her name in my car and cry. [theme music] >> good morning. >> and warm. >> welcome to street signs. >> i'm julianna tatelbaum, and these are your headlines on this friday morning. germany's election. >> campaign enters its final. >> sprint with transatlantic ties dominating discussions. >> frontrunner friedrich. >> says europe's future hangs in the balance. >> america. >> this is not the. >> america i used to. >> know. >> 40 years ago. >> something is changing at. >> the. >> moment, and we may only. >> really understand how profound these changes will be in a few years time. >> we'll hear from bundestag

member sevim dagdelen next. >> the us reportedly resists labeling. >> russia an aggressor. >> in a key communique. following a testy week between president. >> trump and. >> ukrainian leader. >> vladimir zelensky. >> former ukrainian foreign minister dmytro. >> kuleba tells cnbc. >> trump only considers one thing. >> i believe he. >> doesn't care. >> i believe. >> he does not care. about any single country in the world. >> except the. united states. >> and it's. >> a mixed bag. >> for uk chancellor. >> rachel reeves, as uk retail sales. >> come in. >> way higher than. >> expected in january. but debt levels stick at their highest since the days of the beatles and leonardo tops. full year expectations to cap a. >> blockbuster week for defense stocks. with the sector surging on expectations. for higher. >> european spending levels. >> leonardo ceo. roberto galani. >> tells cnbc governments need to do more. >> we have to. >> make europe stronger. >> and especially.

>> a more reliable partner for the nato alliance. >> on one hand, but on the other hand, we have to be a continent which is. >> ready to defend itself. >> i mean. our east border is. >> not. >> safe and we have to. >> this has to be clear. >> to everybody. >> very good. morning to you. >> let's kick off today's. >> program with some flash pmis. >> these are for. >> the eurozone. >> now just crossing the wires now. and they come. >> at a time where growth has been very under pressure in the eurozone. >> so as for the composite. >> for february that's come in at 50.2. that is the exact level that we saw in january. so no change at the composite level in terms. >> of the breakdown. >> between services and manufacturing. >> the manufacturing. >> sector, 47.3 versus 46.6 in january. so the downturn has eased somewhat in manufacturing, but we're still below that critical 50 mark. and then in. >> terms of. >> services, which many would say is going to be the key engine of growth moving. >> forward. >> or it should be the services.

>> pmi has. >> come in at 50.7. that is down from 51.3 in january. so we're still in expansion there at the services level. the services sector. but the pace of expansion has slowed. so in terms of the detail here, economic output in the eurozone is barely moving. >> at all. >> this somewhat milder recession in. >> the manufacturing sector is only. >> just being overcompensated for by the barely noticeable growth in. >> the. >> services sector. >> that comes. >> from the survey providers pretty damning comments on what. are still numbers that are above the 50 mark. these figures, therefore. >> do not yet. >> point to a recovery in the eurozone. that is the overall message from these pmis at the eurozone level. the flash figures for the month of february. now in terms of equity markets this. >> morning. >> european stocks opened higher. and we're holding on to those early gains. the main benchmark is up about 2/10 of a percent. we are reacting to the pmis. of course we did get the germany and french, german and

french numbers a little bit earlier this morning. would also flag that. this follows a pullback yesterday. so it's a bit of a rebound today. in today's trade the stoxx 600 lost 2/10 of a percent yesterday. there's a look for you at the split across the regions. the french and italian markets are trading higher. but the ftse 100 is on the back foot from a sector perspective. this morning we've got chemicals at the top of the board, up 1.7%. it's liquid driving that basket of stocks higher after the. industrial gases giant delivered an upbeat outlook. food and bev. >> also doing. >> well up about 9/10 of a percent. construction and materials as well as banks. now interestingly in the us we saw a pullback in the banks. banks were actually the biggest decliners within the s&p 500 yesterday. so a bit of a different trade in europe today. on the downside the laggards in the european. market you've got oil and gas down 4/10 of a percent. media down by about the same. retail and utilities now would also flag that. >> the trade. >> we're seeing in europe is no doubt being impacted somewhat by the trade we saw in asia. overnight we saw a massive rally

in the hong kong market, with the hang seng gaining gaining nearly 4%. alibaba shares hitting the highest level that they have been at in three years, the company pledging to invest more into ai. that was a key story overnight. just wanted to flag that for you. now back in europe, we have got our eyes pinned on germany. the german election campaign is now in its final sprint ahead of sunday's vote. the polls show the conservative cdu, csu ahead in the polls on just under 30%, with leader friedrich merz tipped to become the country's next chancellor. but the question of how a ruling coalition will take shape remains wide open. the social democrats or the. >> greens. >> or both, are likely to make up the next coalition with the cdu. csu, the free democrats, led by the former finance minister christian lindner, would also be a potential partner, but it remains unclear if the party will meet the 5% threshold needed to enter the bundestag. friedrich merz has ruled out a coalition deal with

