Transcripts For CNBC Worldwide Exchange 20180125

Good morning a warm welcome to worldwide exchange. Im wilfred frost. Im seema mody in for sara eisen. Great to have you here. Lets get straight to the Global Market picture futures, after a day when we saw the nasdaq and s p slightly lower, the dow slightly higher, we are expecting all three indexes to open higher today 64 points for the dow. The s p five nasdaq up about 26 points. Tenyear treasury note for you, around the mid 2. 6 level 2. 65 or so today 2. 643. Treasury secretary Steve Mnuchin will speak in davos in just a minute. So far today he appears to be playing down comments he made on the dollar yesterday speaking at a briefing in davos today, mnuchin said the u. S. Is not concerned with where the dollar is in the shortterm. Yesterday he suggested that a weaker dollar is good for trade. Today he said those remarks were balanced and consistent with what he said before. Mnuchin said were not concerned with where the dollar is in the shortterm, there are advantages and disadvantages of where the dollar is in the shortterm. He saadded in the longterm the Dollar Strength reflects the u. S. Economy lets check the u. S. Dollar, which has been trading around a threeyear low it continues to trade at that level. It is weaker against the swrap the japanese yen it was a fascinating move yesterday the broader dollar index, more than a 1 move for the broader index. A huge individual thing. Absolutely. Looking back at the currency board, the pound moving over 1 higher close to 1. 43 again. Extraordinary moves. Continuing today that dollar weakness the euro, pound, yen, all higher against the dollar today as well as Steven Mnuchin that we will bring you live sitting down with Geoff Cutmore of cnbc, well be focusing on the ecb as well. The data out of europe continues to be strong people are expecting therefore that we might get some comments on whether tapering can end earlier than expected. Whether a first rate hike could come earlier than expected i just dont see why mario draghi would be anything but dovish given the strength in the euro well see if theres a correction thats the burning question will mario draghi play dont currency and if that will result in the euro weakening. It had an impacts on International Equities lets have a quick look at those. Asian equities have been hampered by the stronger yen of course the nikkei in particular down 0. 75 yesterday down just over a percent today the markets have been strong so far this year and last year as well european trade, the same applies yesterday. We saw strong declines in european equities. Lets join Geoff Cutmore with his panel at the World Economic forum. I believe obviously a weaker dollar is good for us. Are you actually advocating a weak dollar policy for the United States . Well, let me first say, i guess i would have been disappointed if you didnt start out with me as the fist question first question on the dollar, since this is something people love to ask treasury secretaries about. I think i have been consistent on my comment on the dollar. Perhaps slightly different than previous treasury secretaries, in recent times previous secretaries have talked up the dollar so ive been consistent. What i said not only yesterday and today, but previously is first of all the currency markets are probably the most liquid markets in the world. We fundamentally support free trading in the currency markets. So, my comments have been that in the shortterm where the dollar is is not a concern of mine that is will fluctuate that in the shortterm theres obviously benefits and issues with a lower dollar. In terms of the benefits, its beneficial for our trade imbalances there are also issues for people who hold dollars so i want to be clear on acknowledging both in the longterm i fundamentally believe in the strength of the dollar it is the reserve currency, i believe it will continue to be the reserve currency given the strength in the markets. Thats not a shift in the u. S. Position on the dollar at all. Again, what id say is its not a shift in my position on the dollar at all. It is perhaps slightly different than previous treasury secretaries who in recent times have just commented on strong dollar, strong dollar. So again, its an acknowledgment that the dollar is in essence, again, where it is in the shortterm will be determined by the markets. I dont want to be overly tricky with the language, but that sounds like as someone who worked around Financial Markets for a while, it sounds like an implicit acceptance of a weakening of the dollar from here on in im not making a comment whether its implicit weakening or an implicit strengthening let me be clear, in the shortterm where the dollar is is not a concern of mine, and not something i spend a lot of time thinking about. There are benefits of where the dollar is and costs of where the dollar is depending upon which side of the table youre on. Im focused on longtermer term, where the dollar is. And let me be clear, the treasury puts out a currency report where we comment on other peoples intervention we work closely with the imf what we dont support is fixed people who try to fix currencies we do support free and floating currencies reflective of the market this is im aware of the irony, the fact im asking you this, so i amgen rating perhaps the third round of verbal intervention that the markets are having to respond to and deal with at this stage. In what sense is the level of the dollar a priority at all for the u. S. Administration . Again, where the dollar is now is not a priority. Its a focus of the free markets. I think we clarified that i think so. You have 53 minutes left, if you just wantto talk about the dollar i think the other people may want to speak. But i do realize theres another attractive thing to talk about, and thats bitcoin and cryptocurrencies, so if you want to come back to me later, ill talk about that. You know our social media number also go off the scale the minute we Start Talking about it the millennials will finally start tuning in. But just to take the heat off you for a moment here, madam christine lagarde, we spent times in years focusing on the risks of currency wars and verbal intervention in currencies, and countries using the opportunity to talk down the value of their own currencies as a way of getting trade advantage. The imf has been very clear, i think, on its attitude towards that give than we are seeing tariffs introduced by the u. S. Administration on asian products, and nonintervention in the dollar as far as the treasury secretary is concerned at this point, are you worried that actually we may be headed down a road where we may see response from other nations who worry this weaker dollar will disadvantage them in terms of trade relationship with the United States . Well, let me backtrack. At least mention to begin with that the current Global Economy where it stands is in a sweet spot we dont focus on the latest statement by so and so thats fine withthe media. Lets look at the Global Economy. At the moment, its moving at a pretty solid rate. We forecast 3. 9 growth next year 3. 9 growth the year after that. About 120 countries have seen Income Growth on a per capita basis in the last 12 months. We are still seeing financial conditions that are accessible if not extremely easy an two clear engines for growth one is investment. We just had a discussion with various central bank governors, all of them in the main are seeing investments go up the second thing were seeing is trade. Growing faster than Global Growth rates. So anything that would slow down trade, limit the strength of the engine would be a concern. If were all seeking more growth, better growth, more inclusive growth, sustainable growth, we need to fire from all engines. Trade is one i think we should make sure that trade is well governed, that the set of rules applied are fair, reciprocated, properly enforced, and im sure there will be common denominators around the fact that not everything is perfect. But any measures that would sort of restrict trade would hurt growt growth that sounds like diplomatic way of directing the fire back at the United States and washington and just pointing out that the imf doesnt agree with the process that escalates tariffs in either direction. Who would agree on measures that would significantly reduce trade, impact growth i think what we agree on is that the rules of the game have to be clear. The rules of the game have to be fair and enforced. I was listening carefully to president macron, my president he wasnt saying something vastly different from that he was saying the landscape has changed. There have been massive innovations in things, like finance, but not only, and we have to change the rules under which we opoperate but opening barriers on a rules based way is consistent with growth he think we share similar views on this. Our issue is we want more trade, not that we want less trade. We just want reciprocal and fair trade. Our issue is where there are big trade imbalances, the markets may not be as open in one direction as they are. I would say the United States has probably the most open Trading Market in the world. And the most open investment market in the world. We want to continue that, but we want fair trade. This is about reciprocal trade where there are trade issues, we will enforce them. What about china . Does it have a fair trading system i think weve had productive conversations. I had conversations yesterday with the chinese i think that President Trump and president xi, we have had direct conversations about both of our objectives its to shrink the trade imbalance. From our standpoint, thats about increasing exports to china and shrinking that its one of the largest growing markets, we want u. S. Companies to participate in an open way. The Foreign Ministry this morning said that the hats of protectionism cannot be put on chinas head professor, do you think the Chinese Government would agree with the treasury secretarys assessment china certainly wants to embrace this trade integration, globalization, and more trade. The pressure is on for reciprocal kind of trade protectionist pressures. I have to say that china is also trying to shift its trade kind of production away from lower End Manufacturing sectors. But that is not necessarily good signal for the kind of trade tensions that might come about also because theres going to be domestic pressure coming from the chinese businesses and the Chinese People to pressure the government to react. They will have to take a stance, the Chinese Government what do you think that stanc will increasingly be, as we hear overnight that lg will have to raise prices of the white goods in response to the tariff. I think its it depends on its not a good signal for what will happen i think china wants to shift production structure, but, you know, this imbalance in terms of trade is not a matter of just commercial policy, its a balance between saving and investment, its not due to the currency or trade policies that