Transcripts For CNBC Street Signs 20240713

Saudi aramco with a crash as the bite in crude faces its bottom line. Defining a trend in the Energy Sector Boris Johnson facing criticism over his return to work guidance. The country looks to gradual reopening. Well talk about the lockdowns effects on the economy thank you for joining us weve been watching on the market today they have fallen 10 after the steel giant saw its net loss widen to nearly 1 billion euros in the second quarter. The coronavirus hit all of the business lines from steel to car parts. Lets get out to annette for more typically, some companies will try to sell assets, which was exactly the strategy in the last few months yet selling assets in this environment is not an easy one that has been the case. They have been able to sell their crown jewel. The elevator business is going to a private equity consort yum. They are apparently looking for coinvestors it seems with the crisis, the price is quite a burden with them as well but now thyssenkrupp is going ahead saying they dont know of any problems with the sale of the business they are also saying they dont have a liquidity problem. Expecting another record loss in the Third Quarter of roughly 1 billion euro at the same time, they secured the kfw loan until the end of september when they expect the ree re receipts from the elevator business you dont really see that Business Model Going Forward because they are going to concentrate on steel if you look at steel business, it is hugely loss makes and the price is under pressure. The question is when that will change they tried merge with the steel business which didnt go through regulation the question is how are they going to perform or be successful Going Forward currently, the market is not believing that this is very easily doable looking at the rough share price in action. Theyve scrapped the already back end of march. They are saying there is no visibility because of the Coronavirus Crisis they are especially hit hard by the auto weakness which is not going away very soon, we guess back to you. Thank you i want to take you to a view on the european markets now it hasbeen choppy from the start as we pull back from negative territory investors really picking up on the theme that the reemerge ens of the lockdown not going smoothly with the infection rate jumping. The ftse in the uk and others trying to move farther revisiting that market and also in france where the trade is down by a third a perfect. It is mixed across the board thats what weve witnessed the next hour or so, there is a strong steel theme this morning. The back of this negative result there is only days after posting the First Quarter loss as it contends with a sharp down turn in demand from the Auto Industry looking at shares of toyota after the japanese carmaker says it plans to lower profit in more than a decade. It does not see a shortage of cash reserves at the moment and expectso expects output to recover. U. S. Auto industry gets ready to return. Marking the beginning of the gradual reopening. Industry sending skeleton crews to plants. Ford and gm plan to return next week elon musk is defining the lockdown in al mena county referring to a letter by california governor that allowed manufacturers to return to work ignoring the fact that county laws super seed state rules. The billionaire spoke to twitter saying that he would join workers on the Assembly Line and asked if anyone was arrested it only be me the market has been impact bmw trades down 19 . Also down is daimler and porsche trades lower by half a percent bigger losses in the french makers fiat trades weaker bright spot is ferrari at this point. I want to pick up on tesla it is seen as one of the winners because of the market shares it can make that should be a positive road these shut downs could be impacting the fortune of the country now. I know youve been eyeing the picture. What do are you making of the reopening today . Customers may not be there i couldnt agree more, karen. I did speak to the guys when i was outside jaguar land rover. What have people got to do if they are not working, they have a look at auto trader or other brandnew sites and they configure new cars and what they could afford lets take a step back saying even when people stop Holding Staples and thinking about discretionaries. Are people going to be buying brandnew cars thats the first problem second is the industry as you know as well better than i do was in deep deep trouble way before the coronavirus epidemic we speent the whole of 2019 and latter part of 2018 that the industry got china so very, very wrong. The demand for vehicles dare i say new generation of vehicles declining and what was really poll ty at all Public Policy was not to have cars outside your apartment or houses what are we seeing as part of the recovery in london, trying to get people to walk to work or get on their bicycles. It is not realliness to go out and buy new cars, which creates contradiction. Youve got industries begging for support for relief packages and the lessening of tax burden but yet it is an industry that has not seen much. Not part of the new way people are going to be working. They dont need to drive to work one quick word, i would say about tesla. I think tesla had a path itself for a very long time they owned luxury ev we know germans are back, the u. S. Are looking at their portfolio as well. I dont know if theyve ever had such