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tv   Street Signs  CNBC  January 8, 2016 4:00am-5:01am EST

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>> the new year kicks off with global markets in turmoil and five trading days in theoller coaster keeps running. we'll bring you breaking analysis over the next 60 minutes. you're watching street signs. >> stocks inching higher after stocks access the circuit breakers and turn sharply lower. >> and beijing intervenes again propping up the yuan after the central bank fixes the currency higher for the first time in
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nine days. >> the dow and the nasdaq close in correction territory lead by the tech sector that saw the 6th negative session in a row. >> what a week it has been. big long related to china or basic resources. i want to show you how markets are doing today. what we're seeing is a little bit of a rebound. some stabilization given the measures we have seen overnight. similar percentage gains for the xetra dax and cac 40 higher. in terms of the sectors performing well today. first of all, let me say all the sectors are trading in the green
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but basic resources is seeing a very, very nice bounce back but once again all china related over the course of the week but we didn't just have the china concerns but geopolitical concerns. how did the markets fair over the course of the week? >> there's signs of relief today but let's take a look at the week because it's been a terrible week for the first few days of the new year. let's get straight to the german main market here because the dax is bearing the brunt of the turmoil triggered out of china. you just touched on what a week it's been for basic resources and remember the german market was one of the outperformers last year. so this will be disappointing to investors hoping to hold on to their long positions. french cac 40 off 4.4% and the ftse 100 here still with some pain but a bit of a bounce today on relief in the energy prices
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and basic resources as well. >> let's get to the source of the volatility. chinese stocks ending in the green after regular queue lay tos scrapped the new circuit breakers. reports suggest that china's central bank stepped into the market to support the currency as well. let's get out to sri in asia. a much calmer friday. >> absolutely. stability has returned for all the reasons that you mentioned. there's talk of intervention by the pboc as well and also talk that the national team, the so-called national team t government, we have been seeing state sanctioned buying in other words and they are the canary in the coal mine.
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stability and gains today. also let's not forget the circuit maker mechanism has been deactivated. let's not forget over the course of the week china stocks are down by 10%. that's the worst performance since august. since the summer route last year. i do think that the pboc could follow up with some more action possibly as early as the weekend. remember we still have data on saturday, the cpi print may provide it by 50 basis points. that could be another round in the reopen next week. it will be interesting to see the payrolls when you look at global market sentiment to see if the narrative shifts away from the chinese markets and the volatility we have been
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witnessing and the u.s. and the stronger dollar and domestic economy over that. that's where we stand. back to you. >> thank you, sri. reaction from the china state regulators, expectation weighing on the u.s. dollar overnight. we saw the markets move in tandem with the action out of beijing but fears that it could continue lead markets back down. we saw it close into correction territory. >> now bearing the downturns in mind they're now pricing in the next rate hike in june. that compares to previous forecasts for march. all of this following the volatility we have seen. now the chicago federal reserve president says the central bank is keeping a close eye on china and the volatility sparked out of the region. evans also said in a speech he'd like to see two interest rate moves this year. that compares to his colleague
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who would like to see four hikes. now bearing the fed and investors in mind they'll be watching closely the nonfarm payrolls report due. that is lower than the november figure of 211,000. overall the forecast for the unemployment figure expected to tick down to about 4.9%. >> joining us now is the cio. good morning to you. thank you for joining us. does anyone care about the jobs report today? we have bigger fish to fry, don't we? >> yesterday i would have answered absolutely not with china and everything else going on. you would have thought any given number today you could just print it. but maybe. just maybe with a little bit of stability with the way the markets opened this morning suggests there's a lot of caution ahead of pay rolls and people might still be looking at
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it. especially if it's a surprise either way. but otherwise, who cares. >> risk sentiment has been extremely bearish this week. we went through a couple of the numbers for the european markets. also the latest fund flow data taking over $12 billion out of u.s. stock funds in this week until wednesday. those were the big outflows since september. do you think this was warranted given that nothing has changed about the chinese economy? >> no, i think perceptions have changed about the chinese economy. it continues to change. it continues to down shift it looks to me. but i think that the point is fundamentally the growth picture could not have changed that much in three days. just can't be the case but thor is acception about the inherent risk is certainly different but there's a whoet whole lot of tel factors that shouldn't be playing the way it is at the moment.
