not just make money from his investment, but can he enact change? ♪♪ ♪ good morning. welcome to "street signs." i'm joumanna bercetche with julianna tatelbaum in london. we are live from abu dhabi and london this morning. here are your headlines. opec secretary-general warning that under investment is putting energy security at risk and beyond net zero chairman lord john brown tells this channel new capital needs to

increase fourfold. >> this is going to take longer than we thought because of the interruptions in the energy security because of where the money's going to go. and stay tuned as i speak to the ceos of bp and shell and other energy groups coming up on programming. chinese factory expands for the first time in six months as the country eases into the golden week holiday. european index gains boosting hopes the fed could be done with hikes. wall street highs a positive trading month. and kicking the can down the road. the u.s. government narrowly

avoids a shutdown. president biden points fingers at hard-line republicans. >> my colleagues brought us to the brink of a government shutdown. enough is enough is enough. this is not that complicated. the brinksmanship has to end. warm welcome to "street si signs." quickly getting data in from the pmi. the eurozone september final pmi in at flash estimate. eurozone activity is mired in a deep downturn according to the survey data. in terms of the detail, the output pmi was under 50 for the

quarter. that is according to hamburg commercial bank. france and germany are leading the way to september pmi to the bottom and spain is pulling away less skcathed. let's get a check of the equities. julianna, there is a lot of green on the heat map. the stoxx 600 is up .30%. this after a september to forget and quarter to forget for the global stock markets. we are starting off with more positive footing. the main news over the weekend is the u.s. has managed to avoid a shutdown. that is the good news. a spending bill was passed last minute over the weekend. the more medium-term news is the spending bill is 45 days long. we may have to visit the

shutdown as soon as november. u.s. futures are trading green as we head into the u.s. session. of course, the hand over into the european session is positive as well. one thing to note is the asian markets are closed for the week. china and india and hong kong out for golden week. we will not get a lot of signals for those markets as we think about trading for the week. we did have signs over the weekend that some of the chinese activity data indicators have started to bottom out. that's part of the issue now. let's look at the individual indexes. the swiss index under water today. we are getting the final pmi manufacturing numbers come through mostly in line had for . signaling the manufacturing in europe is in slump territory although we are moving in the right direction for spain and

italy. germany and france are still in the do the duldrums. dax is up .40%. ftse 100 is at absolute level up .20%. in terms of sector leadership, this is where we have leaders and losers. real estate is leading the charge up 1.3%. basic resources is up. rbc put out a note cautious on the sector. on the flip side, healthcare is down .40%. that explains the weakness in the swiss index. media is down five points as well. we are keeping a close eye on the energy space this week as

the secretary-general of opec warns of the risks of un underinvestment in energy security. lucky for us, steve and dan join us from the conference with more. you have been busy this morning. talk about what is happening on the ground and the conversations taking place. >> we will tell youyou move of t is to come for viewers. i look at this meeting and it is a joy to be back with you, by the way. i have been coming here since 2009. amazing to watch the evolution of industry. it used to be an oil conference and then oil and gas companies and now energy companies as well. the question is how do they negotiate the transition? i look at this with the twin

coverage with the cop-28 conference in november. how will this industry do and move on the transition as well? i find it amazing to get a gauge on what is happening with the oil and gas and energy companies and the contribution to net zero. >> we know there is still a lot of work to be done on the transition stage. that is why the leaders have been gathering. the headlines we have been following suggests that there is a new energy and mood and that is squarely focused on cop-28. it is going to take a lot of time and money and it will take a lot of will to get it done within the organizations. >> it is. our viewers are smart for a reason because they don't take anything on face value you. we must not take things on face value you. i have a question if this is lip

service and strong lip service. we hear it from a lot of conner -- corners. this is a nation which has vast amount of wealth because of mol molecules and hydro carbon. is it going to be lip service or a meaningful change? you have amazing stats on the amount of money that this industry is spending on renewables compared to enp and hydro carbon. >> oil and tech is less than 5% on exploration and production according to the iaea. there is real pressure to spend more on renewables and hydrogen and carbon capture. at the same time, the industry is worried about energy supply.

