Transcripts For CNBC Street Signs 20240713

Negative after the dows 900point rally boost investor stocks Airline Stocks surge as the uk government signals cross border air bridges could make Summer Holidays a reality weve got european auto sales plunging 76 in april with fiat, chrysler and psa leading declines as the lockdowns cause supply and demand in the car sector a very warm well come everybody to street signs. Lets kick off some fresh commentary tensions really heating up between beijing and washington w. H. O. Is at the center of the latest dispute yesterday, President Trump threatened to permanently halt funding to the w. H. O. If it did not make improvements in the next 30 days now china has weighed in on the comments saying the comments of the u. S. Leaderships letter tries to mislead the public to smear china. He says paying assessed contributions in full and on time is every members obligation the u. S. Letter according to Chinas Foreign Ministry tries to shift the blame of its own response after President Trump yesterday leveed a series of allegations toward china with regard to the pandemic certainly heating up the tensions between china and the United States. The u. S. President threatened to permanently pull funding and withdraw unless the agency commits to, quote, major substantive improvements the president accused the w. H. O. And came again after accusing the Global Health body of being too china centric. I think theyve done a very sad job. The United States pays them 450 million and china pays them 38 million. They are a puppet of china china centric to put it fairer looking at red across the board for european markets after a very strong rally. The stock gained more than 4 . The best performance since when it gained more than 4 boosted by optimism. Some encouraging data coming out of that u. S. Biotech firm. Today, investors pausing for breath a little bit. The cac 40 down. The german index yesterday was the key outperformer it rallied 5. 7 . The ftse 100 also down 10 basis points looking at the sectors, yesterdays rally very cyclical, heavy. Investors are putting money to work in sectors that will benefit from reopenings around the world. Weve got insurance and banks performing well. The Financial Sector seeing a strong bounce. Media and technology also holding up well. Travel and leisure was in the green but slipped now down seven basis Points Health care down, basic resources. So really a mixed bag this morning. Lets look at the pharma name. Yesterday, positive news on the vaccine front. That doesnt translate to Health Care Stocks and does mean some optimism when it comes to the outlook of the virus defensive names coming under pressure and as i mentioned put money back to work a little down side for the european pharma names. In looking at the airlines, the uk government has announced a socalled air bridge which could allow travelers to britain and avoid the 14day quarantine previously discussed looking at the airline space, we are seeing a little mixed picture but pretty substantial gains in iag up 7 this morning. Strong reaction. Easy jet shares up ryanair extending two points up 8 yesterday, the squawk box team spoke to the ceo of ryanair. Steve, what more can you tell us about what the uk government had signaled and how it compares to what had been on the table before a lot going on in this space. Do not under estimate the large amount of lobbying from industries saying you have got to lessen these restrictions there are no real restrictions on coming in and out of this country at the moment, which seems extraordinariry. Quarantine checks and health care checks. Now the government is saying from the first of june, well have quarantine with a few exceptions the haulers and one of the routes that comes up from dover. A lot of exceptions have been asked for and none given so far. There are a whole host of people who think it is absolutely damming. Saying the uk should involve a risk based approach. Another we spoke to said if this happens, it is a major deterrent much we spoke to him about the recovery of the Airline Industry the most damming of comments came from Michael Oleary to our team yesterday the ceo of squawk box. Listen to what he said they are making this stuff up as they go along the reality is, face masks, as demonstrated in asia if both a covid sufferer and noncovid sufferer are wearing a face mask, you reduce transmission by 98 . We think things that have no medical basis like a 14day i isolation which exempts the french or laurie workers what about this blanket quarantine and what may have been tweaked the transport secretary started talking about air bridge, which would allow lowrisk countries to come into and out of quarantine as you travel as wechwe know the likes of germany, italy, spain, they are easing their lockdown restrictions. The hope is that as this blanket starts, it will be reviewed on a regular basis by the way every three weeks seems to be the popular move by the july period about when hes going to really ramp up his Airline Schedules that maybe the uk would have come down on that. A quick word on the share prices what an extraordinary roller coaster weve seen in the stocks this year. On the 17th of february, which seems a lifetime ago, weve traded 640 pence per share the last couple of days, it has been trading 168 pence now we are back up to 201 pence, as i speak as well youve come up a long way but my goodness, you are under twothirds lower the Airline Industry is having a rally today but still incredibly low rated. The pa is still trading, 2. 