n of "dateline." i'm craig melvin. thank you for watching. [theme music] ♪ good morning. welcome to "street signs." i'm joumanna bercetche. >> i'm julianna tatelbaum. these are your headlines. >> european equities struggle at the open after disappointing data from china weighs on global sentiment. banks post losses with commerzbank leading the losses. and country garden wires money to creditors for payments

on two u.s. dollar bonds due today staving off what would have been the first default. xpeng announces plans to expand into germany as automakers continue discussions at the auto show. the move is about prestige according to the ceo. >> it is the highest standard market for oems. to be here and make our product available to the customers in this market will help us further penetrate the continental european market. and novo nordisk de-thrones lvmh as investor appetite for weight loss drug soars. good morning. welcome to "street signs." just in the last couple minutes,

we have been getting the final pmi numbers for the month of august in eurozone. let me tell you, they are worse than the flash. it is not positive. the final composite pmi for eurozone is 46.7. lower than the flash of 47. it is suggesting that the downturn is deeper than initially thought. just to give you context as well, the number today is down from july's figure of 48.6. it is the lowest level we have seen since november of 2020. quite a stark downward revision with the final pmi numbers for the month of august. in terms of services, the eurozone august figure came in at 47.9 against the forecast of 48.3. services also disappointing to the down side here as well. many economists have started to

downgrade expectations for growth. people are saying the numbers are indicating that the net quarter on quarter growth could be leaning negative. that tells you eurozone is teetering on the brink of resec rece recession. looking ahead, i want to point out the business index has dropped further to 46.7 from 484 48.2. that is a low not seen since early 2021. the numbers have not been positive as of late. currency down .40%. julianna, lots of negative news for the euro szone this morning >> and the central bank alike means what this will feed into the next policy meeting. taking you back to the markets. we are lower across the board in european equities. benchmark down .70%. let's break it down by region.

you can see the broad based nature of the pullback. cac 40 is down 1%. under performing in large part because of the sizeable pullback in luxury. dax is down .60%. we have .50% lower for the italian and spanish equities. in the banking sector, a sizeable pullback. here is a picture of the big movers in europe this morning. we had a number of analysts downgrades this morning. they are weighing on the sector. you have deutsche bank down 3% of the commerzbank down 4%. socgen down 3%. you have another downgraded. over all, a pullback in the banks. on to luxury. cac 40 is leading the losses

because of the pullback in luxury. lvmh down 1.8%. part of the reason we have seen novo take that position as the largest stock by market cap in europe. lvmh has gone down and novo has appreciated. chris matian dior down 1%. let me hand it over to joumanna with data from the ecb. julianna, we have been piecing through the signals on the pmi side of things. we just spoke about the composite numbers coming in lower than the flashes estimate. we are also getting results of the ecb survey with the respect of inflation. expectations for inflation in the next 12 months are unchanged at 3.4%. that is higher than the 2% target. expectations for three years

ahead have risen to 2.4% from 2.3%. why am i emphasizing the word rise? this is key for the ecb and what it is trying to achieve. when they tighten interest rates, the aim is to bring down expectations of where inflation is going to get. at a time when the growth has started to slow down, the activity has started to slow down and you think the expectations would slow as well. that is not the case today. you think going into next week this is worrisome for the ecb. they are looking at a hike a at the next meeting. >> rising expectations. this is potentially hiking to a recession. >> that is the big story partly for europe in the second half of the year. speaking of weak activity,

let's take our attention to china where service activity expanded at the slowest pace in eight months in august with the pmi coming in at 51.8. this is amid weak demand in the second largest economy despite stimulus measures. composite pmi edged to 51.7. country garden wired money to creditors to u.s. dollar bonds today. that is according to reuters which cited a source close to the company. the group offered to extend repayments on eight onshore bonds by three years. this comes after the embattled chinese developer agreed to an extension of 3.1 billion yuan last week to avoid an onshore debt default. a story we have been watching closely. for more on china, let's bring

in george magnus. author of "red flags." george, i can't think of a better time to have you on right now with everything going on in china. let's ask how bad the economic situation is actually on the ground? we have been piecing together the indicators with a slowdown and you see the real estate problem and capital outflow away from the country. how bad is it, do you think? >> good morning. it has been pretty bad. a torrid summer of economic data and overall economic perf performance. i think as we come to the summer and look to the fall, i think things might pbe on the cusp bea

