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tv   Street Signs  CNBC  April 4, 2017 4:00am-5:01am EDT

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good morning, everybody. welcome. you're watching "street signs." i'm louisa bojesen. european stocks shrugging off stocks in asia let higher by basic resources. amid rising concerns around president trump's meeting with china's president xi. european companies exposed to south africa selloff after the country is downgraded to junk by s&p, following the cabinet reshuffle that has rocked the nation. pure imagination for credit
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suisse afterfor a takeover after apple terminates its chip supply deal, helping shares in the uk firm recover some of yesterday's steep losses. asos falls out of fashion with investors despite raising its full-year sales guidance. good morning, everybody. thank you very much for joining us. glad to be in your company over the course of the next hour. we have a packed show. loads coming up. have an fx guest just making his way into the studio, i see. get your questions through nice and early so i can use them on the show. doesn't help when they come in after the show is over. find us on twitte twitter, @louisabojesen, or we'll talk about what's taking place with regard to south africa, venezuela interesting as well. heating up there. we'll hear more about the latest on the french elections.
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we have this second televised debate taking place this evening. european equity markets relatively mixed. the ftse hanging on to slight gains, 7.318. the xetra dax, cac, ftse mib all treading water. out of asia overnight, that session relatively flattish. people looking towards this important meeting between mr. trump and the chinese president taking place on thursday and friday. this after trump having tweeted the end of last week that the meeting will be a difficult one. the u.s. stands ready to tackle north korea alone regardless of china. could be a tense meeting indeed. of course also rounding off the week, just to remind you, with the non-farms payroll data. the big data of them all. i'll ask our fx guest about what anticipated dollar moves we can expect on the back of this. when it comes to the sectors to the upside, real estate poking
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up a bit. travel and leisure higher. media, oil and gas on the gainer's board. six sectors in negative territory, banks, telecoms and autos leading the way lower. you would have noticed weaker auto sales data stateside. when it comes to the u.s. markets and the u.s. close, this is what we're looking at yesterday. slightly lower close across the board there. that despite the fact that the u.s. construction spending grew at its highest level since april of 2006. we saw this deceleration in u.s. auto sales for the month of march holding us back a tad. with the market pricing in at least two additional rate hikes in 2017, a number of fed officials started talking about shrinking the central bank's balance sheet. steve liesman has this report. >> reporter: for sale, trillions of dollars of treasuries and mortgages on the books of the
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fed's balance sheet that it doesn't seem to need anymore. now that the economy is recovered so much so that the fed is raising interest rates, the fed is talking gently about reducing the size of its 4$4.5 trillion balance sheet. >> is interest to shrink the balance sheet in a gradual way. >> reporter: increasing the size of the balance sheet during the financial crisis was the answer to a problem. the fed already cut rates to zero but the economy was still weak, so the fed purchased trillions of dollars of bonds and mortgages to drive down interest rates and drive up the stock market. now four times the size of what's normals, the balance sheet risks creating more inflation if not right-sized for a stronger economy. >> let's say they have a five-year plan, they need the balance sheet down to 1$1.8 trillion. so they need 2.5 billion off the balance sheet. >> the reason the fed is raising
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interest racings before reducing the balance size is it admits it doesn't know how to calibrate a decline in its balance sheet with the effect on interest rates and the economy. >> we think it's much easier in using that tool to communicate the stance of policy. we have much more experience with it and have a better idea of its impact on the economy. >> investors will be listening closely, too aggressive a plan could be a major selling event. so the best guest is the fed announces a plan this year to gradually reduce the size of the balance sheet, but doesn't actually do anything until later this year or early in 2018. steve liesman, cnbc. kit juckes is with us from societe generale. how closely are you watching the fed balance sheet? >> i'm watching it in the sense that i don't think anything much will happen for a while. i'm watching the debate. pondering -- you know, in a
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sense, the fed's balance sheet doesn't matter to me that much. except in the sense that there's the right amount of money in the economy. ultimately if you reduce the fed's balance sheet, how much will that reduce the amount of money in the economy? how much will it tighten policy? how does that play through? if you were to be reducing the size of the balance sheet at the same time rates would be going up, you would be doing the opposite of what the ecb did at the beginning of 2015 when they started qe and cut rates to below zero and crowded foreign investors out of european markets and got the euro from 130 down to where we are now very quickly. you can see what it might do to the currency if you were hand-fisted about it. >> do you think the u.s. economy could handle moves like that? >> right now i can't see there would be a sense. it seems much more sensible to me to slowly edge interest rates up towards a more sensible level. i think they can go faster than
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they are, before doing something unpredictable. whatever they do, i think we should view it in the light that the combination of rising rates, if we get there on a shrinking balance sheet will be significantly dollar positive if and when it comes. >> why do you think they could go faster than they are now? >> rates are -- i don't think the u.s. economy at the moment with a nominal growth rate in excess of 3% needs interest rates this low. this is a fed starting from interest rate levels that have given us strong asset markets around the world. hasn't given us inflation because of globalization, technology are the principle anchor on inflation, irrespective of interest rates. but it's unsafe in terms of what it does to asset prices to have interest rates this low for this long. you could be a bit braver than they were. they went, you know, you could easily argue they went too slowly in 2004 and 2007. we know what happened next.
