Transcripts For CNBC Street Signs 20240712

Translator it was not easy that we needed so many different days shows we came from all Different Directions we are all convinced we can make something out of what we decided. Ubs shares right. Ceo sergio tells cnbc credit losses weighed in the Second Quarter. The possible outcomes are difficult to predict having said that, for the second half of the year, we are modelling recessions everybody is waiting novartis earnings suffer as hospitals front load stocks and lockdowns keep patients away from gps they are optimistic despite the outlook cut. In the force of the pandemic, 19 Income Growth in the first half is very Strong Performance showing the resiliency of the company. Big tech bounces back atting 290 billion in market value as amazon has its best day since 2018 helping the nasdaq outperform their averages once again. A very warm welcome. If you went to bed early last night, youve woken up to the news the eu have come to a deal. Weve got green across the board. The stoxx 600 trading about 90 basis points higher reflecting gains across the region and th underperformed this morning, no doubt about it, the big story is this Recovery Fund looking through the commentary calling it a breakthrough. Well discuss it in more detail. Lets run through the regional split this morning trading higher, the gains are being led by the italian market. The dax also trading up firmly the ftse 100 lagging the cac 40 trading about 90 basis points higher. Looking at an addition to the submit breakthrough, we are suggesting earnings across various different sectors. Just now telecoms turning slightly negative. Autos leading the way higher Banks Holding up quite well. We have ubs earnings up. Technology also joining the wall street rally that sector up 8. 8 this morning. Lets take a look at italian yields with a move around this agreement. Rallying across the continent leading the advance and now we are seeing italian yields vons with yields falling to precrisis levels on this eu Recovery Fund. We have the 10year tradin there around 1 . Showing what this means for the debt market. Italy likely to be a beneficiary of this new aid. Giving us details about what came together. European leaders have finally struck a deal on the 7 billion recovery package after the summit that lasted five days secured through key concessions and being yielded by leaders dutch Prime Minister said his relationship with other leaders remained strong. He insisted the European Union is not a transfer union. It is official. The way the money is collected is within all the procedures we have in the past, the sursystem to propose and accept it in april secondly, it is time limited with a clear end date. That is also crucial in the text, so, no this is a run off. There is a clearnessity given for the excessive situation we are in lets bring sylvia in for more tracking all the turns for these negotiations looking through the commentary, the message is clear a big step forward a massive structural importance to eu member states, the eurozone and globe al Financial System break it down, what are the crucial points investors need to have the European Union is setting precedent that they can tap the market and borrow a massive amount of money to tackle the crisis in the past, the European Union looked to address external challenges for the first time in the history, it is looking to address eternal problems and all the economic countries are facing this is an historic moment on the other hand, we cannot forget other states are being yelled also as very important and good for their own taxpayers. This is the case in austria and netherlands. The countries were against the idea of having this commission and tackling the market. After the significant amount of recession, they agreed to do that they are telling the voters that this is a good outcome for themselves let me tell you what president macron, one of the biggest advocates of applying this, what he told us this morning about how we got here. Translator in two months, weve been able to come to an unprecedented agreement. These long negotiations were marked by difficulty i have to congratulate myself and chancellor merkel for remaining st remaining steadfast in ambition. It will be unchanged it will change in the future too err will i to tell the reality is that the European Commission will come back in the market it is a breakthrough for the eu overall. Being looing at the details of the Recovery Fund of 750 billion euros. 790 will be given in grants and 360 will be given in the form of loans. There was a big debate over how to divide the 750. This was the end result translator europe as a whole as now a big chance to come out stronger from the crisis today, weve taken an historic step we can be proud of. But another important step remains ahead of us. First, we have to work with the European Parliament to secure agreement. We have a lot of work ahead of us but tonight is a big step forward towards recovery von der leyen sharing her vuz. Well take a short break ubs posted better than expected profits and warns of headwinds ahead. Reerhere bak welcome back to street signs. Lets get into corporate news. Core earnings did not fall as much as analysts had expected. The dutch Human Resource company saw the decline but says we are slowly rebounding from the hit they had in april as countries lift lockdowns and allow a return to work says visibility remains limited. Remy cointreau was boosted by resilience in the key Spirits Division it expects Strong Performances in u. S. And china to support a recovery in the second half. Givaudan expects an uptick. The Worlds Largest creator of beverages and took a hit in the perfume category the ceo told cnbc the companys resilience is thanks to its diverse portfolio. Translator we actually flavor all types of products so the less resilient part is fine fragrance and food Service Given that most restaurants and stores were closed. That was a very sharp decline on sales for roughly more than 15 of our sales but on the other hand, on the 85 , we frag raran and flavor many by residing at home thats what i call the natural hedges saying sales plunge 40 year on year to 6. 