will solve these imbalances. Larry, youre nodding you want to comment . Let me talk about the dollar for a second the dollar, as the secretary discussed, is the most liquid currency in the world. It is the reserve currency i think the weakness in the dollar is more due to the successes of europe and other parts of asia. I think last year in davos we were fearful of the european union. We were looking in front of different elections. The elections turned out quite well the european economy is doing far better than we expected. Its doing far better today than we expected three months ago so the currency adjusts. I think were making way too much out of statements from the secretary. I believe the markets are efficient. They move around i do believe, as the u. S. Economy accelerates because of tax reform, the dollar will start appreciating when theres evidence of a more successful u. S. Economy so i think the media is making way too much about it. This is a normal course of markets. Markets move around and adjust to new information thats whats happening. We have done less than 15 minutes here, youre the second speaker that blamed the media for something. When the media starts being blamed for something, i get suspicious that theres an element of look over there. Dont look over here i think the media the medias business is to create information and noise. As opposed to stockbrokers. You make more money on the velocity of noise. I think you serve a good purpose. I do believe what media does by pushing the envelope, it creates a resolution process of valuations so this is how the ecosystem we all operate in, you serve it well validation by larry fink. Well put that on a piece of tape it will play over and over again on cnbc. Larry, let me be sensible for a moment there is a jekyll and hyde side to a weaker dollar the weaker dollar actually could make the funding arrangements for the treasury secretary a little tougher Going Forward theres quite a lot of issues to come over the next 12 months or so here. What about the risks of a weaker dollar undermining some of the attractiveness of the currency from a global perspective . Youre insinuating well have a permanent weaker dollar, i would assert if our economy grows like we think it will grow 2018 into 2019, the dollar will strengthen i would say over the long run, and i know the secretary is aware of it and focusing on it, we do have to focus on we are a user of other peoples Balance Sheets to fund our economy japan, italy has a much greater debt to gdp, but they domestically fund deficits over a long horizon we know that we are going to have to get our finances in order. If we dont that will create a real deterioration in the valuation. Thats not a today issue thats an issue that we all live with that we all recognize the only issue is if trade became so violent i want to underscore violent, and i dont see that as an outcome, if trade became a violent issue and you saw an overt reduction in the purchasing of u. S. Treasuries by other lenders, that would create a disequilibrium im not forecasting that, but those are the tail risks that we all have to focus on thats tail risk that we had before we talked about trade we always had that tail risk i agree with the secretary we created trade policies, which was a function of post world war ii it was a belief that america will do better when the world does better. The reevaluation of 50yearold, 70yearold trade treaties, thats not antitrade. I believe that process probably could be a good one. And obviously as the secretary said, it could become a winwin. There will be different industries, different things, but lets be clear as the secretary said, the United States is the most open society in terms of trade. As an international company, we do face different impediments in other places that we operate you make a great point about growth in europe this weak currency in the United States is going to cause a headache for mr. Draghi, who is trying to negotiate the very tricky job of showing the world that growth is strong in europe, but maintaining Interest Rates near emergency levels all the while a weaker dollar will erode the euros competitiveness in international markets. How does mr. Draghi square the circle i want to thank you for inviting a banker to this panel a european for that, it implies that you think banks and european banks will play a role in the remaking of finance, which is not selfevident if one goes around davos and listens. Thanks for that. Secondarily as it goes to the eurozone and the topic of Interest Rates, first of all, we fully agree, i think on this panel, that the next one or two years, things look pretty good for the overall Global Economy and specifically also for europe i think my neighbor to the left has more to say about that but the fundamental challenge that we have is we think we are in something that you could call a bond bubble, ie credit is not priced correctly if you assume that longterm the Interest Rates will have to shift and rise, that is of course one of the Biggest Challenges that mr. Draghi has, all i can say is be careful what you ask for. In germany we are quick and say we want to have high Interest Rates, because the low Interest Rates basically rob the savers of their adequate returns. Thats nice, but if Interest Rates start rising you have to review your financing structures if you are a government, if youre a household, if youre a company, institution, and that can be painful so i believe that mr. Draghi is quite right to be careful in how he