Transcripts For CNBC Street Signs 20240714

Theres probably a 40 chance of a recession. Eurozone bond yields hit fresh record lows as the ecbs olly renn signals the bank is ready to hit a significant someti stimulus package. And hong kong prepares for more protests. Good morning its friday. We made it to the end of the week its been a volatile week for markets. Mostly in fixed income space but also u. S. Equities yesterday, looking at the u. S. Equity close, you would think it was a muted session. The dow was eking a gain of 0. 4 s p slightly up in the green nasdaq slightly in the red that belied a lot of the intraday volatility we saw yet the theme was bid for fixed income a lot of fear gripping the market as we see money pour nothing tha pouring into that space. You may notice theres a lot of black behind me. Thats unusual the reason thats the case is ftse 100 has not yet opened due to a technical failure we dont have the opening levels the rest of the heat map is trading solid. Definitely a lot more positive than on other days of this week. Stoxx 600 up twothirds of a percent. Finally getting back into positive territory the big driver overnight for europe is that of an interview that olly renn gave to the wall street journal saying a big bazooka is coming as early as september. That is giving a lift to fixed income and to bonds, the bank market lets take it out and talk about bourses. Ftse 100 is opening with technical failure. Xetra dax is up three quarters of a percentage point. The german index recovering some of the losses lost earlier in the week the germing inan index is downt 1 for the week. The ftse mib, having a positive start to the session but again, the action was in yields lets talk about whats going on there. Starting with u. S. Treasuries. The tenyear at 1. 55 now another big rally yesterday about eight basis points or so interestingly enough despite the valley weve seen that twos and tens curve, we talked about it yesterday, marginally resteepened. Its back in positive territory. Yields continue to be driven lower. Talking about yields being driven lower, tenyear bund, new low today. Minus 70 basis points is where we are now the latest catalyst again being that anticipation of a bazooka and extra asset purchases. Gilt at 42 basis points. The curve is close to inversion. Italian btps, another strong session yesterday. The tenyear btp rallied 17 basis points after that story came out at the end of the session. Italian yields going strength to strength despite the political backdrop we spent a lot of time talking about the move in financials, but energy is actually the worst performing complex in the s p this year. What we have seen is a bit of stabilization overnight. 1. 2 the theme over the past week or so has been one of tremendous amount of strain as people get absorbeded by the narrative of a Slower Growth amount, Slower Growth outlook and the ongoing trade war and the titfortat between the u. S. And china brent trading around 55 for more details on that trade war, china vowed to retaliate against new u. S. Tariffs, but bay jieijing also reiterated its request for the Trump Administration to meet it halfway when it comes to trade negotiations President Trump has made his own positive noises about a potential agreement as yune ness yo yune neeunice yoon reports. A trade deal is close. President trump said as far as he knew the september round of discussions were on. The chinese were keen to continue to buy american agriculture products quickly he also said he had a phone conversation scheduled with president xi jinping were having very good discussions with china they very much want to make a deal well see what happens we had a deal. They decided not to make it. Now i think they would have liked to have that opportunity again. I think they missed a great opportunity. I think they feel they missed a great opportunity. He also said he doesnt think china would retaliate for an increase in tariffs, but china warned it would take countermeasures for the Trump Administrations september tarif tariffs, there were no specifics. But the point is even though President Trump partially delayed some tariffs, the chinese are not seeing this as a concession to them we got a comment from the Foreign Ministry that said we hope the u. S. Side will meet china halfway. Of the two, the finance ministry post was more meaningful because the Foreign Ministry comment is more boilerplate, standard fare we often hear from chinese officials when they describe beijings approach china is no longer the largest foreign holder of u. S. Treasuries that label now belongs to japan. Tokyo added about 21 billion in u. S. Government bonds, and that boosted its total holdings to 1. 1. 12 trillion china bought just 2 billion of treasuries during the same period this took the total to 1. 