6 billion in the Second Quarter Auto Companies halt amid the pandemic the preliminary results showed the company was burning money r rapidly. Declined from providing an outlook for the full year. In the banking space, ubs has posted an 11 drop as the swiss bank was hit by retail and corporate lending. Earnings still beat expectations thanks to strong part. Ceo told jeff he expects the banks will see headwinds this year i expect some slowdown but not very big and the reason for me is clear. If you look at the calendar of events geopolitical economic events, there is a lot of scope for clients thinking about their Asset Allocations and movements in the underlying crisis if you look about our clients, we made a survey with investors that says that 61 of investors are considering, will consider an Asset Allocation shift after the elections in the us, no matter who wins. If i put everything together, i do expect the second half of the year maybe not to be as benign as the first but still quite robust that with suggest that you feel markets may run ahead of themselves and the pricing around the vshaped recovery and the vaccine being delivered before year end. There is i dont know if it is kplas come place an si looking at the levels, there is not a lot of move for disappointment in the financial markets. In that sense, should the situation deteriorate, i do expect some movements in the market to reflect the new Economic Data we will see coming out after the summer there has been a lot of speculation about what your largest clients are actually doing after talk many of them raised money initially to take advantage of this uptick of equity markets is it fair to say your larger clients are beginning to liquidate some positions. When i look at the clients, it is quite different. We saw some clients taking profits in the Second Quarter. The one that were quite active and picking up through the First Quarter and took advantage of many orders that shifted a little Asset Allocation. Also on the landing side of some of our clients taking a little bit of leverage in order of deleveraging it is a mixed picture. I wouldnt describe it as one way clear trend. The chief of ubs speaking there. Lets bring in Research Analyst from morning star. Thank you for joining me this morning. For a look across the Banking Sector what weve heard so far, this morning, the key theme seems to be these banks are channelling stronger trading revenues into higher Loan Loss Provisions my first question is how do investors gauge whether provisions are being set aside now . Too much or too small and banks will have to put aside in the Second Quarter thats the Million Dollar question i think it is really too soon to tell which banks are being conservative and maybe more aggressive in its provisioning i think what complicates matters is that i secure the first downturn in the credit cycle has been tested and bringing the whole heap of uncertainty. It leads to banks recognizing credit losses earlier than they would have in the past we havent really seen actual defaults, none performing loans start to perform i thinks that the only way well start that thing in the second half of the year well be able to judge much better if the banks have been providing adequately baring in mind there is so much uncertainty at this stage whether the current provisioning being made will be sufficient. You guys have a pretty strong call on the Banking Sector and think that European Space is undervalued. What is behind this . Why do you like european banks here it is really a valuation european banks have never tried it as low as weve tried it currently. Even during the previous crisis, we havent seen banks right at these levels if you cross back to the previous crisis. What we saw then is banks going into the previous crisis hopelessly under provision banks were earning profitability levels that was unsustainable and undercapitalized going into this down turn, they are so much better capitalized they are not coming from artificially high levels and capitalization are key to look at we also dont believe that although this credit loss are going to surge and it is a meaningful impact, we dont believe that it is going to be as bad as it was during 2009 what will be the catalyst for the banking stocks ascending from here. Clearly all those points you made are valid what will be the catalyst to buy this sector . That comes back to your earlier question i think investors will need to see and get a greater level of confidence that provisioning has been adequate and ongoing to enter into a situation where banks will come into the market for the Capital Asset post 2009 and maybe secondly, also, once we start seeing a bit more clarity emerge around dividends and the listing of the ban on banks, especially the stronger banks, ubs, they believe there is still room for buy backs. There is a Recovery Fund and budget one of the take aways here, we are seeing unity among eu leaders we havent seen before in terms of the Banking Sector, a lot have been waiting for more unity when it