b bit better. weakest service pmi numbers since 2019. in manufacturing and construction, actually things are beginning to stabilize. in fact, local governments authorized to accelerate borrower in august and september and what local governments do is finance low-cost housing. the possibility is certainly there that things will pick up in china and the rest of the year. we shouldn't get too excited about it because it is really just a cyclical rebound from what was a very, very low starting point. it is not quite the collapse that a lot of people were talking about a few weeks ago. >> very interesting to hear your perspective. there is a lot of pessimism around chinese prospects out there. when it comes to the real estate sector, the theme was

deleveraging. you had multiple bond defaults and country garden as i talked about was trying to restructure some of the debt onshore and offshore payments under the spotlight. to what with extent will president xi tolerate this much instability in the context of what they're trying to achieve in terms of deleveraging? >> welcome to number one nuance in china because xi jinping, we call him president, but the chinese really don't. xi jinping really is absolutely adamant about a number of things. he is very adamant about national security. he is adamant about the need to preserve stability above all things which is partly why the government is reluctant as other western economists have proclaimed that they should be

actually putting in more powerful stimulus into the economy. the government's very opposed to doing this because they don't want to risk financial turbulence that might happen as a consequence. the real estate sector, no question, it is a disaster area. you know, even though there might be some improvement in sales and transacting volumes from depressed levels -- remember, sales and floor space and other indicators are 40% to 60% below where they were before the pandemic. so, you know, there's a possibility, particularly given the recent spate of easing of mortgage restructuring measures and urgency of delivering projects to households that have been started. there is a possibility we could see a cyclical bounce in transactions the rest of the year. nobody should be under any

illusion this is a sector that will get better. it is really going to be a very, very torrid situation for years to come. >> george, you mentioned the importance of stability to president xi. earlier this summer, authorities stopped publishing youth unemployment data after hitting a record high. to what extend does the high youth unemployment rate and broader labor market pose a threat to the social instability in the country? >> it is always, i think, been accepted by everybody. an informal social contract in china where the government basically delivers ever rising aspirations of a good life to people and they stay, you know, relatively restrained and quiet and supportive of the government. obviously, we have seen a number of instances. there are hundreds, thousands of

instances of unrest and worker disquiet that go unreported. last year's covid protests and concerns this year certainly about youth unemployment. it will weigh on the government without question. i think it is something that they urgently want to try to address. the question is whether -- there are a lot of things changing in china. a lot of graduates that are coming out of university and not necessarily with the skills that are even needed by companies or perhaps have too much education for the skills needed. plus, of course, the occupational structure of the economy is changing from high pay and high wage work in manufacturing and construction to much more gig economy and informal economy dominated employment market. these things will be very, very

difficult to address particularly in the absence of stronger demand and consumption. everybody is urging on china and including chinese economists, but so far the government seems deft to doing anything about that. >> all very linked as you laid out there. let me switch gears to geopolitics. the g20 summit in new delhi this weekend. the first time since 2008, president xi will not be attending the summit. it would be an opportunity for him to meet with president biden. what is your view on why he is not attending? >> therein lies a lot of speculation. not only is the first time xi jinping not attending, but the first time any head of state is not attending. putin won't be there either. maybe these are bedfellows in more than one way. i think, you know, there is speculation it may be health

related. i'm not sure about that. how would anybody be able to comment with authority about it? i certainly think if it is not health related, it is designed as a snub to india partly because of the new map which china published which india did not like. it doesn't like the tilt to the united states in recent months. doesn't like the fact that india has shutdown a number of chinese mobile apps and so on. it is also possibly xi jinping's way of indicating that he is not really interested in government entities in which china is not the found eer pr er or leader. his attendance of brics in johannesburg is indicative of where china seems to lie with the global south for want of a

better phrase government entities and where it is bees around the honeyp pot. china wants to align the interests of countries that are prepared to accept china standards. it is a snub to india and partly about the statement of international governance if it is not health related. >> george, to round things up, i want to ask about the semiconductor initiative for china. the story yesterday caught a lot of attention namely that they used an advanced processor. they managed to come out with a super chip despite the u.s. export controls and the u.s. trying to restrict china from