approaches this headline calls are dangerous and the u. S. , frankly, is doing something smart. As they are exitinging quee inie easing and raising prices they are doing that in addition with the tax reform, so the economy can digest the fact that credit is being repriced which again for european governments particularly will be a very challenging experience christine i think thats particularly true in particular in those countries which have clearly increased their debt leverage over the last few months. Easy financing has caused that tightening of financing we better be watching there will be capital flow movements, restructuring on the horizon. That applies to corporate and sovereign. That is the question of the moment, really, this issue of the balance between fiscal stimulus and monetary tightening larry, you expressed comments on this in the past maybe i ka get you and the secretary to comment on this paul says you are doing a smart thing, this will also increase the debt stock and raise Government Debt in the United States in the shortterm in the short run. But if the economy continues to grow over the long run, it wont. And it will continue to grow in the long run if Interest Rates continue to go over 3 i dont think 3 is magical or disruptive to the equity markets. If we saw a spike in inflation that would move Interest Rates much higher, that would be d disru disruptive as long as the ecb, bank of japan continue to be more tolerant of quantitative easing, the arbitrage between u. S. Rates and other rates will continue and it will keep rates probably more secure. I would argue the biggest risk we have in this system is not a shift upward of Interest Rates, but a total flattening of the yield curve to possibly an inverted yield curve thats much more distrucktive. We d destructive thats one thing i spend more time focusing on not the absolute level of Interest Rates will the Interest Rate rises there the Federal Reserve next year undermine the benefits of the tax cuts unquestionably when you have rising rates, it will moderate the economy. I was not in the room when they determined to do the tax cut you know, one would anticipate not the way you would have done it . No, you do tax cuts when you can in our political system. Our political system does not allow us to do it at most opportune time one would have thought a more opportune time is when the economy was in real trouble, than today when the economy is doing well doing it now will accelerate the economy. The question is as we accelerate our economy with a 4 unemployment rate, with more restrictive immigration policies does it create more labor shortages . Maybe thats good outcome. We have talked about stagnation. Maybe theres something about good inflation, and good inflation can be wages maybe the Financial Markets dont like it as much, but maybe the average citizen will love it so this will work out. Im not terribly worried well bring it back here to hq and cnbc. The main headline, of course from secretary mnuchin saying in reaction to those comments about a weaker dollar over the last couple days, saying thats not a shift in my policy, but he said it is perhaps a shifters haves past treasury secretaries who always say strong dollar, strong dollar an interesting nuance there in terms of his perspective he did say where the dollar is in the shortterm is not a focus but a function of the free markets. He mentioned there are benefits to a weaker dollar saying its beneficial for trade imbalances we would say its a slight stepping back of the way people have framed those comments over the last couple days, making it clear its not an ultimate focus of the administration. That the dollar level is the function of the free market. Coming up, reaction to what was heard from secretary mnuchin in davos this morning. Were back in a couple minutes good morning im wilfred frost. Im seema mody in for sara eisen. We heard from Steven Mnuchin live on a panel with our Geoff Cutmore in davos, switzerland. Lets listen to what he had to say. My comments have been that in the shortterm where the dollar is is not a concern of mine. That it will fluctuate that in the shortterm, theres obviously benefits and issues with a lower dollar. In terms of the benefits, its beneficial for trade imbalances. There are also issues for people who hold dollars i want to be clear and acknowledge both in the longterm i believe in the strength of the dollar its the reserve currency. I believe it will continue to be the reserve currency given the strecht a strength and confidence in the u. S. Markets lets look at what this has done to the dollar index its down today. Not as much as yesterday some dollar weakness still it has just abated a fraction since those comments down 0. 25 before, now down 0. 