11 trillion fractionally below the Japanese Holdings this also ended a fourmonth selling streak out of china. Christine tam sat down with ray dalio. She asked whether he thought beijing might weaponize its Treasury Holdings as part of the trade war. Could they . Of course they could is the scenario unlikely . When one goes into this new world, there are a lot of unknowns you have to realize there are different pressure points. There was a symbiotic relationship between the United States the United States wanted to spend more than it earned. As a result, they sort of both got what they wanted which are Different Things china wanted to get richer china wanted to build a savings. The yeets waUnited States wante that and pay for iton credit both of those things happened. Now we see we have a debtor creditor relationship that can be a dangerous thing. What are the chances of it happening . I cant say as i say, as you get deeper and deeper into wars you wouldnt rule it out . I wouldnt rule it out. That was ray dalio talking there. We are joined by Jeffrey Sachs how would you suggest investors position themselves now in the credit market given the low yields the yields have reached extraordinary low levels, and we think the rally has further to go but taking a longterm view we think theyll weaken. Our advice is to look at areas of european fixed income that are less extended. Specifically we like european high yield, they rallied on average 8 year to date, they are still yielding 3. 7 . We think when the ecb starts buying, theyll be possibly buying for themselves, if not they will get investors looking at high yield because theyre constrained in buying Investment Grade and high yield bonds in europe could rally further we will talk more about the European Market in a short while. I want to bring it back to the u. S. Its been a week of volatility as far as the data is concerned. The messaging. What the fed will do Market Expectations of what the fed will do. The data we had yesterday was one of continued strength for the u. S. Consumer. We had that strong retail sales number that continues to point to a relatively robust spending out of the u. S. Consumer, which is twothirds of the u. S. Economy has the market gotten ahead of itself in terms of how bad things are on the ground actually the u. S. Still seems to be growing at around 2 . Thats in line with our forecast as well the growth has moderated from last year. Were looking at more closely at the outlook for Earnings Growth. There are signs that the global trade war is beginning to impact on corporate Earnings Growth at city we halved our global earnings forecast for this year. Theres a possibility of further downgrades when we look at europe specifically as an example we see the potential for those earnings forecasts to come down further. Taking what youre saying, youre saying the situation on the ground is not as bad as the market seems to be pricing in. But equally there are warning signs when it comes to corporate earnings yet stocks are close to record highs. Bonds are close to record lows so isnt there complete mismatch between what we were just discussing, the actual fundamentals on the ground verses what investors are driving to and putting their cash yes we think youre seeing expensive bonds getting more expensive we moved underweight fixed income and have increased that underweighting recently. With regard to stocks, were waiting for entry levels, slightly lower down than where we are now that appliesto europe where we had a difficult few weeks. We are looking for opportunities to add into weakness youre talking about Economic Data and countries like germany. Im wondering how much evidence is there in your view that the trade tensions weve seen between the u. S. And china could serve as a potential template for tensions between the u. S. And europe where theres already this weaker Economic Data . We think it will be a very good template for what we see in europe ahead of discussions with the eu leaders, well probably see threats as weve seen from the u. S. With china. Then possibly deescalating what were seeing with u. S. china is currently a slight deescalation, but the likelihood of a more prolonged trade war. What we dont know is when the focus will turn to eu in terms of the trade negotiations with the u. S. We think its coming so uncertainty on timing. Given that, what are your rules of thumb now for equities when it comes to deographies, sectors, themes. For all three we are selective. Its not an environment where you should be chasing beta you should be looking for alpha to generate returns. By country we prefer switzerland. The premium rating we think is justified. Theres companies in switzerland that we think will meet those earnings or better secondly by sector we focus on sectors like healthcare where earnings should be strong even if the cycle begins to turn. By theme were looking at areas Like Companies that can buy back stock and high dividend yields thats an area weve done work on eventually. On recently we are looking at dividend per share, secondly, weve looked at companies that have not cut dividends in the last decade, in europe thats about 95 of European Companies then we looked at the likelihood for payout ratios to be maintained in europe theres a high probability they will be maintained the payout ratio is down to 59 . Speaking about the defensive cyclicals valuations, defensives areshowing that. Do you not worry about positioning in the space if, for example, we get this big bazooka out of the ecb we have reduced our weighting in cyclicals we think if there is the big bazooka from the ecb, there will be a trading rally, no more than that when we look at value, we see sectors like banks and autos which on the surface look attractivity pricee itite itityy