we are focused on what they say as well as what they do, steve. coming into the conference, we have seen the doctor who is the cop-28 ceo and pulling together industry executives for a closed-door meeting talking about the solutions and the agenda that they can put on the table to deliver real change. of course, they have to be held to account on the agenda. we are waiting to see he if real progress is made. it does seem as if what they're doing is putting us on the right course. let's watch and wait. >> the investments have to be there. dan and i spoke to the former bp ceo and beyond net zero chairman which is lord john brown. i began by asking him whether the energy transition is at risk. >> it's the pace of transition that is at risk. this is going to take longer than we thought. five years ago, actually two

years ago because of the interruptions in energy security and where the money will go because energy security requires diversification of sources. a lot of people are putting money in a variety of diversified sources and it takes time to mount the amount of capital we need to get the transition done. it's huge. at least three times if not four times what we are spending today. >> but, there was a time when some of the biggest money on the planet was fool heartedly backing esg and the board and motions that would go through and backing up swifter energy transitions. not just europe, but global companies. i see that money not having the same commitment a couple of years ago. >> i think the money always in the free market chases returns. if returns are higher somewhere, they will go elsewhere.

that is why in the u.s., the inflation reduction act was put in place so people can invest in returns that make sense. i expect he they will be more and more structures which in the end put a price for releasing carbon into the atmosphere. that is what has to happen here that makes the market change direction so people can invest in reducing carbon dioxide. there are plenty of investments to be made and plenty high returns, but they are in the hands of all of the players, not just the oil majors. >> lord john browne. we have an incredible panel coming up. stellar panel. if you care about iocs and the oil industry, watch the coverage. we will be speaking on the panel to the likes of the bp ceo and shell ceo and you name it.

occi. a hughes panel. it would not be the same energy th unless there is the back drop of opec. you will get insight into that. >> i'll speak with the opec secretary-general later on today. we will stress the quarter and dig into the rift between the iaea and opec with the oil demands. opec sags ying don't give up on fossil fuels. >> one says 2028 and the other 2035. do we need to get annoyed about it? that is it for now. dan will hang around. i'm going to shoot off. julianna, back to you. >> thank you, guys. dan, i look forward to you coming back. steve, i can't wait for your

panel. if you want to get involved in the conversation of what is happening on the ground in abu dhabi or in the european equity markets, follow us on x, formerly known as twitter. tweet us. coming up on the show, we will look ahead to the crucial set of state elections in germany. annet t annette will join us to breakdown the details. 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. it makes it really easy and seamless. pick an order, print everything you need, slap the label onto the box, and it's ready to go. our costs for shipping were cut in half. just like that. shipstation. the #1 choice of online sellers. go to shipstation.com/tv and get 2 months free. ah, these bills are crazy. she

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welcome back to the program. chinese factory activity expanded for the first time in six months in september. pmi rose to 50.2 which was ahead of forecast. a separate survey showed growth, but at a slower pace at 50.6 which was down from 51 in august. the yen is trading near a 12-month low against the dollar after japan announced another bond buying operation. the minutes from the latest meeting shows a possible exi

before friday's inflation print showed cpi falling more than expected to 4.3%, the ecb council member said the elements that might torpedo the process is powerful. and tax has risen to the top of the party as the jeremy hunt says the government is not in a position to talk about them at all and will use his speech later today to set out hikes to the minimum wage. these comments come out after he sees a general election is in the cards once inflation falls

below 3%. the senior cabinet member took a more aggressive line with our sister channel sky news. >> thank you. there are some people who are saying that the chancellor thinks it may not be possible. it ought to be possible given what you have seen in the economy? >> i think the critical thing is we absolutely need t sure we are bringing inflation down. naturally, everyone in the conservative party believes in lowering tax and particularly seeing hard work rewarded. i can't speculate on what type of tax cut, if any, we're able to deliver until we are certain that inflation is coming down. >> sky reports the prime meeting as speculation mounts or hs-2. they considering scrapping the manchester leg to save money.