74 pa back to you. Well get back out to you shortly and see why you are in that jacket this morning lets talk about the impact the pandemic is likely to have on the Economy Deutsche Bank says the annual report predictive defaults would have been far greater than without government intervention. Lets bring in our guest geoff is also going to join the conversation jim, thank you for joining us this morning youve conducted this annual study for 22 years pretty impressive. What is the key message for investors out of this years study. Hi, thank you for having me on the key message, weve been in a super cycle of low defaults. I think the Creative Destruction regime has been thwarted by heavy introduction relative to the Economic Outlook. Weve got so much debt in the system, wir nervous about widespread results. And even nor nervous about huge debt burdens the policies put in place to prevent the defaults defaults will probably get to a normal recession and probably lessen in europe defaults massively depress to the shock and thats the key message. That is really fascinating when we think about what all of this means that has kept low and sometimes negative properties coming with the pandemic, they are getting even more stimulus coming what does that mean . Perhaps all of these companies that shouldnt have been kept alive should be kept alive in the future there is a pretty good core relation between default rates and productivity those are normally higher when youve got more defaults per cycle. When you continually stop the natural default process, you tend to get a lower productivity outcome. I suspect the covid19 will be an extreme version of this and keeping the Companies Alive where unfortunately the business levels were impaired that will be lower productivity Going Forward. The take on the world you have is bearish for risk assets but will encourage investors to seek some safety in return yesterday, when we had a bit of a break around moderna, it was the treasury market that got hit alongside gold and other margins. How often do you have to negotiate these holdings id say our outlook isnt necessarily bearish in markets we have an extraordinary central bank theyve already pumped in more stimulus than they did in the first three or four years in the financial crisis weve had three or four years compressed in. That is keeping us relatively neutral it depends on the take of the inflation that will be buy bond yields and negative in many parts of europe is not going to be a hard trait. Those would be capped by Aggressive Central Bank buying in the months and years ahead. Just on the appearance we get today with jay powell and secretary mnuchin, weve had this different view on the rate of recovery who thinks we could get a strong third and Fourth Quarter along the end of 2021 recovery there is a lot of politics involved here. Who is more credible and what does that mean for the 3 trillion package that congress has put together i think any central bank or politician or treasury, it is not in their interest to down play their economy if social distance stays as we think it is, a number of sectors will operate well below capacity for years. In the u. S. , i think you need to be two meters. We are probably at the bearish end of the Economic Outlook it is unrealistic to think of what that will be youll have social distancing for a long time. Because we are bearish on the economy, chances are more will be put in for the authorities. It is a difficult message to put across that probably means youll have more stimulus. Asset markets were like that to some degree. Well have to leave it there. Thank you for joining us the head of credit strategy from deutsche bank. Thyssenkrupp shares are up 3. 8 after the german unveiled plans to sell off several businesses as it looks to become leaner and slash its debts it plans to slim itself down to five core businesses even its steel arm is set to merge with its rival after the need for consolidation has intensified amidst pandemic. Lets move on to annetta, moving on to shift here, bring us up to speed, what is the strategy and fate of its steel arm . Actually, i think it is the most radical overhaul we have seen in the history of thyssenkrupp they are potentially saying goodbye to the business they were actually coming from and where 200year history is based on the steel business. Steel no longer is core. They are looking at various options. Literally all options on the table for their steel. Apparently, there is so much pressure on management to turn around things. They are saying the coronavirus has overhauled the whole strategy so whose interest . Various bidders said to have interest also there is a german solution, which might be favored by some major Share Holders also on the table. I guess they look at everything. They need to get the deal done as soon as possible so the most feasible, the fastest will be the one which is going to be done the same holds true for war and marine business. They are looking at partners they can keep it inhouse. They will go into action to sell the majority of that business. Essentially, there are three units which remain in core, material, science, automotive. Nothing more that accounts for 43 of the exiti existing revenues which gives you an idea of the radical overhaul the deepest cuts in history and all kind of businesses the bad bank, multitracks, they are all for sale there is a huge amount of businesses as you were saying, julianna, coming on to the market shares surged like 12 yesterday. They are up more than 2 today i guess it is good news that this seems to be a very hands on manager with bold ideas and the st stam ina to enact those ideas. Thank you julius baer posted a 16 rise the Swiss Private Bank benefitted from, quote, benefitted increase which offset an 8 decline in assets of management the current Financial Year despite saying it was too early to assess the impact of the pandemic coming up on street signs, julianna and i will go through the unusual set of car registration figures well go on to talk about the restart of facilities here at ford well be back after a short break. I got an oriole here. Eh. Common bird. Ooh look over here something much better. There it is. Peacock, included with xfinity x1. Remarkable. Fascinating. Very. It streams tons of your favorite shows and movies, plus the latest in sports