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>> the fund flows really hit at the question on everyone's mind over whether this is just a normal direction we're seeing or have we slipped into bear market territory here as some analysts suggest? >> we're close to being in a bear market. certainly the last half of last year was not particularly good and i think, you know, if you look at where the market has earnings outlook for the u.s. this year it's very modest, indeed. and if you look at where valuations sit and where the multiples are it's hard to make a bullish case. so not to say we are necessarily going to be the prolonged bear market. but a positive view is close to make. >> is this any reason to buy stocks here when you look outside of energy? >> metals and mining and energy has been the worst place to be.
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market is looking for the underlying commodities to destabilize at some stage. but it's probably early to get too spresed in thointerested ins because you haven't seen the stabilization yet but you're seeing some degree that the stronger players are starting to stabilize on the stock side. european earnings as a whole does look as if there's a bit more momentum behind it but one major risk that the u.s. doesn't have and that's some potential destabilizing effect for emerging market demand. >> what are you buying and selling? what are you telling your clients after this start to the year? >> obviously won't be going into too much of the proprietary
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stuff. we went into the year some what cautious of risk. so a little bit lighter stocks generally globally without getting into the sectors and stay that way. i think as the year progresses there's a couple of interesting contrary juan things that investors should be aware of. one of them is the possibility of stabilization in commodity which is might feed into em stocks. >> so you do want to be positioned for these snap back rallies in a way. >> no. >> i think when it comes to a snap back leave it. i don't think that's necessarily going to be all that sustainable. our view is we'd rather be more on the cautious side and look to see how things progress on the second half of the year. and focus on income generating strategy. look for credit.
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and maybe even high yield. >> okay. thank you so much for that. cio. if you want to get in touch e-mail the show. the address is street signs and we're asking you to tweet your #my market in one word. i asked for a number of your tweets this morningment some of you have written in. thank you so much for that. one viewer has written in my market is sick, paranoid, volatile, dangerous. if it was a person, i would avoid it. another viewer my market word is hot and cold. so send us in your words for today's market. nancy what's coming up on the show. >> well, so much to discuss and it's been a busy week for u.k. retailers as well with christmas
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sales. now tess cco is taking the limelight. plus apple acquires a new company as it looks to get into augmented reality. find out why the deal is getting emotions running high. it's been a rough ride for 2015 for stock players and goldman sachs is taking note. downgrading it's forecast stay tuned on what's ahead for markets as earnings season gets underway. the flu virus hits big. with aches, chills, and fever, there's no such thing as a little flu. and it needs a big solution: an antiviral. so when the flu hits, call your doctor right away and up the ante with antiviral tamiflu. prescription tamiflu is an antiviral that attacks the flu virus at its source and helps stop it from spreading in the body.
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. >> u.k. super markets are trading higher this morning after barclay's raised the biggest retailer tesco from overweight to equal weight. meantime shares are trading
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higher to falling hsbc's rating upgrade from hold to buy. despite a report issued last month by the research firm that called the firm one of the most overvalued firms it had come across. higher by almost 4% this morning but i want to come back to the barclay's note on tess coe. they're feeling quite a lot of love this week from brokers. it was upgraded because they say all the bad news is priced in. that was huge because they downgraded the stock i believe two or three months ago and this morning we're getting that note from barclays. i want to bring you some of the highlights. they too say valuations reached attractive levels since the first half results it's underperformed by 23 points. about 14 percentage points so that's quite a bit of underperformance that they might be catching up on. also they say there's numerous potential catalysts. they expect the full year results in april will bring more
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color on the cost savings opportunity together with some clarity on guidance. that is on margins and capex and trading higher today with a tune of 3.5%. ocado has been sold so heavily because of concerns about increasing competition. from amazon so maybe that's a bounce back after the heavy losses. >> you also have to wonder at what point do they start to see the gains from lower commodity prices too. but good news today. >> shell is edging closer to a $51 billion to deal to buy bg group after sources at the dutch oil giant told the financial times investors are ready to back the merger. shell also ran successful stress tests that the deal would prove profitable even with a average crude price of $50 barrel for
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the next two years. we have seen royal dutch shell come out several times trying to reassure investors they can with stand the crude prices. executives stepping up their discussions trying to prove to them that they can sustain even at $50 barrel. but you have to wonder with crude getting closer to $30 barrel how long this position holds and whether or not investor who is are set to vote at the end of the month whether they'll raise concerns about oil closer to 30 than 50 but shell continues to announce they'll cut back investments and expenditures and we have heard that they're standing by them but remember just last week we did hear from capital group. >> you talk about the premium.