arabile is on the ground for us as the conference party kicks off. arabile, i watched the prime minister's interview on the bbc over weekend. he did not give a lot away with the future tax policy. he simply harped on and on about bringing down inflation and that being the priority for the government. >> reporter: the same tone consistently, julianna, to bring down inflation to the 5% figure which is the best tax cut he can offer because the initial tax cut which was wanted by the likes of michael gove and consumers alike will not be at play, it seems. even jeremy hunt speaking here in manchester at the conservative party conference. highlighting they will be unable to do that. one of the things they will look at, however, is the benefit sanctions and how they will be more harsher and which will

increase the living wage. you see them increase the living wage for uk households to above 11 pounds per household. that will be very interesting to see if that adds anything of substance. the question mark is with taxes as high as they are, what can they do? the institute for fiscal studies has come out with the study this week saying taxes are set to increase by 3,500 pounds per household since 2019 making it the highest increase of any government that has been in play in the united kingdom. clearly, a lot more needs to be done. these were the words from jeremy hunt when he spoke to us regarding the tax hikes or whether there was any hikes happening this year or the next. this via sky news. >> i can't tell you what the state of the economy will be going forward. what i can say is it is

difficult to see having that kind of tax cut this year for two reasons. >> you say that ahead of the next election. >> i'm answering as accurately as i can. i don't have a crystal ball. i can't tell you what is happening with the economy. right now, public finances don't allow that. our interest payments are predicted to be much higher than at the spring budget and it will be inflationary. is this something i'm willing to put us on a path? i understand lower taxes and i'm prepared to take the difficult decisions to make that happen. >> reporter: tax cuts are occupying the top of the agenda sheet. let's not forget that you do have the reversal of the net zero emissions on the back of the petrol and diesel vehicles which is delayed another five years. it sets back the green energy discussion. i was speaking to hydrogen uk,

the company here in manchester, and they are saying the in invein investment is bound to come off after the year the uk has had. they are about to miss the charts for the investment case. another topic on the agenda, of course, is hs2. high speed rail network that is meant to link london with the northern part of the uk. a large part of that which could be scrapped and we could see that cabinet meeting happening later today with regards to that. more announcements at play. we'll unpack those across the coverage here in manchester. guys. >> arabile, thank you for the overview. to go back to what julianna was saying. i watched the same interview with the prime minister. one thing he kept saying is having inflation is akin to a tax cut. that is not the same thing. especially 2/3 of inflation is

dropping on the back of base effects of energy and food and where things were one year ago. that is a bit of a political spin. it does tell you that arabile was stating how much pressure is on the conservative government to introduce something akin to tax cuts. >> that is so much pressure and what the conservative party stood for. he is falling under criticism for not pushing through the tax cuts. >> they seem to think they can turn it around. switching to another country in europe. spain's center right leader feijoo has failed in his bid to become the prime minister after losing a second parliamentary vote 177-172. spain's king is expected to give incumbent center left leader pedro sanchez the government with the call to a path for r

referendum for catalonia. two-time slovakian prime minister came out top in the elections according to preliminary results. the pro-kremlin leader has another chance to form a government, but needs to form a coalition. he said ukraine is not his priority. >> translator: slovakia have more serious problems than ukraine. we believe ukraine is a great tragedy for everybody. if we form a government, it is irrelevant now. we will do all we can within the eu to reach peace negotiations. and german chancellor olof scholz is facing a big test as centrist parties look to stem growing support for the far-right alternative party.

elections are set to take place in two of the country's most populous states. annette joins us now. annette, you have been flagging on the program the last couple months the german economic back drop which is not supportive. the question on everyone's mind is how do they turn it around and how much backlash or blame is the chancellor expecting? >> reporter: i have to say germans don't vote on the economy. that is different in saxonbuerg. voters are disgruntled with the government. be it a discussion on the economy or the high energy bills

or immigration which is on the rise back here in germany. it is a imaginatmajor topic. we are seeing voters going to the city inscity which is polli% and that makes them more successful in the polls than any of the parties which are forming the ruling coalition now in berlin. to give you an idea of how people are actually voting with their feet toward the right wing or populous party. in the east of germany, the afd is the most successful party, almost in every federal state. that is moving toward the west. that is actually new. for hess, we see the afd coming in at 16%. that could be better than the

greens or better than the social democrats. their topics are the economy and lack of skilled labor and immigration. you have an abundance of topics to tackle. i had the occasion to speak to the leading candidate here for the federal state of hesse from the afd. i did ask him how the economic factors are actually weighing on the decision of voters voting for the afd. take a listen. >> if you compare certain figures to other countries, we're at the end of the scale. the government is not really looking at the topic. sometimes i have the feeling that they don't represent the interests of the people who live in germany with or without migration background.

they represent the people who want to come here. that is not the reason why citizens voted for them. >> germany has one of the highest industrial prices in the nation. are we facing a difficult time ahead? >> i studied economics at university. for me, it is clear the target of the green deal will lead to very negative consequences. >> why is that? >> because they don't look at the economy. they look at the green deal and reduction of co2 and they don't even notice that right now a lot of people at the end of the month have high inflation and energy prices and don't really know how to finance their lives. they should represent these people.

