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tv   Worldwide Exchange  CNBC  August 5, 2019 5:00am-6:00am EDT

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you have to get people used to the . it is 5:00 a.m top five at 5:00 has the trade war turn sboed in dangerous currency war sinking to the lowest level in ten years. global stocks slammed on the news futures down more than 300 right now as markets everywhere fall as stocks fall, investors, they're hiding in gold and bitcoin. gold rallying to a six-year high bitcoin up more than $700 right now. it is not just trade hong kong rocked by more protests and a general strike. the city's leader says she fears it is on the verge of a, quote, very dangerous situation in corporate news, the ceo
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of one of the world's biggest banks leaving after less than two years on the job it is a busy monday, august 5th, 2019 "worldwide exchange" begins right now. good morning good afternoon good evening welcome from wherever you are watching i am brian sullivan. we have breaking news with regard to china's currency it is sinking in a big way the chinese yuan traded offshore is now sliding below 7 to the u.s. dollar. that is a threshold that's not been breached in more than a decade tough go to 2008 and the financial crisis now, as that currency falls, remember, what does it do? it makes chinese exports less expensi expensive, which some say could mitigate any positive impact from the u.s. tariffs. analysts are quick to note, china could retaliate more against president trump's tariffs by further devaluing the currency you can see where it is 7.08
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this is a four-year chart. remember, it is inverted as that goes up, that's the dollar against china's currency. that's a weakening of china. look at this we were at 6 and change here four years ago as that trade fight has increased, we've seen china's currency weaken. we have not seen that level in more than a decade the currency war and hong kong protests are happening across the pacific ocean, but you'll feel it here. as this happens, dow futures are down more than 300 points right now. of course, all this as our major averages are coming off their worst week of the year dow pfutures down 366 nasdaq and s&p also lower on a percentage basis as stocks slides, bonds keep getting bought people are looking for safety anywhere they can find it. the benchmark 10-year yield, wow, 1.75% by the way, 2-year yield, 1.6%
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you have to watch these spreads. watch this and watch this. if they invert, that's that inverted yield curve we talk about, which has preceded many recessions still, yields very, very low as all this happens, as you might imagine, stocks in asia, they are selling off, as well. you have japan down nearly 2%. shanghai, 1.5% the hang seng being rocked by protests, down nearly 3% right now. europe, they're losing the same. similar story, a lot of red on the screen across the board. look at that, france down 2% germany down 1.5%. the uk down more than 2%, as well outside of stocks, here's a look at global commodities and currencies oil is also down in global slowdown fears if the global economy slows down, oil production remains high, you have too much of the stuff, it is down 1.5% right now. euro/dla euro/dollar to 1.11.
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gold continues to be bought. bitcoin, the mover of the day, up nearly 7% to 11,700 that's more than a $700 move in bitcoin. let's now get more on this heightened tension in trade and the big currency moves we go live to beijing, where there is no shortage of news to discuss. >> reporter: thanks so much, brian. the chinese yuan has weakened past the psychologically important 7 mark, as chinese currency traders say, it has cracked 7. that's been raising questions here as to whether or not beijing policymakers are pur purposefully devaluing the currency to counter president trump's latest round of tariffs. we know the chinese government controls the currency very carefully. in a statement on its website today, the people's bank of china didn't mention the u.s. by name but explicitly linked the
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depreciation to the trade war, saying losses were due to unilateralism, trade protectioni protectionism, and tariffs on chinese goods. for the past decades, authorities have been keeping the currency above the 7 level now, we are hearing the signal that the authorities here are willing to tolerate a much weaker currency. that's been received well by the manufacturers here many of them have been telling us for the past couple days they've been very concerned about the impact of the 10% tariff on $300 billion worth of goods. as one manufacturer said to me, there's nowhere to hide. the cheaper currency, as brian was talking about, means that it is going to be beneficial and advantageous for chinese exporters. now, there also could be a backlash from the white house. the signal could also be received there that beijing is willing to give up on the trade talks all together, which are