developing high-end chip technology of their own. they seem to be moving in the right direction for huawai. do you believe china will catch up in the next decade? >> i'm not a chip expert. among the many things generalists can observe is probably idle banter which is the idea that the american export controls have suddenly galvanized chinese chip making into doing things it could not do before. remember china is spending tens of billions of dollars for the last 10 or 15 years trying to catch up in semiconductors. the idea they suddenly discovered something last six months or nine months that was beyond them before that is probably a little bit childish,

really. this is the combination of -- not the combination, but step in the china's program of self reliance. they want to build and design and manufacture all chips without relying on america or japan or south korea or taiwan and so forth. will the american controls contain chinese chip making? certainly not. whether they have the capacity to get and close the five-year or six-year time lag which people believe china is currently behind is a moot point. the rest of the world is not standing still either. there is a strong possibility the gap will never close. s certainly for the time being, it means the controls have to be tightened and tightened even further. >> george, thank you for joining us this morning. fascinating to get your views.

george magnus from the oxford university and author of "red flags." coming up on the show, appetite for weight loss drugs sends novo shares to new highs ofhighs. we will have more after the break. 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. when we started our business we were paying an arm and a leg for postage. i remember setting up shipstation. one or two clicks and everything was up and running. i was printing out labels and saving money. shipstation saves us so much time.

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welcome back to "street signs." novartis has released sandoz first quarter results of $4.8 billion and net sales for 2023. now in today's street smart, we are talking novo nordisk. it has taken over lvmh in market cap after releasing wegovy in the u.s. it made the highly sought after drawing in the uk as part of the con the ttrolled launch.

this success of the drug has valued the company with a gain of 41% this year alone. there are still new things to talk about and i kickoff looking at the laust month with the shares up 20%. the leg higher coming from the select study and highly anticipated study in august and showed the drug leads to weight loss, but releases cardio events by 21%. speaking to analysts and investors, the rally of nearly 20% is a combination of earnings increases and genuine buying and short covering. the investor community was divided into the results if they would be so positive or not. this march higher is a short covering and fundamental buying. >> and what has happened in the last couple months is factored into the price with the drugs

rolling out in europe and uk and our dot-com team wrote a piece of wegovy is starting to be provided with the lvhs. some insurers decided not to underwrite it. the british insurance company has said that wegovy will not be covered under its policy. what is the fate of the stock from here linked to whether or not they they side to underwrite the product? >> aside from anything going wrong with the drug like side effects or negative with the drug coming out, i think the insurance piece is the number one determining issue with the stock price and how high it depose. the study was so important that we got in early august was because the assumption is if the

drugmaker can prove reduction of the cardio events means they won't have to pay down the line with heart attacks because throwthose are costly events. >> really interesting. the other thing that also people have started to talk about and i remember when the study came out the same day with the price action of novo. we were watching the price action in food manufacturers as well. the assumption is people's appetite will be curbed. they will be eating less processed food. that will have a knock-on effect in addition to the alcohol suppliers as well. it suppresses your appetite for food, but also for drinks as well. that's one of the potential knock-on effects we can think about, too. >> absolutely. an interesting side story here with the reaction of the companies outside of the realm

of pharmaceuticals. charlotte highlighted a piece from morgan stanley's unit this morning with the alcohol consumption. you read the research unit found people taking these drugs consumed 62% less alcohol. that is an interesting impact. i would leave it on this note that longer term from a medical perspective, a lot of excitement around potentially harnessing the pathway that these drugs target to address drug addiction down the line. it could be used in a different way. not these drugs specifically, but interesting discovery. >> it is reflected when novo gets trading and then eli as well. for more on wegovy rollout in the uk and continental europe,

check out cnbc.com. you can check out julianna's comments online as to what the drugs are and this was the video she put together a couple months ago. eating a burger. if you want to get involved in the conversation, tweet us on x. we are @cnbc juljulianna. the point of the video is you suppress your appetite with one bite. >> i hadn't tried the drug. coming up on the show, pres pres presi pres pres presidents erdogan and volodymyr zelenskyy meet to discuss the black sea grain deal. know that if she owns a life insurance policy of $100,000 or more she can sell all or

