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is it lagging 1 and a half percent and the auto industry. travel measure is down one percent. and some retail is see some decline at 1% also. is this the number one story for investors this morning. new records being broken. this is the first time touched that. earlier on in the week, japan had to come in and do a bond-

buying operation to sustain some of the higher yields. what is the fund? she shrugged it off and continues to fire. the trend is a lot of moves higher to your treasury notes sitting at 5.1%. this is a higher than average narrative. and it is now 30%. december is now priced for 57% of a 25 basis hike. that is the highest that we have seen since august. and after ten year notes, we're sitting at 4 headlight 62.

a lot of people have been talking about that as well. and these are ten basic point higher. that is a 16% high at this points. let's talk about the german yields. we have the curve and the inverted tier as well sitting at 3.22. the interpretation from the market is they are mostly done from the hiking cycles. what is happening is the it the bear bare move and that. david

wonderful to have you with me. you seem to be in the driving seat here. tell me where you think the yields are heading this point? >> it depends on where we're talking about in the world. in u.s., we still have pressure to increase interest rates in the united states. i think in europe, we're probably at a standstill right now. i think we're going to hold for a while. and i don't see that changing a lot. but that means we got that diversion and yield between the u.s. and europe and maybe even asia as well. >> it looks like the greenback

is reacting higher, especially in the last couple of months. we see the strength of the u.s. dollar continue. is it a big move. to your mind, have people been positioned for the stronger u.s. dollar in. >> from our clients, yes. that is what we're seeing, people are expecting a stronger dollar. we're calling for a stronger dollar. pretty much across the board. that is causing a lot of ripples in the marketplace. that is make something economies work better than others, frankly. >> when you talk about the economies not working that well, let's talk about europe. the sentiment is negative at the moment and the it is sub

subdued. and that tells me there is a downturn in europe. we had a surprise on manufacturing. but the relative prospects are pronounced here. does that explain the full excellent of the euro? >> i think that is part of it. you have the increase in the interest rates and the economy doing strongly in the united states. again, you got some struggles going on here in europe. but one of the things that i am seeing in europe -- i'm from the states and over here. i've been here for about two weeks, i'm seeing a lot of people traveling and a lot of people coming to europe. i'm seeing a lot of people from china and the states. there is that type of input coming in. but at the same time, the general job market and the underlying infrastructure this year seeing in super struggling. they're having a hard time.

the job market is really strong in the u.s. >> we're sitting at 105. what does that mean? we have it up here. we're back to where we were at the beginning of the year. we bounced up and now we're back to the levels again. >> yes. we're talking about that again. i think we'll come close to parity again. we have some resistance levels down in the 80 right now. but we have been down to 104. i think we'll go through that i think we'll test the parity in the marketplace. >> and to determine if we get there, should we just be looking at the differential in the yields? do you think that will be one of the big drivers? >> that is one of the big drivers.

if the u.s. raises interest rates again, money chases the yields and the returns. so you would feel that in the u.s. marketplace. so that is one of the drivers. but you have to look at the underlying economics as well. if the european market is doing well and buying lots of products from overseas, that is one thing. but if they're not, that changes the whole economic situation. it is more than just one thing. but i agree with you, it is the economics and the divergence of the interest rates that main drivers. >> people were speculating. but it must be at levels now where the japan are doing good. >> i'm not sure if they have

the capital or the wherewithal to do that right now. their economy is struggling. i was talking to my friend over there. and he told me that everyone is struggling over there in japan. he said that he doesn't have the appetite for a strong intervention, maybe a slight one. but that is the market that we've seen a tremendous uptick in investment, in properties and real estate in japan from outside the country from the u.s., singapore, places like that that we don't typically see, like a 45%. >> if they don't intervenes, what happens? >> i think we could go to 150, 155, 160 by the end of the year if nothing happens on the

japanese side. they got to intervene and do something. there is no end in site. >> i hear what you're saying. and that says one thing. this is through the end of the year. so much going on. very nice to get your perspective. >> coming up on the street sign, this is the long away the the spinoff is completed. we have the details coming up next. this halloween, trick or treat yourself to the blendjet 2 portable blender... it's to die for. blendjet 2 gives you monstrous power for a delicious smoothie, shake, or frappé anytime, anywhere.