comes to banking and deposit schemes thinking this will be a precursor to another sector does this mean anything on the more median turn or long term for this sector . I dont think so. It is positive the whole thing has to change. For us to move to a centralized Banking Union or deposit scheme, you are really starting to move towards fiscal Union Situation i would be cautious at this stage to read too much and speculate too wildly in terms of potential m a in the banking space. If you were an investor and equity Research Analyst, what offers the best value and way to access this, is it through credit or equity markets i think at the moment, it is all through equity markets we believe it is a couple of names undervalued. We particularly like Credit Suisse ing is another name. We do like offering more stability but we believe key is to diversify port followio one cannot rule out the potential that one bank can run into and having a diversified portfolio and provide the downside investment. Thank you very much i want to bring you some fresh comments from the ecbs is bell schnabel she says as long as we remain in the baseline scenario, it is likely the envelop will be used in full. She adds there is no urgency to discuss fallen angels now but we are aware of the risks so these are fresh comments from the ecbs is bell schnabel this was a big question going into last weeks meeting no reason to discuss fallen angels now answering the question whether they would consider fallen angels sounds like they are not going to include them but they are aware of the risk. Well be back with more after the break. Vaccine optimism remains after trials show immune responses more after the break this is a good deal. This is a strong deal and most importantly, this is the right deal for europe right now. Breakthrough in brussels. European markets jump and the German Italian yield gap widens. Boosted rebates and a lower 390 billion in france help swayed frugal four. Translator it was not easy it counts to me that we all got together in the end and we are all convinced we can really make something out of what we decided. Ubs shares rise as the Swiss Banking giant post a higher than expected net profit. Ubs ceo told cnbc credit losses weighed a mitt the uncertainty the possible outcomes are still impossible to predict. Having said that, we are modelling severe recessions and everybody is waiting novartis earnings as hospitals front load stocks telling cnbc hes optimistic despite the swiss pharma giants outlook cut. The 19 core operating Income Growth is very Strong Performance showing the resilience of the company. Us futures accelerate gains after big tech bounces back. Adding 290 billion in market value as amazon has its best day since 2018 helping the nasdaq outperform other averages once again. Well we are about an hour and a half into the trading session and equities are in a bit of a terror moving up with a tune of about 1. 1 every region led higher. The ftse mib up over 2. 2 . In spain, up there about 2 . Ftse 100 lagging for another day. Up about. 6 of 1 . In germany and france, tallying 1 a piece this comes on the back of the breakthrough leaders in brussels lets get a check on the euro. Currently trading a touch lower versus the dollar, we have seen some significant strength. Currently the level 1. 14 versus the green back in the uk, the pound trading firmer against the dollar up to 1. 2686. Looking to futures and wall street yesterday, the key take away from the u. S. Session was the outperformance of the nasdaq, the tech heavy index closed at a record high led higher by amazon shares clearly big tech coming back into fashion this morning, it looks as though gains are coming from all of those. The dow to up up 230 if these levels hold. Yesterday was a big day for vaccine news the biggest one we were all waiting for, astrazeneca and oxford university. The phase one trial showed the vaccine was safe paired back most gains on the news that the vaccine would be most effective as a double dose. A little travel given how telegraphed the data was novartis posted a fall in Second Quarter sales and profit the company cited hospital overstocking and lockdowns keeping patients away from their primary physicians we spoke to the novartis ceo earlier about the performance. In the First Quarter, we saw very strong sales growth on the order of 13 now what we are seeing is a reversal of that forward buying leading our sales growth at 6 in the course of the pandemic, 6 sales growth, 19 operating Income Growth is a very Strong Performance showing the resilience in the company. In the second half, we continue to see very strong sales growth if our launches and core growth drivers. We will have the impact of reduced visits we talked about in othpthalmology and others. He also said he hoped the decline in hospital vifsits for other treatments will be handled better there are so many other chronic diseases patients are not getting the care they need we are seeing reduction of visits for emergency care, screening for cancer and even pediatricians seeing reduced vaccines we are starting to see visits come back in may, june and july to visits offices primarily in europe also a strong rebound in u. S. As well, which gives me hope in the future, not having the Collateral Damage across so Many Health Care issues a little bit of a mixed picture overall. Trading 0. 