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welcome back to "street signs." i'm julianna tatelbaum. >> and i'm joumanna bercetche. these are your headlines. >> the pressure is set to extend to wall street as the markets

reopen after labor day holiday. new figures indicating the eurozone downturn was deeper than first thought. and country garden wires money to creditors for payments on two u.s. dollar bonds due today staving off what would have been its first default. and bank of israel governor is weighing his options after the central bank denies reports he won't seek a new term. >> i will take high holidays here in israel as a period to figure out what are my next steps. our very own dan murphy did speak to the governor of the bank of israel, yaron, about the decision to hold rates and report he will not seek another term in the role. dan joins us with more. dan, on the decision itself, it

is interesting they did not hike interest rates despite the currency has been downgraded this year. >> that is right, joumanna. that is despite what has been an 8% decline against the usd for the currency. the finance governor saying further depression could cause more inflation pressure which would require the central bank to continue hiking rates. maintaining the hawkish bias. listen to our exchange. >> we believe we are in restrictive territory to allow inflation to come back to target in q1 2024. we see inflation expectations. we have seen several positive readings on inflation. if you look at the three months

and the six-months inflation, that is how we analyze dynamics ofdynamics. i want to be clear. it will put us at the 4% inflation. as long as developments come through the way we expect them, this should be enough. however, if we see surprises or if there is a significant depression in the currency, that would put pressure on dynamics. we will not hesitate to raise rates again. price stability is critical. we are vigilant and determined to get inflation back to its target. >> governor, you mentioned depression of the currency down 8% against the usd. what is your view on whether the currency moves from here and how does this impact the inflation dynamic in israel? >> let's take a step back. the currency has had a long relationship with the financial markets abroad.

it has been tied to that. that link has weakened significantly since the beginning of the year. the market is trying to figure out the appropriate risk premium with the increased uncertainty in israel which has come about with the judicial changes that we are seeing. we believe that we should let the market try to figure out that risk premium. so far, we have seen increased vo volatility in the currency in the depression process with markets functioning well. however, there will be market failures, which we have not seen thus far or very significant movement that really feeds on inflation and then we have the tools to deal with that. >> you have been listening to our interview with the israeli central bank governor yaron.

he has been a vocal critic of benjamin netanyahu's judicial reform plans which has caught the ire of the ratings agency in israel and at the same time upended israeli asset market and currency. that will be key to determine the interest rate trajectory moving forward. all of this is raising speculation of his future at the bank. his five-year term ends the end of the year. there was speculation he would not continue on in the role, at least according to reports this week. i asked him directly when we will get a decision on that. he says he will take the tail end of the summer to make his own call and app, of course, wel find on ut if the prime ministe will reinstate his role. no real clarify if he stays on and maintains that position. time will tell. he says a decision is coming soon. back over to you, joumanna. >> dan, i'll pick it up.

thank you for bringing us the interview. great to hear from the governor directly. let's turn back to the uk. final pmi to share. august figures. these draw contrast to the eurozone just at the start of the program. in the uk, august final pmi were revised slightly higher than the flashes estimate. composite has come in at 48.6. we were looking at 47.9. cer now still the survey shows the sharpest business slowdown in seven months. they are bad and in contraction territory, but not as bad as feared. you have uk gilt dropping ten ticks after the rerevision. service providers saw spending reverse as higher borrowing costs and stretched household finances acted to curtail sales

activities. backlogs of work fell in most by three years as few errorede er e in. that is interesting given that we have so much focus on wage pressure and if businesses are beginning to slow hiring and what impact it has on wage pressure and when we see that come down which is what the bank of england is waiting for. >> the most hiking out of the bank of england. let's look at broader markets this morning when put up against the data in the uk. european pmi is disappointing. final numbers for august coming in lower than the initial estimate. that is a downward surprise on activity indicators as we have been talking about on the show. this is how europe is trading with a negative bias.

dax is down .60%. cac 40 is down in france. ftse mib is down .40%. in terms of foreign exchange, we have the euro trading on the back foot down .40%. 107.50. the pound is dipping .60%. we are seeing strength on the dollar transpire. we see that against the yen. .30% stronger. 147. the dollar with the weakness from china at the activity indicators are disappointing. china services activity expanding at the lowest pace in eight months. that index dropping to 51.81 in august. i want to draw attention to commodities.

brent and wti are down .80%. this comes on the back of yesterday's highest level for the year. brent is almost trading at $90. that is having a knock-on effect on commodities and commodities pricing and inflation expectations in the next couple months. there are no signs whatsoever that opec plus is actually considering increasing production. in all likelihood, we will be set on this very tight supply market in oil for the next couple months. we are keeping a close eye on that. in the meantime, errecep tayyip erdogan says there is a chance to restore the black sea grain deal soon. russia backed out of the deal in july over the concerns being unfair and food and fertilizer space faced shortages.