priced and within that some cheap opportunities. Lets talk more about the china story. Chinas envoy to the uk warned beijing will act swiftly if protests in hong kong intensify. His comments come as hundreds of chinas armed Police Conduct exercises in shenzhen. The former british colony has seen ten weeks of Anti Government demonstrations with another protest planned for sunday. President trump suggested that president xi should meet with protesters in a bid to end the unrest i am concerned. I wouldnt want to see a violent crackdown. I put a little bit of a memo out last night hes a man i like a lot. I get along with him well, president xi i said i would be willing to bet if he sat down with the protesters, a group of representative protesters, i bet he would work it out in 15 minutes. I know its not the kind of thing he does, but i think it wouldnt be a bad idea coming up, teasing some further easing ecb board member olly renn says the central bank is prepping a stimulus package that should surprise the markets tas tethbrk. 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Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Welcome back big news in europe, olly renn says the European Central bank will unveil a significant package of easing measures in september. He told the wall street journal the package will include a substantial and sufficient Bond Purchasing Program as well as further cuts to the key Interest Rate and he kept the door open to even equity purchases annette is in frankfurt, the home of the ebb. The market is reacting to this dovish interview i have to ask you, why now why this timing . Just a couple of weeks before that meeting if you think its strategy, you could think this is the ecb trying to use the signaling effect earlier than september given the adverse Market Reaction currently and the bad Economic Data. Thats one alternative you could think that they want to use that component of pillar of how Monetary Policy works clearly the signaling effect is one effect of Monetary Policy. Mario draghi in past years made that clear over and over again another alternative is is that olli rehn wants to pressure others by putting out so much information that the market is pricing it in. And anything less than that will be a disappointment by september that could be one alternative. Looking at what hes saying, that everything is on the table, and that also the market should not think that they cant do more than already anticipated, meaning on the Interest Rate front they could go lower than minus 0. 1 now the speculation is whether it will be 0. 2 or lower what happens to the deposit rate will we get tiering is the next question will there be any alleviation from the pain from negative deposit rates for the banks. And also his comments that he didnt rule out a move to purchase equities. Previously it was a nogo area for the central bank that gives you an yt how bidea g the ecb might be going in september to boost Inflation Expectations it is clear if you listen to mario draghi in july that theres a huge amount of disappointment with how effective the current policy tool is. It is clear is that there needs to be Something Big to boost them so much detail, to that point is surprising normally the ecb would not let go so many pieces of information ahead of a policy meeting. Having said that, i think we are getting an idea of how the new ecb could look with the package approach, thats a new thing under the new chief economist. The previous chief economist was a fan of introducing new policy measures a lot of parts for the ecb as they are headed for a change at the top of the bank clearly. With that, back to you excellent great summary of what we can expect in a couple of weeks. That will be a very, very big meeting for europe and for the ecb. I know youre upset this morning when the ftse wasnt operational. There was a lot of black behind me. The London Stock Exchange says instruments on the ftse 100 and ftse 250 are in an opening auction call we should start to see some pricing in the next few minutes. Well keep you updated on the latest of course in general European Markets are bouncing today so we expect a positive start to trading for the uk index jeffrey sacks is still with us annette gave us a comprehensive overview of what we could expect out of the ecb come spent. If youre short european stocks here, youre probably nervous at this juncture ahead of the anticipated bazooka. I agree you would be looking for opportunities. I also think if youre a holder of short euros you may be getting nervous and looking to close some of your reuro positions. What weve seen eventually is the your euro being used as a fg currency to buy into emerging market currencies. With more pressure the euros rallied. If you take a medium term view we think the euro is going lower because of pressures from ecb easing, italy, problems are still there. We think 1. 