Transcripts For CNBC Street Signs 20240713

Pound hole in its bottom line. Auto aid renault struggles to restart production amid faultering demand mixes messages from the hill was fed chair and secretary mnuchin give different assessments of the speed of the recovery they also seek to defend their stimulus measures from accusations they are propping up wall street at the expense of main street. Main street is in a class by it self really. Diverse small, medium and Large Companies different credit needs, some credit based, some asset based. It is a really complex undertaking. A warm welcome to the program. Lets kick off with the top corporate story. Marks and spencer has reported more than 20 decline. The company added that it with also accelerate a restructuring effort aimed at trimming costs during the pandemic. Lets get to steve who joins us outside an m and s store in london theyve been struggling to restructure for years now. Is it going to be different this time around . I hope so a lot of us have an historical knowledge of the brand where we remember being dragged around on saturday with our mothers. We are talking about the recovery and turn around of this company back in 2004 i kid you not, geoff and i sat around and had philip green telling us why his bid was the best then stewart rose talking about why the strategy was the best. I remember when they turned down and said, no we want to stick with the current management steve row has inherited a very different company. The fact of the matter is, this is a fact in both share price terms and market scope and share terms, m s has been on a restructuring down tick my entire career. I started in the city in 1988. Lets look to the future as well there are big challenges for this company one to turn around general merchandize, home wears and clothing two, to have a response to covid19 and to bounce back when it opens more of its stores. And third which was the Restructuring Plan looking more at food operations and online delivery with that interesting carter retailer outline. They are pretty late to the online delivery party. They could execute two out of three of those two challenges, one to turn around in a longterm decline. Two to have an internet strategy and three to come out of the coronavirus as well. To get the shares up from where they are now down to 74 for their low these are pennies compared to the glory days of Marks Spencer. Looking back at march and the previous year. 21 decline. 16 of Clothing Sales compared to a year ago. Huge write downs in stock. A lot of this is not their fault. I have enormous empathy for the shareholders there are companies out there that cant do it with just the one challenge. We wish them all the best in the world but it is going to be a really tough road to recovery. Thank you for breaking it down for us. Lets get a check on Broader Markets now. We are seeing more losses come through for european stocks led by the italian index and fts mib led by 1. 7 . The cac down and following a down day yesterday for the main benchmark stoxx 600 broke a twoday win streak dampened hopes around moderna and the vaccine. The positive data came through on monday now being criticized and investors are being a little more caution about whether it was premature to get excited over the release of a very small trial there. Investors looking at fresh comments and Steven Mnuchin ahead of the fed meeting today we are seeing a bit of a mixed picture at one stage, every basket of stock was trading lower. We have defense yich names holding off better than the Broader Market health care up about 2 . Early in the week where we are seeing the reversal down the bob now. Travel and leisure down. Auto, banks, basic resources, oil and gas. Taking a little off of trade this morning lets take a look at banks this morning. We have seen a strong bid in a resent rally we are seeing a little reversal of trade we are seeing ubs down 2. 2 . German, swiss, french banks coming under a bit of selling pressure one bank in focus Deutsche Bank is due to start share holder meeting after posting a positive net income and set to deliver on the cost despite the outbreak. Facing fresh scrutiny over the years losses and legal charges. He is due to be speaking shortly. Well bring you his comments live as they come through. Trading 1. 8 lower this morning. Powell and mnuchin defended the governments 3 trillion stimulus to fight the economic fall out and the first of what will be a quarterly testimony before the Senate Banking committee for the c. A. R. E. S. Act. He stressed lending to smaller business was far more complex than the feds usual facilities indicating that it was tough to get money to main street main street is in a class by it self really. It is a diverse small, medium and Large Companies Different Industries different credit needs. Some asset base, some cash based. It is a really complex undertaking. Steven mnuchin warned the u. S. Economy faces permanent damage if they stay closed too long he insisted the treasury was even prepared to take a loss on its loans. The way these facilities work, those that dont have the ppp, i approve those any facility that the fed believes puts them at risk, they do put up capitol. We are fully prepared to take losses in certain scenarios on that capital the Congressional Budget Office expects the economy to contract by 38 in the Second Quarter with 26 million americans unemployed since last year the deficit will balloon to 2. 