news and. Huh run the newest streaming app has landed on xfinity x1. Now thats. Simple. Easy. Awesome. Xfinity x1 just got even better with peacock premium included at no additional cost. No strings attached. Just say peacock into your voice remote to start watching today. European car registrations have tumbled as coronavirus lockdowns weighed heavily on sales and halted productions across the continent. Italy was the worst hit eu market marking a decline while spain and britain also saw steep falls. Steve joins us yet again with a ford plant where workers are ready to return. Talk us through these latest numbers and what is happening behind you always sunny here near to the old stomping grounds look, the numbers are bad. One number i havent given you yet, weve got individual Car Companies. Horrible numbers across the board bad, ford lower. Countries across the board are horrendous 76 lower. Since february, no covid problems march, april, horrendous as well compacted by 38 spain, 48. 5 france 48 absolutely horrendous figures. Weve seen a real pledge era of activity here in the uk, at one stage, they have about 475 acres produced 39 million engines and 11 million cars. It employed in the 50s about 40,000 people. Now, it employed about 2,000 people it doesnt make the cars anymore, they assemble the engines. But they are really concerned about the demand picture Going Forward. Ihs market thinks they are going to go down when you think about whats happened to people in the uk, youve had a huge, huge increase people have lost their jobs the people who have kept their jobs, the first thing theyll do Going Forward will really suffer the other thing that could work is the fact that Interest Rates are continuing transit vans and customers as well the fact is if youve kept your job, youll have a good deal the finance arms of Car Companies has always been an area where even if they havent made as much money, theyve made their money on servicing i dont see how on that latter point that financing will be a decent area of profit it will be a hard road back they are still trading very, very low as well it remains to be scene in the market Going Forward and how much support theyll need in the eurozone and as in countries across the uk. Thank you, steve for the update glad we got an action shot we can see the activity behind you. Coming up, could renewables be key to the restart to the economy after coronavirus. Well talk to the ceo of Vestas Wind Systems after the break. Welcome back to street signs. Im Julianna Tatelbaum these are your headlines china accuses President Trump of misleading the public to smear beijing after he writes to the World Health Organization saying it mishandled the pandemic while xi jinping defends his role in the outbreak translator all along, weve acted with openness and transparency and provided information to the w. H. O. And countries in a timely fashion. European equities accelerate losses construction and oil shares move lower weighing on the stoxx 600. European auto sales plunge 76 in april with Fiat Chrysler and psa leading the declines as lockdown stall demand and supply in the car sector. Airline stocks surge as signaling cross border air bridges could make Summer Holidays a reality lets get a check on european markets about 1. 5 hours into the transition today, we saw a strong rally yesterday, the stoxx 600 soaring about 4 this morning, we are seeing a little pull back here and losses accelerated. We have the dax now down about 40 basis points. In italy, the ftse mib down about 1. 1 nearly every sector is trading lower with technology essentially flat on the day. Pausing after the surge we saw yesterday across the globe on the back of the hopes of a potential vaccine from moderna lets get a check on u. S. Futures. We are similarly looking at a little pull back as we are seeing in europe no major moves in terms of the magnitude. S p 500 and the nasdaq looking to open a touch lower. Well get a check on u. S. Retail investors will be eyeing that as well as Jerome Powells commentary. Germ a and france unveil a 500 billion Recovery Fund. Seeing the Eu Commission raise the funds. Countries hardest hit would receive france something germany had before now been reluctant to agree to saying these funds should help them come out of the crisis further and the response should be a one off translator the goal is for europe to emerge from this crisis stronger, more cohesive and in solidarity. We know the impact on our countries varies there is a risk that the cohesion of the European Union has been damaged that is why the Recovery Fund must help to ensure all the states in europe are able to respond appropriately. That requires an extraordinary one off effort which germany and france are prepared to make. French president said the funds would allow the block to better defend its assets translator the action we are bringing together consists of reducing our dependancy in sectors by the production of medicine and to improve protection of our companies and better fight on investments and attract key investments. Additionally, our wish and collective will is to build confidence in europe in terms of the health care sector, we are built together. Our attempt to buy and cord nate together share plans over the production of the pandemic the pan european policy in Health Care Never existed and it must become our priority our next guest believes that investing in Renewable Energy could be the key to rebuilding the economy after the pandemic joining me now is the ceo of Vestas Wind Systems. Steve will join us also. Chime at change advocates have long said that in order to really make a difference in the fight against climate change, we would need an overhaul of a lot of key systems and that this has provided a lot of opportunities. To what extent do you think renewables will be a key part of rebuilding the economy at the other end of this pandemic thank you for having me there is a couple of