1050 is possible over the course of the summer for euro dollar. I net talked about signaling there from mr. Rehn. How helpful do you think it is for Market Expectations when they get these unilateral pieces of guidance between meetings the potential for the market to overdiscount ahead of the meeting and be disappointed on the day of the announcement is high what can the ecb do to surprise . The view is that in terms of qe2 theyll announce in the region of 600 billion euros of bond buying, of which 425 billion will be sovereigns, the balance in Investment Grade. We dont think theres much discounted yet for equity buying will the ecb measures in total with the rate cuts and the tier deposit rates be sufficient . Thats a big question. Its certainly necessary whether in combination whether it results in an increase in lending growth that remains to be seen. This is one of the most detested rallies of all time in fixed income everyone loves to hate fixed income, yet we keep going, most particularly with the performance in italian bond yields people love to talk about the political development. But yields keep going from strength to strength here. What breaks that cycle if at all . It seems to me ecb action way overcompensates for political turmoil. We are nervous about italian bonds. We wouldnt chase this rally in the medium term we are concerned because what you got in italy is two big problems one, the bank sector is undercapitalized and nonperforming loans are still significant at 200 billion euros, and italy has a debt level of 2. 3 trillion. Both of those issues need sustained growth our concern now, is that with the Coalition Government about to fall, we think that then youve got the difficulty of passing the upcoming budget next month. And if that budget eventually is overexpansionary on the fiscal side, then you have the potential for bond yields to rise significantly and of course the bonds are linked to the banks, because the banks are largely the holders of those bonds. If you look at the fiveyear credit default swap in italy, its up to 2. 16 basis points its a measure of the cost of insuring against default we think if it rises further, perhaps to 2. 80 where it peaked last year, thats a signal that we could be approaching the end of the italian bond market rally. A lot to watch in rome. Thank you very much, jeffrey sacks from citi private bank. Coming up, alibaba gets a boost from its cloud unit in its latest results and the ceo praises the Chinese Consumer well bring you details next 12 . Wheres your belly rubs . After a day of chasing dogs you shouldnt have to chase down payments. vo send invoices and accept payments to get paid twice as fast. danny its time to get yours vo quickbooks. Backing you. Welcome back to street signs. Im willem marx. Im Joumanna Bercetche. These are your friday headlines. European equities accelerate the comeback after asian markets gain and china outperforms, but the ftse 100 suffers its largest outage in years. Hedge Fund Billionaire ray dalio tells cnbc in an exclusive interview theres a strong chance the u. S. Will fall into recession before the 2020 election in the next two years, lets say prior to the next election, theres probably a 40 chance of a recession. European bond yields hit fresh record lows as the ecbs olli rehn signals the bank i ready to hit a significant stimulus package. And hong kong prepares for more protests. Chinas ambassador to the uk warns beijing could act to quell the unrest if the situation worsens. We saw stabilization in asian markets overnight, this after some little gains were eked out of wall street after a volatile intraday session. The mood for europe is positive with the european indices trading firmly up in the green the uk index, ftse 100 is still in the black really this is a signal for it not being opened yet we are expecting it to open shortly in the next few minutes as the auction crosses take place. Well keep an eye on that. Europe is trading on a better foot today a lot of that is on the back of a dovish interview weve been talking about that olli rehn gave to the wall street journal saying a big ba soozoof help is on the way in september. The mood is more positive. We are seeing more cyclical sectors get a bid this morning lets switch and talk about Foreign Exchange one currency pair i want to point to is euro we finally broke through 1. 11. This is a key level weve been watching trading on the back foot today, 1. 108 1. 1080, 0. 20 weaker the bar keeps moving higher and higher there, thats the euro this morning cable, were back through 1. 21 on the upside, 1. 2125. This week, we had strong wage data, cpi data and retail sales. The picture from the data perspective has been quite positive of course brexit discussions linger in the background and will continue to do so for a couple of months lets talk about u. S. Futures. I mentioned the s p and the dow ended the day up in the green territory yesterday after a positive retail sales number indicating still that the health of the consumer in the u. S. Is continuing to be a driver of the economy here you can see that the indices are called in the green today. S p 500 is up 20, dow also up 180 points capping off what has been a very, very volatile week for u. S. Equities. Ray dalio, the man that runs the Worlds Largest hedge fund told cnbc that a recession is coming at some point in the next two years. The founder of bridge water outlined how the Economic Situation has deteriorated in an evolutionary way over the next one, two, and three years, that there will be a turn for the worse. Yes. I think that there will be an environment in which youre going to have excess capacity and debt restructurings, and political issues