1 the comments from Steven Mnuchin, a slight stepping back of what the phrase of embracing a weak dollar and how they were framed over the last couple of days he said where the dollar is now is not a key focus, its a function of the free markets lets discuss more with boris schlossberg. Good morning clearly secretary mnuchins comments on the dollar have gotten a lot of focus. What is your take of it, those comments and what he said this morning . I think its fascinating. The comments out of davos suggest that the Trump Administration policy now is bet it all on black. There seemed to be an effort now to dilute the dollar, increase the deficit, tax cuts, and juice up growth as much as possible. Trying to do everything in their power to increase American Company profits as fast as they can. I think the market is not buying the narrative. Your interpretation is focusing on the headline from two days ago, not the full comments we heard there. Are you saying Steven Mnuchin there is not lying but trying to fake the true incentive which is a weak dollar . Absolutely. Lets be clear the policy of the u. S. , of all the past treasury secretaries has been of strong dollar. He has basically said i suspect i like the strong dollar in the long run, which means he doesnt care about the dollar being weak in the short run. Its none supportive of the dollar, because hes trying to increase exports and increase the profits of dow jones in the u. S. , which pace in dollars and receives revenue from across the world. So this is actually all designed to juice up the u. S. Economy as fast and as strong as possible thats the key tell. If theyre right, the dollar will rebound if theyre wrong, the currency market is saying this is a massive tactical mistake. So far equity markets have interpreted the weakness in the dollar as a tailwind for multinationals, good for the broader Financial Markets what about the down side risks of a weaker dollar . It does make our imports more expensive. Thats not good for big retailers like walmart which relies on imports from the likes of china theres two components here one is the issue of the weaker dollar making things much more expensive for u. S. Consumers at a time when wage growth is not growing strongly that will be an interesting tell the single most important economic variable i will be watching for the next three months is u. S. Retail sales. That will tell us if the u. S. Economy is going to go to 3 or not. If that fails, the currency market will be proven right. Secondaril secondarily, though they denied theyre engaging in a trade war, any time you knock down tariffs, it wont be unanswered theres other actors in the world, if you engage in retaliatory actions, thats the big risk that nobody in the stock market is watching how should traders take into account the recent comments from mnuchin over the last two days but at the same time get ready for the European Central bank meeting to kick off and mario draghi and what the stronger euro means for his campaign. I think Mario Draghis face will be more pained than usual he has to walk a fine line its a situation where they are seeing the best growth in decades, but because of the decline of the dollar, its changed its calculus he will state they will taper but do it gradually. He does not want to see the euro run up to 1. 25, 1. 30 they will try to do everything to talk it down. The problem is, i dont know if the market will buy it the market is so negative dollars. When you have a situation where Interest Rates are rising and currency is falling, that suggests that the currency market is looking at the fiscal responsibility of the government they are worried about the budget deficit right now the bet is that tax cuts will pay for the deficit. If that does not come through, you will see more currency weakness, and that will translate into greater weakness in all the other assets. I think all the other assets being delusional and the currency market is giving them a flashing yellow warning sign thank you very much for joining us boris schlossberg. Lets look in on markets futures pointing higher, comes off gains yesterday for the dow, but slight declines for the nasdaq and s p were expected to open higher this morning, 65 points higher for the dow. Tenyear treasury note pulling back a bit, 2. 64 the yield on the tenyear looking at markets around the world that weaker dollar, stronger yen hurt asian trade. The nikkei in particular it closed down a percent today in europe, the stronger euro had a bigger effect with germany, france and the uk down more than a percent. Germany slightly lower the rest of the region slightly higher President Trump a has arrived in switzerland, lets talk to ben white about his trip what do you think President Trump will comment on in his speech in davos . Do you think he may comment on the currency i would be surprised if he did. But were talking about President Trump, so you never know what he would say he has shown willingness in the past to go ahead and say the dollar is too strong secretary mnuchin tried to clean that up and he went and did it who knows. He could say anything about the dollar the address will be bragging about the economy in the United States the tax cut plan which he passed and people in davos liked. So a lot of that an talk about trade, and the fact that he believes in free reciprocal tradement talking about nafta and negotiations there but its a bit of a victory lap for donald trump he will be saying the u. S. Is doing well and well be tough on trade. Could this come off address a master stroke from his perspective . Expectations coming into it, of him coming off with praise from other attendees or at least not criticism from other attendees are low, expectations are low, could he deliver more than expected and come back and have a bit of wind in his sales i think thats true you never know until you hear him speak what he will say i think the reaction in davos has been mutedly positive about him and the deregulation for the most part and tax reform he has put pressure on european economies to lower their own tax rates. Theres a tension going on between the u. S. Rate and others so i think he will get some positive reviews, and if hes not all immigration, borders, building a wall, he may get some good attention what line will