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supposed to take place in the u.s. in september. or potentially that they're seeing this as a move that beijing would want to weapon iz. the central bank expressed confidence the yuan would remain stable and there would be no policy change. there is capital flight with this latest reaction the public reaction has been interesting. people are talking about it non-stop on social media, this is the top -- one of the top trending topics with 350 million comments and views. >> wow. >> reporter: a lot of them are concern. yeah, the authorities here won't be able to control the currency. that they won't be able to protect, you know, a currency that a lot of people here see as important to their bottom line >> is the fear that people are going to continue to put their millions and billions of dollars
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out of china into the u.s. or other locations? >> reporter: yup, that's right we've seen this story before back in 2015/2016, after a depreciation, a lot of people here gt scaot scared about what would mean people started moving their money offshore, and that became a major headache for pay jing policymakers they've been -- the policymakers have been very careful to put in more restrictions over the past couple years, to make sure that doesn't happen again it's difficult to tell whether or not the authorities would be able to keep it totally under control. >> wow chinese leaders talk a tough game looks like the chinese consumer may be betting with his or her wallet and sending capital outside ede the country thank you. will this trade fight turn into an all out currency war let's welcome in the senior economist from capital
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economics. julian, do you believe china has weaponized its currency? >> i think it knew what the reaction would be in doing this, in terms of the headlines, in terms of the way it'll antagonize the trump administration yet it's done it anyway. it's explicitly linked the move to the recent escalation in trade tensions and additional u.s. tariffs i think it is effectively weaponizing it, even if it sunt intervening to push the currently down, but by linking it to the trade tensions and timing the move so soon after the tariff threats i do think we are moving in that direction. >> do you believe the chinese government has expressly allowed that offshore currency to go below 7-1 to the u.s. dollar in years past, they've defended that level, julian. >> well, i think it is clearly intentional. we haven't seen any effort since
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this morning to push the exchange rate back down below 7. we know they have the ability to do so, directly through deploying effects reserves or through the state bank the fact we haven't seen any drop back, and actually it's remained at that level, just above 7, suggests that this was an intentional step upwards. >> where does it go? how low does the chinese currency fall? >> so i think the goal here is clearly to offset some of the drag from u.s. tariffs otherwise, they wouldn't take the risk of breaching 7 in terms of capital flight in terms of what it means for the trade negotiations they'll want to see it weaken further, in my view, in order to get more of that offset. we now think it could end this year around 7.3 against the dollar, maybe 7.5 by the end of next year. >> wow do you believe -- i mean, the other side of this, obviously -- there's two sides, right, to the currency story number one is, it is going to make their imports into the united states, and the rest of
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the world, less expensive. to your point, maybe semi-mitigating the tariffs. it also has the effect of making imports into china, maybe from the u.s. or other locations, more expensive how does this play out, julian >> wilell, i thinks the positive for china. they import less than they export when you adjust for the higher cost of imports, i think it will be a positive. even if exporters don't adjust the u.s. dollar export prices, their export revenues will still pen fi benefit. a 10% devaluation could increase gdp by 0.2%, enough to offset a tariff. >> will this set off a global currency war will the euro have to go down? will the united states have to act? >> well, i think at this stage, this is not clear. i mean, at the moment, what
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we've seen is actually in the big scheme of things, a fairly small move i think we will, in the coming days and weeks, see intervention in order to prevent the currency from weakening too quickly i don't think we'll see a very major devaluation. we're predicting a 5%, 10% decline over the coming quarters i think that wouldn't cause significant problems for other countries. if things do go beyond that, it could descend into a broader currency conflict. >> julian evans-pritchard, thank you for joining us the other developing story out of china is we are seeing more chaos in hong kong amid protests and a general strike. more than 200 flights in and out of hong kong have been cancelled. much of the city was brought to a standstill beijing leader carrie lam is warning protests are putting
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hong kong on a path of potential no return. >> the recent protests and marches have seen escalated violence, and these worrying acts have gone beyond the fugitive offenders bill. particularly when i have already announced some time ago that the bill is dead such extensive disruptions in the name of certain demands or uncooperative movement have seriously undermined hong kong's law and order. and are pushing our city, the city we all love, and many of us helped to build, to the verge of a very dangerous situation >> we'll have more on this developing story, including a live report from hong kong, in just a bit so much more to do on this busy monday when we come back.
