffering. this was well flagged. we knew the first half was inflation pressure and we would see volume softening we have seen how vietnam has fared and negative impact in nigeria with socio- economic volatility in nigeria. those two are infecting consumer output and that resulted in the decline. it is largely those two markets. the americas region is seeing a soft beer market in the second quarter. clearly, they are having issues

there. it seems to be more mexico than p the united states. the other thing i would point out looking broadly in terms of consumer trends, they say outside of vietnam and russia, premium brands are strong. outside of the two weak regions are continuing to buy the more premium beer they are buying less of it >> that shows in the volumes as it points out. very interesting that both ab-inbev and heineken have the same story they bought the likes of sab and this was the hope they would encourage more premium-ization of alcohol

and they had to take a different move with hieneineken taking on premium brand. they are aiming at that and when the economy turned, that will bear more fruit. >> a difficult tradeoff with price and volume let's shift to the education sector pearson reaffirmed guidance after first half adjusted profit of 250 million pounds. a 44% jump the education group is seeing strong demand for english language learning and qualification certificates speaking to cnbc, andy bird talked about the impact of artificial intelligence. >> seeing generative a.i. as a

positive the value of our data sets, whether that be textbooks or data that we have in our fathom skill space will increase with time the quality of the data you put in equals greater quality on the data output. i'm very optimistic about the opportunities. the bank of england publishes the latest consumer credit ahead of june we will breakdown the numbers next

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sitting on a goldmine. call coventry direct today at the number on your screen, or visit coventrydirect.com. welcome to "street signs." i'm arabile gumede >> i'm julianna tatelbaum. these are your headlines >> european equity markets are muted in the final session of july, but firmly higher for the month as earnings season kicks into full year the s&p 500 and nasdaq is on pace for the fifth straight

positive month heineken shares sink to the bottom of the s&p as they result a drop in sales and cut the forecast for the year. the ceo tells cnbc that vietnam posed a particular challenge >> we had a very big de-stocking effect in the vietnamese market. in the second of the second quarter, the stock levels were normalizing and we were in line with the market. pearson shares topple after the open and the ceo andy bird outlines a.i. >> i see generative a.i. as a positive the value set of the textbooks or data in the skills base is

only going to increase with time and china's state council pledging stimulus measures aimed at consumption of autos and real estate after pmi for july showed a contraction for the fourth straight month let's look at the look at the european markets and see how things are faring. we started off negative early on, but turned a corner with the ftse 100 and ibex really sitting in negative territory and the others are firmly higher thus far. investors digesting the heavy week on the earnings front looking ahead to eurozone cpi and the decision from the bank of england set for this week

earnings numbers as we have pointed out with heineken and legrande and pearson reporting bp reporting with the group is one to look out for in the european trading picture thus far. interesting here with the side note the ftse mib is hitting the highest level since september of 2008 in today's session. up .30%. let's get to fresh data from the bank of england. june uk lending and mortgage data net mortgage lendsining is up 03 billion in june. the increase was 0.1 billion mortgage approve als were higher

than expected. 54,662 the number was expected at 49,000 and 1.66 billion against 1.3 billion expected for credit growth all of this, despite the further increase of interest rates from the bank of england. this morning, we have sterling lower against the dollar by nine points 128.39 i'm pleased to say anka is joining us from rbc capital an markets. anka, i'm pleased you are here it is confounded expectations time and time again. here we are interest rates higher and we are not seeing cracks in the housing market or cracks in lending. what does this imply about the

trajectory of rates in the uk and the economy? >> thanks forego having me banks reported last week and more to report this week the results were reassuring. very little signs of quality unemployment is still very, very low and the banks have a large buffer in the last year with no sign of situation in the uk or europe to your point with net interest income and the decisions with the 25 basis points last week was unexpected and now economists feel we have turned we expect another 25 basis points this week then the terminal rate of 50 in total. the market is more expecting more on that front the key thing is the debate of

net interest income. in europe, we still have margins going up i think it will peak this quarter or next. in the uk, we have started net interest margins coming down the key thing for the banks, we say margins are coming down, but they are at high levels compared to the past. if you put this in the return prospect, they are all seeing prospects. we need more visibility on the rate path. that is what borrowers need. if you see rates coming to a halt, you womenill come back ans for a mortgage at least it is going in the right direction. i think the fact there is more clarity on the rate path, that should help banks with the borrowing and probably the share prices which were depressed. i think more clarity on the rate

