Transcripts For CNBC Street Signs 20240712

Into our freedom the Chinese Party getting into strength and Services Also pushes the french print past expectations retail rebound uk sales urge past expectations in june as the lockdown lifts while the uk starts to enforce new rules on face coverings. European stocks struggle after chip maker issue earnings dpi guidance and delay the launch of a key next generation product a very warm welcome to street signs. A big day in terms of data we have the flash pmi coming through. Weve heard from germany and france better than expected now we have the eurozones overall for the region the flash composite up from 54. 8 we cross into growth territory we look at the breakdown and the flash manufacturing pmi that has come in at 51. 1 versus 47 in june on the services side, the pmi has surged to 55. 1 up from 48. 3 in june. So a big, big step higher in terms of the overall numbers for the eurozone that is reflecting strength in germany and france lets get out to williamson. The organization that provides this survey data the big question today was whether there would be a rekovry gained or show signs of fading and show signs of highfrequency. It shows that recovery has gained some strength in the last weeks. Yes these better than expected numbers in every country and market better than economists were expecting it looks like some of the High Frequency datas as you say with the experiment al uses like google tracking. There is a big number of uncertainty with those numbers they were not able to take into account all the seasonal affects. Looking at the upward trend so far. We are at such early stages of the recovery that is still a technical rebound. After the lockdown has built up through manufacturing and Service Sectors. There are still big patches of weakness they are still struggling in decline. This is not a universal return by in means. There is momentum building the big question is can it be sustained into the coming months i know in the june numbers, some intermediate and investment goods and a return to growth among consumer goods producers what are you seeing this time around according to the split. What weve got is an indication that we are seeing some good strength in the consumer goods producing sector. Largely the opening of retail and shops ordering more goods. The investment good side as well as picking up and this is a little bit lacking more cautious there. That really reflects more in the job numbers as well. This lends itself to the discussion about has this recovery got legs. Well be looking at more detail about those and the Capital Expenditures at the moment, the job numbers up one of the issues weve got here will be the bounce likely. You need those new order in flows to bring those good numbers and sustain this bounce if that demand starts to fade, youll get more of a w than a vshape recovery at the moment, increased capacity and firms will be even more convinced that theyll start cutting back on their costs. Another thing with costs arising and relating to covid19 and ppe. An additional burden that will make them think twice as in their environment. These numbers are encouraging. When you peel back the layers, it paints a more cautious picture and paints the recovery. Is that a fair summary thats exactly the way i would summarize it on the surface, very encouraging numbers but we need those other numbers to pick up to be convinced that it has legs this doesnt change our outlook. Our Forecasting Team is predicting a very slow, drawn out recovery chris, the labor market hugely important to the trajectory to the eurozone what are the companies signaling for further job cuts at this stage . Still cutting jobs at the moment but in much less trusting numbers. It is interesting to see that pattern of job cutting is more severe in manufacturing and Services Many of those Service Sector jobs are still on furlough and waiting. Manufacturers are waiting at the longer picture thinking that demand is not going to be what it was a year ago going through the next year. Companies are taking a longer term view on this. We are seeing signs irrespective of these schemes, the numbers weve got at the moment are too high for the production levels well need over the coming year. For the moment, there is a pairing back of the job numbers that looks like it it will continue in numbers barring any further set back well leave it there. Thank you for the numbers. Chief economist, ihs market. Lets look at the asian markets. Shanghai down 3. 9 lower in hong kong, a little better but still down 2. 2 . On the weakness that china ordered the u. S. To close its consulate after the u. S. Told china to close its consulate in houston. Investors question whether it will remain from here. Comments from the secretary of state with more words getting worse before it gets better between these two economies. That is weighing in sentiment around the globe and in terms of u. S. Futures lets look at the breakdown for wall street. The dow to open about 200 points lower and the nasdaq poised for a weaker start this comes off the back of a weak day yesterday particularly for the nasdaq megacap stocks leading there in part driven by reports that apple could be facing a multistate probe and also tensions between u. S. And china. Let me flush out the latest in terms of the u. S. china story. A china leader back and rise in rhetoric after china ordered the compound in chengdu to close it added that u. S. Staff at the site attempted to interfere in chinas activities pompeo urged the Chinese People to turn away from the quote, frankenstine, Chinese Government china ripped off our intellectual property. Stop pretending huawei is an innocent telecommunications company. We called it what it is. A True National Security Threat and weve taken action accordingly. On the back of that, asian stocks have taken the leg lower. These losses really came through immediately. We saw every sector opening up in the red post up above the flat line. This selloff came in fast and hard that is no surprise given the heft ty declines we saw in the asian session. It feels as though this is a global trades that come together given the markets in the u. S. Yesterday and now here this morning. Looking at the individual regions. Losses spread on the ftse, a little bit down 2. 