a clear road for themselves there have been a lot of competitors when the Auto Industry is back i like the analogy there. Getting to julianna. Clearly, the production in the United States, about 6 the size of the contribution to the u. S. Economic output. It is a very important industry you just spoke about this that every state is now in charge of their own exit strategy. The complications this creates and the stayathome orders vary state by stay and going across the grope country by country, the orders are so different. We talk about such an integrated Global Supply chain. Smaller players plaps in a more difficult position, they may be looking at a very different timetable for reopening. There is a huge number of questions even if the industry wants to reopen in terms of their supply chain you made a discussion in uber and their earnings pointing to a near term increase in demand when peoples patterns will change. People will be nervous about going back to public transport this is what uber was pointing to, that they will offer ride sharing instead. Im thinking about the Auto Industry and what this means for cars when we come out of this, will people necessarily be eager to go out and buy a new car, probably not and also how much exposure people want to crowded spaces and how long these preferences will be in place once the pandemic is hopefully behind us. I wondering when that congestion chart will come back. Lets bring in our guest from jeffries i want to start with tesla, clearly seen as one of the winners, it could extract on the back of the crisis what do you make of the challenge to restart its factory in free mont against county orders good morning. There is also a lot of drama around tesla and elon musk i wish there would be less of it i think all carmakers are trying to restart as quick as possible. What is the question about tesla . Nothing really they have to follow Public Policy requirements to make sure covid19 doesnt transfer. The indication given is the only one voicing it in that particular way there is not much he can do more than other carmakers in the same situation. I want to talk about cash, we saw that taxpayers had had to come to the rescue toyota had a credit line up to 9 billion how concerned should we be about the cash side. We dont know what the consumer demand story looks like the next 12 to 18 months. Absolutely. The cash position going into this crisis was much better than in 2007. The cash position was better we have seen carmakers draw down credit lines so liquidity itself isnt the most pressing problem if you assume we go back to work gradually during the course of may. If you do the analysis and assume no production at all. Those would go through the end of the second quarter, early Third Quarter without getting to the liquidity problem. Thats not really sustainable. The industry prepared and the issue when it is drawn down is leveraged at the end no reservation about the carmakers would have and on the Balance Sheets, there is plenty through the end of q 3, we had no production. The question is how do you jump start a production and demand for cars again i want to touch on demand in a moment but first on the supply side of things as we hear from automakers, as they look to restart production, a lot of it depends on their customers and given the rules state by state and country by country. Where are the Biggest Challenges when it incurs the Global Supply chain is there and ready in full thats the risk due to supply chain since the beginning of this crisis. We havent seen a major short fall of delivery or anything of that nature. That has not materialized, the risk is one part missing short your Assembly Line it is interesting also to see that in the First Quarter of 2020, most have effectively outperformed the Industry Growth part of that is even after the carmaker stopped producing, the carmaker kept delivering cars for a while and have restarted production to not incur any shortages. There are all kind of longterm issues and risk in terms of the supply chain and so far will manage quite well. Easy question for you, which company is the biggest value trap and which is the best value . There are two companies we stay away in the auto space at this stage with he think renault at this stage we dont really have the view the Balance Sheet will be repaired and there is no way they can get out of the situation organically. We have some concern there is more valuation on the ferrari. It is definitely a luxury brand but it has some interesting charact characteristics. The new order in take might not be as high as expected and there for they may be forced to down grade estimates. Thank you for that this morning. Coming up, coronavirus weighs on saudi aramco earnings but the oil major maintains its vind d in france. Mmm, it shows so good. Oh hey, did you say you needed help with investing . Because i know someone whos really great. And you trust him . Totally. Yeah. We went to school together. Ill check him out on investor. Gov. So, whatll it be . Ill just have the burger. Before you invest, get the full report. Check out an investment professionals background for free on investor. Gov. Before you invest, investor. Gov. Truly transformative sleep. So, no more tossing and turning. Because only tempurpedic adapts and responds to your body. So you get deep, uninterrupted sleep. During the tempurpedic summer of sleep, all tempurpedic mattresses are on sale during the tempurpedic summer of sleep, there are times when our need to connect really matters. 