>> reporter: so the afd, by the way, is advocating tax cuts, but various other topics which actually would make them probably an easy coalition partner for the conservatives. here in germany, the conservative and liberals and greens all say no, we never do into a coalition with the right-wing afd. perhaps that might change. we have seen changes already on the communal level because it was just not possible because the majority of people voted for the afd candidate. perhaps we might see a shift after these federal and state elections that the traditional party scene will cooperate also with the so-called right-wing populous afd because many people are going to vote for them. it will be a wake-up call in any case for the ruling government because clearly they will feel

the pressure with more federal elections coming in and the next general election in two years time will be a tricky one for the traditional parties. >> annette, thank you for the interview. interesting over the summer, afd, the party she was talking about, overtook popularity in the polls. very interesting die naynamics germany. let's go back to the uk with fresh numbers. final manufacturing pmi number is 44.3. that is a touch better than the flash figure of 44.2. for comparison, it is stronger than the eurozone at 33.4 in september for the eurozone with the final manufacturing number which came in early this morning. the s&p global community says

the downturn will cut back further amid weaker intakes from domestic and overseas clients. optimism was linked to a recovery for a stable inflationary environment. a bright spot in the outlook, but these are dire figures. also coming up on "street signs," dan yergin says the horse is out of the barn. we will have more with that after the break. meet the portable blender we can barely keep in stock. blendjet 2 gives you ice-crushing, big blender power on-the-go. so you can blend up a mouthwatering smoothie, protein shake, or latte wherever you are! recharge quickly with any usb port. best of all, it even cleans itself! just blend water with a drop of soap.

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welcome back to "street signs." i'm julianna tatelbaum with joumanna bercetche. we are live from abu dhabi and london. here are the headlines. crude closes 30% higher and the $100 oil dominates at adac. we will hear more on that later this morning. and the downturn of chinese

orders and factories expand for the fursirst time in six months and inflation deceleration and wall street eyes a positive start to a new trading month. and kicking the can down the road. the u.s. narrowly avoids a shutdown after both chambers agree on a short-term funding deal. president biden points fingers at hardline republicans. >> maga extremists again brought us to the brink of a shutdown. enough is enough is enough. this is not that complicated. the brinksmanship has to end. industry leaders are discussing challenges to the energy transition with g

geopolitical concerns high on the list of issues. steve and dan spoke to yergin with more. >> china has such a hold and position in mining and processing. lithium nickel with 70% pro procepro processed in china. this real tension and you see it in the huge inflation reduction act in the united states with the foreign entity of concern. for conforeign entity of concer read china. >> i don't know how they allowed chinese on get ahold of another technology. can it adapt and copy china or

are we way too far behind? >> we are hearing the horse is out of the barn. china is in this position and you can't separate china out of it. people want to build resilience into it and build diversified supply chains. you are starting from the concentrated supply chain. that is the reality. >> fascinating. let's get to dan who joins us live from the conference. dan, decarbonization is a theme, but energy security is taking up the airwaves as well. the main take away here is how you find the balance between the two of those. >> indeed, joumanna. that is central to the conversation at the conference in 2023. we have been covering this conference for many years now. a long time ago, it was a play on oil and gas conference. now it is all about the energy

transition and all about the future of the energy systems will look like. we have had a number of conversations with how the companies are pivoting for a new energy future. we are kicking off a fresh quarter in the trading markets as well. wti and brent recording double digit gains in q3. we're here to unpack what will happen in q4. let's continue the conversation with martin ratz. he is the strategist at morgan stanley. >> nice to be here. >> let's continue the conversation on where oil will go in q4. what is the demand and supply on stocks? >> the oil marked is tight. we can see it in a broad consistent indicators. we see it with the balance and prices. it is not just the spot price,

but the curve. you put it all together, but the fuel market is under supply. we put that close to 1 million barrels for the fourth quarter. with that, prices will be supported in the mid-90s. the reason why we're undersupplied is because of opec cuts. as you roll analysis forward in the first quarter of next year and 2024, the question to answer is what is opec going to do with the production decision? as long as the production cuts last, prices are supported. >> opec said they will extend the supply cuts to year end. what happens at the start of 2024? are we on track for the unwind? >> the first quarter is typically a big part of the demand. typically, that can be softer and we recover in the second quarter and we flat line in fourth quarter.