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pressure on powell is president trump forcing the fed's hand with those new tariffs? how does the fed react that debate ahead. plus, the ceo of one of europe's biggest banks out after just 18 months on the job. futures are down sharply dow futures off 360 points bonds up gold up. bitcoin up more than 700 big morning developing we're back right after this.
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welcome back and good morning. 5:15 on a monday it could be a rough day for your stock investments. dow futures are down 350 points. all this as major averages are coming off the worst week of the year nasdaq and s&p are down on an equal percentage basis as well as we see chaos reign in stocks, buyers are flocking to bitcoin as volatility as gone up, we're seeing buyers from around the world come into the digital currency bitcoin is up 750 points right now, nearly a 7-point move to 11,730 as our bonds get bought, we're seeing bonds around the world get bought, and yields continue to fall. 14.5 trillion, with a "t," of sovereign debt around the world now has a negative yield nothing stands out as much as that
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the german bund, you may not care about german government bonds, maybe it is boring at 5:16 in the morning, but you care because that signals the demand for risk and risk appetite has collapsed around the world. people are literally willing to get no return. in fact, the negative return on their money just to have a place to park it the yield on the german bond, one of the most widely traded government debts in the world, down to 1/2 of 1% negative can you imagine if our 10-year note was a negative return that's happening right now in germany. on deck, heading for the exit the ceo of one of the world's biggest banks out after 18 months on the job. 4,000 workers get laid off more on that story ahead. plus, the situation in hong kong growing worse protests continuing. nearly 100 people arrested as the head of hong kong calls it a, quote, very dangerous situation. we'll get a live report from that city still ahead. ♪
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welcome back 5:20 4:20 there in the city of chicago. dow coming off the worst weeks of the year last week. the weakness will continue today. there is news outside of china in trade this morning. here are some of the top stories. hsbc ousting ceo john flint
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after 18 months on the job company's chairman says the move is necessary to speed up growth plans including its u.s. business hsbc telling dow jones it plans to cut thousands of jobs and slow investment spending this comes despite the bank reporting a rise in first half profit and a $1 billion stock buyback. softbank's operating profit rising in the second quarter, adding more mobile users they're maintaining their forecast for the year with growth seen rising 9%. stock not reacting global weakness down 0.5%. berkshire hathaway's operating profit fell more than expected in the second quarter wa weakness in insurance underwriting and trading woes for buffet's economy trading at $306,000 a share. coming up, are we on the verge of a global currency war
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china doing something it hasn't in ten years, and it could mitigate the tariffs how does president trump react what does it mean to your money? answers to both ahead. five? one to five? it's more like five million. there's everything from happy to extremely happy. there's also angry. i'm really angry clive! actually, really angry. thank you. but what if your business could understand what your customers are feeling... and then do something about it. turn problems into opportunities. thanks drone. customers into fanatics change the whole experience. alright who wants to go again? i do! i do! i have a really good feeling about this. ♪ think you need to pay prestige prices for better skin results? try olay regenerist. the rich, hydrating cream is formulated with vitamin b3 and peptides to plump skin cells, brighten, and visibly smooth wrinkles. in fact, just 1 jar has the hydrating power of 5 jars of the prestige cream.