the far right alternative for germany. the future of europe and america's transatlantic ties has become one of the. key points in the final stages of campaigning at an event on thursday evening. friedrich merz warned nato faces the possibility of losing the us as a member. >> state distance. >> since yesterday. >> at the latest, with. >> donald. >> trump's comments on zelenskyy in ukraine, it's become clear what's happening here. the rift in the atlantic is getting deeper, and the question is whether or not we can still celebrate 70 years of the federal republic of germany's nato membership with the americans. that question is not answered. >> we've heard from top german executives this earnings season about what they want to see from sunday's vote. take a listen. >> you have to change something. >> you have to get this. >> german economy. >> back into a growth momentum. >> we cannot live. >> with. >> a. >> contraction or. >> very, very low growth. actually, we should grow by. >> 2% with our economy. >> something needs. >> to change. so we.

>> expect and hope that there will be very. >> soon now. >> a new. >> stable government. as stable as it will be, depending on the outcome of the. >> elections. >> and what we are requesting very. >> clearly is. >> we need a government who has an impact on on economy. >> who speaks. >> in favor of free trade, of international trade and who sets the right regulatory framework. >> what is necessary is. >> that a. >> we have a. >> clear vote, that. >> we have a fast formation of the. >> new. >> government, and that we then have. >> a government. >> who is willing. >> to really execute. >> reforms and. >> who hopefully. >> also has the necessary. majority for that. >> we've also been speaking to business groups and associations throughout the morning about what they want to see out of the next government. >> what we need is a sound. government which is doing their job, which also have a long. >> term vision. >> of really bringing the company forward. and if you look at the big topics, for example,

energy transition or also ai or digital transition, you really have to have a sound understanding of technology. >> what we need right now is specific deregulation for. >> small and medium. >> enterprises. >> as those often. >> cannot handle the. bureaucracy that has been piling up in the last couple of years. >> bureaucratic regulation. is the. >> first topic that comes to mind. 40% of. our employees. >> have of our. >> companies have said so that this is the number. >> one topic, even. >> ahead of cutting taxes. regulation is strangling us. so overall, germany needs to become more competitive. >> anita joins us now with more as we head toward sunday's vote, and that we have seen the focus from the various parties shift over the last several weeks from migration to the domestic economy and now to transatlantic

relations with the between germany and the united states. for voters, as we head into sunday's election, what matters most? what's going to ultimately determine the result of these elections? >> i think the society. >> is pretty. >> much divided. >> onto whether it's migration. >> defense or the economy. so parts. >> of. the society. >> or the electorate is. >> concentrating on. >> what friedrich is doing. >> when it comes to. >> migration, and some are. >> actually taking. >> to the streets to actually protest. >> against that shift towards the right, as they call it. so. >> so for them, friedrich merz. >> the cdu. >> is unavoidable because of his migration bill. for others, it's very crucial that we are increasing defense. >> spending in order to. be independent from. >> the states, especially in the light of what has. happened ever since jd vance appeared at the munich. security conference. >> and of. >> course. now with. >> trump being. friends with putin, it seems, and. taking

over. his narrative. >> of the ukraine war, i. guess that is that is coming. >> in first. >> for some to actually show that we can defend ourselves. and of. >> course. >> his party. >> the cdu. >> is standing. >> in favor of increasing defense spending. >> but the spd. >> and the greens do that. >> as well. >> and then, of course, comes the third big topic. >> that's the. >> economy, because obviously we have a rise in unemployment. it's still not as. >> bad as some 20. >> years ago when schroeder came up with his agenda. >> 2010, which was kind of. >> deregulating the. >> labor market especially, and creating a lot. >> of low paid jobs, but still bringing back a lot of people into. >> the workforce. >> so i. >> guess this. >> is the mix we are looking at. and the recent poll is actually suggesting, juliana, that 20% of voters haven't made their mind

up. and what we are seeing in recent polls that there is a shift towards the left, again, with the rise of the left party, actually to 8%, where they previously haven't been even hitting the 5% threshold. so that is the mix we are currently looking at. and at 1800 on sunday evening we have the first exit polls, and then we at least have an idea of how a future coalition might look like. >> and that's a fantastic breakdown. do stay with us for this next interview. we're going to be speaking to one of the key members of one of the parties on the left that is dagdelen, a member of the bundestag. bfw, thank you so much for being with us in the lead up to this historic event on sunday. first, for our viewers, your new party, you characterize it as a left wing conservative party. how would you how do you approach policy differently from the traditional left? >> hi, juliana.