entering into it i think the elections were going to have in the United States will have an important bearing. It is a contrast or a conflict between capitalists and socialists well see more of that i think theres going to be a risk for capitalism. Is a recession in the u. S. Inevitable of course recessions are always inevitable. The only question is when. Do you see one coming yeah. I think in the next two years, lets say prior to the next election, theres probably a 40 chance of recession. And i think that youre seeing this around the world. Were in singapore, you can see borderline limited amount of growth you can see it through asia. You could see it in europe you can see it in the United States the fed cut rates the end of july the first time its done so since 2008 where do you see Interest Rates . Do you think bigger cuts are needed yes i think you will see greater Interest Rate cuts as you start to see the World Economy starting to slow down. I think youre seeing that being led now by the bonds in other words, longterm Interest Rates are falling faster than shortterm Interest Rates. And that is inverting the yield curve. When that happens, it means that cash is more attractive than bonds. And as a result you tend to see then the Movement Towards cash and the slowing up of lending. So we have a situation in which theres a lot of pressure to cut rates. At a time where the economy yet is, you know, fairly operating at a high level. Do you think the Federal Reserve has the ability to avert a sharp and serious slowdown or is the possibility of a fiscal stimulus more likely . I think were in a Political Year so the fiscal stimulus will not be anything happening in the United States in the way of fiscal stimulus until we get past the elections when we get past the elections, then well talk there will be examination depending on who gets in. There will be a big change in fiscal policy. I dont think youll see much of a change in fiscal policy any time soon. I think theres a time horizon that we should look at the markets. That is also marked by the i electiole election that will have a bearing on relations between china and the United States. Alibaba shares popped after the chinese ecommerce giant beat revenue and earnings expectations Arjun Kharpal joins us how has alibaba defied some concerns there were very much focused on the china macro environment here alibaba continues to do quite well thats right. It was an extremely important quarter, the june quarter for alibaba needing to prove to wall street it could defy any consumer slowdown or any worries about the broader macro environment in china the way its done that is through a couple of means. It goes back to the core Commerce Business which accounts for over 080 of alibabas revenues its slower than what youve seen in the past, but thats still extremely strong growth. When you look at china specifically, the china retail market, thats where theres a small bit of concern revenue theres were up 24 broadly in line with Market Expectations, but not beating them so people are watching that closely to see how that plays outgoing forward overall it was a good number there were contributions from the food delivery business, an area that continues to grow quickly. Revenue theres are up over 100 alibaba talking about pushing into some of these smaller chinese cities which have become a big battleground for some ecommerce players in china. Cloud was another bright spot. Cloud computing, revenues up 66 . Alibaba is the biggest Cloud Computing player in china. Thats seen as a bright spot for the future of the company. The other thing the street was happy about is alibabas discipline when it comes to its spending not as exciting as food delivery and ecommerce, thats what wall street was looking at closely. Margins have been under pressure the past few quarters as alibaba continues to invest in new areas. What we saw in this quarter is that while Investments Continue to rise, they fell sharply as a percentage of overall revenues that was quite a happy picture you saw improved margin in areas like cloud and Digital Entertainment where alibaba has been spending a lot of money as well those were trends that wall street very much welcomed. In terms of the broadermacro environment, the ceo said while there are challenges there are opportunities for alibaba because he feels china will move towards a consumption economy, a serviceled economy and thats a trend alibaba can benefit from in his view. Overall positive thats why you saw alibaba shares get a boost in u. S. Trade overnight. Back to you. Excellent great summary there. Weve been tracking the price action of alibaba closely. In todays real estate segment, President Trump has reportedly raised the possibility that the u. S. Might buy greenland. According to the wall street journal, trump has discussed the purchase with varying degrees of seriousness during his talks with u. S. Advisers the officials view the island as strategically important. The u. S. Has twice before tried to buy greenland back in 1946 and before that in 1867 lets take a quick look atfe its opened up a third of a percent. There was an outage due to a technical problem. Its trading positively this morning. Already up 0. 