3 in contrast to the swiss market down 1. 6 in the uk, the ftse 100 down as well that data in the uk, better than expected retail and better pmi numbers for the eurozone but not enough to offset the serves around the geopolitical tension. Red across the board every sector trading in negative territory. Oil and gas trading more than 1 technology, the clear laggard. Intel blows past earnings estimates but shares still plunged on the delayed chip launch a lot to invest for this morning. Franken stien its pretty inspiring the way families redefined the word school this year. Its why, at xfinity, were committed to helping kids keep learning through the summer. And help College Students studying at home stay connected through our university program. Were providing affordable Internet Access to low income families through our internet essentials program. And this summer, xfinity is creating a Virtual Summer camp for kids at home all on xfinity x1. Were committed to helping all families stay connected. Learn more at xfinity. Com education. Shares of intel plunge as much as 10 after hours after delaying the launch of microchips by six months saying it may be forced to outsource more the tech giant posted better than expected Second Quarter earnings and revenue to 19. 3 billion. Intel issued disappointing guidance for q 3 seeing shares rally. Our u. S. Colleagues will speak to intel ceo bob swan. Twitter shares rose after the social media platform reported the highest ever growth of daily users monetizable users who view ads grew the strike attributed mostly to the pandemic the crisis mostly weighed on the ad spending. Causing those to fall missing estimates. Signifying Second Quarter results maintaining the profit margin despite the pandemic. The Worlds Largest lighting manufacturer with 85 of employees participating in worktime reduction. The ceo told us. We recovered in q 2 but not completely we are far from being at historic levels. If we go outside of asia, in countries like france, spain, italy and uk, that has been fairly impacted because of the lockdown we try to do the best we need to adapt locally and it is very kpi indicated to deal with at this point in time at this point, voda phone is still on track the company has more than 68,000 mobil units. After seeing a 1. 3 fall in First Quarter organic service revenue. Thales has suspended its reporting of sales on the first half of the year the french supplier now expects operating profit to come in at 1. 3 billion euro. They expect delays such as the installation of new London Underground signals. Theyve seen a decline of era space products which make up 11 of the companys revenue Russias Central Bank set to release their rates as the country issues economic sanctions from the west and battles with the pandemic. Lets bring in global chief economist. Thank you for joining us this morning. Lets talk em here weve been talking about the impact of the Central Bank Liquidity as a key support at what point do they step up in liquidity. We thought they had bottomed out in april i think well see the 2020s as the best emerging markets since the 2000s. The weaker dollar and the debt pile thats landed on europe and the states i think the Interest Rates in the u. S. Will not rise above that theyll look to em to find that yield. A pretty bold call here for these countries billing up debt to provide support you say this all the time looking around the world, some of these hardest hit places, most fall into the category. Brazil, russia, india all suffering really hard. How do you reconcile this with the rosie outlook you are painting they discovered they couldnt afford another lockdown in countries like india or pakistan because they are letting the virus do its thing there was a hit in the second half we dont have that same concern. That demographic story of the rich and old west for savings that will have to find a home. That em provides that home youve tweeted that chart in the investment region. Weve been debating the direction of travel for many months now im wondering how they view these. Has it provided for strength or is it more down beat than that it is fair to raise the question anyone is free to follow me on twitter. Weve seen a big rise on debt levels for countries like zambia, we have the debt youve talked about. That is almost certain for zambia theyve just borrowed a little too much china has made it easy the good news for africa is that financing has been cheap europe has a savings glut it has been built in for a structure that arguably wouldnt have been built. The railways and in kenya, the railway. Airports flown into from zimbabwe, zambia they are look great but they are not making the return expected the debt pile right now does look too high for a few countries that will be the story for the 2020s. The difference between africa and europe is fertility rates are very high. That means savings on households are voe low. To invest, you need to borrow abroad that is going to be a cycle well see through the 2020s. Africa like em will get a big benefit from the 2020s, there is also going to be a few hiccups along the way. Charles, put