things. When we just go back and say the pandemic has moved us from the clear pandemic of countries will reopen in phases there is no doubt we are reopening from the small headache what debt levels. Whatever we like to call it, we have put the world with the like of the Economic Situation which leads to the question of how should we then do the recovery and what should be part from a personal perspective here. Im a strong advocate of the Renewable Energy because it is worth because it is efficient buy the way, it creates and secures a lot of job for both now and for generations to come. Do you think in europe at the european level, there is a political will to make renewables a major part of the Recovery Plan . I think it was obvious that even before we reentered into this, it was on the agenda of the green deal. That it was country by country in europe. A lot of initiatives driven by both countries and driven by the eu so europe as such has clear been seen to grab this. It makes a lot of sense. Europe is one of the areas we havent seen it requires very little subsidy if any actually it requires the opposite it requires the underlying financing for future owners. You have the permitting and how you allocate the wind and in terms of on shore and off country by country but as eu as a whole. I manage to buy some heating oil. A third to a quarter of what i have to pay. With all the best in the world, i would love to put up solar panels or a small turbine. If im paying 16 k a liter, why would i . Do you fear that will be the case in india and elsewhere trying to make the transition . I think we probably have to deviate and a little bit discuss here what you believe youll be able to do the same in 6 to 12 months time when the world is back and operating to some extent again probably not. You and i know there will be short term deviations in commodities like energy and others i would say contrary to that, you may have found here, there are major countries that have experienced that theyll be able to run all of the Energy Consumption and demand purely based on Renewable Energy. Some countries can see mountains and other things and actually be outside. It is not more than 24 hours ago, i spoke with a number of colleagues and customers theyve said they never had a better outdoor quality of air in their whole life this is down to a few months of close down your trade in terms of Energy Commodity here shouldnt lead us away from the strong underlying Consumer Climate can see there is a difference to be made so, no im not saying that that is finish off. I thought you had finished no, no. Back to you. Let me ask you about the Bigger Picture as well you and i know the doctor at the iea very well. He has said well have a combined set of resources. My problem is to keep the lights on over the next 10 to 15 years compared to the next 15 to 30 years, do you think those not used rather than disappear will go to hydrocarbons there is a risk im pretty sure a lot and im sure you included have a family. My two daughters are now 18 and 21 year old. I for sure know and fully admit what we have been spending over the last four months across o society mainly for that generation to repay that debt put on here. I think it will be a little unfair if we dont start taking some of the more serious questions like dealing with the climate change, which we have to do at some point in time anyway. If i look at that, the tools are there. They are available this is about getting your priorities right as part of the Recovery Plans so, no i feel it is there and obvious also how we can do it. I think throughout this crisis, weve shown to all societies that renewable cant be trusted but we both know that transmission and transformation of Energy Sources is not going to happen overnight and from a quarter to a quarter it is going to happen by consistently planning year in and year out and adding more renewables to the underlying please dont retire something by urgency or a something here because then you wont be able to replace that quick enough by some of your other means in terms of renewable i think here, the bhoel renewable inspector from coal to nuclear and hydrogen and renewable. All of that will have to play together when we look 10, 20 years ahead and only by combining it, we can make it a better place a long road but very worthwhile certainly for you guys well leave you there. I want to bring you some fresh comments out of the german finance minister the german finance minister saying we need further progress. When the lockdown is over, we need to ensure the economy recovers sense the Recovery Fund. This is good it will help get europe out of this crisis. These are comments from the german finance minister after germanys about face on the stance to the coordinated response with other european members. Well continue to watch this space and bring you any other comments well take a quick break but coming up, several key big box retailers will report this week as worries mount over the coronavirus lockdown more after the break welcome back to street signs. It is time to talk retail. French connection has warned it could run out of cash soon it is in talks with several potential partners over new funding and adding that it doesnt expect to return to normal for some time some stores will reopen next month. Well get another snap shot on the outbreak in the u. S. Consumer when several key retailers. Walmart will report later today followed by target and best buy on wednesday and thursday. Courtney reagan has the details. Well hear from a lot of retailers reporting this week. There will be a lot of nuances in some of these numbers when you think about some of the essential retailers that have been allowed to keep their doors open, you will expect to see stronger sales for things like food, household sales, cleaning products youll probably also see weakness in other discretionary categories like apparel. Those retailers have had to pay their