President Trump take more of a protectionist instance or will that globalist come out in him as well i think youll see a mix. Hes wary of being too globalist. His base in the United States is in favor of tufr boaough border immigration and tough on trade he may preview his position on china. Theres a lot of upcoming negotiations in the u. S. About how to approach intellectual property he will signal well be tough. We want to continue to have free trade but it also has to be fair trade. Hell maked nos to th s t make o the base of the United States saying i will still be tough on immigration and tough on trade deals, not doing multilateral but doing unilateral trade with individual nations you know what i would do if it was up to me heading up davos . No but im intrigued to hear. There would be a q a after state leaders speak. Prime minister modi making this big speech, such a sharp contradiction to the truth because its still challenging for Companies Like walmart and apple to set up shop in india. Theres just this contradiction with what the leaders say and whats actually happening. I think that would be interesting to have a q a with President Trump. Hes good at reading a tel teleprompt teleprompter, but less restrained in answering questions. I agree with that modi is only fractionally more free trade than china was. He was the big keynote of the emerging world youre right, didnt get enough criticism and focus on that. We have to leave it there. Sure. Ben white of politico i think you should run davos i should. I can do that. Cnbc reporter running davos. And all the exclusives on cnbc modi would have joined us as well what else is on the agenda today . The ecb announces its decision at 7 45 a. M. Eastern time followed by Mario Draghis News Conference in the u. S. , look for weekly jobless claims and december home sale sales. In corporate news, south koreas Lg Electronics will hike prices on most washing machines sold in the United States. This comes after the Trump Administration announced steep tariffs this week on washers and solar panels lg has been anticipating the move and is building a factory in tennessee that could open this year. The company is warning u. S. Protectionism will likely increase lg reporting Fourth Quarter earnings today it swung to a profit lgs u. S. Rival whirlpool reported slower Revenue Growth in the Fourth Quarter. They say price hikes were offset by rising raw material calls. Shares of daj iageo posted upbeat earnings. Landon dowdy has more. Shares are moving higher on betterthanexpected earnings. The Spirits Company beating on the top and bottom lines reporting a 2 increase in halfyear sales. The maker of guinness, johnny waker had previously warned that sales and Profit Growth for the current year would be driven by the second half, which ends in june diageos growth was curbed by Unfavorable Foreign Exchange rates, a ban on selling alcohol near indian highways, but guidance was unchanged it stands by its fullyear goals. The company promised consistent md si mid single top line growth in the years ending june 2019 shares of the spirit maker soaring 29 in the past year, up about a percent this morning in london trade thank you very much for that. Ford reporting lower than expected Fourth Quarter profit the automaker says it was hurt by rising Commodity Prices and currency headwinds ford expects more pain to come from raw material costs. Call com siqualcomm signed deals with cli thehinese compans qualcomm will supply the companies with helps to help launch a 5g Wireless Network in china within the next year. And lam Research Continues to benefit from the boom in memory chip prices the Company Expects record spending by customers this year. That stock up better than 4 stmicroreported Fourth Quarter revenue rose 43 the Company Expects Strong Demand for chips used in the auto and industrial sectors to drive growth in the quarter ahead. Its up 0. f5 networks quarterly profits fell due to changes from the new u. S. Tax law the network equipmentmaker said it turned the quarter after several quarters of declining growth alibaba and kroger have held early talks about working together sources say that includes a meeting in which kroger executives traveled to china alibaba has been testing a move into traditional retail. Kroger could direct customers to alibaba sites where they could buy general merchandise. Its an interesting move. We heard that tencent, alibabas rival, signed a partnership with car carrefour. So theyre trying to gain a larger presence in traditional retail and alibaba in china invested with sunop retail, the biggest retailer in all of china carrefour has a big presence there. Much more so than walmart. Clearly a move we have seen with amazon all about amazon. All following its trend. Coming up on worldwide exchange, uk finance minister Philip Hammond on the pound. Well hear what he just said in davos. As we head to break, a check on european equities, mixed at this moment as we await the ecb policy meeting the dax down 26 orwi eha wl be right back and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. Welcome back we heard from treasury secretary mnuchin earlier in the show in terms of his comments on the dollar Geoff Cutmore has been speaking to uk chancellor Philip Hammond as well about how the economy in the uk has reacted since brexit. The answer to the question is that the uk economy has performed a lot better than most people expected it would after the shock of the referendum decision in 2016 there has been a spike in inflation, which has been driven by a depreciation of the currency against the dollar we recovered a great deal of that ground. This morning we seem to be recovering more, steve, thank you very much. This spike in inflation at a time when the economy has been relatively weak has had an impact on real wage growth thats a really crucially important issue for us he did also say he thinks inflation seems to have peaked for now. And interestingly on the brexit discussions, the Financial Services must be a part of that deal, not just trade of goods. Thats an interesting comment. Finance Services Important part of those negotiations. The pound still higher today only by 0. 