>> bmw alliance is in for economic reason, for social justice, but also. >> for limiting. >> and controlling the migration, because. >> we do believe that the irregular. >> the unlawful migration in the amount of every year, more than 250,000 is not affordable for germany and not for the economy and not for the society. and this is the biggest difference to. >> the. >> traditional left parties. so in this regard, we do we are a little bit conservative and also in. social stuff like society and issues of the. >> society. >> like the transsexual lgbtq, we are against. cancel culture, we are against the wokeness of the left. in in germany and in general. and, and. >> we do. >> believe that dialog and cooperation and the policy of

balances in the foreign policy is the best to. keep the security and the peace on our soil and on the european continent. and this is a difference to our former left party, where i was a member, for example, they just left the traditional foreign policy positions they are not in. they are, for example, not against the weapon deliveries to ukraine. we as. >> w we. >> are opposing the weapon. >> deliveries to ukraine. >> and we do oppose the weapon deliveries to israel because. >> we say the. >> the principle of the german foreign policy for many years and decades was always not sending weapons. to war zones or to crisis zones. >> let me jump in here, because i think the whole issue about sending weapons and. >> also. >> increasing defense spending

makes you probably not eligible to form a coalition into the into the future government. so perhaps you can elaborate a little bit on that. are you also against increasing defense spending so that european europe can actually be. >> also be. >> independent of the united states? >> well, we do believe that we need, i mean, the nato as an instrument, as. >> a tool. >> of the united states geostrategic. >> and. >> geopolitical foreign policy is overstretching. >> itself, which is neither a values nor. >> a defense alliance is now becoming apparent. >> so nato will stay. >> so it's absurd to think. >> that trump is. >> going to pull out us from the nato. nato is us. so nato will. >> stay, but. >> it is pushing itself into the most serious crisis in history. and in history. and we believe. >> that we need. >> a european defense alliance as an alternative. and the us

stands for a policy of balancing interests, détente, like what it was in the past, and disarmament. we do believe that the german economy is undergoing a heavy crisis, and the situation is characterized by economic stagnation, like you expect also mentioned. so among industrialized countries, germany is at the bottom of the table when it comes to economic growth. mass layoffs are now also on the cards in many companies, and not only in the car industry. and the reason for that is the are the sanctions, the self-destructive economic war against russia. germany cannot shoulder the. impact of this, of this sanctions or of a rearmament on a massive scale in the context of nato and of military support for ukraine, which has caused. ■k737 billion alone over the past two years

for military aid to ukraine and the economic sanctions against russia, with the official goal of the europeans to ruin russia is ruining the german industry. it costs the german economy the sanctions cost till now ■k7200 billion. that means we are doing a self-destructive policy. and that's our. let me ask you. >> yes, please. >> yeah. let me let me ask you especially about your position related to russia, because you are portrayed as being very russia friendly. so what you say that we again need a cheap russian gas and we should just forget about what putin has done to the ukraine and of as well that he is a potential threat to the rest of europe just for the sake of getting that cheap gas. no. >> we don't say that. we have to forget about it. the violation of international law, we do

condemn this. but the problem is, you know, we do have we it's an absurd situation. we do not import cheap pipeline gas from russia, for the economy and for the population, and. have really skyrocketing high prices on energy and food and so on. but we do import still lng, fracking gas from russia, 4 or 5 times more expensive than the pipeline gas through netherlands, belgium, india and sometimes even azerbaijan. so what's the point to say? we do not want to cheap pipeline gas, but we do want the very expensive fracking gas from russia through other states. and that's the reason why we really welcome the fact that peace is finally being. negotiated between the us and russia, because we have

demanding this for many years and have had to endure being insulted as putin or kremlin supporters. that's just insane. we wanted to stop the killings, you know, and what could have happened? we could have rescued so many lives if we could have achieved the peace negotiations in spring 2022, which was targeted by the united states, and boris johnson, the former british prime minister. and we are currently very concerned that the europeans want to continue the proxy war in ukraine without the us and against the us will, and we consider this to be a dangerous overestimation of their own capabilities. europeans are in danger of pursuing a completely unrealistic foreign policy. let me now taking sides. >> let me just jump. in here. >> the major powers. >> let me just jump in here on this on the topic of a peace agreement, because there is this

question of is it a peace agreement worthwhile at any cost? so to your mind, what are the minimum conditions for what an acceptable peace agreement looks like? and at the moment you just mentioned yourself, it's an agreement that is being negotiated between the us and russia. ukraine doesn't even have a seat at the table. >> yeah. the problem is or or even europe, the european commission or the, the member states. and the reason for that is that three years long, the strategy was a militarily and economically to wean russia, and they all rejected any diplomatic initiatives. and that's the reason why none of us, the europeans and ukraine, i mean, president zelensky, he had decreed like a bill, like a law in ukraine, which is forbidding and persecuting any initiatives regarding diplomacy and negotiations. that's the reason

why us and russia is now on the table negotiating and excluding all the other ones. so that is the you know, we are victims of our subservient politics into regarding us. that's the problem we want as good relations with the united states. and, and we are very happy. if the killings could be stopped in ukraine. but all i see is that the europeans are not happy with peace negotiations. they want to continue the war and they want to continue the killings. and i think this is not a responsible, reasonable politics. >> the europeans would agree that they want to continue the killing, but we will leave the conversation there. sevim dagdelen, a member of the bundestag. bfw and anita, thank you for breaking us down. breaking down for us. all of everything we need to know in the lead up to sunday's election now. join us monday morning for special coverage of that vote.