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This should be market positive we saw a pretty mixed picture play out here. Lower and concerns about potential further spread of the coronavirus or a second emergence with a pocket of infections be egg reported in wuhan. That being the epicenter of the outbreak in china before it spread across the rest of the world. That is keeping the market on tender hooks today as you are looking at the heavy weights, i want to focus on tencent shares they are reporting q 1 results tomorrow important to note as everyone is at home with devices this is the owner of we chat well look at how that reflects on the q 1 numbers after the numbers close tomorrow t tencent shares close lower looking at allianz as they say the coronavirus has cost it 700 million euros. The german insurer says it faces aggravated continues due to the uptick in the pandemic it released preliminary earnings last month to vodafone on the other side of the equation, up 5. 9 higher it maintained whethering the fall out from bt to scrap its payout and paying nine cents with a prize of 2. 6 in fouryear core earnings. Increased in data volumes. It has seen rooming revenues fall due to the slow down in International Travel Deutsche Post falls. It cannot provide guidance after taking a 210 million euro hit. Revenues rose slightly with all five divisions reporting positive core earnings looking at the oil industry, translated to red across the board. A selloff of bp and shell more than 1 . Total down a third a percent saudi aramco fell 25 to 16. 6 billion missing estimates. The oil major said it was hit by plunging crude prices over the period as coronavirus wiped out global demand. It expects the strain to continue to weigh on its earnings this year im not sure what else to expect given such a run on oil markets. A lot of baring on the Production Oil and any announcement of production from saudi arabia what an Extraordinary Company. It can have the attacks it had last year and get back to production ramp up and get down to 7. 5 Million Barrels the first thing ill say, its quite an Extraordinary Company with the lowest cost barrels on the planet the problem is not profitability, the major share holder, that is of course saudi arabia and the royal family, they need a higher price to show you a real problem here, i pulled out an article from early march. Talking about what the imf needs andry add needs. An 80 barrel budget which currently carries a deficit of 50 billion pounds. 187 billion expecting the deficit to climb from 20. 7 to double digit territory this year. When the article was written oil was 38. 04 a barrel. This shows the deficit is blowing out in saudi arabia. There in lies the real problem not necessarily where they can balance the books. It is the state that is the problem. It is somewhere in the region of getting 27 thank you for breaking that down for us looking closely at the implication. Bank of england Deputy Governor with us to discuss the lockdown effect on the economy and the Monetary Policy response sleep. So, no more tossing and turning. Because only tempurpedic adapts and responds to your body. So you get deep, uninterrupted sleep. During the tempurpedic summer of sleep, all tempurpedic mattresses are on sale welcome to street signs. These are your headlines a metal melt town for thysenkrupp shares siege losses widen in the second quarter. More industrial pain weighs on Market Sentiment as chinese producers see the biggest decline in four years. Saudi aramco falls as the crash in crude bites the bottom line the oil giant maintains its dividend elon musk defies authorities by reopening teslas Key California plant despite lockdown orders. Uk Prime Minister Boris Johnson faces criticism as the country begins its gradual reopening. Speaking to the Deputy Governor about the lockdown effects on the economy shortly. Let me take you to the action we are seeing on the european market. We saw reversal at the start and a little bounce. Holding on to some of the challenges to the dax and the frank market still seeing a solid performance for the ftse 100 pays to get italian stocks 138 points investors getting mixed signals on the Economic Impact from coronavirus as we track the reemerge e reemergence. Others hoping as we get back to the swing, we limit the damage investors seeing conflicting messages lets push on to u. S. Features to get a sense of how well trade today. In the red so far as the s p, dow and nasdaq are suggesting a weaker start yesterday, it was the dow that fell, you had gains elsewhere and the nasdaq up somewhere 18 . The uk government has announced guidance as part of easing the lockdown. Urging face masks. The option was quick to attack the announcement calling it conflicting and confusing. Calling construction to return on wednesday all drawing criticism. Tom will be interesting on the roads to see how many people are back at work it seems some people are interested in getting out of their homes it is understandable, the government is making this nuance step by step and how they can make their businesses covid secure. It was never the idea for the government to furlough the entire economy and those that can continue with safe practices are called to do so they were working there and had been to a degree as well seeing those travels and a large amount of construction sites were working on