2 trillion in 2020 and sees economy recovering in the second half of the year but added that the damage will be lasting the Federal Reserve is set to elise minutes of the april meeting. It did not produce change on the rates. Hints on whether the fed could introduce negative rates in the future and shed more light oven how policymakers could view the do downturn and recovery. Lets bring in our guest. Geoff will be with us also lets kick off im curious your view at the moment bank of america came in closely showing twothirds of Fund Managers believe the rise in stocks weve seen is a bear market rally a strong but doomed bounce what is your take . Caller i think that says it all. Our take has been for a while that we have a negative bias on the pricing at the moment. Im not in the bear market rally camp there is a dug of war going on between clearly very weak growth environment but pushing up against that is one of the biggest policies that ive seen. Im not in the bear market rally camp thats a critical point weve got andrew bailee speaking in testimony today here. We know how sensitive the market is to any news that suggests further action from the bank of england at this point. There has been this phoney war about negative Interest Rates that they hold and the chief economists appear to weigh in on and suggest are still on the table. How important is it to have the central strategy and appearances . We thing i feel strongly about as we shift to the recovery in this crisis and currency is going to become a very interesting asset cls we have all these positive stories. We have seen an interest in sterling and the chatter around the rates. These things will be very important. Is it your assessment that sterling looks undervalued at this point i know weve had a very long ride down from the brexit vote several years back here. As we look at where we are against the dollar, this 120 to 124 range currently. What do you think about buying at this level and know that you are going to get a decent return caller sterling is tricky. The problem you have is things like the bank of england negative rate discussion more important, the brexit dynamics are coming back to the floor. The mood music is not particularly good. I like the idea of sterling higher in the longer term. It is difficult to get excited about buying it yet. Jim, i want to come back to the comments made last month around the ballooning federal dead he has dismissed concerns saying this is a time to use the great fiscal power now investors are asking whether all of this spending in the u. S. , european government, uk government will lead to the inflation. The Immediate Impact concession is deflags arie but what about more medium term caller yes, listen it is a debate jim, i think we lost your line there we will push on. Jim, thank you for joining us. The global head of desk strategy for more on the u. S. Economy our colleagues state side will speak to dallas fed president at 14 45 cet. We are closely watching the Deutsche Bank annual general meeting taking place today we are just getting a couple of lines now in from the chairman of Deutsche Bank he has said we are standing on very solid foundations banks can be part of the solution to the virus. Coronavirus will have lasting consequences pretty high level comments to begin with the chairman is under a lot of scrutiny given that he is at the helm of that position for years and seen Deutsche Bank through periods of strain, losses and restructuring. Hes been the Consistent Force there as they have struggled with their strategy and losses a lot of ceo change and hes been the stable force there. Those are initial comments well continue to watch and bring you more lines as they trade well take a quick break now renault reportedly strikes a deal with the government as the french automaker struggles with the events of the coronavirus. More on that story after the break. To his whole room smelling like sweaty odors. 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Italian officials may consider setting some conditions on a planned 5. 5 special dividend p payout by Fiat Chrysler after asking rome for a backing. The dividend that plays a key role in the merger with psa group has come under fire with italys coalition. Shares are down about 3. 8 this morning. Renault has secured a loan the french carmaker has been seeking state aid to help cope with the pandemic. Charlotte, talk us through what this will look like. Are there conditions attached to it shareholders seem to be reacting well this figure 5 billion euros has been floating around part of the package put together to support key sectors that was impacted by the epidemic 5 billion will go to renault in march, renault said about 10. 3 billion euros in liquidity and undrawn credit lines and have burned 5. 