anita and carolyn will be on the ground in germany, joined by lawmakers and business leaders. that coverage starts at 6:00 gmt. coming up on the show, it's been a rough week for us ukraine relations. we'll get reaction from former foreign minister dmytro kuleba. stay with us. >> some people like doing things the hard way, like doing their finances with a spreadsheet instead of using quicken. >> quicken pulls. >> all your financial info together in i got this $1,000 camera for only $41 on dealdash. dealdash.com, online auctions since 2009. this playstation 5 sold for only 50 cents. this ipad pro sold for less than $34. and this nintendo switch, sold for less than $20. i got this kitchenaid stand mixer for only $56. i got this bbq smoker for 26 bucks. and

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800 696 6500. >> to get invested, join the club. >> as a woman. i wanted. >> to experience. financial independence and become financially. independent in my retirement. >> join the club, new member savings and soon go to cnbc.com. join now. terms and restrictions apply. >> welcome back. >> to street signs. the us is reportedly objecting to the phrase russian aggression in a statement by the g7 on the third anniversary of moscow's full invasion of ukraine. that is according to the financial times, citing western officials. the reported opposition follows trump's suggesting ukraine was responsible for the war, but the us president calling for russia to be invited back into the group formerly known as the g8. this week has seen relations

between washington and kyiv turn frosty, with ukraine not invited to talks between top us and russian officials in riyadh on tuesday to discuss ending the war, ukrainian president volodymyr zelenskyy said his country would not accept any outcome of talks held behind ukraine's back, as ukraine called to be involved in negotiations to end the war, president trump suggested they were responsible for starting it. >> today i heard, oh, well, we weren't invited. well, you've been there for three years. you should have ended it three years. you should have never started it. you could have made a deal. i could have made a deal for. >> ukraine. that would have. >> given them almost all of the land, everything, almost all of the land. and no people would have been killed and no city would have been demolished, and not one dome would have been knocked down. but they chose not to do it that way. >> as russia's full scale invasion approaches the three year mark, steve sat down with former ukrainian foreign minister dmytro kuleba and asked him what he thinks is going on in the us mindset.

>> i don't. >> think president trump is sensitive. >> to accusations. of spreading russian disinformation. i believe he is pretty. firm in what he believes. >> in. >> and i don't think it's going to work. >> you know. >> just to tell him that you are wrong. everything we know about him is that if he he never recognizes his mistakes. so and it will be an issue. the question is, he looked around. he thought, you know, europe is not a partner to make a deal, ukraine will have to impose what i tell them to do. so all i have to the only side that i really have to make a deal with is russia. and he's wrong in this assessment, because whatever kind of deal he may strike with putin, there will be two issues. one, you cannot enforce a deal without ukraine and europe. and second, putin does not trust trump for a very simple reason,

because he does not know whether trump's promises will hold after he is gone and he does not need a temporary solution. he knows that the best guarantee for him that ukraine will not become a member of nato is the nonexistence of ukraine. he is in his in his conviction. the west always betrayed him. and unfortunately, there are some pundits in the west who kind of reinforce this message and tell the stories of how bad the west was and towards russia and how the west brought all of this on our heads, which is not true, but that's a different story. so there are some very, very big hurdles ahead of trump. >> do you think donald trump cares. what happens to ukraine? he just wants a deal. >> he just wants. >> to. >> stop financing. the war. and obviously he's talked about a huge number, which has been disputed. but do you think he actually cares what happens to ukraine? do you think he cares about the ramifications for europe and for the world?

>> i don't think he cares. okay. let me put it even simpler. i believe he doesn't care. i believe he does not care about any single country in the world except the united states. the only what what really makes him feel kind of concerned is that ukraine does not turn into his afghanistan, that ukraine does not, that his plan does not collapses in a way that will expose his weakness to the whole world that he failed to achieve, because he he is he has zero tolerance to failures. we know him and this is the issue. so it's not about, you know, telling him how good ukraine is and how it deserves his support doesn't make sense because that's not how he thinks. >> really fascinating to hear from the former foreign minister of ukraine. you can catch steve's full interview with dmytro kuleba on youtube and spotify this coming monday. would highly encourage you to

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>> find out if you're already a victim at home. >> title law.com. >> the cnbc change makers returns. >> 50 women innovating and driving change across industries. >> find out who has made this year's list. meet the new icons, the cnbc changemakers revealed monday on squawk box. >> welcome back to street signs. i'm julianna tatelbaum, and these are your headlines this morning. germany's election campaign enters its final sprint with transatlantic ties dominating discussions. frontrunner friedrich says europe's future. >> hangs in the balance. >> america. >> this is not the america. >> i used. >> to know 40 years ago. >> something is. >> changing at the. >> moment. >> and we. >> may only. >> really understand how profound these changes will be in a few years time. >> the us reportedly resists labeling russia an aggressor in a key communique following a testy week between president