the other side of the coin, i spoke to barrett developing and said it had only just started. It has been bee spoke despite this grand announcement that the uk is back to business ill do this quickly, getting up today to talk about the furl owe scheme financing the furlough scheme is a huge bone of contention for many some who said it should be kept open ended becauses it more about the pandemic and others looking at the government finances who have seen it is untenable and could cost 40 to 50 billion pounds and that it is always going to be a tricky part of the economy. Taking the death toll ged to 15,265 thank you for the update. The bank of england voted to keep rates steady at an alltime low. It could contract by 14 this year and predicted a 15 rebound in 2021. Suggesting it would require significant monetary and fiscal stimulus also joining the conversation i want to ask you about how much more stimulus is required. Investors noted that the fed fund futures suggested potentially the u. S. Could face negative rates what about in the u. S. With rates sitting at 1 . Is there suggestion negative rates would be required . Caller good morning. You have seen, as you say, from the vote we had at the last meeting and also from the minutes at that meeting that i think the committee are certainly prepared to do what is necessary with risks still to the down side that, yes, it is possible more monetary stimulus will be needed i want to ask you about those negative rates weve seen a domino effect with the u. S. Economy would that mean an implication you would also have to consider doing the same thing caller no, i dont think so. There is no direct impact. We keep under review all our potential policy tools this is a question that has been thought about on and off since the financial crisis it is a balanced judgement the very reason the Central Banks conducted assets was because they felt Interest Rates were reaching an effective ban at these levels, you have to think about the beneficial effects of directly cutting rates on demand and might be the potential effects of the Balance Sheets whether you cut rates, you actually risk doing more harm than good because with deep rates you contract the margins for banks and even encourage them to reduce rather than to increase these are the balances they have to think about you will remember in 2009, the committee decided to stop at 50 basis points at that time, particularly the Building Societies were quite weak and that many of her assets fell directly at some rate to go, because the Balance Sheets were stronger and with the help of the funding scheme, we were able to go lower and at that level. That for the time being is able to respond also expand the qe asset purchases by march Deputy Governor, there are questions about how far the bank of england should be balancing of course, you were on as external member since 2011 and you overlapped by two years the former governor who said the furlough scheme should be open ended. Do you have concerns that the pressure now through the bank of england is financing the government and actually seeing as much as the furlough scheme should be cut out. The quantitative easing is not that limited caller no. First, thats not a matter for us, the furlough scheme. Thats government policy thats part of the scenario we put out but not a matter for us to comment on. The reason for the qe is to put out a target the reason they voted last week to increase the target stop by 100 billion. What we have to think about is the task to gus in the target and supporting demand. I dont think that is really to do with financing the government but given the framework for the policy decisions sir, some would argue the question over the independence of england and the huge amount of guilt made by the government and the fact that via qe, you are dousing the market concerns. I will ask you, do you think those concerns about the independence at the bank of england given what appears to be implicit report and saying it is more about the Inflation Department the government raises more money. The bank of england issues more qe not when you scratch a little at the surface the government has been running a deficit at least10 years inthe economy at leasts that the way theyve feared talking more about the implication taken place around the world. Clearly led to inflation and now the pandemic has exacerbated are you concerned about this implication in society i would suggest that certainly inequality has not gone up in this country. It has been pretty flat for the last 20 years here hence for asset prices, i dont think theyve gone up much either even before, when you look at the price of uk housing. It was about where it had been about 15 years earlier equities were lower. Even 20 years earlier. It is true rt part of the purpose whether the Interest Rates or of qe is to support demand and asset prices but i dont think it is the case that it is pushed up materially net or the depressive effects. It is very clear asset prices, we havent yet seen house prices and what has happened to them. They are difficult to measure. Not the case that equity prices are higher i would hope there is some effect whether in Interest Rates or asset would work. Seeing in balance and is not the case that is needed to go up in a couple of years. There is a lot of cost, hume amount of uncertainty even in real time and as we look ahead, difficult to say what those effects on whether on