it all together for us which countries offer the most promise we focus from russia front year space as well what is going to be interesting is the yield on local bonds. Partly because i suspect the dollar does weaken with the change of the president in november and less in the way of trade wars i still think there will be tension with china whoever is the u. S. President theyll be seeking yield and putting money into the region. You can expect the disinflationary trend in the u. S. And europe is going to extend to russia, africa and so on im not sure about turkey. I think thats still going to carry risks. As those yields go down, youll see equities have to rerate upwards. Russia, south africa is pretty liquid then there is a industrial story in north africa which will happen for the first time. Thanks to education. China needs to offshore production to lower Income Countries in order to maintain access to countries like europe. Charles robinson. Coming up, well break down the latest uk pmi data as the uk continues to recover from the pandemic more after the break welcome back to street signs. Im Julianna Tatelbaum these are your headlines european markets sink. Chinese stock sink lower after an order to shut down the consulate in chengdu we opened our arms to the chinese citizens only to see they are trying to skploid our free and open society. They sent propaganda into our colleges, schools and even pta meetings Business Rebounds in july rising to the highest level since 2018 thanks to a boost from pent up demand as german and pmis also Beat Estimates retail rebound retail surged past expectation as the lockdown lifts as england starts to enforce new rules on face coverings in stores European Semiconductor stocks struggle after issuing disappointing Earnings Guidance and delays the launch of a key next generation product. Weve got more data crossing the wires for you. This time, the uk flash. The composite pmi has come in at 57. 1 up from the 47. 7 it logged in june. The Services Sector has come in at 56. 6 versus 47. 1 in june. Also seeing an up tick from 53. 6 up from june already tipped in the growth the gains continue in july and the overall composite that has come in at 57. 1. So a pretty significant jump that would come in line with what weve heard out of the eurozone this morning also out of germany and france. The european recovery including the uk is in full swing relative to what we saw early on. The question is how sustainable are these gains. Lets get a check on european markets and how we are trading now. Red across the board the dax down 2 in italy the ftse mib leading losses. All of these coming on the back of a weak session in asia. We had a soft day yesterday for u. S. Equities but overnight, the negative sentiment seems to be building around u. S. china trade tensions lets look at the u. S. Futures weve clawed back some earlier strong losses. Thedown now set to open 140 points lower we were looking at about 200point drop the tech heavy data and dropping about 2 , 2. 3 so megacaps leading the losses there. So leading on wall street as well on the virus front, the u. S. Has reported over 4 million coronavirus cases. Over 144,000 people have died and the numbers continue to rise in florida, a Record Number of people have died in a single day according to the latest data President Trump has announced he will cancel the Republican National convention in florida amid rising infections in the state. The event was set to take place next month he said he will still deliver a Campaign Speech but in a different forth and confirms delegates will still meet in North Carolina england will become the latest european country to require face coverings in shops and markets today. Those who dont follow the rule could face a fine of up to 100 pounds the uk Prime Minister defending the move it is the right thing to do as the pandemic has gone on, we want to drive down the incidents of the virus the ons says it is 0. 25 and 0. 28 in scotland. But we are pushing it down the purpose of the masks, as you know, is to stop you transmitting any of us transmitting to anyone else and it is a mutually beneficial thing it is the right thing to do in shops and confined spaces when you are in company of people you dont normally meet and also on public transport thats what the rules say. There has been dispute among societies over the course of the pandemic about the utility we are saying to people wear there in shops and in public retail sales jumped in june sales fell less than expected declining 1. 6 the uk is facing push back in brussels as the fifth formal round on key trade issues. A lack of consensus sharply reduced the likelihood of securing the deal on the end of the transition a warning that both sides would fail to reach an agreement by the end of the year. There are risks of a no deal. Subjectively, thats the case as far as the positions on the points the requests remain the same on these. Firstly, the level Playing Field was important to all 27 countries and the economy of the eu and secondly on fisheries as long as we have a stalemate on the uk side on these two points. Until there is an openness and shown on the eu side to the uk interests. Then there is objectively a risk of no deal im very pleased to bring in our guest. Thank you for being with us. Always great to hear your in sight brexit talks appear to have stalled around the key Playing Field. In your view, how far away are we from a deal you know, by the standards of the past eu deals. Even without the complication of the uk, we are a long way from the true last minute, smokefilled room. There is a lot of sparing going on here. I wouldnt pay too much attention even though it is very complicated and obviously