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we're going much more slowly this time. >> so, in other words, asset bubbles? >> bubbles, asset prices rise. global debt levels march upwards to accommodate this. it may be the problem doesn't show up the same place as last time, but not even in the same country. this is not -- we're not in an equal l e equilibrium. >> i often play the fun dinner party game, where will the next crisis be and how will it look? nobody knows. what do you think will happen with non-farm payroll data and dollar positioning? >> i think the foreign exchange market will take its queue from what the market is doing. this morning we're sitting at the bottom of this mini range for ten-year yields that we've been in the united states as a result of the angst around generally but also the soft car
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sales numbers yesterday if we get a decent payroll number on friday, we've been getting good numbers for long enough that the odds favor that more months than not, we'll keep the yields in the range, just moving up to 2.4% for a ten-year treasury or somewhere like that. i don't think that propels the dollar higher. i think you may get a slightly stronger dollar for five minutes, but more than anything else, we all look around and say 2.4% or something like that, meh, that's not exciting. where can i find some yield? maybe we'll all look at the beaten up south african rand by the end of the week depending on what happens between now and then and think what i really wanted was south african bonds. >> do you think it's too early to get in still by the end of the week? >> depends on what happens. i think the wider theme is of, you know, the search for yield that comes from such low yields
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in all the developed safe assets. and so that's very potent. so, how soon do you go and pick up what are now cheaper south african government bonds and a cheaper rand? yeah, it does feel soon -- it will feel too late if you miss the boat. it's not -- there's no science to that one. >> so your dream currently cross at the moment is what? >> my dream currency cross -- not many dream currency crosses out there. all very frustrating. probably strong indian rupee, a that would be one of the currencies i buy. my long-term currency cross is long the euro, short the pound. that's not a dream but a nightmare in my personal finances. that's what i suspect. big evide as the ecb approaches the point the other side of the french elections when they're likely to
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further slow the pace of bond buying, that's going to be a seat change, we have a euro that's lower than it was before this combination of bond buying and negative rates. once we turn the corner, the danger is a spike higher for the euro. >> so long indian rupee, look at that. and longer term long euro short pound. >> yes. >> kit, thank you very much. kit juckes, global head of foreign strategy from societe generale. abb has bought the austrian brought bernecker and rainer for an undisclosed sum. it will be completed mid year. the company says it is funding the deal from its own cash. we'll speak to the abb ce
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abb ceo ulrich. spie spiesshofer. and as os shares are off by almost 6.5%. the fashion retailer raising its full-year guidance by increasing international demand. asos left profits before tax outlook unchanged which morgan stanley analysts say could be disappointing investors high expectati expectations. and shares in imagination technologies have been rebounding on a report that they could become a takeover target. credit suisse upgrading the rating on the firm saying it saw potential interest from chinese suitors. this after apple terminated its contract with the company sending shares into free fall, you remember that yesterday. this morning higher by 5% or so. e-mail the show. a number of you have already. i'm not working for lululemon.