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for wifi with super powers, get xfinity xfi. and go see, fast & furious presents, hobbs & shaw. welcome back 5:24 in new york city. the nation mourns the victims of two more mass shootings over the weekend. here with more is nbc's frances
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rivera in new york. >> it is a tough morning for the country after those two mass shootings in el paso and dayton claim the lives of 29 people in 13 hours two cities, 1600 miles apart, both grieving. in el paso, a shooting opened fire near a crowd walmart. 20 people were killed and 26 others injured mes of the fami most of the families were back to school shopping and had to dive for cover the rampage started in the parking lot with the gunman shooting his way into the store. the shooter, patrick crusius, surrendered on murder charges. a similar scene in dayton, ohio. it happened outside a popular bar in the oregon district the shooter walking up in an alley and firing dozens of rounds into a crowded street nine people were killed and 27 others injured authorities say police fatally
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shot the gunman within 30 seconds of firing his first bullets. president trump is expected to make a statement about the shootings at 10:00 a.m. eastern. the president spoke briefly sunday, extending his condolences to those impacted, and praising law enforcement for its quick actions. those are the headlines this morning, brian we send it back to you. >> frances, thank you very much. coming up, trade turmoil heating up china's currency collapsing right now as reports say china will slow its buying of u.s. farm goods with trump and xi jinping dug in, how do the sides out to solve this trade crisis? we'll talk about that coming up on "worldwide exchange." ♪
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breaking news. u.s./china trade war hitting a new level. china's goods are cheaper and our goods sold into china even more expensive with the yuan down stock futures over 300 bond yields falling again. how does president trump react it is monday, august 5th, and you're watching "worldwidecnbc welcome back good morning i am brian sullivan. there's a lot of red on the skre screen i'll give you an upside. dow futures, halfway through the 5:00 a.m., they're down 300
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points the upside is we were down 350 about 20 minutes ago we've actually seen them pull back a bit still not going to sugar coat this, as you can see, s&p and nasdaq futures, they are all down as well this morning. this coming off the worst week of the year for the u.s. market averages already the weakness we had on friday continuing today the big driver this morning is china's currency it is collapsing the chinese currency, the offshore yuan, falli ining p ii- to the u.s. dollar this is a four-year inverted chart. when the green line goes up, that means china's currency is weakening. that's the u.s. dollar we go back four years, we were at 6 and change four years ago a lot of moves here. as you can see, the trade war kicking off right about here the chinese currency continues to weaken. now, this 7-1 level, why do you care it is a big round number, but it is also a threshold that's not
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been breached in more than a decade not since the 2008 financial crisis have we seen a chinese offshore currency down more than 7-1 to the u.s. dollar this makes chinese exports into the united states cheaper, which some say could mitigate any positive impact to the united states from those tariffs. of course, it also makes the goods we sell into china more expensive. that big currency move slamming stock futures and stocks around the world. we showed you the u.s. futures similar story. if you don't like the color red, you might want to go back to bed. the asian markets, japan, down 1.75%. hong kong is also rocked by protests, so you have multiple things going on there. hong kong down nearly 3% that weakness also carrying over into the european markets again. a lot of red on the screen the biggest drop is the uk, down 2% global currency war, global trade war, euro is weaker and, oh, by the way, you have this brexit thing outstanding a lot of concern there about the
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uk markets outside of equities, here's a global look at commodities and currencies they're on the move, as well. if the world slows down and oil production stays up, weir n're going to need as much oil. it's sending prices down here are the moves i want to call your attention to right now. comex gold, the price of gold continuing to go up. people are nervous volatility is up. they're buying gold. you know what else bitcoin. the price of bitcoin up nearly 7%, my friends that is a $700 move right now in bitcoin. we are talking about the u.s./china trade war, and maybe now currency war, all morning long both nations presidents, trump and xi jinping, firmly dug into their positions. how do they dig themselves out joining us is jared burnstein. listen, the chinese can they