path would help. >> we will talk more about the stocks in just a moment. i want to bring your attention to the banking space three eu banks fell below capital requirements in the latest round of stress tests the eba did not name the banks, but said buffers fell under 5% in the three-year economic shock. german lenders had more than half falling below the eu average. we have been talk to a raft of c-suite geuests this season. >> it will reduce the i am p-- impairment risk. we want to make the right kind of number and credit risk. >> we think the environment

looking forward to the balance of the year should remain about the same or improve slightly for the businesses we are optimistic about the path forward. >> in all countries, the labor market is strong that means asset quality is actually doing better than we felt a few months ago. our cost of risk which is provisions to loans is 0.18% in the first half we are on track to beat the target for the year of 1.2%. >> the difference will plug the gaps we will continue to keep costs flat or down or propel the price of the revenue line beyond through the investments we are doing o doing. that should bring us in line for 2024 >> anke is still with us

anke, how do you get comfortable with the investment case with the european banks with the yield curve inverted and as you mentioned before those comments, loan losses look manageable and they have not ticked higher in a meaningful way sdp >> that is the question on the investors minds. the investor is trading at lower valuations i think what we need to see is economic data improving for investors really to come back into the space if you look back last week, the pmi was very, very weak. i think we need that data to come back and clearly the stress tests which is reassuring and probably more interesting than decisive i think we need our numbers to be conservative and anpproaching these numbers.

we can see the range with downgrades the valuation is attraction, but it needs the macro data and interest rates to have a clear path for investors to come back especially given the experience from the beginning of the year which claims a number of investors in the market. >> anke, the c-suite leaders have pointed to a more upbeat sense from here on in and how they plan to navigate the space. this is all despite being a deal drought. do you think that comes back online or will they take on the fact that the higher rates are continuing and this will offset into retail banking? >> do you mean investment banking? >> yes >> a number of bankers spoke

about that with the fees that is from the early days at a low level. we look back in time and sorry for repeating myself you could always see that come back especially when you leverage with more clarity on the interest rates at higher level, it would pick up if you see more clarity it lags a bit, but at the moment it is at the lower levels. one issue is the trading which say is a larger part of the revenues it is nice to have more fees, but we need a good level of volatility of trading performance. that would be a larger impact on the earnings obviously, the pe is low on trading. it comes with a flip side. i think as we get more comfort to the second half, there is more activity.

now it is hard to see with the summer i hope we see more of this coming back and more optimism and checking over to the loan economy. that investment side kicks in. >> the surety of the rate path is bound to help when you look at deutsche bank nearly doubling provisions for bad loans in the second quarter and do you look at that and think that figure is where you expect the worst before it gets better particularly in the environment we are sitting in economically as well as with higher interest rates? >> i guess the new provisioning rules means you take that fast it would peak quickly. i hhave to say i would have expected the second half not to look different from the first

half obviously, no situation with the quality. i think everybody would like to take a cautious stance at the moment >> the uk government and european governments and parts of the u.s. administration are frustrated that banks have not pushed through higher interest rates with higher deposit rates for customers. that is one reason we have not seen a full mechanism of monetary policy. now in the uk, the government is keen to get banks to pass on higher savings rates to consumers. should we expect more re-pricing become a headwind in the months to come? >> it is more of a headwind. especially in the uk which is advance in the rate cycle and in europe that is why in the second quarter you saw it in the uk with the margins contracting that is the expectation for

europe as well the higher rates myanmar be-- rates mean margins peaked in q2. we are still looking at levels that are above previous levels i guess the sweet spot is if the economy improves and we get loan rates going up with a steep curve. that could be interesting. there are lots of moving parts the pressure on mortgage pricing and the banks hedged interest rate exposure. that is more of a tailwind lots of moving parts it is set at peak at the moment. >> can i wrap up about one bank absent from reporting last week and this week. ubs. depllayed the publication of the

q2 with the credit suisse acquisition. what is the biggest question for investors as we head for the results at the end of august >> the deal long term looks a track tive its --attractive the more details they provide ask the better they tried to do this, but i have questions when they report at the end of august i think the more clarity they get with the cost savings, the better it seems this is one of the key catalysts for the shares >> anke, thank you a lot of clarity you have been able to share. anke, the analyst at rbc capital

markets. coming up on the show, we talk ukraine and that's after russia shoots down drones near moscow

welcome back to "street signs. russia said it brought down three ukrainian drones on sunday amid the attacks on the buildings in moscow. some damaged high-rises which house government industries and three residential apartments ukraine will hold talks with the u.s. on the bilateral security agreement according to zel zelenskyy's chief of staff to discuss the ukraine demands for peace of peace. we have the author of "economic war. he has joined us many times before max, let's start with the question with the offensive by