2 higher. That means it is the worst performing sector in the market. Probably more reflected on the sentiment taking hold across the Community Given the moves higher in the most cyclical parts of the market bringing in a partner to discuss the vaccine outlook and more detail always great to have you especially today after all the news with he got yesterday, lets kick off with the University Data that came through. Seems to be bank in line with expectation here eliciting a twofold immune response with antibodies and t cells. How encouraging was this and what are the big open questions around this vaccine. It is very encouraging and would go according to plan having antibody and t cells are good other vaccines in the development. That said, the immune system is very complex and requires more than simple measures to get there. Im excited by this news, the Real Movement comes in the pivotal phase three trials where you linked more closely specifically with the patient cohorts. The dose may need to be increased. Whether you increase the dose, you have trouble with safety there is still a balancings geto Clinical Development which is risky, you can get disappointment later i would say tempered optimism. It is great to see that there. They are not the only one. There are 23 candidates now in Clinical Trials, which is a huge increase when you consider there were none. That is a marvelous reflection on the industry. Certainly pretty tremendous when you think about what has been done by the health care community. Dosing is one thing to look out for when it comes to the future. You mention the other vaccines that are in development. Yesterday, we also got some data on the biologic. The vaccine there using the same method being employed. The results seem to be pretty similar. My question to you, when we get data like this for a type of vaccine similar to others. In this case, viral vector and moderna and messenger rna, is it likely one bucket is going to prove effective. If we have one piece of positive data for one, should we sk extrapolate that to others using that technology . To a point. You should be encouraged when two platforms gives similar results. The question regarding all of the platforms is whether youll need a combination of vaccines here. It may well be that one works particularly well in a certain patient and another works particularly well with another patient core hurt. I think there will be several vaccines and treatments coming through that compliment each other. Thats why it is encouraging that the 23 in Clinical Development and also the 140 in preClinical Development. There is a long way to go. It hopefully could be soon, likely, it is going to be later. Around the point you raised with how the public is getting comfortable with the Clinical Trials many of us are watching these Clinical Trials and reading medical journals ever. How should investors prepare to deal with late stage failures. If ulisen to the medical community, they keep saying brace yourselves what is your word of advise for investors . This is giving everybody a look at the data. It is massively driven balancing that potential si with safety is the issue. Youve got to look at the platform thats never been approved before for any indication that tells you something youve got to look at the mechanism and read the data. We are delighted there is a lot of scientists working on this. There are extremely sophisticated data pouring over the data this is fair enough. It is lets assume we get a vaccine. There is still a pretty substantial amount of people in the United States and uk that dont believe in vaccines. The antivaccine movement. In some places, this is significant portion of the population to what extent could they undermine . Is this a risk we should be thinking about of course youll always get people that dont want to take it for whatever reason. It may be personal, it may be ethical. There are going to be those. The problem with vaccine is that you need a big chunk to be vaccinated otherwise, there are others Walking Around carrying it there is going to be a balance here it is hard to believe it is going to end up like polio that more or less thats been eradicated it is going to be around we have to be aware these viruss mutate and create different versions and that may mean a different vaccine in the future. We are in it for the long haul as different parts of the world get a different virus, which is great from the public outpoint what do you think about moving toward human challenge trials to test the vaccine is that the direction you might be going in. Patients have to be fully consented to do it one of those things you can apply to vaccines we may well end up going down that path. I hope it is not required but it could be necessary thank you for sharing your in sights russias finance minister has brushed off sanctions as washington ramped up criticism of the pipeline they promise to send gas directly to germany via the baltic sea saying the kremlin knows how to manage sanctions translator sanctions are always bad news. I have always said that. The fact that russia is building a gas pipeline is dictated and possesses advantages of sorts allowing us to develop our own competencies and sectors we are familiar with this situation and we know how to manage it. The russian finance minister also weighed in on rising tensions between the u. S. And china telling cnbc it is important both sides compromise. As for u. S. china potentially deteriorating situations we are talking two economies it will negatively Impact Global economy and rate of growth it is important to compromise to find a final ground and settle their differences. Coming up on the show, the u. S. Secretary of state arrives in the uk amid heightened tensions with china. The check on u. S. Futures are poised to a positive start the dow indicating about 230point jump if those