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close to 962 right now. that's roughly 10% below the current value of the offer and that tells you how skeptical many of the analyst or investors have been about whether this deal will actually go through. moving on u.k. drug maker shire is poised to unveil it's take over on monday. both companies are hopeful that tax concerns surrounding the spin out will not hinder the deal with legal confirmation said to be one of the last remaining sticking points. >> >> and they have reportedly entered talks according to reuters reports. discussions are set to focus on issues that could lay the ground work for a merger proposal later this year. the deal could create the largest wireless schedule with oi struggling in the overcrowded telecoms market. >> tech giant samsung expects a 15% rise in fourth quarter operating profit to just over $5
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billion. the figure comes in lower than forecast and is set to rekindle concerns of a tough year ahead for the tech industry. analysts say slowing demand for components including weak semiconductive components are set to weigh on the smartphone makers. this is after they fell to a 3 month low in yesterday's trading session. a lot of people and investors had anticipated weakness in the guidance and even on monday we had warnings about the guidance for the full year so maybe a lot of it has already been priced in but the problem is for the likes of samsung but also apple, am shares falling below $100 is that they have very little visibility on when things could improve, whether that's china or the saturation in the smartphone market. we have to take 2016 day by day. >> exactly. china being crucial for these smartphone makers. there was already expectations that the market was saturated
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but it depends on the product too because we did hear from the chinese firm whose shipments defy it jumping 44% in 2015 and others outside of tech reporting stellar sells in china as well. it's not always the slow down you can blame. it largely depends on the products as well. >> we talked about the massive moves in the equity markets this week. they're back above the 50 level. we also want to show you what gold is doing. all of these going into the assets given the geopolitical concerns we have this week but also concerns coming out of
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chi china. i want to move on and tell you about gold prices. sending chinese shares up by some .2%. 1,112 per ounce yesterday. it is on track to post a gain of almost 5%. that's the best weekly performance since january 2015. >> joining us is matthew turner. >> a lot of investors said gold lost it's safe haven appeal. this has proven us wrong, or no? >> it's interesting and gold sends to start the year quite well. we're approaching a peak demand
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season in china because of the new year but also we had a lot of bad years so a lot of speculators are very short. in fact the speculators were the shortest since 2001 in december. so you had the fuel for the rally. >> whether it's in gold or treasuries they're usually very short lived so does it make sense at this point if you're an investor to be building up your positions in gold given that we're still in a year, 2016 where the dollar bull run is set to continue and we might be reminded by that once we get the jobs report later on today. >> yeah. it was a q-1 rally. maybe 1140. >> so it's a good problem to
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have. and if you want to take a longer term view and if you're worried about equity markets being overvalued then it makes sense but i don't think we'll see a big rally in the short-term. >> it's really not just the yuan. there's quite a bit of a talk around the currency war and isn't that another reason to buy into gold? >> inflation and deflation. >> do you think it will be a -- could it alter it in they're set and want to keep the tightening
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going. >> it's quite hawkish but the reason we think that inflation is going to pick up faster than expected. so real interest rates will remain low. and the payroll is always a bit of random occurrence and the rallies tend to get reversed quite quickly but people are getting pretty bullish about the economy again. >> what about the physical demand for gold? at what point will it be choked off? >> that point seems to be lower and lower every year. it seemed to be 14131200. there's two things here. the price and the state of the chinese consumers. we've seen large plays into china but the information on the ground is very weak. >> all right. thank you so much for your time. appreciate it. matthew turner, precious metals analyst. let's get back to our top story.