trump. >> and ukrainian. >> leader vladimir zelensky, former ukrainian foreign minister dmytro kuleba tells cnbc, trump only considers one thing. >> i believe. >> he doesn't care. i believe he does not care about any single country in the world except the united states. >> and it's a mixed bag for uk chancellor rachel reeves, as uk retail sales come in much higher than expected in january. but debt levels stick at their highest level since the days of the beatles, and leonardo tops full year expectations to cap a blockbuster week for defense stocks. with the sector surging on expectations for higher european spending. leonardo ceo roberto milani tells cnbc governments need to do more. >> we have. >> to make europe stronger. >> and especially a more. >> reliable partner for the nato alliance on. >> one hand, but on the. >> other hand, we. >> have. >> to. be a continent. >> which is ready to defend itself. i mean, our border is not safe. >> we have to. >> this has to. >> be clear to everybody.

>> we have got uk pmi just crossing the wire. now these are the figures for the month of february. so some new information here. the composite pmi has come in at 50.5. that is a touch lighter than the 50.6 in january. interesting developments between manufacturing and services. the services sector has accelerated the expansion 51.1, up from 50.8 in january. but on the flip side, the contraction in manufacturing has worsened. we're at 46.4 versus 48.3 in january. in terms of the detail, the pmi survey shows that uk firms have cut staff before the tax hike due to come in from rachel reeves. a little bit more detail on the numbers here. 1 in 3 companies reporting lower staffing levels directly linked to linked the reduction to policies announced in last october's budget. that's according to the survey

provider. there was a sharp fall in employment, which sank to 43.5 from 45.3, its lowest since november 2020 or since 2007. 2008 financial crisis excluding the covid pandemic period, which obviously was exceptional. so a lot to unpack here. thankfully, i do have a guest who's going to help us do it in just a moment, but let me bring you up to speed with the other uk data that we had come through this morning. uk consumer confidence was lower in february than this time last year when the country was coming out of recession. that is according to gfk's consumer confidence index. the figure did rise versus january, though, with gfk flagging improvements in how consumers see their personal finances for the year ahead. uk retail sales jumped more than expected in january, posting the biggest rise since last may. sales rose 1.7% versus december, the first monthly increase since august. it comes despite major uk retailers flagging a tougher year ahead as taxes on employers rise. meanwhile, new data shows the uk

public sector was in surplus by more than 15 billion pounds in january. that's 0.8 billion more in surplus than this time last year and the highest january surplus on record. but that figure was lower than expected, and likely skewed by the fact that tax receipts are usually higher in january than in other months. public sector net debt came in at 95.3% of gdp, sticking at levels last seen in the early 1960s. hence our beatles reference in the headline if you caught that. as for gilt markets, here's a picture on your screen of where we stand right now. the ten year is trading slightly lower on the day with the yield of 4.6%. we're a little bit higher across the other maturities. now let's get to jeffrey you, emea macro strategist at bny mellon, to digest help us digest this raft of uk data. i don't know where to start. we've got so many interesting data this morning. so i'm going to leave that to you. what was most interesting from the updates we got this morning. >> so i think. >> as. we head into. >> the march. you know, spring

budget. >> statement, it really is about, you know, borrowing, you know, those figures and you know, whether that leads to. >> expectations that some degree. >> of fiscal retrenchment is going to be needed. i think. the forecast for the surplus, as always in in january, you do get tax receipts. and with fiscal drag in there expected to be higher as well. >> but i. >> think there are about 5 billion short. and i think the fiscal year, year to date at the current run rate versus the obr's. forecast for about 1,314 billion pounds. short as well. so hence. >> you know, how much. >> fiscal headroom is there going to be. >> and what action. >> needs to be taken. so some very tough choices up ahead. >> well, in terms of those tough choices i mean rachel reeves it's she's in a difficult spot because she, you know, the political backlash that she would face if she raises taxes on the working people, something she pledged not to do has got to be huge. but on the other hand, labor has also pledged to increase spending and provide more public sector services. so, you know, she's really between a rock and a hard place. certainly is. and i. think that's why the.

>> focus, at least the messaging right. >> now. >> is on growth, because the growth is going to surprise the upside. then the taxation or revenue sort of take care of themselves. but, you know, can we actually rely on that in the current environment. so i think. >> the. >> market's going to expect a bit more of a skew towards. fiscal retrenchment. and i think if we look. >> at some of the cases. >> especially in g10, it's not comparable. >> but new. >> zealand for example, you know last year very strong fiscal retrenchment. and that's actually one of the factors cited by the rbnz. they've been able to cut much more aggressively 50 basis points again recently. whereas bank of england we're not sure where they're headed up ahead. >> so if you. >> actually do have. >> a commitment towards more fiscal consolidation, which the market will reward through lower borrowing costs and also interest rates can come down, i think that can help with the borrowing side a bit. but again, it is going to be a balancing act. >> and for andrew bailey, i mean the mandate from the bank of england is not about growth. so what can we really expect from the bank of england in terms of its role here in supporting the economy? >> i think he's going to be looking at the broader macro