historically, it is rare to unwind production cuts in the first quarter. there are have been examples in the past where there was an opec agreement for a full year and as the year got to the end, opec said we'll extend into q1 as well. in this occasion, there is a sequence to keep in mind with the official opec cuts cannot be unwound before saudi arabia unwinds its voluntary cuts. the first question is what happens with the saudi voluntary cuts before the full opec cuts. this will roll forward in the first quarter. >> it seems opec has a significant amount of influence over the market and to pick up on something you said before, you are tracking oil at 95 plus usd. why is that a stretch? >> well, the oil market tends to be anchored by one or two levels.

either anchored by a level which is effectively centered around the marginal cost of production. there are periods in the oil market where we need to balance the markets with demand destruction. we can't supply the stuff quick enough and we must balance the market by pricing out demand. prices that are associated with that become 110 or 120 or 130. if you want a price above 100 and we are at 95, all day we can go to 100. substantially above that, you need to answer the question do we need demand destruction. if you look at the oil market right now, it is tight, but it comes with a large amount of spare capacity in opec. opec market share which is quite low. our suspicion is if we were to go above 100, then opec would add barrels back to the market. this is not like last year where

we did think for a while we needed outright demand destruction. >> the supply cuts from opec come against the back drop of stronger than expected demand. i think the china story feeds into that as well. what is your view on the demand outlook from here as well and are you encouraged by the data from china with the pmi? >> all year, i guess, the oil market is feeling like an outlier. it is fair to say broadly china reopening has been a disa disappointing theme, but not in the oil market. oil market has the chinese market recovered. you see the mobility indicators for driving which are good and for flying which are good. we see the data released by the chinese government and other data primarily with tanker trucking and a lot of crude oil

going into the country. there is a broad set of indicators which suggest that chinese oil demand has recovered quite substantially during the course of this year. right now, i would say september and october, we are in the seasonal peak in china. after this week of holiday, you should see demand soften a little bit. that is seasonality. >> also before i let you go, i'll have a conversation with the opec secretary-general today. the rally cry from opec is we cannot lose sight of what they say is under-investment in traditional fossil fuels. what is your view on levels of investment within the industry and is what opec saying essentially true when it comes to a lack of investment? >> it is right and proper to argue that we need substantial amount of investment.

it is also fair to say if the levels of investment we had during 2020 and 2021, those levels were almost certainly too low. in those years, we spent $320 billion on oil and gas fuel development. there are two other data points that create some doubt about the under-investment thesis. one is cap x has increased a lot. we will track over $500 billion in cap x. that is a significant rally in cap x. the second thing is we're seeing strong non-opec dprgrowth. the north sea for example. there is little fear that is under-investment. actually, although we had low investment in 2020 and 2021, opec production has grown by 2

the millio million barrels. the strong growth in cap x and strength of opec supply is the fly in the ointment. we are not on board with that. >> very interesting. martin, we're out of time. i appreciate the conversation. good to see you. >> my pleasure. >> that is martin rats from morgan stanley. back to you. dan, thank you for bringing us the conversation. fascinating stuff. we have a stellar panel coming up later from the conference. steve will discuss actions for a net zero world with the bp and occi and shell. don't miss that at 11:00 a.m. cet. coming up on this program, a u.s. government shutdown is shutdown and averted with hours to spare. we will look at what the bill