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china of course. this is one new christmas toy that was broken before it even started. a market can bounce around very violently. now the mistakes seem to be in the math. a 15 minute trading halt lost 5% and early end to the whole trading day if it went down 7%. this selling makes up some .8 of the market afraid of being locked out from a plunging market. with the circuit breaker set aside for now, what is china trying to do with it's currency? the weaker fixings over the past week made eight pier that china was aiming at a large, quick devaluations but beijing has gone out of its way to point out that the yuan has been stable against a new currency basket announced last year but until
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china says it constitutes an official currency peg the market continues to fix sate on the u. s. dollar cross. of all this is still largely a dollar denominated world. >> still to come, shanghai market jitters making waves across global markets. we'll be getting insight on how to play china's list of stocks. one not to miss out on. stay with us. we'll be back after this short break.
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welcome to the show. >> these are your headlines. >> a pretty optimistic start to the session. stocks inching higher after china accesses the circuit breaker prompting a relief rally but close out the week lower. >> beijing intervenes again
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propping up the yuan after they fix the currency higher for the first time in nine days. >> the dow and the nasdaq closing in direction territory lead by the tech sector which saw it's 6th negative session in a row. >> nissan enters the driverless race this is the future. >> these are of the wheel. you know, we're doing nothing. we're just following everything. >> welcome back to street signs in the week that was for the first trading week in the new year but more optimism today in the final trading day despite the massive losses we have seen. we're looking at positive sentiment. up about 0.7%. the xetra dax up as well 0.7%.
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the german main market has been down more than 6% for the week. a lot of the china exposed firms taking a particular hard hit here and resources in decline as well we did see the dow and nasdaq slip into territory. they were taking their cue out of beijing and u.s. markets are cheering the up tick we saw a bit earlier today. we're looking at a implied open up of about 176 points. >> the big focus is nonfarm payrolls and investors will look to see how many jobs the economy created last month. that could spell a few more tails of where the fed could be headed when it comes to raising rates throughout the rest of the next year.
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>> some of the chinese exposed stocks. seeing a rebound to the tune of 2-thirds of 1% but over the course of the week, falling 6% and falling 10% and off by 2.3%. maybe it has to do with the fact that apple did fall below $10 a share on the trading session. >> let's go through stocks and kick things off the minors. it was on the china concerns. you say to some extent that was justified but not for one specific stock. explain. >> i think it is to find shares unduly punished. the natural start for that has
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always to be to gravitate toward the finances. while i wouldn't want to fan the flames enfwufligulfing that com it's clear if your starting point is $10 billion worth of debt and your market cap is $4.5 billion that's a precarious place to be. but if we use them today, i think today they can and has the ability to deliver a cash flow yield comfortably over 5% it's well in excess of the market and you can buy a company that if you had the bad moment in '07 they reduced their debt heavily. we believe they're in a spot to get past the cyclical phase they're in and we'd love to see them taking hold in the rest of the sector and that they have more of the mining landscape to itself. >> that's currently mispriced by the market?
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>> in our opinion it is and i think it's important to add it's the only one in the mining sector. >> >> i'm aware of the overwh m overwhelming consensus. but no cash generation and modest market caps. the outlook looks bleak. if there's ever a way to ensure that cyclical pressures become terminal it's leverage. you have to rebel against that and in the situation we think they have done a reasonable job in navigating that leverage argument. >> how do you feel about the u.s. banks with heavy exposure to asia and we mentioned them before there's all these concerns about the rising bad loans coming out of asia. do you think it's warranted? >> yeah. there's a tale of two stories.