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zaire thar not purposely devaluing the currency, but they're not defending it, something they've always done. looks like both sides are digging deeper politically, how do both sides come out of this, solve the problem without looking like they're the ones who caved or they're the ones who, quote, lost >> it is a great question. let me say, if you don't like red, go back to bed, i may have to tweet that later. well said. welcome, y look, you put it exactly right the chinese tightly control their currency, to state the obvious, and this looks to myself and probably everyone else, currently the markets, as an intentional, call it a soft pushback, call it a slap in the face, but it's a way to very effectively offset the tariffs in that sense, from president trump's perspective, and he is extremely sensitive to this, it looks like an escalation i suspect that's why the markets
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are reacting the way they are. how do you get out of it well, the only way is negotiation. this is the kind of tit for tat we have seen most recently, i think the president was unsettled by the fact that the chinese were slow walking some of their agreements to buy more agricultural goods from us. he didn't like that. you saw him threaten to slap another 10% tariff on $300 billion more of goods from china. that would begin september 1st they're mostly consumer goods. i have a hard time seeing much of an upside here. >> by the way, if you tweet me, i'd be honored, jared, thank you very much. it is the nation who flinches first who is going to be beat up policeful politically in their own country. it is hard to see a path out of this when both sides politically, xi jinping facing the protests in china, a capital flight out of that country and, oh, by the way, we have a presidential election in the united states next year. does this just sort of drag on and maybe worsen all the way to
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next november? >> that's an interesting point first of all, let me say though, i don't think that either side wins from a trade war. the only way to win from a trade war is to not be in it look, in terms of the politics of this, if there's any road out of it, that's the only one i can see. president trump, i believe he plays, you know, kind of yo-yo with a lot of the key variables in this trade war. he can make the markets go up and down like this by escalating or de-escalating if this next round of tariffs on china hit more consumer goods, as is very much the case if you look at the list of goods facing this new tariff, that's going to be felt more by american consumers than anything in the past, which is much more intermediate goods donald trump in 2020 could decide that he just doesn't want to ding the american economy
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like this in an election year. that could motivate him to pull back for his own, you know, re-election bid reasons. yeah, i feel it is a thin read this morning. >> it will and it won't for the consumer side of the story listen, it is 5:35 in the morning on the east coast of america. i don't want to do a bunch of math, and my math would be rough, but here's why americans care about this currency move. if something from china costs $100, and it hits the port of long beach, california, 10% tariff slapped on, now it is $110 as it trickles out to the consumer economy if the chinese currency weakens by 10%, the good effectively costs $90. you slap the 10% tariffs on it, it is now $99. it is actually less expensive than it was. it mate gait mitigates the impat i wonder if there is an impact if the currency keeps falling. >> that's the point i was making earlier when i said this is an explicit pushback on the
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tariffs. it offsets them one for one, precisely as you said. however, the key word here is escalation what you just -- the math you just ran through is not unfamiliar to trump administration, hawkish, protestisprote protectionist economists what is more worrisome is if it spreads to autos from japan or the eu i don't think that's going to happen i think that's a bridge too far, even for this team but that kind of offset will not go unnoticed. >> we thought there's been a lot of bridges too far and, apparently, the bridges keep getting torn down. >> fair point. >> what if we get the tariffs on europe, jared? what happened? >> i never know exactly what to make of these nurpnumbers folks throwing macro modeling of these effects. you don't know what the retaliation will be, and you have to build it into the model.
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what we're seeing this morn sg a for morning is a form of retaliation, the weakening of the yuan escalating to autos from, say, japan or the eu, it has the possibility of dinging gdp growth, you know, by more than 0.5 point. it is abig deal. >> especially heading into an election year. the economy is the one big thing the president can tip his hat on jared bernstein, thanks for coming on "worldwide exchange. we'll talk to you soon. >> absolutely. the tariffs poised to hit retailers particularly hard. joining us is president of sw retail advisers. just because i know you, stacy, and you're listening to the conversation, you're probably saying, turn my mic up i want to jump into this conversation will that weakening of the chinese currency pretty much mitigate the impact of the u.s. tariffs? >> i mean, it should, as you laid out the math.