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i'm with cnbc. this is not a lululemon shirt. it's a dress. you can find us on e-mail,, tweet me directly at @louisabojesen. get your questions and your comments in on the earlier side so i can use them. we will be talking more about what's taking place in latin america and south africa as well. venezuela is interesting. french election. talking political risk and hearing the latest on some m&a deals we've been seeing during q1 and what type of environment it is for m&a. the world's most valuable pink diamond is once again up for auction. once again because the 59 carat pink star gem fetched $83 million back in 2013. it's not all that long ago. 83 million for that thing. the sale fell through when the buyer defaulted on the purchase. some experts are predicting that
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the internally flawless diamond could get a higher price when it comes back under the hammer in hong kong. we should all be going to these auctions, saying me, i'll take it default. can't pay. it's a big gem. big gem. sotheby's chairman for asia told cnbc why his firm chose to hold the auction in hong kong. >> we believe the market is right today for a pink diamond of this caliber and of this rarity, and that we will be ability to attract great buyers and great collectors here in asia. coming up here on "street signs," downgraded. we will be discussing the continued fallout from south africa's controversial cabinet reshuffle. that's coming up after this you're watching "street signs."
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welcome back. you're still watching "street signs." as i've been saying, venezuela getting increasingly more and more interesting. the organization for american states adopted a resolution calling on venezuela to restore the full authority of its national assembly and democratic order. this happening after the south american country supreme court controversially took control of the opposition-led national assembly. venezuela's delegate stormed out of the meeting calling it a coupe detat. the president reacting by slamming the meeting. >> it's become a court of inquisition, anti-venezuela, a true court of inquisition with all the abuses, with all the vulgarities we've seen these days. today they did whatever they wanted and staged a coup against
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the presidency of bolivia. s&p downgraded south africa to junk after the ousting of finance minister pravin gordhan. moody's placed government bonds for a downgrade also pointing to key leadership changes, this following comments from the new finance minister, malusi gigaba who said changing one member of the government would not lead to a ratings downgrade. since the change from s&p, gigaba has vowed to transform south africa's economy. we were talking about this yesterday as a possibility of it happening. just looking at some of the reactions here in the rand. seeing the rand dropping quite substantially and seeing a reaction in the south african bonds. let's talk more about this with edwin gutierrez from ab eerdeen asset management. let's start with south africa. s&p downgrading s&p to junk. moodys placing government bonds
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ton a downgrade as well. how do you see this? >> moodys is in a wait and see mood and waiting to see whether the key institutions for south africa, the treasury and bank are hindered by this cabinet reshuffle. i think that's going to be key to determine whether moodys decides to join s&p in downgrading them. >> if they do, what are the prospects for investment? how long before investors come back into south africa? >> the key thing is moody's, there was a reprieve yesterday, but that was on review. if moody's would to downgrade them to junk and the local currency bonds, that's where a lot of foreign exposure, that's where you could see forced selling. if south africa is downgraded by moody's t could drop out of the city or government bond index, followed by a number of investors globally, that's the true threat to south africa. >> we understand.