data. for example. >> i mentioned. >> in some of the surveys that hiring intention is certainly coming down. and we're seeing. >> that in. >> terms of vacancies. but at the same time, wages aren't really coming down. but i think what. >> he's been very firm in his. >> communication and saying, look, the direction. >> of travel for. >> the uk economy is extremely clear. >> we are heading towards. >> a. weaker growth. >> and. >> that should. >> drag down prices to some extent and should drag down wage growth to some extent. so i think he's anchoring expectations there. but if data continues to challenge that on, you know, there are issues with the underlying wage surveys and the like, but if that's going to be challenged, then it's more policy volatility up ahead. but i think he can only just maintain the message that the direction of travel for policy is lower. and we're looking at least another 25 basis points per quarter if not front load some of that as. >> well when it comes to the labor market and sticky wages that we've seen, to what extent is that structural and due to structural challenges with the labor market because of, you know, gaps in key markets. >> so i think for the uk, it's even more acute compared to much of the g7. now, that's a sort of

a post pandemic hangover. but we know that working force, for example, the people participating labor force that has stagnated, even shrunk compared to other countries in the g10. so how do you actually get more people to participate. to see jobs? >> and also. >> it's a productivity issue, even if you look at the pmis out of germany, for example, you know they're contracting. but underlying survey still companies will say that some of the biggest challenges or the biggest inputs into their costs still from the labor side. so this just and heading into the german elections, for example, how do we get competitiveness up? how do we get productivity up, especially compared to the us, for example? that really is the challenge for european policymakers up ahead. >> well. >> let's shift then to germany with the election coming up, how bullish are you on the german economy post election. >> so our view for this year, if we look at asset prices, right, markets been so under allocated into europe and also asia, china i might add such that the rally we're seeing right now, one is a correction of that under allocation, especially relative to us exceptionalism. but what

they want to see up ahead, irrespective of the result is investment right. investment. implement the draghi report. implement the letter report. acknowledge that europe really needs to rediscover that competitive edge and also rebalance its own economy. i think that's the same for all of the exporting economies around the world. look less towards how much more can we sell to the us or towards the deficit, economies and more. how can we actually incorporate domestic demand so that investment will drive potential growth, offset some of the demographic drags, get productivity up. so i hope that is the message that and i do see that message, especially with regards to the discussions over the fiscal and the constitutional debt break, for example, they are getting there, but implementation accelerated implementation or accelerated implementation that will decide, you know, how markets react afterwards. >> and how much of that is already baked into markets. i mean, as you as you said, we have seen this massive outperformance of europe, especially germany. so it feels like investors are already pricing in a lot of the upside that you just described.

>> they are pricing some of that. but if i look at our underlying custodial flow data, for example, you know, aggregate flows into the eurozone, we are seeing concentration in certain sectors such as defense, for example. but if you look at autos, for example, and also luxury goods, which is more dependent on so chinese demand or just broader external demand, there's a bit of dispersion there. so i would actually like to see greater breadth in terms of sectoral allocation, in terms of the flows coming in and also on a country basis as well. if we look at germany on an aggregate basis, actually could be a bit stronger. but yes, you know, that holdings gap is being closed. but again, how much of it is much more overweight us exceptionalism compared to where i need to be? so that is closing. but again, let's look at the narrative in asia right now that really is surging ahead. so you know what's going to be like the flick of a trigger to really get that trend. growth rerated in germany as well across the european union. that's going to be a challenge. >> it has been extraordinary to see the change in investor sentiment in asia. we'll have to talk about that more next time. jeffrey, thanks for coming in. jeffrey, you a macro strategist

at bny mellon. let's get a check on european markets. you've got the stoxx 600 trading higher by about 3/10 of a percent this morning. after the modest pullback that we saw yesterday. pmis factoring in here. also investors keeping a close eye on the geopolitics. with tensions rising between the ukraine and the us and of course europe as well. and all of this as we head into germany's election on sunday. so a lot to factor in to trade this morning. as for the breakdown across regions, here's the split xetra dax up 9/10 of a percent ftse 100, up just modestly this morning as investors digest all the data that's come through, from retail sales to borrowing data. excuse me, deficit data at pmis a lot to digest there. the cac40 in france up 3/10 of a percent and similar gains for the italian market. as for u.s. futures. the main story yesterday was walmart weaker than expected growth forecast from walmart really weighed on sentiment. we saw a pullback across the three majors. we're looking at a little bit of a rebound this

morning but nothing major. so still some trepidation stateside. the dow looking to add back about 27 points at this stage. the nasdaq about 25 points in the s&p looking at a pretty much flat open back here in europe. standard chartered posted fourth quarter net profit of $493 million below forecast, with operating expenses and restructuring costs coming in higher than analysts had expected. the asian focused lender announced a $1.5 billion buyback and said it plans to increase shareholder distributions over time, ceo bill winters told cnbc earlier that he is very optimistic about china. >> the consumer has been. >> very reluctant. >> to spend and invest in businesses, have. been reluctant. >> to invest both. >> domestic and international. you're seeing the charm offensive. >> you're seeing president meeting. with with the private. >> sector. >> serious private. >> sector reforms, serious. step up. >> in in. >> stabilization measures. >> it has been a significant refinancing of the of the troublesome. local debts in. provincial and.