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welcome back to street signs. this is a move that they the healthcare form will allow to focus on innovation. the opening praise the 24 franks, 1.2 billion franks

below the estimate from jeffrey's analysts. thank you for staying extra so discuss this with me. this a company that you've been following for a long time. so talk us through some of the key highlights here. i don't think it is a surprise here. >> definitely not. this is part of their transition to be a focused innovating health company. i was filling in this morning. and the ceo told us that today's spinoff will allow the begin they're the generic's business to spin off. >> this is the largest generics company. and becoming an independent company, we can focus on how we

grow the business and bring the products to the patients and the products over the last couple of years. >> what does it mean to grow the business? you have an outside exposure to europe, about 50% of your sales come from europe. that sets you apart from a lot of the other u.s. generic businesses. what is the focus moving forward? >> we're continuing to build on the sales that we've seen over the last several quarters and looking to expand our maria begin in the next few years as we separate. >> and we also had the pleasure of talking to the ceo. he said that the spinoff will allow them to focus on their strengths. >> we have been on a journey for a number of years and accelerating over the last six years to focus as a pure play innovative medicines company. and the last six years, we have

done over a hundred billion dollars of transactions. we exited the consumer health companies and exited the largest public market in the european capital markets. and now we spin sandos that is the best way to succeed in the long run. they are focused on bringing the r&d efforts and the new medicine that we create to markets around the world. >> he is talking about the strategy quick rational about the deal. emily, great to have you on the show once again. what is your take on the business. this is not as high margin and not as special as the innovative medicines. is there still value in a

company like this for investors? >> great. thanks for having next i would say so a brand-new pharmacy business, there is animal health and consumer health. and focus on branding and innovation. from their perspective, people under agreement that this is the right thing for them to do strategically. and then santos, having the focus on europe, the u.s. generics market has been structurally challenged over the last few year with significant pricing declines for a lot of the major competitors. so the focus on europe is something that the investors do like. and the other big question withstandouts, this is one with

standouts, it is something that we cannot answer yes. wehow valuable are those biosimilar markets are going to be? it is still quite early these days. >> emily, we just brought up the relative share prices. it is up on the day. santos is down 22%. i understand a lot of this is technical. but should we read anything to the fact this is trading down 22% today? >> i don't think so. in speaking our guests and investors, we are expecting volatility in the first few

days, if not the first few weeks, following the spin. there will be a lot of holders selling because they're not interested in a generics company. who knows what the reason is. they may be saying, let's wait for the volatility to shake out. and we expect them to be volatile the next couple days and weeks. once it settles on we'll look who handed on to santos and how the trading dynamics will shape up. >> this is a company that we have spoken about the last couple of years. they have undergone a massive period of restructuring. the fact that this company is going to be a lot more focused on structured on being a company of innovation, what

does that tell you about the upside going ahead? do you think the fact they have pulled off of these for generic businesses that are not part their core are will be productive for them in the next couple of years? >> investors, they were investing innovative medicines business. standouts, it wasn't what they were aiming for in the investment. we can focus on how is the portfolio doing and the pipeline doing just because a branded business, and a generic's business has different pipelines and research and development, et cetera. from a shareholder perspective, they can focus on what are the drugs that are going off patten. so i think that it is certainly

right thing for them to do on what is a long transformation and journey. >> emily, it sounds like you're optimistic what the new strategy is for them. put your recommendation and view from a stock perspective relative one of your other major bull calls? you talked to us many times and out in front leading the charge for the obesity maker. how do they stack up? >> we have had rating on them. and this year, that has not necessarily played out just because they have had some significant and positive pipeline readouts earlier this year. they had a significant breast cancer readout. that was successful. particularly in these types of markets when things are really choppy, investors like to see catalyst and pipeline readouts.