strong views on that side my own view is that there will be some kind of deal coupled together i dont say that with massive confidence if i look beyond the brexit deal, at this point, it feels like there isnt a real narrative where britain sees itself in the future how do you see it come together. We know the uk is in talks and also a question of the uks relationship with china. Your opening sentence sums it up we are yet to see any real strategic goals from this government there is a lot of very powerful sounding sound bitessometimes. Given the die lemas but also as im sure well get into the increasing ones between them the uk seems to be struggling to develop what is this great bonus that post Brexit Britain will have in the world. It is not clear to me to see what it can be based on where we are drifting towards we need to articulate a more confident, positive position with how we want to engage with the world and change things at home in the uk as well on that point, the uk has faced criticisms from some that they havent taken a harsh enough stance around developments in hong kong. There is an effort to preserve efforts with beijing what do you see as the uk continues to gain. Is that the right way to think about the uk strategy in approaching the issues in hong kong ill refer to the previous discussion to start with it depends on the relative merits or weights it puts on security, diplomacy and the economic growth. In a piece that ill have published sometime in the next 24 hours the reality of the modern world as complex as it is, the 3. 7 gdp growth the world enjoyed in the last decade. It would have gotten nowhere near that if it werent for china. The g 7 countries grew by less than half that if you only want to have growth that will be in a much weaker environment particularly trying to look at those and what they should be. I think the uk was right to tread a middle ground between washington and beijing and not withstand the issues of hong kong and other issues with china. Other wise, particularly given the brexit challenges, well be heading into a weak area of growth into the for seeable future even when we recover from covid. I want to give you the detail on u. S. china relations. Lets round out discussion around the uk. Theyve taken a real back and forth attitude we know in their latest move, theyve followed washington to a degree in banning the use of the equipment in ag. What is your take on what led the decision is it an attempt to bow to washington or Something Else we didnt have a choice just the judgement of the independent security expert. It was their judgement that led the government to create the structure of the deal at the start of the year. The heightened u. S. Stance and the banning of Huawei Semiconductors and the judge by our own security people saying they couldnt have the same confidence once that judgement was made, there really wasnt a lot the uk government could do. Otherwise, it would be perhaps opening itself up to morris being. Indirectly, the pressure from washington has played the major difference in what was decided in january and now well take a quick break and be right back to you coming up, china makes good on its pledge to retaliate after the u. S. Orders a consulate to close. Stocks fall off amid the early sessions with these tensions just over a year ago, i was drowning in credit card debt. Sofi helped me pay off twentythree thousand dollars of credit card debt. They helped me consolidate all of that into one low monthly payment. They make you feel like its an honor for them to help you out. I went from sleepless nights to getting my money right. So thank you. Iredefined the wordng thschool this year. So thank you. Its why, at xfinity, were committed to helping kids keep learning through the summer. And help College Students studying at home stay connected through our university program. Were providing affordable Internet Access to low income families through our internet essentials program. And this summer, xfinity is creating a Virtual Summer camp for kids at home all on xfinity x1. Were committed to helping all families stay connected. Learn more at xfinity. Com education. Welcome back to street signs. Chinese equity markets close sharply lower. Beijing orders the u. S. To close its consulate in the southwestern city of chengdu chinese saying it was legitimate and necessary after Washington Closed the chinese consulate in houston, texas lets get straight back to chair of chatam house. Saying the u. S. Trade deal means more to him now. What is your take, how would you describe the Current Situation between the two nations . Not good. Given the degree to which the opinion polls seem to be suggesting how far behind President Trump is i suspect well have this on a recurring, erratic basis until the election i think talking tough about china plays well with the american population. I think well get more of this between now and november i guess what weve had in recent weeks and months is an increase in rhetoric but no concrete action. Not like weve seen an increase in sanctions or alterations to the phase one trade deal is it really significant or just talk you could ask that question about anything that comes out of the president s mind and often mouth for the past three and a half years on so many different areas. The tone and rhetoric ends up being very different than the actual word. Look how his whole positioning on covid and where he is today is different from where he was four or five weeks ago i suspect that will be the case with china because of the reality i touched on earlier you wouldnt dream this is the case but im sure from the last data i saw that china has now become the third most Important National export