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there is always a however. when you think about the retailer's perspective, how do they manage this they're depending on currency here to put sticker prices on the shelf. you know, if the currency changes, how do they manage consumer expectation with pricing? that's a bigger issue here we've been hit with this conversation about tar river ifr months the consumer has been expecting a price hike they don't know how much certainly, retailers were not expecting this list number four to come true as the guidance was laid out for the year, nobody had this in their guidance the currency at this point should mitigate some of this, but still, you're going to see very volatile pricing as we go into holiday, and we don't need that. >> if you are a u.s. retailer, you're not going to be like, okay, the currency is weakened, everything is fine if you had plans to try to get some of all of your production out of china, to vietnam,
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bangladesh, the yiunited states, wherever, you're still going to do that. it adds another layer of confusion and volatility >> right should we stay or should we go also, another point everybody is missing here is, yes, everybody is rushing out to vietnam and bangladesh, but there is basic supply and demand. if everybody is rushing to the places, do we not think the prices there are going to go up over time? they will. pvh, the ceo pointed out that fact on a conference call a few months ago i don't hear conversation about that running and hiding is not always a safe thing here. >> 74% roughly of the u.s. economy is consumer spending here's the multi-trillion dollar question, no pressure, how much of the fairly decent consumer numbers, retail sales numbers we have seen so far this year, are people and companies pulling forward their spending from an
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expected painful second half of the year >> and this is kind of like black friday part two here in a different version, which is, what do we know about the consumer we know that, a, when there's really great discounts, they pull sales forward that's just a fact here. we also know that when they're afraid of price increases, they try to get ahead of that here. i think that is very much going on i know it is a controversial thing. there's been some -- a lot of pushback when i say this, but i do think that the consumer has been listening to this and bombarded with these headlines for things like consumer electronics or appliances, i absolutely think the consumer is saying, you know what, maybe i'm going to get ahead of that maybe not so much in basic products but in the very discretionary products, i think that is very much going on don't forget, we came out of q1 with very high inventories retailers told us there were going to be huge promotions. again, the consumerq2, ready to
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opinion. >> jacked up inventories the first half of the year maybe a consumer that will slow down the second half of the year prices will go -- that's the universal noise for they're going to fall. inflation is not there price margins at companies may fall because they'll have to discount, discount, discount >> also, they just don't know what to expect so it is incredibly hard to manage and invest in your business for the longer term. >> stacy, always an interesting and sometimes controversial view we've still got a second half of the year this is going to play out in always a pleasure. talk to you soon. >> can't wait. >> i can't either. coming up, should investors be bracing for an all out global currency war the chinese currency falling to its lowest level in more than a decade right now all this as protests continue in hong kong. thousands taking to the streets. more than 100 arrested in what
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carrie lam calls a, quote, very dangerous situation. dow futures down 275 we're back right after this.
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get our special tv offer a 4-week trial plus postage and a digital scale go to and never go to the post office again! welcome back it is 5:45 on the east coast could be another tough day for the markets and your money dow futures down 175 points. s&p and nasdaq also lower. this as we come off the worst week of the year last week for the major market averages. we are following a number of developing stories, many of which are out of china in hong kong, protesters continue to flood the streets as part of a general strike and protest. nbc's matt bradley is live in hong kong with more. matt >> reporter: yeah, brian, you know, there's been hundreds of flights that were delayed here at the airport and, of course, that's thnot the only public transportation affected by this.