>> municipal level. >> so these are all part. >> of the program of getting. >> china going again. >> let's remember china. >> grew 5% last year is probably going to go 5% this year. this is not a calamity at all. >> china is still. >> the largest. >> exporter in the world. >> and exports are growing. >> so overall, i'm. >> very optimistic about china. i might add. >> hong kong is part of china and. >> one of our. >> key home markets. they both. >> been through. >> a. tough time. it feels like they're coming out of. >> it now. >> alibaba shares are surging to their highest level in more than three years, after the chinese tech giant announced it will invest aggressively into ai in the years ahead. the company reported $10 billion in capex last year, as it continued to buy processors and infrastructure to train large language models. alibaba also beat analyst expectations for its fourth quarter revenue numbers, posting 8% growth, the fastest rate in over a year. and that stock up, you can see nearly 15%. we've seen a massive rally in the hang seng as a result of these numbers coming through for alibaba. and as we were just discussing with jeffrey, it's been extraordinary

to see the change in sentiment toward asian tech stocks now in the auto space. nissan shares climbed today amid reports that a japanese business group is looking to convince tesla to invest in the carmaker, according to the financial times. the group, which includes the former japanese prime minister yoshihide suga, is hoping tesla will become a strategic investor and could also acquire nissan's plants in the united states. quite a story. the carmaker has struggled to turn around its fortunes, walking away from merger discussions with honda earlier this month. and you can see there nissan shares are were up nearly 10% in overnight trade. the italian competition authority has opened a probe into byd, stellantis at tesla and volkswagen over allegations of misleading consumer information on their ev offerings in the country. the agcm alleges that the company's websites have failed to provide consumers with clear and complete information on battery capacities and have also displayed, quote, contradictory

information regarding their ev driving range. coming up on the show, we'll break down results from defense firm leonardo and take a look at the weekly gains of the wider sector. 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. everything from our kitchen to our bathroom. all our laundry. you just pick a date, pick a

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>> get invested. join the club. >> the value you're going to. >> get from. >> making better investments more than outweighs whatever. >> the cost. >> of the membership is. >> join the club, new member savings and soon go to cnbc.com. now terms and restrictions apply. >> welcome back. now as i mentioned before the break, the main story of the day yesterday stateside was walmart shares posted their biggest one day drop since 2023 after guiding for slower profit growth this fiscal year. speaking to cnbc, cfo john david rainey said that consumer patterns are, quote, steady, but the geopolitical landscape is far from certain. we have a bumper week of earnings next week. home depot reports on tuesday. while investors are closely eyeing nvidia results on wednesday. salesforce, ab inbev and

stellantis will also report on wednesday, and it's a tech heavy day on thursday, with results from hp and dell. italian defense firm leonardo has topped expectations for full year orders, revenue and cash flow. the company reported a 12% increase in orders with the defense electronics and helicopter divisions outperforming. leonardo ceo roberto villani told cnbc that europe must be a continent that is ready and able to defend itself. >> we have to ask. ourselves what will be the future. >> in europe, given the geopolitical situation. >> which is rather. >> unclear at the moment. i think. all the defense companies, europe will have. >> to create alliances. >> and we have to make europe stronger and especially more reliable partner for the nato alliance on one hand. but on the other hand, we have to be a continent which is ready to defend itself. i mean. our east border is. not safe, and we have to this has to be clear to everybody. >> speaking to our us colleagues, the ceo of defense firm lockheed martin said lessons should be learned from

the war in ukraine. >> i hope the conflict ends fairly and quickly, but the lessons from it, i think, are, for better or worse, are going to live on. we need to get more effective at national defense. that's the real lesson, i think, of the ukraine war. we just weren't ready four years ago, 3 or 4 years ago, to really meet a challenge like this. and that's the big learning. >> european defense stocks have seen sharp weekly gains with the stocks. aerospace and defense sector posting its biggest one day jump since the start of russia's full scale invasion of ukraine, as traders bet on further european defense spending. you can see on your screen there some of the big movers of the week. tesla is up more than 10%. bae systems up 4%. mattel up about 10%. so it really has been an extraordinary run for these defense stocks. let's welcome our next guest, joseph brusuelas, principal and chief economist from rsm to talk through the sector. joseph, before we get into various asset price moves, i'm keen to hear your assumptions around defense

spend in europe. we talk so much about more defense spending, but let's put a number on it. what are you assuming in terms of how much the european economies could start spending on defense? >> well, the number that's being. >> thrown around on global. >> wall street is something. >> along. >> the lines of 3 trillion over the next ten years. that's a very. >> large number. >> now the question is, will that be sufficient to fund the needs of europe? and will that be enough to quell the transatlantic tiff that's currently driving all of this conversation? >> the other question is how they fund it. you know, obviously, is that going to be enough? but also, how do they fund it? how do you see it playing out from a european perspective? >> you know, what's interesting. >> is lenin once. >> said that sometimes for decades nothing happens. and then sometimes in weeks, decades happened. >> and i think we're in one of those situations here where it's. important to remember that the european union. >> was built via crisis.