the level of income or its distribution. Changing the tact and talking about the banks the best thing they can do is to continue to lending. Making sure this isnt just for the bank but for the economy as well the banks continue to keep afloat companies that shouldnt survive this pandemic. What do you think about the risk of keeping some Companies Going that dont deserve to continue given the shape of their finances and where they were heading into this crisis caller that is a good point. Good question. The message in the interim report is pretty clear it is definitely better not just for the economy but even the banks themselves but the supply of credit that should be maintains or even increased. With all of this that can be provided by the government is there a risk that some companies who went into this possibly with too much debt will find themselves overburdenened afterwards yes even a risk before then, there for, they will be unwilling to take on new debt the answer to these Companies May be to raise equity instead of debt. The risk at the moment is a greater concern the first of those risks we should be talking about. As to this lockdown, and the link of how well those would be allocated and with the damage. After hearing the speech and looking at the clarifications issued how confident are you and whether we can limit damage in the uk we can only see we produced the first stylized scenario that lockdown would be eased later in early june and phased over four months. One can only tell as the indicators come through what effects it will have we are monitoring all sorts of output and other things, which im sure your watchers and listeners are indicating with travel and payment to see how the economy is fairing through this period we are monitoring as they too relax some of these restrictions the Data Analytics about the appetite the bank of england has been considered about the bigger step away from the bank notes towards Digital Assets that is the trend that has been playing out over the years. The use of bank notes for transactions and the share of those paid for with bank notes have been declining. We have seen a drop over the past couple of months. By the overall level of transactions wed have to see how enduring that is. I think it is not too early to say whether these changes are permanent or not but certainly something we are watching. Thank you for giving us your time Deputy Governor, Monetary Policy, bank of england. Coming up, white house officials prepare to test on the virus response as President Trump takes offense to questioning on the fall out. These days staying connected is more important than ever. So were working 24 7 to maintain a reliable network, to meet your growing internet needs. Were helping customers who are experiencing Financial Difficulties stay connected. Were increasing internet speeds for low income families in our internet essentials program. And delivering selfinstall kits to your door. Nos comprometemos a mantenerte conectado. Were committed to keeping you connected. For more information on how you can stay connected, visit xfinity. Com prepare. President trump says he is not interested in renegotiating the phase one trade deal with china after the chinese stateowned media is asking washington to get back to the table with a more favorable deal asking to buy at least 2 billion as part of the truce the pandemic has put a strain on chinas ability to increase imports from the United States three white house officials are set to testify remotely on the trump administrations response to the pandemic tracie potts has more from washington, d. C. Reporter karen, they will testify remotely because they are selfquarantined all three have been exposed. Dr. Fauci who has appeared numerous times is expected to say that there will be needless suffering and death if the United States tries to reopen its economy too soon hewill testify today along wit the heads for centers of Disease Control and food and drug administration, which just gave emergency approval to a new test that will make it more accessible to more people. That is a question that came up when the Briefing Room when President Trump said everyone now entering the west wing will be required to wear masks and there will be daily testing of his senior staff he was asked ifs that ironic because there is not enough testifying for the rest of the country. The president said there is enough tests out there for those who want it. His own testing csar said there are enough for those who need it could see a repeat of the Great Depression if lockdown continues for a year there will be a shift in focus from liquidity to solvency issues if we start seeing, if we dont find a vaccine or a occur orcur better way of testing for the population if we are seeing daily doses of bankruptcies lets take you to the u. S. Markets. You can see where we are marching on to the boards well condition and where they were on the flat line. The nasdaq has been trading about 6. 5 off line. A little red ready to hit those stocks later on today. That wraps up todays show thank you for joining us Worldwide Exchange is up next. It is 4 00 in chicago and 5 00 at cnbc headquarters. Will the tech rally loose some steam . Well dive in. Investors continue to focus on the efforts to restart the bulk of the u. S. Economy, even as the number of cases continues to grow outrage at United Airlines after a viral tweet of a jam packed booking elon musk ordere