>> translator: we will be ready to consider the possibility of reviving the grain deal. i once again told erdogan about this today and we will do it immediately as soon as all agreements on lifting the russian agriculture products are implemented. >> arabile is joining us with more on what changed in putin's mind and the implications of what we have seen with price action across the commodities. arabile. >> julianna, he offered a way through to finding a solution when it comes to the black sea grain deal which he did back out of in july having been organized by the u.n. as well as turkey last year. the 22nd of july is when it came into effect. july this year, it ended with the president of russia vladimir putin saying that he felt that the sanctions against russia itself when it came to fertilizer and its own agriculture exports weren't being prioritized.

unfortunately, it has limited its trade and ability to trade when it comes to the agriculture exports. he offered a way through to say if you agree to our demands as russia, then we can open the black sea grain deal within days, he said, which is interesting to note. the west has put aside his demands and said he is being cynical in all of this according to the foreign minister of germany. that gives you a clear sense of how the west feels when it comes to this. it is important to note how significant that black sea grain deal was. a lot of what comes out of ukraine through the black sea area, actually goes to africa and middle east and asia. 57% of the wheat out of ukraine was going to developed nations which need it most. significant in all of this, russia said it is win is willin give grain to africa nations.

some concessions being made here by russia, but on the other side, saying the west does need to play ball is what the president is saying. what does it mean for the price? we see the price do down significantly having it gone higher for wheat since we saw the invasion of ukraine by russian president vladimir putin. what does it mean for sunflower export? russia and ukraine are major exports of sunflower as well which is an important one plus barley and wheat. ukraine taking 5.4 million tons of the world's largest production of sunflower oil. here are the soft commodities which have taken a dip for corn and wheat for the year to date. soybeans are higher at 1.5%. as i said, the prices have

spiked last year in particular. this is a good fall with prices for some who are looking to import that corn. guys. >> arabile, thank you so much for breaking down the impact on soft commodities of the grain deal. we will keep an eye on developments there. i want to turn to gentjakar with the premier li qiang's plane arriving. we discussed with george magnus earlier on, president xi will not attend that summit. more focused on the china pre premier's visit. >> it is the subject or subject matter of the summit is superseded by the fact that xi is not attending. a lot of speculation of why he

is not attending the summit and not participating in the g20. some are citing health reasons. others are saying there is some rivalry going on between china and india which is surprising given the brics summit and success of that last week and they decided to expand the brics number of nations to beyond those already included in the brics. to come to the conclusion that china and india were on board. the fact that xi is not attending either summit this week is notable. that means it will with not happen for bilateral meeting with president biden and president xi. some people thought it may happen. >> to follow-up on that with the summit, president biden is skipping the asean summit. he is sending vice president

kamala harris in his place. all right. coming up on "street signs," european automakers are watching their rear-view mirrors as chinese competition revs up. we will have the latest from the auto cfenconree in munich more after this break. hi. i'm wolfgang puck when i started my online store wolfgang puck home i knew there would be a lot of orders to fill and i wanted them to ship out fast that's why i chose shipstation