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>> let's talk about venezuela meeting. we had this organization of american states, and the venezuelan representative there storming out of the meeting ups upset over what was being called erosion of democracy in venezuela. among other things. in your version of what's happening, what's happening? >> i think the last move by the supreme court to mess up the assembly of powers was a bit of an overstep. the secretary-general has been sending us warning shots about the deterioration of democracy in venezuela. the fact they have been flagrant violators of the charter. he's been threatening to take the -- the nuclear option, kick venezuela out of the organization. whether they actually have the support to do that when the oas remains to be seen. a number of countries in the
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central caribbean region receive subsidized oil from them in the past that program is effectively over, but they are seen indebted to venezuela. so i'm not sure if they would support removal of venezuela from the oas. >> maduro's socialist party has been in charge for 18 years now. do you think we'll see sanctions on venezuela? >> i think sanctions is another step they're not considering now. even the u.s., the current administration, said they're not looking to impose sanction s as of now. it's still in play. now this restoration of power to the national assembly, let's see how this plays out. >> the next presidential election in 2018, so there's the possibility they bring that forward? >> there's the possibility. that's the case because madura
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is unpopular and the ruling party would be more viable to bring their revolution forward. >> as you were coming n in, i asked you about other points. you said brazil, why brazil? >> despite the negative headlines in emerging markets, there's some bright stories and brazil is one of them. they remain challenged in terms of emerging from the worst recession in history of the country, but nonetheless we now have inflation that is falling pretty dramatically. that's allowing the central bank to cut interest rates. interest rates hit 10%, still elevated. for us, still remaining an opportunity as we think the central bank will be cutting rates aggressively. >> to what levels? >> the overnight rate in brazil eventually finishing around 8%. the market is priced in 9%. so we think there's more to come from the central bank. >> and you think politically
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they turned the corner, too? >> yes. >> four years ago, five years ago, they were the darling of the emerging market investors. overnight they fell out of fashion so quickly. you saw huge recession hitting them and they're still trying to get out of this recession they've been flirting with. >> absolutely. it's also testimony to the strength of democracy in brazil. brazil has these institutions that can challenge the leadership. that's not something that is present in most emerging market countries. we have to tip our hat to the brazilians for that. it's a painful adjustment process. that's what these things always are, especially after this big fiscal binge, and it's not easy to put in things like social security reform, telling brazilians they have to work an additional ten years. this is why you get the push back, but we remain confident this administration will be successful in pushing through those merging markets are catching your eye?
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>> some have swung to the right or center right, we've seen in in argentina. reversing a lot of damage done by the institutions in argentina over the past 15 years. so we have a friendly administration now. the process, as we've seen in brazil, is very slow. argentina shares the same fate, emerging from recession, it's always tough for the painful adjustments when your country is in the midst of recession. >> am i correct in saying i'm picking up a latin theme? >> i think so one is external environments. despite the fact we're in a gradual rate rising environment from the fed and u.s. treasuries, we are also in a sweet spot in terms of the commodity cycle. commodities is what latin america does. mexico is an exception. it's a big exporter. but the rest of latin america, these are some of the biggest commodity exporters, both hard
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commodities and soft commodity nas we have. they are benefits from that sweet spot in the global economy. >> edwin, thank you very much. quick comment on china? a viewer wants to know your thought on the strength of the chinese economy. >> sure. that is the commodity sweet spot. it's a reflection of that cyclical upswing we're seeing. the consensus view is that china looks okay for 2017. they have a key political event in october, and it's very much in the state council and the leadership in china's interest to keep things on a friendly, even keel. as we know, china has substantial issues it needs to deal with. they're putting that off. 2018 could be a much more challenging year for china. >> edwin, we've got to go. thank you very much. edwin gutierrez. have a lovely day. we'll talk soon again. we need to take a break. check out world markets live, it's our blog that runs
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throughout the entire day. on the other side of the break, lots more for you, talking political risk, the latest on france and m&a as well.
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welcome back. everybody. you're still watching "street signs." i'm louisa bojesen. these are your headlines. european stocks shrugging
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off stocks in asia led higher by basic resources amid rising concerns around president trump's meeting with china's president xi. european companies exposed to south africa selloff after the country is downgraded to junk by s&p, following the cabinet reshuffle that has rocked the nation. pure imagination for credit suisse, which says the uk tech firm is ripe for takeover after apple terminates its chip supply deal, helping to reverse yesterday's losses. asos falls out of fashion with investors despite raising its full-year sales guidance. welcome back, everybody. you're still watching "street signs." just grabbing some date a hitti the wires. uk construction figures, growth cooling for the month of march. adding to the signs that we've already had of a slowdown setting in.