5 billion in the First Quarter alone. As they were looking at guarantees to be extra safe and to stay with a very black scenario, quoting her again. Renault has their own issues they posted the first loss in a decade in 2019 they were about to begin a new Restructuring Plan to be shared next week. Part of this plan would be the shutting of some plants. The reshuffling in other plants north of paris the french government has a 15 stake in renault we will see how job cuts come into play. The guarantee has no Strings Attached to the no dividend payout this will be interesting to see also because the french government is presenting a package to support the auto sector next week, theyll present some data on this an interesting conversation. Weve heard from unions this morning that they are criticizing renault potentially Closing Company while receiving money from the french government they said it was too early to comment on rumors and it wasnt confirmed at the moment. Well see when all of this information is confirmed how the french government will be and while the package is for next week in the meantime, the market receiving the information. Renault stock up 0. 8 in the paris market this morning. Thank you for that report. Pushing on, rolls royce expected to layoff 9,000 employees representing a fifth of its work force as they aim to an annual cost savings of 1. 3 Million Pounds the job cuts will mostly take place in the Civil Aerospace business which has been badly hit by the pandemic. Lufthansa expects more than a fourth of aircraft will be main grounded until 2022 due to the virus. Also warning of further cuts in maintenance and catering business shares are down 1. 9 sticking with the airline space, Norwegian Air has announced a deal worth 2. 7 million. They took out a credit line backed by the norwegian government finnair seeks to make cost cuts the carrier already furloughed much of its work force aftrican selli afric after canceling 90 of its flights. Investors are still optimistic about the green sector more after the break tempurpedics mission is to give you 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 welcome back to street signs. Im Julianna Tatelbaum these are your headlines european markets open questionly after questions over the moderna trial snap a threeday swing on wall street. Volatile trade in Marks Spencer after reporting that the virus left a 50 pound hole in its bottom line. Mixed messages from the hill Jerome Powell and secretary mnuchin give different assessments. In the criticism of helping wall street over main street. Main street is in a class by it self it is a diverse, small, medium, Large Companies with different credit need. Some asset base, some cash based, it is a really complex undertaking. Lets get you a check on european markets how we are trading about 1. 5 hours into the session looking at red across the board but bouncing off the lows of the day. The dax down about 10 basis points ftse 100 down as well. Italy still underperformer but not down as severe as we saw this morning stoxx 600 broke a twoday win streak ending 0. 6 lower last night, we saw the moderna share price sink even further in after hours trade in the u. S. Session in the afternoon portion of the day we saw more doubts cast over the promising update from the vaccine maker on monday. A little caution this morning. Overall, fairly muted moves at this stage lets look at four x markets it as been difficult for the pound this morning sterling under more pressure selling 1. 22 versus the dollar euro contrast stronger up 20 basis points still above the 1. 10 mark. The dollar up about seven basis points looking at u. S. Futures. Looking at a bounce back the dow looking to open 260 points higher after we saw u. S. Indices break a win streak yesterday again over those questions around modernas early trial results. Retail earnings continue today as well as the fed meeting minutes. Lets get back to Deutsche Bank the annual general meeting taking place the ceo now speaking we heard some comments around the general macro environment. Weighing in a little more detail on Deutsche Bank specifically. He said we enjoy a good start to the year in january and february the Banking Sector will be in a different shape after the pandemic youve got christian speaking there in german, let me continue to bring you the translation here last year, will hopefully go down as a turning point for the bank cost pressure will continue to intensify. Making comments on the crisis 10 years ago. Banks were the problem this time, we can and want to be part of the solution another comment i thought interestinghe made with regard to the Supervisory Board given the scrutiny the chairman has been under he said at such a time theyve been going through the transition, a close relationship of trust with the board is particularly important i would like to take this opportunity with the entire board especially our chairman. On that note, lets get to annette with more. What do you make of the comments weve heard thus far given the latter has come under a lot of criticism given that hes been the one at the helm the last several years as the ceo has changed numerous times over that period annette . Yes, i guess he has been criticized for his position and his overview over the bank for so many years and the strategic u turns for many, many years the pressure on him was super high he seems to be in quite a stable position given that the turn around 12r59 gi on the reign really seems to work a lot better than before i guess he takes credit for that as well. Thats what he wants to convey about what hes saying that they are a good team and there on the right track and think that this last year has really been a parallel year for the bank in another part of that, hes saying