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welcome back to "street signs." automakers and suppliers are gathering at the iaa conference in europe where the competition for ev makers is high on the agenda. let's get to annette who has been at the conference and speaking to the various players. annette, what more can you tell us with the interviews you conducted in the last 24 hours? >> i think it is a special situation the ckcar industry is in. we pushed into electrification and the strong and fast rise of chinese car producers who want to enter the german market. we heard back from xpeng that

the german market is attractive to chinese carmakers. we have less density of production because of the electricfied vehicles in the future. all of that means loads of pressure on the margins for traditional carmakers. ev cars are more expensive and they sell less of it and less profitability in them. it is a very terrible mix for the traditional car industry. at the same time, the suppliers actually have a good time because they have new customers coming from china who also loads of demand for cars. that is on a global scale. i guess the power is shifting away from the traditional carmakers to new players in the market, at least in the

short-to short-to-medium term, perhaps. then the suppliers are empowered by more customers and no longer super dependent on the traditional carmakers which are mainly coming from germany or continental europe. that is actually the mix. here on the ground, we have been speaking to loads of people. the big names of porsche and volkswagen and bmw and mercedes-benz. you name it. it is interesting to see that every company, in a way, has a different strategy. mercedes-benz goes on luxury. we have volkswagen who is looking back into the product line and revived icons of the past with the gulf. bmw keeps everything open and warning about the end of combustion engines which would increase the dependence of

china. many topics on the ground. one thing is clear, the race is not over yet. that is what the ceo of one of the major car suppliers told us this morning. listen in. >> i would say the race is not over. i would not say it is defined. for us, it is a global supplier and the largest supplier in the industry and we see ourselves as a tech company. we have 20,000 people in china working with chinese customers. of course, it is an opportunity to help them develop their portfolio. for them and their customers, it is an opportunity because you see clearly in munich with a broader portfolio to offer to the customers. >> if you say the race is not over, is that because one should never underestimate the innovative power of german

carmakers? >> as we display here, much of that is happening under the hood. us, for example, we have a completely magnet free motor. that means dependence on rare earth. that is all part of the geopolitical turmoil with the footprint reduction by 50%. it is huge with latest innovation and technology. if you want, we are based in germany and the ideas came from germany. innovation will be part of the game. this race is going on. >> so the race is not over and more innovation is yet to come. one very important element of electrified car is the battery which makes up 40% to 50% of the cost. we see china ramping up battery capacity tremendously. that could actually be a warning

as well for the european carmakers who face costs and they are not operating on the same cost level. that is actually the biggest threat going forward. the mass market for the producers operating in the middle segment of the market are most threatened by those chinese competitors. with that, back over to yyou. >> annette, thank you for the coverage you brought us from munich. turning to european markets, we are trading with a risk-off bias. ftse 100 is down only .20%. fine al pmi for august is down bit with the rest of the numbers disappointing for august against the flash reading a couple of

weeks ago. cac 40 is trading down .80%. those eleluxury names are comin off. we are not that far away from all-time highs. a lot of people are pointing out the stock market is forperformi despite the weakness with the activity indicators. >> same for the u.s. last week. wall street advanced with the three majors gaining. nasdaq gaining 3.25%. after the long weekend, we are looking at a marginal pullback at the open. all three of the majors there. i know, joumanna, you are keeping a close eye on the a.r.m. listing. >> that is interesting to watch. first of all, it has been a long time since we had a major listing in the tech space. the whole world is watching to see how the road show will go and what valuation a.r.m. commands. when we spoke about softbank

buying out the station that vision fund already owned and back then, the valuation was more than $60 billion. analysts said this seemed lofty. it seems since then there was a mark-to-market. a lot of press over the weekend suggesting the valuation will be 50 or 60 rather than the 60 to 70. >> clearly, the company ben benefitted from the talk of a.i. on the listing. on the other hand, the piece over the weekend saying a.r.m. is the supplier of chip design is at risk. and arjun stated the china a.r.m. is a separate entity. that increases the susceptibility with the tension with the u.s. and china. >> it is not just about the listing price or valuation, but

which investors end up getting innvolved involved. they have been courting apple t and samsung and nvidia. whether or not they succeed. >> i wonder which direction the courting has gone. the companies have as much skin in the game and the reason to develop the relationship. that wraps it for our show today. the u.s. is back today. we will leave you with "worldwide exchange." i'm joumanna bercetche. >> i'm julianna tatelbaum. thank you for watching "street signs." we will be back to do it all again tomorrow.

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it is 5:00 a.m. at cnbc global headquarters. here is your top "five@5." investors bidding farewell to the summer and gearing up for the fall trading season as the ongoing rally in stocks faces a potential spooky path forward. data from china and europe weighing on this morning's futures. goldman sachs giving an optimistic outlook on the changes the u.s. will enter recession and the factors it is citing on the recessionary outloo