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that's according to the pmi data hitting our wires. construction pmi slipping to 52.2. a poll had been looking for a figure around 52.4. a bit shy of that poll forecast. february was the figure of 52.5. so it's lower than the february figure. again, 52.2. the new order growth, construction new order growth remains at its slowest level since october. business expectations are rising a little bit. that's what we're seeing now. so, it's the joint slowest rate of growth since a recent pick up seen for the sector that started back in september. a bit weaker than the median forecast put out by the reuters poll. those figures again hitting our wires. glenn is atequity markets. the cac and ftse hanging on to some gains. the ftse mib is off along with
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the dax. implied open on the right-hand side of the screen for the u.s. markets, a bit lower. a bit softer stateside. >> asian markets have been skittish ahead of president trump's meeting with his chinese counterpart in xi jinping in mar-a-lago . topping the agenda will be the issue of north korea. investors will be seeing if president trump will keep his word to get tough on trade after he suggested to the "the financial times" that he could use the issue as a bargaining chip with the chinese over north korea. republican senators are considering changing senate rules regarding supreme court confirmations after democrats secured enough votes to filibuster neil gorsuch's nomination to the highest court. >> reporter: on capitol hill, a senate showdown, democrats
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standing their ground, refusing to back the president's supreme court nominee, neil gorsuch. they say gorsuch will get voted in, even if they have to go to the nuclear rule. it is certainly the end on bipartisanship. >> reporter: democrats say their no is based on the judge's policy. >> he agrees with the trump litmus test that he would automatically overturn roe v. wa wade, strike down gun violence prevention. >> reporter: but republicans claim it's nothing but politics and payback after president obama's pick was never given a hearing. >> if judge gorsuch is a unacceptable, there will never
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be a nominee by this president that will be acceptable. >> reporter: some of the same republicans who held up garland accusing democrats of obstruction. justice sonia sotomayor in 2009 got 9 republican votes, and justice kagan getting 25. >> reporter: the next stop is the senate floor. republicans hope to get a vote this week. that music is so dramatic. emanuel macron is leading the french presidential race with 26% of the votes, while marine le pen is trailing with 25.5%, that's according to the latest poll, this coming ahead of the second presidential debate which
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will take place tonight. claire joins us from hayange, france what do we expect from tonight's debate? where on earth in france are you? >> first of all, let me tell you that the televised debate tonight is far from the preoccupations of people here. we're in the east of france. and as part of the decrepit rust belt, hayange is the sign of a declining enduindustrial area o france and part of the failing promise to keep jobs here. president hollande pledged to keep the factory open, but that's not what happened. in many ways it's a symbol of a france that feels abandoned by politicians. as we observed going around town. take a look. it all started here, at this steel plants that once
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represented the economic heart of hayange. that was until 2012 when the factory was closed down where 600 people befowere working. today the jobless rate is 17.5%, well above the national average. while hayange is one of 11 towns that elected a pro national mayor three years ago t wasn't always in favor of the extreme right. during the 2012 presidential election, the town voted for socialist francois hollande who promised to keep jobs. then the vote turned around drastically. >> translator: we had the closure of the a & e hospital, the closure hit us hard and made votes swing. i think the nonvoters helped swing the election to the national front rather than support for it. >> reporter: the pro national
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mayor has started making changes. he reinforced the police and installed 26 cameras across the town and reduced public funds for ngos linked to refugees, but cracks are already emerging. prosecutors are investigating contracts worth tens of thousands of euros awarded outside of regular procedures. and four people have resigned, like patrice who said he joined national because he was angry. >> i made a huge mistake and i paid the price. the mayor prides himself on cleaning the city, but he also cleaned out its soul, its people. the youth doesn't come out to play anymore. we have less people shopping here. we have less people passing through hayange. >> reporter: nevertheless the party is expected to score well in the town during the first round of the presidential election, and it remains to be seen whether it can confirm that
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trend for the second round. going around town we had confirmation that it's not easy for these unexperienced mayors to manage a city on a day-to-day basis. when the national front was created in 1972 by jean le pen, father of marine, it was not meant to be a golf earning party, it was meant to be in the pop signals. n position. but now she is trying to establish he presidential status. as many point out today, it will all eyes on macron, target number one. he's the favorite in the polls, as you were saying. he will probably be the target of all the attacks. the stakes are high for emanuel macron who needs to con sosolid