market for the United States. Given how china appears to be showing signs of a pickup from a covid19 brief recession u. S. Companies are going to benefit from that. I cant image iine given the rhetoric i think it will be tough and scarey but whether they follow through with deed and action, im not sure i hope not it wont serve much benefit for the United States or the world you mentioned china as such a huge export market we were discussing chinas influence in after crican natio. There is so much talk about who will fill the void of the United States on a Global Leadership level as President Trump and his administration looks inward. Do they want to get. The wto, imf, un, w. H. O. And so many other things it is very difficult for the chinese. Some legitimate, some super official ficial to some degree the states the world is struggling with many Major Solutions i dont think the chinese are entirely comfortable about trying to fill that role i dont know how we solve this challenge from time to time. We need to make efforts to somehow ensure the g 20, which in my view was one of the great things government wise to come out of the 2008 crisis can be resurrected notwithstanding all the differences, play a much bigger role and shape a better state of World Affairs one of those things, i think the g 20 would be designed to help is in coordinating a response to the pandemic and we are looking all around the world when it comes to vaccines and these governments moving to secure access for themselves there is a lot of rhetoric we are seeing the uk and european governments secure access for themselves. Where is the g 20 in all of this this is a perfect example at one end, it is the same with the funding and resources of the imf. It was a strong view for many g 20 participants back at the april meetings that resources should be boosted but the u. S. Quashed it i know because i saw the outline document it was a pretty strong basis of an agreement on vaccine developments, they are pew ticks and treatments across the g 20 that would allow for the full g 20 meeting to take place not surprisingly by default, countries are going off with their own domestic plans i dont think it is the worst of things going on. It is truly astonishing. Thank god that is the case if it werent for Global Governance we wouldnt be in the position we are in does it worry you that we are not seeing these wealthy countries . If it is a problem in one part of the world, where is it elsewhere . It worries me in this instance and beyond it for many of the next few years that there are so many major global issues that unless we could have another form, we could get Equity Solutions it will be true on vaccines and Global Climate change, tax havens and how do you treat on forms of investment flows and what do you do on capitol fl flow capital flow and so on notwithstanding the fact as you reported before i came on air, it does seem to me in the short term, the chances of a vshaped type recovery are probably better than many people think. That shouldnt be mistaken for all sorts of significant medium to longterm governance that will be needed to solve them. Do you think a vshaped recovery is more probable than people think two simple things all the indicators ive been trained over 30 years to Pay Attention to although some werent around 30 years ago. The global leading indicator i was involved in creating at goldman over the years and a few of those things i would follow virtually all of them with the slightest exception of u. S. Weekly jobless claims. You are reporting whether the uk, germany or france is a perfect example. At the end of the month, well see more of those. I want to pick you up you mention the jobless claims in the u. S. As a counter indicator. When you look at High Frequency indicators like restaurant bookings, it suggests we would see a bounce back. Suggesting that people are nervous. Businesses are nervous to spend. I think thats what the weekly job numbers reflect and some of the opening would be shut down again in parts of the states i think thats what the equity market continues to do it is remarkable and has been in hind sight essentially trading the rates of infection curve in many parts of the world with the probability of some kind of vaccine and usefulness and clearly in the past few weeks with the pick up of infection sharply in the states. It with be unlikely things would slow down again. If you want to be an optimism, you hope to see more use of masks and social distancing, the infection rates come down again. As we see rather encouragingly, if you are more careful, you could perhaps have a more sustainable recovery thank you for your time this morning. Chair of chatam house. Thank you for watching a shot live in gilford as the uk kicks off mandatory face coverings in stores. Its pretty inspiring the way families redefined the word school this year. Its why, at xfinity, were committed to helping kids keep learning through the summer. And help College Students studying at home stay connected through our university program. Were providing affordable Internet Access to low income families through our internet essentials program. And this summer, xfinity is creating a Virtual Summer camp for kids at home all on xfinity x1. Were committed to helping all families stay connected. Learn more at xfinity. Com education. It is 5 00 in new york here is your top five 5. Big tech tumbles pulling the overall markets down futures are lower. Tensions growing between United States and china now china forcing an american consulate to close in washington, republicans delay the rollout of the latest aid plan as time runs out on unemployment for millions. If the nasdaq does something today, it will break