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the bank that did lend this cycle and didn't lend this cycle. and standard chartered is playing a game. they have slightly underraised and let's be clear, standard chartered has two emerging companies and mining companies. bad combination. and i think we have been up down and around that and further to that there's been an element of soul searching at hsbc which has seen it sell a lot of the emerging assets above book value to retreat to its core which has been the biggest deposit franchise on this planet. about $1.5 trillion and if the u.s. are going to start raising rates that's a very valuable asset in deed so 6% of the loan book does reside in china, the
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vast bulk of it resides in hong kong where the housing market is buoyant. and for us that is a situation where i think hsbc can weather this storm and we still feel a little bit nervous that they haven't raised enough money which as i understand it in one regard because they don't want to raise money and give it all to the u.s. regulators but it's a slightly nerve racking game they're playing because if they do have a bad debt situation and relative to three months ago it's a lot more likely. >> and you just touched there on some banks having lent to the mining sector. we have also seen concerns, do you think investors are pricing in the risk and we talk about them having exposure to the energy sector? >> well, one would answer no. >> it's a complete wipe out. we have seen bond holders being returned to 0. so it would always be very reticent to be too contrary in
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those situations but you therefore have to be scared ridged of the banks that have lent this cycle but that's domestic banks and i don't believe it to be hsbc. >> let's move sectors because the luxury stocks listed in europe, one of the biggest losers when we think of the u.s. it tends to be burberry. pretty dramatic fall if we can look at the 12 month price as well. do you think they have further room to fall. >> i sense i'm in the company of two women that know more about burr berry than i do. it's got itself into a problem in asia and what i mean by that it's clearly got the channel full of its stock so i don't know how many air miles you both
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have but if you did have air miles you can go to hong kong right here and buy 50% off goods from outlets in hong kong. they have clearly got themselves in a pickle at this point in time but if we could look beyond this situation and it just takes one season and the rain to come or the sun to shine and it's a different story for a retailer but with burberry with 20% of its market cap in cash. bank of america, merrill lynch came back with a negative note and took earnings down to 65 but it's a situation where we could be buying burberry on 14 times trough earnings and i would suggest that that would be the right thing to do is look at something like that but you do have to hook at situations that have huge financing fire power to keep this company in business. >> a reminder to keep an eye on fundamentals. >> that's the worst thing you can do. just stick to the numbers and
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and you'll be better off. >> well, the major u. s. indices slumped to a three month low with all s&p sectors closing in negative territory yesterday. this with the tech sector leading declines and that was the longest losing streak since the summer turmoil. it's on track for its third worst week in five years. >> dropping below the $100 mark. report this week that the tech heavyweight could be looking to scale back iphone production apple brought an undisclosed amount.
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it's understood that they have raised around $8 million so far. >> and nissan announced it will launch more than 10 self-driving cars over the next four years as auto makers battle it out to lead the charge in autonomous driving technology. they announced the plans overnight saying that the first semiautonomous vehicles will debut this year with a fully autonomous car ready by 2012. phil met him for an exclusive test drive. >> all right. let's go. >> he is addiment autonomous drive cars are coming quickly. so fast he took us for a ride in a nissan leap test vehicle to show us how these cars are close to being ready for every day driving. >> his hands are on the wheel. he's doing nothing. we're just following everything. and you see we'll be in configuration which are complicated. you see? the car is putting itself on the
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right lane. >> this ride in the silicon valley highlights a top initiative bringing a completely autonomous drive car to market by 2020 as we maneuver through traffic effortlessly. he was pleased with the technology but admits there's still work to do. >> one of the most difficult problems to solve is people with bikes because i don't respect any rule usually and the car confuses them because from time to time they're like pedestrian and from time to time, they behave like cars. >> they're all racing to build driverless vehicles the connectivity and technology will spark demand for consumers that want something more in automobile. >> this is not about kicking the
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driver out of the car, this is selling the driver your in power. >> as the ride around the silicon valley showed us, nissan and it's chairman are close to putting driverless cars out on the road and changing how people see and use their cars. >> well, you didn't disappoint. >> i wanted to bring you the latest in terms of mercedes benz sales. and that is thanks to the 40% jump. and also because china became the car makers largest single market for the first time. we talk every day about the slow down in china. what slow down you might ask when you take a look at those numbers? china 2015 sales up 32.6% on the