that he thinks post corona, he sees a need it seems Deutsche Bank even wants to play an active role here there on stable footing. Whether this remains true or not, if you compare them to the french banks, they have far higher profitability and it seems that the french banks in general are better positioned currently in europe than Deutsche Bank is but still, what they say is that they want to be key players in markets that they are good at and they think size matters and that is the point here where they mostly want to grow if you talk about cost efficiencies if you are bigger, that is easier to be cost efficient. That is interesting that they even consider to cut down on office space in urban centers post corona because clearly the home Office Working scheme as i would like to call it now seems to work quite well for them as well that is one area they are looking to cut cost further. Also Business Travel is one area that seems to work perfectly fine not to fly around the world all the time and still do business we are going to see the Deutsche Bank with perhaps fewer office space in urban centers and Business Travel going forward. Thats probably not the only corporate from the world that would draw that lesson from the Coronavirus Crisis bottom line, Deutsche Bank seems to be on a good track. Thats what they conveyed to share holders. The performance is really bad given the selloff after the coronavirus was hit in europe. But before also saying the share price even hit 10 euro which they hadnt been at like for years now. Bottom line, there on the right track and seem to be confident that bank will get through that crisis also and perhaps be able to be in a better position even when it comes to european consolidation afterwards back to you. Another element that stuck out to me was the real emphasis on germany and being the Corporate Bank, which has been a critical part of the strategy since taking the helm. Refocusing on being the german lender one line around the need for the house bank for all banking needs for the Small Companies which are so critical saying Deutsche Bank is the house bank, the global one the fact that Deutsche Bank is unique having all the presence in europe but also in the United States moving forward in terms of their strategy, what does their bank look like with the heavy emphasis on germany and much less on markets around the world. I think they are done with shedding businesses all over the world. They have shed substantial business in the u. S. But still want to be a major player in the u. S. Not that they just downsized completely the emphasis is on germany and europe that is the u turn compared to what it was. Literally, Deutsche Bank does not want to be everywhere but they want to be in major spots where they are, they want to be among top players in these markets. Clearly as they were saying size matters. It clearly doesnt make a lot of sense. Thats what he is saying he needs to be a substantial player in all these markets, which are important for german corporates big German Companies can be as big as dax List Companies talking about bosch or others. Everywhere german business is interested in, they need to be in these markets a bit on the side note not funny but interesting to hear him in that kind of way because for so many years, when Investment Banking was the big thing, they just forgot about the german and disgruntled some clients by that attitude i think he and his team have done a lot of work to get clients back to Deutsche Bank especially from the middle who for many years didnt seem to be of interest to Deutsche Bank thank you for breaking it all down that was the commentary on Deutsche Banks agm moving forward, Global Growth in energy will fall for the first time in 20 years the agency says countries are still building new renewable conditions at a slower pace. Construction in Global Supply changes. Renewables are expected to bounce back next year. Similar to 2019 levels lets bring in karen frank who is the ceo of barclays bank. Thank you for joining us on the topic of esg, im curious your highlevel view what is covid19 doing about the Way Investors are thinking about investing in esg i think much of the attention we had earlier this year about esg and Sustainable Investing where super nationals really started to get behind and bring that into their narrative. I think the attention has obviously shifted to covid and importantly so, our attention needs to be on people, on finding a cure and making sure people and economies are supported through that journey but i dont think it changes much from a sustainability perspective. The way we think about it from barclays, it is not a trend or sector, it is the next evolution. Weve seen a lot of evidence of that it is not a new topic but becoming more mainstream and quasiinstitutionalized. We think about backing into the flow of the Sustainable Strategies we saw 120 euro going into those funds last year. Almost a 60 increase. In q1, despite much of the disturbances weve seen. The fact that the in flow would move robustly about 50 billion in q1. It is not about a topic or a fad or new trend or how people should allocate their money. It is really about a different wave of investing. In 2019, we back the survey about 450 clients in the world we are focused on the feedback and what they are interested in. We noticed