2. At 1. 4263. Still ahead, investors eyeing the markets after a wild day on wall street what this volatility could mean for your money. And a quick check on u. S. Equity futures as the dollar trades lower what does that mean for stocks and what to expect the dow is higher by 67 points in the premarket and the nasdaq higher by 28 welcome back to worldwide exchange. Futures pointing higher, 67 points or so for the dow up about a percent for the nasdaq and the s p the dow up less than that a bit of slvolatility yesterday lets discuss that with kevin curran from Washington Crossing advisers good morning good morning. Volatility picked up yesterday, but in general markets remain well supported despite a lot of volatility in currency markets what is your take as to what that volatility in the currency markets means for the equity markets . Ultimately it will have an effect on trade. We have seen a weaker dollar, and consequently we have seen a pick up in growth around the world. The two things are to some extent linked. But the degree to which those things can continue, its limited. The big story is weve seen a pick up in growth, its been supported by the reflation trade, the trump trade and now tax cuts we have good momentum. Investors feel good and thats feeding back into the economy. What about the risks of a continued weaker dollar, the impact of inflation and wage growth as well if the dollar were to continue to weaken, we would expect higher prices were in a sweet spot where the price level is about 2 in terms of year over year growth rate. Thats where we think were headed thats a nice play for the equity markets to be were not seeing a lot of concern about where the fed is heading or a sense that the fed will have to get aggressive. If that were to continue or poli prices fall, you may see more pressure on the fed. What has more impact on the equity markets, the shortterm rate that the fed is putting out or the longer end of the curve adjusted forev inflation last year we got quite a few hikes but the curve stayed flat. Its the whole thing. Its all related to the extent you have higher Interest Rates across the board, the discount rates apply to cash flow streams would go up, you would have lower asset prices. Typically the stock market would have a longer duration associated with that long rates would be important. But short rates matter, too. If the fed were to get aggressive, and we started to see that if you look at the forwards markets, theyre starting to be more concerned about the pace of rate hikes thats not really yet become an issue. But if that trend that weve seen over the last month or two were to extrapolate the next year or so and you saw aggressive hiking in a short end of the curve getting nervous about it, then the whole curve would be something that you would have to watch. Has the softness in the dollar provided an opportunity for you to allocate more money into sectors that benefit from a weaker dollar . Whether its technology, financials, industrials that benefit from not just a weaker dollar but benefits from overseas technology is a place we like longer term very well, but more for the secular trends, the cash flow that that sector is generating shortterm we have had a strong run. A lot of what youre describing has been discounted into price so while we like the fundamentals, we are concerned about the valuation and cut back there. Lets talk about the headlines we got from Steven Mnuchin. He says that where the dollar is in the shortterm is not a focus, its a function of the free markets a slight stepping back of the way people had interpreted the headline and focus on the weak dollar from the last couple of days the dollar index for you there, which was down a percent yesterday, down about a tenth of percent today. Still trading around a threeyear low well look to see what mario draghi says, he will talk down the euro and the impact it has on the dollar index . That to come and a huge lineup still from das,vo thats coming up on squawk box. Treasury secretary Steven Mnuchin clarifying his comments on the collar ondollar at a pand by cnbc. And a u. S. Grocery chain is in talks with alibaba. Details ahead. And trumPresident Trump arrg in davos this morning as we learn more about his immigration plan and his pumped up infrastructure proposal. Good morning welcome to squawk box on cnbc. Were live from the World Economic forum in davos, switzerland. Im becky quick along with joe kernen, and Andrew Ross Sorkin on this day in davos, lets look at the u. S. Equity futures, yesterday was an up day for the dow. It was a day that you saw those s p with the slight pull back, but some green arrows once again. Dow futures indicated up by 70 points nasdaq up by 30, and the s p by 7 points if you look at whats been happening overnight in asia, look at where those markets closed you will see that in japan the market was down