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year. and really seeing the benefits in china. meanwhile, they dropped sharply in after hours trade after the clothing retailer said comparable sales for december were down 5% compared to a 1% increase last year. meanwhile, comparable sales for november and december were down 2%. however shares in urban outfitters trading higher up now about 2.4%. let's get out to wilfred frost at cnbc headquaters. wilfred, it seems to be more of the same from the retailers reporting disappointing sales through the end of the year. >> there's a mixed bag in fact there nancy. nothing stellar perhaps but some were less bad than expected. urban outfitters one of those names. in fact l. brands were pretty strong and gap was one of the negatives and continued to close
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some stores. macy's was disappointing. it said it was also laying off stock so that is something to watch ahead of this nfp release later today. the general theme overall so far, we're still early stage of these retail releases is the point that consumers wasn't as much. captured 42% of online sales. so that did particularly well. of course, we have to bear all these stock prices with a pinch of salt. looking at how much the u. s. futures have been moving following moves in asia and netflix say great example of that. it announced this week that it wasn't even going to launch in china and yet it's been as effective as everyone else with
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these declines so clearly a lot of contagion and correlation in markets as opposed to fundamental links with what's happening in asia but i'm interested to see what you have but with the dax we have so many export focus companies that have heavy exposure to china so it doesn't really beg the question why is this happening? yes it might be an overreaction when it comes to other stocks but if you take a look at the auto makers and chemical companies that have banked so heavily on chinese growth in the past i don't think you should be surpris surprised. but maybe china is still growing. it might be growing slower and what we're seeing happening in
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the equity markets is not reflective of what's happening in the underlying economy. >> we have robert who is the chief global strategist at citigroup. also earlier this week they cut their forecast for equities and of course the nfp and what to expect there. we also have my former boss who managed around about $8 billion in the past to tackle what to think and what to make of all of the developments in china this week. worldwide exchange coming up in about 15 minutes time. >> can't wait for that. one final quick question. getting used to the new sleep schedule? >> well, it's been all right this week because i have just stuck on british time but i haven't mixed any socializing into the bargain yet so we'll see how it works after a weekend in the city. >> thank you. have a great weekend. quick peek after u.s. futures.
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the dow jones seen bouncing back to the tune of 173 points. nasdaq up by 45 and s&p 500 up by 19. this is after the dow and the nasdaq fell into correction territory yesterday. >> well, carolyn, the big theme this week of course has been thigh in a but next week we'll start to get a glimpse at u.s. earnings season officially kicking off and ahead of those releases goldman sachs downgrade it's outlook for full year 2015 eps estimates for the s&p 500. it sees the worst earnings season for that index in about 48 years since the tracking began at goldman sachs and there's three main factors driving this call. one of which is concern over margins. now they point this down to the tech sector. tech has been leading an increase in margin growth over recent times but now tech margins expected to plateau in 2015 even despite strength in other sectors. the other big factor, no surprise here, the overriding main factor this is roller
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coaster path of energy earnings. they see energy as a whole, this sector leading to a negative eps sector for the first time on record and overall they see about a $2 eps decline for 2015 but the good news here they do expect energy sector earnings to pick up from 2016 and 2017 which should boost the s&p 500 as a whole and last but not least goldman sachs say concerns over muted growth in the united states. now despite some strength in the consumer sectors they're pointing to weakness in industrials. something we have seen of late with ism manufacturing data and of course a key reading on growth for the u.s. and we get that non-farm payrolls report out later which could say a lot about where the fed is headed for the rest of the year. >> on a day like today and week like this week few people will worry about the jobs report nancy. thank you so much. it's been a historical first trading week for stocks. as we go to break, let's take a look at this week's market moving moments.
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♪ >> deja vu all over again. >> volatility is back. we have wiped out the bulk of 2015 gains. >> the repercussions of a financial crisis that is not halted quickly enough by the chinese government would be global. >> the pboc injected around $20 billion into chinese markets following monday's sharp falls. >> csi 300 that we're keeping track of because of course yesterday that triggered this whole global sell down. >> china is undergoing a pretty significant pivot. it's not as surprising that we're seeing weaker data in terms of manufacturing. this seems to be part of a process. >> reports after a hydrogen bomb test rock counter to the globe of denuclearization. >> the chinese markets are behaving themselves despite the weak read with the services number. despite the fact that we continue to see beijing engineer a weaker currency.