and they had two in a row in the quarters. so the short-term dynamics has been favoring the momentum. our longer term rating is more predicated upon the newer launch mode pipeline products, not necessarily having the ability to replace the revenues that they need and a drug that will be added to the inflation reduction act. so very different dynamics in terms of growth of pipeline and patten profile versus it that launched, launched, launched. they will face a patent. but that will be longer in the next decade. i would say that we still very much like them. they have been hitting all the right notes this year.

but we're not quite there yet in terms of these having these pipeline products being able to deliver and ffset the drugs that they will be loses to patent losses. >> so great to have you on. thank you for your research. >> thank you. see you tomorrow. coming up on the show, speaker kevin mccarthy is out of a job as hard right republicans vote to out of the him. we'll discuss this first of a kind removal after the break.

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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. welcome back to street signs. european he can equity will reason come back.

u.s. ten and 30-year treasury deals rise to not seen since 2007 amid the political turmoil in d.c. santo's shares sink. but the ceo tells cnbc said that the business is in a unique position to grow. >> is it the world's largest generics company. and being an independent company we can focus how regrow the business and bring more products to patients and continue to build on the mow moan item that we've created over the last couple of years. >> usa speaker kevin mccarthy is out. he is the first house speaker to be removed from the post.

>> i took a risk for the american public. regardless, it was all for the american people. i could not look the troops in the eye and say i would not pay them. we're getting final figures coming out this morning. it is coming in a bit higher than the flash estimate. it was 48.8. but it conbeen confirmed at 48.5. that is two points better. it is still below the 50 line that is a contractry market it may tell you that downturn was not as severe as the initial numbers may have painted.

and the biggest thing is the manufacturing number. the services pmi number is at its lowest level since 2021 outside the pandemic. stain the lowest reading since 2010. there is evidence that some companies decided not to replace the stock because of strong wage pressures, the wage pressures over here in the uk. this number is 47.2. so pretty much in line with the flash of 47.1 so we're seeing the seem on the back of that.

>> u.s. house of representatives has ousted speaker kevin mccarthy. the first time in history that it dethrowned the leader in a no confidence voted. it was triggered by matt gates, saying that he no longer represents the interest of republicans after working with democrats to pass a bill that would avoid a government shutdown. there was a motion to vacate. patrick of north carolina assumed the role of speaker. that is temporary speaker. we have more from washington. this is unprecedented. and there had been rumors of a motion to remove speaker kevin mccarthy. and now this is a time when big decisions need to be made.

>> reporter: that's right. the effort to to avoid a shutdown played into this. this is less than nine months since he was elected in that job and now it threw out republican party into more chaos. there was frustration with the lawmakers when it came to remove him from the top position. they slammed the decision to work with the democrats to avoid a shutdown. speaker kevin mccarthy stood by his decision to do so. >> the florida governor matt gates is the one that led the motion to vacate. every house democrat. that is what sealed his fate. the historic move further divided republicans and now the lawmakers will decide who will

let the house majority moving forward? patrick mchenry from north carolina will be a temporarily speaker. he was on a succession list submitted by speaker kevin mccarthy. they do plan to have an election for a permanent replacement next week. >> that is interesting in light of the moves that we're seeing in the markets. investors are focused on some of the government issues and increase polarization. speaking of global markets, let's look at what is happening with the yield. it has been on the driving seat for the last 24 hours. these are the ten year treasuries. mounting at 4.82. so we're seeing a stabilization today and this morning. yesterday we did move 11 points higher. both in nominal and real

killed. you are getting closer and closer of the 1%. let's bring in luke heckmore. there is a lot going on in the yields. can i just ask you your assessment on what is going on here? why is there so big a move going on yields? let's start with the u.s. treasuries. what is going on? is it that the markets about the rate higher. what is driving the yields

higher? >> let me say, yes. it is all of those. there is also a really important underlying factor here as we get towards the big rates. ten year yields tend to go to where the base rate is. that happened every time since the 1985 records. i've seen this again and again and again. we may not actually get five and a half park. it feels straining to me. but that has the dynamic as the market is pushing towards that level and reseep ening the curve as they would do normally as we get into the cause.