65 tehran refused to make promises about the future travel plans of a tanker that was seized in gibraltars waters last month thats according to an arrai arraignian foreign spokesman the spokesperson said the vessel was not going to syria in the first place. The u. S. Launched a lastminute legal bid to keep the ship in gibraltar. And south koreas military has confirmed that north korea launched two unidentified projectiles into the sea earlier today. The launch is the latest in a series of short range missiles fired in recent weeks as pyongyang expressed anger over joint military drills between washington and seoul north koreas ruled out further talks with the south after the president of south korea, moon, pledged to unify the two countries between now and 2045 top u. S. Lawmakers from both sides of the aisle condemned israels decision to block two members of congress from entering the country and visiting the west bank ilhan omar and Rashida Tlaib were denied entry shortly after President Trump tweeted that israel should block the visit. Reporter democratic representatives ilhan omar of minnesota and Rashida Tlaib of michigan planned to visit israel on sunday. Now israel says theyre barred from entering the country. Both are muslim, frequent critics of President Trump and the Israeli Government last month israeli leadership said the representatives would be allowed to enter. But shortly after the president s tweet, Prime Minister Benjamin Netanyahu showed that the itinerary showed the sole intention was to harm israel President Trump denied pushing israel to prevent omar and tlaib from traveling there i believe it would be a terrible thing for israel. I think it would show a terrible sign they want to do boycotts democrats rushed to condemn the ban. Nancy pelosicalled it deeply disappointing. Sign of weakness omar called the move an affront slamming netanyahu who she says has consistently resisted peace efforts and aligned himself with islam phone fo islamaphobes like donald trump in the west bank within tlaibs family still live say israel is afraid of what omar and tlaib might see. Investors watching for signals in European Markets will be happy to hear the ftse 100 fine finally opened up for trade. This is the longest closure or the longest outage for one of these indices in about eight years. Its taken more than an hour and a half for the ftse 100 to get going. It is a positive start for the session. It is in line with other European Markets, so we are trading in the green i was looking at the lac stock price, given the outage, and that stock is opening flat or just above the green line. And this is actually the second outage this year. They handle about 5 billion pounds market volume every day something investors will want answers to somebody is in trouble in the bowels of that business. The lse stock is up a quarter percentage point. Ring looks set to disrupt another set of crickets as australia take the upper hand in the ashes. Well talk with adam after the break. Applebees handcrafted burgers now starting at 7. 99. Now thats eatin good in the neighborhood na blend of quality probiotics. And fermented whole food botanicals, expertly curated to naturally support your gut health every day. Go with align whole food blend. From the pros in digestive health. Hey i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. If youre wondering why joumanna is on tenderhooks its because the second ashes test is delicately poised going into day three at lords, after another phenomenal batting performance australia will resume this morning on 30 1. Adam reid is here in the london studio how important is this morning for the english bowlers . If you will indulge me for a second, its a huge day for the england bowlers at lords on day three. The batsmen didnt do their job particularly well on day two after day one was a washout. But they hope to be fighting back only resistance came from rory bur burns. The top order fell to really do their job. It was up to bairstow to make sure england could make a competitive total. It will be a big day today for the bowlers. We know archer is on the side. Chris woakes and stuart broad, they will have to put in a shift to make sure they get rid of those aussie batsmen australia did lose david warner. Today, day three, is delicately poised as rory lyon and rory burns talked about i dont think we had the best day. I think Josh Hazlewood is exceptional. The spell from pat cummings after tea, it set the time for us for our standards, i dont think we were good for a long period of time. Its a good day for australia. We won the toss. We created more than ten chances. We can get better. Thats exciting. We are still able to bowl england out for 258 on day one wicket were going for a competitive title. We could have eked out a few more, extended at the end. I think its game on were amongst it both teams thinking they may be in the driving seat at the moment it will all play out today there will be some rain later on so it will be a busy morning trying to get the overs in a lot of excitement to see what jofra archer can do. He does look quick well, this week cnbc offered you some food for thought which has left me thinking of food, with coverage of the challenges and opportunities in the Food Industry Smart Devices on factory floors are crucial to maintaining competitiveness. Thats according to our next guest, martin walder, vp of Industrial Automation at Schneider Electric uk and ireland. Great to have you on the show, capping off our food week. Your whole model is centered on improving food efficiency. Can you tell us more about where automation comes into this and where people should be pushing for software over hardware lets take a step back and look at the demand going on there. The population in the world is 7. 