retailers more with higher hourly pay as well as increased costs for increased sanitation and cleaning providing workers with professional equipment. That is likely to weigh on the margins. In late april, the total comparable sales to date were up 7 due to 100 increase in on line sales. Target did warn about pressure to Gross Margins costco did warn about the increase in april, that stockpiling and hoarding behavior had fallen off a bit. So traffic was lower and they werent buying quite the volume than the month prior then names like kohls, Urban Outfitters and l brands were operating purely on line some were able to fulfill curb side orders. Otherwise, it was just regular delivery and consumers pulled back on purchases for that time. The focus for these will be more about what they are seeing as stores gradually reopen in some areas of the country is the consumer coming back . If they are, what are they buying analysts still like some of these off price names like a tjx or ross stores and think they could continue to be a beneficiary of consumers doing a trade down if they are feeling more constrained they might even be inventory beneficiaries. What is interesting that in general, they have a small on line e commerce experience during the quarter, they actually shut it down entirely there is a lot to watch with retailers this week. Courtney reagan cnbc joining us now to weigh in with more insights stacey, thank you for joining us lets kick off with walmart. The next step in terms of the reporters. Given the majority of the u. S. Walmart has about 50 of its offerings. This should be pretty good quarter for walmart from a revenue perspective, right absolutely. The ones pfocused on here, those are spiking with 50 exposure to the grocery space. The big problem target has talked about is that this big shift is lower margin. It is not necessarily a profitable mix shift as other stores start to reopen, nonessential stores, what does Consumer Behavior look like. Weve heard from target that things slowed into april as the frenzy calmed down so what does may look like certainly for apparel that is down 40 to 60 the title of your latest Research Note jumped out at me, big fish eat little fish talk to me about the landscape of retail in the u. S 70 of retail is small business. Thats right. I think people forget it is not just about these big public companies. Those are the ones really at risk here. As youve seen with walmart and target they were originally penalized for that from a multiple standpoint for now, they are looking for pick up in store they are meeting the consumer how they are wanting to be met the small guys, it is impossible to pick up the big ones, target, costco amazon selg amazon telling us they are going to spend all of their profits to meet the consumer how they want to be met over the summer. Now the u. S. Economy is opening up again and u. S. Shoppers are getting out and about, how can you expect the Consumer Preferences involved. What kind of stores will Consumers Want to shop at. There is a lot of anxiety involved in going to the shops there is tons of anxiety not only from the consumers but people who have worked in the stores there are tons of contentions in the u. S. And people arguing over Wearing Masks or not the mall will be a scarey place to enter because it is enclosed where as the strip malls or where you have access to the outside rather than to walk through a mall will perhaps perform a little better here the Consumer Behavior will be incredibly different there are restrictions on how many people can walk through a store at a time, so volumes will come way down which means rents will come way down on the topic of malls, weve talked about the shift towards a more experienced based shopping. A lot of malls have made Big Investments making it more of an experience not just going to the stores and leaving what is the response as of this pandemic weve heard over the past years of malls adding in entertainment, fitness, adding in more and more highend restaurants. You think about those and particularly for the restaurant space, that is something that has not been talked about enough the ppp Protection Plan doesnt really address restaurant needs. They need major capital to open up it is not just about employee paychecks. Youve seen a lot of those go dark that has been driving the traffic into the malls also, in general, all of these experiences, play areas, people dont want to be close to people right now. All of that money plowed into experience right now perhaps takes a backseat and perhaps doesnt drive the traffic that was expected to. A lot to think about. President sw Retail Advisors a note for you, weve heard from the bank of japan that they will hold an emergency meeting on friday to discuss a new lending program. On the topic of banks, Jerome Powell and secretary Steven Mnuchin will give testimony later today on the covid19 and economy. A roaring day yesterday on wall street. A mixed picture there for today. The nasdaq slightly higher thats it for todays show im Julianna Tatelbaum across america, Business Owners are figuring things out. Finding new ways to serve customers. Connect employees. And work with partners. Comcast business is right there with you. With a network that helps give you speed, reliability and security. And enough bandwidth to handle all your connected devices. Voice Solutions Like remote Call Forwarding and readable voicemail. And safe, convenient installation. When every connection counts, you can count on us. Get the connectivity your business needs. Call today. Comcast business. It is 5 00 at cnbc Global Headquarters wall street looking to keep the party going. Some encouraging numbers in the fight against the virus crisis as more states push ahead with their plan to reopen and the fed that says we just wont quit President Trump raising the pressure on china and threatening to quit the World Health Organization. The president says hes been taking