where the equity markets are looking. and this is a worrying point for the investors, i think. >> is it interesting. it feels like all of the u.s. yield services are graph taking the towards the 5% level. you have the two year to five year and the two and 3 year all trading at that level. the question for investors is what happens next? and what happens to the yield curve will be determined by the feds' next move and if they go for a rate hike next year. >> yes. they are all talking about a potential cut in late 2024. the only thing that we do know is that the market will be

turned. i'm kind of penciling in next year for a rate cut towards the end of the next year. but to get there, we need to see the jobs market react. they are trying to get in place, all points and continuing step on this with the inflation as well. the turbo charge was significant. this is what i'm trying to understand. >> it got so much worse in

europe. people are talking once again about the recession. germany being the signal of europe. shouldn't the european yields be moving lower because it is worse? >> at some point. there is a bigger rate. so there is more steep ening. so steepening situation it has not been pretty at all. and we could be in a recession right now. we talk about alternative ways of tightening monetary policy and maybe increasing things.

you speed it up. it saturday feel we'll reach that faster here in europe than in the u.s. i guess that is one point of positivity. for a while, it seem to hold up. and the city ex held up, the widest level since may, wider from where we started in 2023. should investors keep an eye on the ramification on the credit? >> yes, for sure. when you get to the peak and interest rates, they lead the way in terms of forbes.

the construction and levels that we're seeing right now. it is hard for the critics to ignore. it means that the market priced everything everything wider. short-term, we could see some volatility. i don't think we should worry too much how wide it goes. >> is there part. market that you would like to get exposure to? is it too early? >> i like banks. that area looks interesting. you can look at short call where

the coupons get reset. it could be go to double digits. i think you can come up the investment quality space and look at it as well. it is a good place for solid balance sheets for companies. they are just getting cheaper and cheaper, rather than getting into worrying territory. >> certainly, if you look at it on a more recent historic time frame, the yield is are getting to attractive levels. one analyst the other day had a chart going back 5,000 years. luke, thank you very much for joining me on the and helping us make sense what is going on in the fixed income markets. it is not just income,

we've been keeping a close eye on commodities. we're talking about all the big conferences about the commodity complex as we talk about decarbonation themes where countries are focused on energy security as well. so we're getting close to $90. >> what we have seen in europe is a quite strong wave of crisis. and we saw the gas prices come down. and it is indicating the

margins coming down. but two or three bouncing back quite strongly. chemicals, is it a strength and will continue to do so for a month. >> the criminal kyle of fdx founder and former ceo sam freed trial starts today. he faces accusations that he stole billions from investors. >> reporter: it kicked off today with jury selection in lower manhattan. they went home for the day and they will reconvene tomorrow morning. the judge saying don't talk to a sole sole about this case. he called it electric quarantines for the upon jurors. once they have the group of jurors, they will move on

topping statement and witness testimony. a handful of people were dismissed today. one juror had investment and others said they know key details through podcast and media coverage. some said they don't understand cryptocurrency. the judge said that is the fine. he founded and ran what was once a $32 billion cryptocurrency. he watched in the courtroom. he has been in custody since august and noticeably shooter hair. he said that he did not know some of the financial issues about ftx and fled not guilty.

some of his top executive he's said that they knowingly committed fraud. we expect three of his former colleagues to testify, including his former girlfriend. the insiders' cooperation will be challenging for the defense throughout the six week trial. we'll discuss more after this break.

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it is 5:00 a.m. at cnbc global headquarters. here is your five at 5:00. we begin with wall street coming off its worst day since march as surging interest rates trigger a new round of market turmoil. and not just here at home, overseas, over in europe, it is following asia's lead to the downside as japanese bonds hit their highest level in a decade. we turn to washington, house kicking off the first day without a speaker after kevin mccarthy was ousted by far right members of his own party and every democrat in the house.