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his first position, also the stakes are high for le pen and fillon who believes he still has a chance at the election. back to you. >> claire fournier, thank you very much. david lee is with us in the studios. good morning. welcome back. what do you think are some of the points that clash brought up there? one of them being that front national was never meant to be a governing party, just an opposition party. now there's a chance, though some analysts say a low chance that it could quite close to being a governing party? >> this follows a pattern with many populist far-right parties across europe and some populist left parties as well. they never go into this to be in government or taking those big decisions, mostly against protesting the people who were. when they do get into government, there is criticism of them, and they are
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inexperienced and tend not to handle it well. so these parties have tried to change their innate sense of being from being that protest party to being something like marine le pen wants. it's not always getting there. >> claire also making the point that fillon thinks he still has a chance. he went from zero to hero pretty much overnight in the polls. now most people say that he doesn't stand a chance. do you think that as well? >> i think it's difficult for him from here. i think his campaign has been a succession of unfortunate events. given the centrist nature of macron and the squeeze on the right from le pen, i think it's going to be very difficult for him unless he runs a fantastic last few weeks of the campaign. >> will it be or could it be a landslide victory for macron if
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macron does run off with the seat or will it be a close one? >> i think the republican front, as they call it in france, the people will come out to vote, they will vote against the person they dislike the most. that's still going to be le pen. i think there's a very strong chance that there will be a fairly sizable vote for macron against le pen if it does come down to those two. but a landslide, 80% like some people predicted, i don't see that happening. >> why should we now be thing about parliamentary elections? >> the important thing about macron, he came from nowhere. he started his own movement with the same name as his own initials, it is hugely identified with him. it will be difficult for him to
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parlay his presidential vote into, you know, on the ground retail politics winning each individual seat. that will be tough and might lead to a fairly divided national assembly as we go forward into the meat of his term. >> we don't talk a lot about the popularity of fillon. it comes at the expense of who? >> he has gained a lot in the last few weeks. one poll yesterday he hit 20%. mostly comes at the expense of the social list party. the social liists chose a left winger after francois hollande, but it does not seem to be working, and the left weing ser
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striking more of a chord with people. >> what are people voting on? personalities? still voting on immigration? perceived immigration? are they voting on the economy? >> i think there's a lot of voting on fundamental competence after what we've seen in the last couple of presidencies where very strong personalities have turned into weak personalities quickly. there's a lot of that. that's partly why macron has done so well in the campaign. clearly the le pen campaign will be voting on emigration, jobs in peripheral areas like you saw in that film. >> david, thank you very much. david lee, senior europe analyst for control risks. >> the government's assertion that no deal is better than a bad deal when it comes to brexit is unsubstantiated. that's the view of the cross-party brexit committee which is calling on the government to improve its contingency meeting.
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this after the brexit secretary admitted that the government had not assessed the economic impact of leaving the eu without a deal. coming up here on "street signs," less could mean more when it comes to global m&a. we'll recap some trends seen in deal making from the first quarter. that's coming up after the break. keep your questions and comments coming through. always nice to hear from or @louisabojesen on twitter.
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hi everybody. welcome back. you're still watching "street signs." i'm louisa bojesen. we are seeing some movement in the auto sectors today. european autos hitting a session low. most trading in negative territory. we had data through from the states showing us a deceleration in u.s. auto sales for the month of march. also speculation about the
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health of growth seen in autos and seen in the global economy from this particular avenue. tesla shares hitting an all-time high in the session despite a broader selloff seen in some legacy automakers after weaker than expected u.s. sales data. listen to this. tesla now delivering a record 25,000 vehicles during the first quarter of 2017. that might not mean a lot, basically overtaking ford as the second largest u.s. automaker by market cap. by market cap, tesla is now the second largest u.s. automaker. let that sink in for a second. short interest in the stock has traditionally been high. that move higher came to the delight of the founder and ceo elon musk who made his feelings known on twitter. stormy weather in shortville. u.s. auto sales slowing for the month of march missing estimates for a slight upturn. is this the beginning of a