levels hold well be right back. Hey, kids welcome to camp tonsafun on xfinity its summer camp, but in your living room. Learn how to draw with a minions expert. How to build an indoor Obstacle Course plus. Whatever shes doing. And me, jade cattapreta. The host of es the soup camp tonsafun. Its like summer camp, but minus the poison ivy. Unless you own poison ivy. In which case, why . Just say summer camp into your xfinity voice remote to join. Welcome back to street signs. China is reportedly eyeing retaliation on nokia and ericcson beijing considering measures that would stop the chip makers from exporting any items made in china. Any move is said to be a last resort if the eu follows the uk and u. S. Taking a tougher line on the chinese tech giant. Chinas foreign mine industry said the move with hong kong is, quote, a blatant interference with the internal affairs. Dominic raab said the move is a clear violation of the 1997 hand overagreement. U. S. Secretary of state is meeting uk Prime Minister Boris Johnson today a week after the British Government ordered a gradual purge of all huaweis equip. Senior fellow joins me now thank you for being with us. Firstly, on the uks recent decision around huawei, what is your take on what ultimately drove the British Government to this decision . Is this a reflection of the Trump Administrations influence or more reflective of chinas actions on hong kong i think it is a combination of both. It is obviously a victory for the Trump Administration that was pressing very, very hard against itsallies and the uk there was in the uk a strong group of mps that lobbied hard. There is also a case that china shot itself in the foot it is clearly overreached and braisen violation of the agreement under which that territory was handed back to the uk by china. What do you think could come of this meeting from the secretary of state and Boris Johnson on this front . Are we likely to see any further developments we are seeing them really ramp up this pressure against the United Kingdom i think you are likely to see a declaration of unity, which is, i think, appropriate given the chinese threats against the uk and European Companies that were mentioned on your program previously there is always a danger of overdoing it at the end of the day, the United Kingdom and the United States need to maintain their unity at the same time continuing to engage with china. The sort of bifurcated world is not a happy one given the crisis that they face lets not forget they are in the midst of trying to hash out a trade agreement. Factoring into negotiations taking place that are under way. What is your take . I think huawei was an irritant to the United States and the uk to the extent that it is less. I suppose that means it is a Better Climate and feel for negotiations the larger picture is pretty grim i say it is a huge amount of hype on the british side invested on the idea of Free Trade Agreement with the United States that is creating the groundwork for a Global Britain that will compensate on the very hard exit from the eu there is zero chance that the u. S. , uk trade agreement will reduce the harm britain is doing to it self. Strong statement there. How has covid19 created a strain covid19 has created a difficult situation for economic relations all over the world you cant really travel very easily from the United States to the United Kingdom or any part of europe right now so thats the first thing. The second thing is that two of the wealthy countries who have done very badly in this pandemic are the United Kingdom and the United States. This might create a certain amount of comradery but not the basis of a Good Relationship given we are five months or so from the u. S. Elections, how would a biden election affect and different. I think the biden will be similar but a bit more coherently looking out for u. S. Issues all the delicate issues involving u. S. Trade will going to be pursued vigorously by the United States. Anothe of Biden Administration and democratic control of congress is that the House Speaker nancy pelosi has already put the United Kingdom on notice that it is going to take a very hard line against any deviation from understandings involving the Northern Ireland good friday agreement. This is central to brexit. Thats potentially another sticking point, which would be amplified with democratic control of the government. A long road ahead dana, thank you for joining us senior fellow for u. S. Foreign policy and transatlantic affairs, iiss. The dow jones looking at over 200 points of gains. The nasdaq looking at a further 100point gain following yesterdays tech heavy close amazon having its best day since 2018 well wait to see whether the renewed appetite for big tech will continue for today. Thats it for us, Worldwide Exchange is coming your way next save hundreds on your wireless bill without even leaving your house. Just keep your phone and switch to xfinity mobile. You can get it by ordering a free sim card online. Once you activate, you only have to pay for the data you need, starting at just 15 a month. There are no term contracts, no activation fees, and no credit check on the first two lines. Get a 50 prepaid card when you switch. 5g is now included with all new data options. Switch and save hundreds. Xfinity mobile. It is 5 00 in new york your top five 5. Big tech in control or is it calling some of the biggest momentum stocks insane after 200 trillion in value in one day. Amazon up adding billions to Jeff Bezos Bank account adding to the commander and chief that could help stem the spread congress debating about the next round o