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>> absolutely extraordinary. >> the chinese markets having the shortest day of trade ever in history. >> 7.3% decline on the shanghai composite. 8.3% decline on the shenzen. >> the opening calls for europe this morning it's a much weaker picture expected. >> china central bank has stepped into the market to support the yuan. regulators have also scrapped the circuit breakers. halted trade twice this week. >> unless china comes out and says it constitutes an official current hike the market continues to pfixate on the u.s dollar cross. >> does it remain relative to the basket of the currencies. ll, ll, mom knows it needs a big solution: an antiviral. don't kid around with the flu, call your doctor within the first 48 hours of symptoms and ask about prescription tamiflu. attack the flu virus at its source with tamiflu, an antiviral that helps stop
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welcome back. belgian prosecutors said they
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found singer prints of sal salah abdeslam in an apartment raid. >> let's bring you up to speed. the paris prosecutors office is investigating yesterday's paris attack on a police station as an act of terrorism. police shot and killed a man at the entrance of the station in the 18th district of the capital. he was also found to be wearing a fake suicide belt. and at least 47 people were killed on thursday when a truck bomb exploded at a libyan police training facility. the attack was the worst since the fall of gadhafi. the mayor of the town said it detonated as 400 recruits were gathered. >> u. s. secretary of state john kerry says china's approach to north korea has failed. this following claims that it had a successful test of a hydrogen bomb. china cannot continue with business as usual. this comes as the united nations says it will begin work on new
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measures against north korea. u. s. president barrack obama continued to further his campaign for gun control on thursday. in an op-ed the president admitted that lasting gun reform won't happen during his presidency but pressed for others to continue to press on with the issue. obama also wrote that he will not campaign for, vote for or support any candidate even in my own party that does not support common sense gun reform. >> chinese stocks ending in the green after regulators scrapped the new circuit breakers and meantime the pboc strengthened for the first tile in nine days and reportso suggest that china central bank stepped into the market to support the currency as well. goldman as a new note. >> that's right. goldman sachs taking advantage of the volatility and they're just in the dollar yuan forecast slightly weeker to 7. that's in line with right now
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and this compares to the previous forecast of 6.6. and they view that policy makers will continue to put forth stimulus measures and this could have additional down side pressure in the currency as well. joining us for more on that was the senior analyst. there was a great deal of confusion running through the markets over whether or not chinese regulators have lost control of their currency plan or whether this was just a part of a plan to ease the currency lower. >> they were setting it during a market mechanism which means they have to price off the previous days lose. everyone thinks this is market guidance rather than what market force is. so people think they're guiding the price lower where as actually it's just the depreciation pressure in the market. so what they did yesterday was issue an announcement saying we're going to change our mechanism. we're going to base against a
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basket of currencies and it's though the going to slavishly follow the u.s. dollar. this means they could bump it up slightly today and we have a bit of stabilization but it does mean depreciation pressures remain but they won't be quite so aggressive on just following the market moves. >> so you expect signs of stabilization to hold although we could see a bit of depreciation. where do you see the target going for the year end? >> you still have depreciation pressures. the currency has gone up 14% while the economy has been weakening and interest rates have been cut. we could see further depreciation pressure down but possibly lower than that toward year end. possibly strengthening into h-2 but they'll try to do it gradually but there's large risk. >> this week we have an
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inconsistent message. first they immement the circuit breakers and then scrap them. first they weaken the quan and then fix the yuan. it's a deja vu of august and that doesn't help the credibility that they're trying to fix once again. >> no, you do have a problem where it's a government -- removing from anmen controlled economy to one based on market forces and there's a massive dislocation between those things. people think the government is saying one thing where as actually the market is doing something else. this creates volatility. if china wasn't the second largest economy in the world it wouldn't be a problem for global markets but this change that we're seeing is very disruptive. >> and you actually believe the economy will make a fundamental break from the past in 2016. so actually, what are we even worried about? >> well, this is all to do with their reform process. so instead of being sort of the government lead stimulus from
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the past we'll see more supply side reform and more changes toward market forces. but it does mean that you have a bit of harsh medicine to follow. to take in that process. and it does mean that it's not going to be -- it's not going to be -- you're not going to get some magic upside from the government just when things go bad. >> thank you for your time. have a great weekend. >> okay. that's it for today's show. i'm carolin roth. have a fantastic weekend for yourselves. thank you for watching. see you next week.
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>> rough ride. $2 trillion wiped from the global stock index in two days. beijing takes action overnight. >> wall street connection. the dow and mazz dak dropping more than 10% below their 52 week highs but futures looking at the open. >> it's jobs friday. a key read amid fears of the slow down. it's january 8th, 2016. worldwide exchange begins right now. ♪


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