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downtrend or a blip in the radar. >> reporter: make no mistake, americans are still buying plenty of new vehicles, especially trucks and suvs. but march shows u.s. auto sales overall continue to slow down. last month business was much lower than expected for gm, toyota and fiat chrysler, ford did slightly better than forecasted, but still had negative sales last month. is the auto market that's been in overdrive finally stalling? well, it's too early to tell. the warning lights are definitely flashing. for starters, inventories are rising. so new models are sitting on lots longer. when they do sell, dealers are spending more to close the deal. also, there's a glut of used cars and trucks hitting the market, pushing those prices down, making some used models more attractive than new cars and trucks. with the march sales pace falling under 17 million for the first time since last june, this
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could be an indication that auto sales will not rise for the first time in seven years. but how much sales slow down depends in part on how automakers handle the drop in business. >> it gets tricky now at this point in the cycle, how aggressive do automakers want to be on insentincentives. at the end of the day it's about profits, not market share. >> reporter: that's the challenge. can auto americas remain disciplined and avoid an incentive war that cuts into profit margins. this is a cyclical industry, historically automakers have not done well when sales slow down. phil lebeau, cnbc business news, chicago. a top akzonobel investor encouraged the company to engage with ppg. the top 20 investor said that
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they had done a fantastic job but should enter talks over the decent offer of 90 euros per share. abb bought the austrian group bernecker and rainer. that deal is expected to be completed mid year. the company says it is funding the deal from its own cash. we'll be speaking to the abb ceo exclusively at 111:45 cet. speaking of deals, global deal making remains strong according to a new report. there are fewer deals than the same period last year, but the overall value of those deals is greater. to talk us through this, we are joined by gemma. tell us what merger market is announcing. >> we're seeing fewer deals, but greater deals in size. so we're seeing a tick up in the average deal value to 4$400 million, pretty high compared to
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last year. we've seen a fall in the number of deals, but a 9% increase in the value of the deals. if we look at a couple key themes, consumer was really the tear-away sector. it produced a whopping inping$ billion worth of deal value, and we saw three mega deals, so that's u.s. $10 billion or above. led first and foremost by the british american quarterback acquisition of reynolds. this compared to last year when we saw more mid level activity. so there was only one meg a dea for the whole of 2016. looking at china, an 86% drop in outbound activity from china. do you to t due to capital outflows and
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foreign acquisition. in europe, a lot of political uncertainty to overall a 39% drop in inbound european m&a activity for where europe is the target. partly due to brexit uncertainty and a jam packed election schedule for the year. but also because of the asia pacific slowdown. britain slowed down as well. one exception was the u.s. u.s. acquirers of europe par testimo targets was at a first quarter high since 2008. >> so i'm wondering who is taking the place of china? who is plugging that gap? >> what's interesting is different regions, different things are happening. u.s. activity into europe picked up. british activity into the u.s. picked up. so we're seeing moves around in general about what was happening there. the outlook for china is quite bleak for the rest of the year, which should have an impact on m&a overall, given that they are
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huge in 2016. >> also interesting the point about the consumer deals or lack of deals. again, which other sectors are we seeing that are really standing out as interesting? >> tech sector is quite interesting. there's a lot of capital markets activity in general. speaking earlier this morning to a guest who was talking about the ipo market. that's been absolutely buoyant in the tech sector. where we are not seeing ipos, we're seeing m&a activity. oil and gas as well. i would point to the uk. in preparation for brexit, we've seen uk domestic dealmaking reach highs not seen since the final crisis. preparing there, not vk having worry about the fx or political sensitivities. >> makes sense that if you're a company and you're thinking i'm not sure what's going on, you might want to look at diversifying or finding value from within via these deals.
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>> a lot of revenue synergies as well and cost synergies being pursued. >> very interesting. thank you very much gemma acton. a glance at u.s. futures and how we're setting ourselves up for trade, 4 1/2 hours away from the u.s. market opening. implied open still pointing just a bit weaker. so a bit of a softer open is is what we're anticipating. in europe, mixed markets. that's it for today's show. i'm @louisabojesen. white s that's it for us today. "worldwide exchange" is up next. so you're having a party?
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good morning. u.s. equity futures in the red pointing to a third straight session of losses. trump's town hall. the president plans to meet with some of the biggest names in business today. we'll tell you what's on the agenda. and the tar heels take the title. the highlights of the ncaa championship game coming up. it's tuesday, april 44, 2017. "worldwide exchange" begins right now. ♪ good morning. a warm welcome to "worldwide exchange."


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