ukraine. how is it going and what is the take on the state of things right now? >> first, thank you for having me you know, the state of the counteroffensive is the attacks in the south they haven't confirmed how much progress has been made in the recent days, but they have advanced russia's actions included countering that, but a barrage of missing strikes in ukraine and odesa and the withdraw from the 17th of july on the black sea. we have seen missile strikes russia's attempts to attack ukraine on the front and continue the economic aspects of the war continue very much intensely as well. >> we had an interesting piece of news over the weekend

saudi has tried to play both sides keeping close to russia with the moves in the oil markets and calling for cooperation for the ukraine peace deal what can saudi do here >> i think this is a remarkable and rhetorical shift i argue in the book that russia's securing of the opec plus partnership with saudi arabia is geo economically a victory when putin p firfirst ie in 2022. if saudi is changing its position or supporting ukraine's demands for russian withdrawal from the areas it claims to annexed and occupying, that is remark remarkable do i think this will lead to adjust the approach to opec plus not really that is the demanded other

countries want to see. if saudi wants to call for this, they want to share in the pain saudi arabia will continue to play a key role because kremlin is weaponizing it's supplies particularly with restrictions of secondary sanctions and others working with russia a lot of the activity in hong kong and uae >> one saw the likes of china try to step in with the relationship with russia and try to play a read role in the saga at some point. could saudi arabia be heading in that similar way with posturing to show a greater sense of leadership we have seen them posture in

other ways as well of late particularly in sports, for example. could they do the same here? >> i think saudi arabia wanted to position itself as a mediator we saw it carry out with -- prisoner swaps in the past right now, this is going a bit further than china has china is willing to support peace initiative, but has not overtly condemned russia at the same time, this is a challenge russia faces and how its strategy in the economic war has been unsuccessful. putin wants a deal on the power of siberia pipeline and he wants direct military aid and large loans to replace the lack of access russia has to western credit markets 500 days in the war and china has yet to give russia anything. beijing's position is complex

and they won't go as far. >> i want to note iff sanctions are working. you are closing russia out of the banking system in essence, that economy has gotten better. yes, fine with the ruble, they kept more in it feels the sanction are not doing what they should. >> the tragedy of this before was russian living standards have not going back to the 2013 level. i think there was a misunderstanding of the role in that period in 2014 as it was viewed as deterrent tool anx sanctions are effective is war by other means and state capacity tool. this was dented in 2014 and

black lists and a lot of countries were not on board and taking efforts to go around it we have seen that expand south korea joined which it didn't in 2014 and singapore has expanded significantly i think looking at russia, we saw putin talk about the dollar being weaponized we saw the meeting with the head of the development bank and the development bank which is at challenge here has suspended loans in russia since the full-scale inn vevasion last yer the sanctions are working and impacting the kremlin's ability to fund the war. they will not deter putin from waging the conflict that he has gambled the house on. >> how do you see this war

ending >> sadly, i don't think it will end any time soon. i find that a tragedy. the kremlin has a long-term strategy i argue that the aspect to the eventual end of the war will be success on the economic front. i truly believe compared to the trade war with china over the last six years, this is really a scale larger russia is actively seeking to destroy the internationalorder i think it is clear that russia can't win that aspect of the war, but the west can lose through disunity and failures to continue the path that putin, himself, has begun. >> should the west offer incentives to china? >> the sanctions package and elements have been really the sort of stick and carrot aspect

which hasn't been there enough with china, i certainly think there is an argument that we should look at focusing primarily on defeating the russian threat china wants to be the note of the economic order, but happy with it. loans are mostly in dollars. russia wants to smash and destroy. i think there is a reason for interests to arguably be aligned there. there are other places where we see signs the west is getting better at offering carrots of t the -- carrots we have now seen shifts with the agreement to admit sweden in exchange for the f-16. i'm an advocate they should be used more broadly. >> yes what an interesting discussion

i think overall looking at the war, it will be interesting. congratulations on the book. thank you so much for joining us. >> thank you available at all good book stores >> thank you so much for joining us max huess. author of "economic war ukraine and growth conflict with russia and the west." we have a positive start out of the united states with the heavy earnings week as we lead up to the jobs numbers out on friday that's it for today's show i'm arabile gumede >> i'm julianna tatelbaum. "worldwide exchange" is coming your way next.

ah, these bills are crazy. she has no idea she's sitting on a 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.

it is 5:00 a.m. here at cnbc global headquarters. here is the "five@5. we begin with gearing up for the final trading day of july with stocks on track for the longest monthly win streak since 2021. futures are searching for gains. wall street bracing for the busiest week of the earnings season we talk stocks taking center stage and the names on your radar. in china, a batch of weak economic data and beijing scrambles to head off inflation. a developing story as the country'