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> w well, the u.s. senate passed the spending bill on saturday night avoiding a government shutdown. the bill allows the government to stay open for 45 days and giving the house and senate more time to finish their funding legislation. the 71-page short-term bill has the relief funds, but does not include new assistance for the ukraine ongoing war with russia. the fed's inflation rose less than expected in august. it rose 3.9% on the year. the inflation on the month was largely driven by energy costs which accelerated 6%. an to talk through everything going

on, let's welcome the equity strategist to the show. wolf, it is great to see you. thanks for coming on "street signs." what we had in the equity markets since the last fed meeting is a difficult environment. the stoxx 600 lost 2%. nasdaq is the worst performer and dropped nearly 6%. now we had the pull back, what do you think of valuations in the equity market? >>very clear valuations are the reason for the move in the last two months. the pe in the u.s. has come down 10% from the peak. it is now slightly below 18 times forward earnings. remarkable compared to the last levels in march. what is more rehe marremarkable late march, the real yield in the u.s. has gone up 100 basis

points. we had aggressive action. compared to debt at the beginning of 2022 to now is very moderate. this 10% reduction in the pe has come partly from the move in markets or the market by itself with the index down 6% from partly higher earnings which was upgraded after the second quarter earnings season. at the end of the day, we are at the same level from march where yields were 100 basis points lower than they are today. since the fed meeting, they moved 50 basis points. remarkable with that resilience we have seen. >> that resilience caught investors off guard in the equity space. how do you think about the relative attractiveness with the european equities against the u.s. equities? >> we think the u.s. is the better place.

valuations are very high. we think they should come down going forward. we think there is more of a reaction to the higher rates which we had over the past two months. we don't think rates will go down in a massive way. on the european side, inflation may play a higher role. there are stronger headwinds. china is slowing and not picking up to the scale which would be required for china to come out . >> wolf, i want to go back to what we started off this segment about which is the shutdown. we did get the deal in the last seeked. -- second. we know it was only a 45-day

deal. what is the premium to what the equities were trading in the last couple weeks? >> marginally so. if you look at what is happening in the rate space and what is happening in the equity space, the equity market reaction has been moderate. i'm not much of a risk premium priced in the equities. what is a consideration in that regard is credit spreads have not widened the last two weeks. that goes to show the market is not really pricing a lot more risk than it did just a few weeks ago. what is happening is the discount rate has gone up and equities have gone off the back of this. risk aversion has not gone up much. if that were to happen, the downside on the equity market would be more significant. i don't think the market has been on the edge when it comes to the government shutdown. it didn't really matter that much. i think what really matters with

regards to the u.s. fiscal policy is that we see a substantial stimulus on the first half of the year. the government shutdown doesn't really change the needle here. i think it is very difficult for the u.s. and the government to repeat that stimulus into next year which would require growth from the first half of 2023. that goes to show u.s. policy making is more difficult and getting more of the fiscal stimulus next year will be difficult to get through congress. the growth outlook for the u.s. next year is dire in that regard. >> fiscal tailwinds turning to headwinds. wolf, let's ask your view on the tech sector here. largely, they have been viewed as a separate part of the stock market. magnificent seven is what people like to refer to them.

can these big mega cap tech stocks continue to out perform? >> we don't think so. it's mostly valuation argument. let's say two components. on the one hand, valuations are stretched for the tech sector. in addition to that, we have cyclical headwinds. i say the next downturn in 2024 is coming from the consumer end of the economy. it will look different from 2020 when the consumer was pourwerin ahead with the stimulus and people shifting from consumption to services into goods. i don't think the next downturn will look like that. i think that is something which has been forgotten lately and with the a.i. spending increasing significantly and a.i. earnings going up, at the end of the day, it is a consumer focused sector. with these valuations being hit

at some point by slowing con sub sumption, there will be tech valuations coming off and revisions rolling over. from the technical point of view, into the end of the year fourth quarter, for me, value looks more attractive than growth which seems counterintuitive given the caution market outlook. if you look at hiss hi history managed to out perform. >> wolf, thank you. equity strategist. thank you. that is it for the show. i'm julianna tatelbaum. >> i'm joumanna bercetche. stay with the program.

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it is 5:00 a.m. here at cnbc global headquarters. here is your "five@5." the s&p notches the worst three months in year, but now gains are higher. and the deal to avoid a government shutdown creating new rifts in the halls of congress. we are live in washington with the latest. oil coming off the best quarter in more than a year. we layout the key factors facing crude in the fourth quarter. tesla rolling out a revamped version of the most popular models i