a real die cot my about investors backed their correspondenting they were very interested and the criteria and how they were incorporated and how they were affecting the world. To contrast that and put the own necessa ownness on the Private Banking only 30 had cooperated privately. We have a way of helping investors meet that fundamentally unmet need a big part of that is really debunking some of the myth that there is a tradeoff there. Karen, one of my big problems with this is that it is not binary Energy Companies are all on a transition route you know that. From an esg point of view, can you invest in an Energy Company that says we are on a transition becoming one of the biggest investors in greener tech, greener energy, knowing they do lied row carbons as well i would reframe the question a little bit what you are seeing is sales, most Asset Managers out there. Through european eu action plan, there is a call for exactly that, steve, the need to have consistent information and Data Collected across the industry. You almost saw a shot across the bow earlier this year as companies saying you need to do a better job of consistently reporting. That is gaining momentum we have to step away from looking at a specific asset class or company interesting you used the word compromise where we see the return of studies and research that dates back to the 1990s. 2004 to 2018 rather than picking on a specific company or target if you look at the strategies of investing versus some of the sustainable esgled ways of investing. Weve come to the conclusion that the returns to both of those are roughly the same the actual punch line, the risk that you take in doing that type of investing is actually lower it is a win win. You can do something about it. You can meet the return that you want with your in investment dollars and do it at a lower risk you can do something positive for the planet i hear what you are saying but i respectfully disagree. I think you have to look at individual companies, individual sectors and individual Asset Classes. If you buy a theme, again, your experience is way better than mine, you buy into a general trend as well. What we saw with the dot com bubble bursting and the banks in 2009 if you buy into a general theme without doing your homework, you will inevitably lose money on a vast majority of those youll be going down blind alis and blind profit fronts. I think you have to look very specifically at the individual companies, Asset Classes and sectors. To that extent, steve, we couldnt agree with you more it is important to take strong looks at companies and really understand where they play in the realm of esg and sustainability for example in the discretionary process. The first level would be looking at the esg perspective and industry and Certain Companies within those industries. To your point. Doing analysis and those susceptible from massive disruption that would include things like beyond energy where we see the highly kmodized market looking at firearms or the Tobacco Industries we look again at companies esg, we found a high core relation between using the criteria and companies that do deliver. They have robust practices things we would look for in the company. They have a very strong culture. They think about people, impact and foot print on the environment. They think about the longer term there is a strong consistency and if we move onto the strong consideration. We think about companies positioned for a transition to a new economy. Those are companies we look at goods and services and think how are they positioned and how are they accelerating . Weve seen that play out in the market in medical and health care and technology. Those have been by and large the winners as theyve come through an performed well through the crisis well have to leave it there. Thank you for the insight to this debate. Look forward to speaking to you again, ceo Barclays Private bank some companies refusing to offer bail outs to companies linked to offshore tax havens. To read more go to cnbc. Com. Well get back now to the ceo of Deutsche Bank speaking now translator Deutsche Banks liquidity today is more than 20 of the net Balance Sheet a risk management. A low book remains low risk. Half of our loans are to borrows in germany and about 60 are well collateralized private mortgages. Our loans to provision rose 5. 6 Million Euros in the First Quarter. However, we have had to set aside less money than many of our peers. Common equity tier one ratio was at 12. 8 and 250 basis points, 2. 4 higher than the minimum requirement of 10. 4 we are making years of that scope on behalf of our clients, on behalf of the economy and on behalf of society at large in the interest of all of our stake holders to grow our Balance Sheet at this time we already increased our loan volume by 25 billion euros to help our clients through this difficult phase. As we do so, we have prepared to accept modest or temporary drop below our goal of 12. 5 . But we will not dilute our risk standards. Our revenues have become less volatile due to the new strategy because we are focused on new strategies now we are less exposed to volatile markets after trading for institutional clients in the secondary market while keeping our equity business. Instead, we can devote all of our energy to our businesses where we play a leading role we even manage to increase our First Quarter revenues in the core bank by 7 to 6. 