7 billion today. And were already maxed out in food supply. Pro its projected to go near 10 billion, but its worse than that as the emerging economies, more and more people join the middle income bracket, they want to move into cities, they want cars, they want consumer goods the demand on energy goes up the demand on luxury food goes up the pressure is to deliver a lot more for less. Its efficiency across the whole supply chain from farm right through to the consumer. The whole use of energy and technology through all that, which will be key for us in the next 30 years. I remember thinking i went to california a few years ago. There was a drought going on i went to an almond farm they had to focus on efficient use of water theyhad a smart system of tiny amounts of water overnight, that was data dependent it was dependent on what the heat was like during the day and the next day that is a high value crop, almonds. What about some other crops that we need, that we all eat, but perhaps are not as profitable. Where does the distinction between business and the private side come when it comes to investing in the future of this technology it is quite a challenging one. The high value foods, you start with almonds, but you could look at meats, too. When western consumers are buying meats, theyre prepared to pay premium you could invest in that area. The keynology is getting lower and lower in costs. We can get sensors for tens of pounds that can sit in a field and communicate directly to the cloud to allow you to decide when to irrigate and when the pressure dropped that Technology Cost is coming down while it may be almonds today, tomorrow it could be corn and wheat crops. Does that help developed economies where you have agriculture techniques that might be considered Old Fashioned in developed economies . Does that help them catch up when it comes to things like crop yield potentially ive been looking at how much food is wasted 25 of the worlds food today is wasted in somewhere like north america, very little is wasted in the field, in production most of it is wasted by the consumer in africa, 70 is wasted in production and in storage and so on so this is exactly where technology can be used in those emerging economies today its more expensive. As time moves on the technology will allow us to get better yields in subsaharan africa. When we talk about the shift to technology, doesnt that mean less Human Capital and less human manual labor going into the industry i guess if you look at factories now and across the uk in particular, there are hundreds of manual laborers picking products, putting them in containers, packing those containers into pallets. To be more efficient in that process, today were using more robotics that can work three shifts, not one. They can pack at twice the speed. They can do it in the right hygiene, the right cleanliness yeah, one for one the robot replaces a person or two people. But of course those companies become more productive, they make more money, they employ more people doing different jobs ultimately were in a global economy. Were all competing. If we dont invest in efficient plants, ultimately theyll go out of business. Its vital you use technology, even though they displace that manual road today, they bring more jobs in the future. Where would you rate the uk in its embrace of technology in the food space were a little behind the curve today. A lot to of blue chips in this country are automated. Theres a lot of nationals which are nowhere near as well invested as germany and europe and if you go to japan, heavily roboticized. Today we need them to step up on the Digital Journey and also on automation and robotics. Martin, thank you very much for taking the time to talk to us lets take you to European Markets. That is the picture across the board. All of these indices are trading in the green ftse 100 opened up about ten minutes ago. Long outage there. Almost more than 90 minutes for the ftse 100 to get up and going. You can see its up 0. 7. A lot of green on the board on the last day of this week. This mostly isdriven by those dovish remarks out of olli rehn in yesterdays commentary. All of the three makers in the u. S. Are opening up in the green. We will hand you over to our u. S. Colleagues now. Thats it for our friday show. Im Joumanna Bercetche im willem marx thanks for watching. Have a great weekend it is 5 00 a. M. At cnbc global headquarters. A wild run wall street on pace for the worst week since may could a friday rally turn around those fading fortunes . Trade truce. Could that be ahead . President trump trying a new tactic to get his chinese counterpart to the negotiating table. And pressure on powell, two key fed heads are pushing for another rate cut sooner rather than later and not if but when. Billionaire Hedge Fund Manager ray dalio out with new odds for a u. S. Recession before the 2020