>> and we. >> we truly, i think, do have, do have a crisis on our hands and something. >> that's been talked about very quietly for. >> a long time is likely to come to the fore here, if indeed europe is going to fund its true defense needs. and that's joint. >> european bond issuance. in other words, the greater than. $20 trillion. >> economy where the european. >> union is going to move to. >> put together a. >> continental wide bond market. >> this is something that's simply a no brainer. >> it would be. >> incredibly well received, and i think it's absolutely going to be. necessary to do the heavy lifting now that's going to. >> be. >> required to deal with the risk to the east. >> joseph, europe is known for many things, but moving quickly on major reforms, major policies like joint issuance is not one of them. what's the time frame? realistically, we could expect from the eu if they do get agreement. and that's a big if around joint debt issuance.

>> well, remember. >> we did have modest. >> joint debt. >> in the pandemic. >> so this isn't exactly. >> something that it's. >> not well understood or it's not known how to do. all right let's let's create a scenario here. let's see that european defense spending needs to increase over the next five years to 3%. that's above the 2% target that 23 the 32 members are already hitting. well, that would require about a ■k7600 billion debt issuance. okay. i think that that's something that could be put together. >> quite quickly. >> you know, it's interesting that you say that referencing. it's interesting that you say that referencing the european response to covid, because we had the former foreign minister for the ukraine on cnbc yesterday, and he made exactly that point, that when europe wants to move quickly, it can. and that's what they did during covid. but that's not what they're doing right now on defense, because it's hard to sell that to voters. putting the politics aside, do you see the

europeans buying gas once again from russia? if we do see an agreement on on the peace front? >> no, i don't. >> and, you know, one of the. >> really incredible, i think, interesting opportunities here is that once you're. >> once you're moves. >> to begin. >> putting. together a. >> realistic defense budget. >> that's funded. >> by joint. >> issuance of debt. >> what we're going to be talking about is not. >> imports from russia, but imports of natural gas from the us and elsewhere. >> this is going. to touch all areas. >> of the european economy. >> and, you. >> know. sometimes it's better to be opportunistic. >> europe's going through deindustrialization. >> we see what's. >> going on. >> in germany, the overcapacity in the auto industry. and something like this would be well timed as a substitute to maintain stable. employment across the european economic heartland. now it's, i think, premature to link this to. >> what's going to go. >> on on february 23rd. in in

germany. >> however. >> this is. >> something that would. >> truly put a floor under the european economy. >> and it makes sense given the. >> transatlantic tiff and the risks that are. >> clearly proliferating. >> for the european union. >> so. >> you know, why do you think we've only seen or we've primarily seen a rally in defense stocks if there is, you know, potential wider implications here as a way for europe to, you know, reclaim its foothold as a as a powerhouse on the industry front. what sectors do you think do stand to benefit if we do see things materialize as you just described? >> so obviously you've pointed out va and rheinmetall. the pure defense sector. but to see this spill over. into other areas, we're going to see some money on the table and some movement. once we see that i'm thinking energy shipbuilding are going to be two of the of the big sectors

that are going to benefit from a pretty big defense. >> buildup. >> not to mention. domestic tech. it won't just. >> be us. >> tech, it'll be french tech. so you're going. >> to see this spillover across the european industrial landscape. if the european authorities can get it together once we're past the. >> election. >> then they can begin to move forward. >> you know. >> french president. emmanuel macron is going to meet with president trump here next week. i think that may be the start of a broader and perhaps a little bit. longer negotiation than anybody wants to see. but nevertheless, i think we're beginning to get the move to the point where beginning to move towards the point where the european union steps up on its. >> long overlooked. >> defense spending. we really do need to see. >> all 32. nato members. >> meet the 2% goal. and it's very. >> important that the large economies. >> actually accelerate well through that to three, 3.5%. >> joseph, really interesting to flesh out how this could

actually result in a real bull case for europe. what is, you know, started as a serious crisis. joseph we'll have to leave it there. we're up against the clock. joseph brusuelas, principal and chief economist from rsm. a quick look at european markets. we are trading lower on the dax by about nine basis points or so, but still higher overall for the european market. as for the us. yesterday was a down day after those disappointing walmart figures, adding to nerves around the health of the us consumer. today we are looking at a very modest bounce. i will leave it to my us colleagues to take you through the lead up to the wall street open. that is it for me. i'm julianna tatelbaum. worldwide exchange is up next. >> nine tablets. >> of 100mg. >> generic viagra. for $7. >> honestly, i thought it was a scam. >> but friday. >> plans made. >> the process. >> so simple.

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