4 billion euros. At group level, yearon year revenues were stable ladies and gentleman, just think about what it really means we exited our Equities Trading business in the middle of 2019 no further revenues accrue out of this business three quarters later, we booked revenues at a same level than a year earlier when business was still included we did not only grow in a much more focused Investment Bank but also in a private bank, while revenues in the Corporate Bank has remained virtually unchanged. All of this in a turbulent environment with lower Interest Rates. It is not only the Financial Results that demonstrated our strategies right we are also making market share gains at this very time when the environment is tough we have further extended our position in debt origination our Investment Bank since the beginning of march has been involved in 200 transactions to raise 240 billion euros. We are playing to our strength in financing on the global stage. Including in the United States and in asia. The strong position in the finance business also, of course, benefits businesses with interest what is more, in germany, we are back at the top of the ranks for Corporate Finance and advisory ladies and gentlemen, with the highest market shares since 2015 and in the region, in the europe, middle east and africa, we are back in the top five ranks. Year on year, we have managed to trade our revenue by 30 and with our 100 biggest institutional clients, we have managed to increase revenues by more than 40 . For the First Time Ever in the First Quarter of this year, we reached global number one position in Interest Rate dr derivatives. At the same time, our Investment Products business thus managed to more than offset the pressure at the start of the year Wealth Management reported a rise excludeing specific items of no less than 17 one seven percent. Given all we have achieved in recent months, we can take a little pride in saying that we are part of the solution in this crisis spear headed by the work of our Corporate Bank, weve been able to provide to our government with its assistance programs advised that bringing our expert hes to bear thank you for that. Speaking there at the banks shareholders meeting. They were blamed in large part for the financial crisis now now suggesting that they could be part of the solution. Well leave that there and push on to another company in focus today. Disney is set to reopen parts of florida park today with strict social distancing measures including a cap on visitor numbers and mandatory face masks. The company restarting earlier this month when Shanghai Disney opened after more than three months the global head of Equity Research joins us now. Thank you, sir for being with us we all remember the closing of disney shanghai was pretty symbolic and signaled to the rest of the world how severe covid was. That park reopened on may 11 today in florida, Disney Springs is beginning its reopening process. How significant is this . Caller you are right it is very significant the business is a high fixed cost business, which means profits are very sensitive to bring in revenue prolonged period of closure will be devastating we dont expect full capacity anytime soon, some capacity is better than none in shanghai, the government can impose limits. We expect in florida, it will be a similar amount a return to normality or a path to a return is important given the relatively high fixed cost base you say some capacity is better than none what are the economics here. What kind of attendance numbers does disney need to see these parks no longer loss making . Caller like i said, because it is a high fixed cost business, well see profits similar to revenue 30 to 50 capacity would be good it is difficult to say what the break even level is. They dont discuss that split. The path to return to normality is important for the division. Beyond the parks division, what is the outlook for disneys media which has also been challenged by the outbreak caller broadly speaking, the sector isnt immune. There appears to be some pent up demand we look at espn, we are seeing impact due to no live sports the nfl draft was one of the most watched ever. There is pent up risk particularly for sports when it resumed. Obviously it has been very successful thank you for joining us appreciate your time this morning. The global head of retail Equity Research at william oneill. Looking at u. S. Futures, we can look at how wall street is posed to open. We are looking at a bounce back for wall street. The dow looking to open more than 250 points higher this morning. U. S. Indices dropped breaking a threeday win streak over questions of err willarly trial results. More weighing on retail earnings as well as minutes from retail reserve. That is it for the show. Im Julianna Tatelbaum thank you for watching Worldwide Exchange is coming up next. 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. 5 00 at moderna headquarters in massachusetts it is your top five at 5 00. Investors raise scrutiny of modern and results of that famous now phase one trial for a vaccine. A report that says you have to take it with a big grain of salt major milestones across the country that could have some Small Businesses breathing a sigh of relief appl