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hard core road, which, as you know, a major artery here in hong kong, has been blockaded most of the day. then we've had tear gas. it's a little early because, you know, normally in the last couple weeks, we've been having tear gas after dark, when the police are trying to clear the roads. now, it is starting very early that's a sign of where this is all headed in the last couple of days, we've seen the cross harbor tunnel over my left shoulder blocked for a couple of minutes at a time, twice in two days over the weekend really, this is a demonstration by the protest, that they can bring this whole thing to a gridlock they can block one of the major financial hubs of east asia. then they got another thing they wanted, which was the chief executive, carrie lam, came out of two weeks of silence and addressed reporters and the protesters she warned the protesters that they were taking hong kong down a path of no return, and that they were gambling with the lives of 7 million residents of this huge and very important city
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then paul chen, the financial chief here, he came out and said that, paul, they've had already a bit of an effect on the economy, the continuing protests that have been going on for nine weeks. he said retail sales have been knocked by about 7% in june. the hang seng has seen nine days of dropping. that's about a 3% decrease over nine days. it hasn't had a run like that, apparently, since 1997, the time when, of course, the britain handed over hong kong to china you can see what a body blow the protests are dealing to this vital east asian economy it really is just going to go on from here. carrie lam did not satisfy the protesters in any way with her comments she really kind of chided them and took a paternalistic attitude she refused to fully withdraw the extradition bill which was the start of this nine week as g back in june, and she refused to resign, which is what th protests have been demanding for weeks and weeks. this looks like it'll get worse
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before it'll get better. >> matt bradley, live in hong k kong, what is a more difficult situation every day with hundreds of people arrested. thank you for joining us. let's get back to the big story of the morning financially. china's currently falling. their yuan, their dollar, sliding below 7-1 to the u.s. dollar that is a level that it has not fallen below since 2008's financial crisis this as two u.s. senators unveiling legislation in congress aimed at weakening the u.s. dollar. are we at the very beginning of what could become a global currently war? let's bring in boris schlossberg from bk asset management how important is the 7 level for the yuan, and how important is it that the chinese government seems okay with letting it fall that far >> i think the latter point is the most important point in effect, the chinese government has opened up the
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pandora's box here of 7 on the dollar it means they're willing to go toe to toe president trump administration and the fact they, of course, added the point they're essentially -- there are reports that they were going to basically not buy any further agricultural goods from the u.s. it's putting salt in the wounds. i think they're signaling they're willing to engage fully now in trade war, on that front. of course, as you can see, the political situation with hong kong, with china, it is only one flash point. the other flash point now is europe it feels like the whole financial market situation right now is very much dependent on the political developments that's what's freezing all of the economic activity across the world. >> it is not getting a lot of attention, obviously, not only because of what is happening with the trade war but, obviously, the events, the terrible events in the united states over the weekend. before they left for the recess, we had two senators, a democrat and a republican, unveil the
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competitive jobs and dollar act for the united states. we don't know where it'll go effectively, it is legislation that is designed to weaken the u.s. dollar to make it more competitive. the euro has been weak the yuan falling. is this going to be a global race to the bottom with currencies >> it could be, and it is not helpful. whenever governments try to intervene in currency intervention, first of all, it almost always fails and, secondly, it has to have negative ramifications across the board. if we get into this competitive currency devaluation regime, what it will mean ultimately is contraction of any kind of economic growth. businesses are going to be very uncertain about the value of their assets all across the world. business investment, which is the key thing the fed was really talking about, this is the reason the fed cut rates, because of business investment being frozen, is only going to get worse. it is a very, very ugly path to go when politicians begin to
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take over the markets and try to control them. >> boris joining us on the cnbc news line. the currency story suddenly the biggest financial story in the world. thank you, boris appreciate it. >> thank you. well, that currency fight is sending stock futures down off their lows but down 266 points right now stocks certainly looking a little shaky lately. how do you manage through this new world of volatility and risk we'll speak with top wall street strategist jeff kleintop next. ee they use all the services of the post office only cheaper get a 4-week trial plus postage and a digital scale go to and never go to the post office again. get a 4-week trial plus postage and a digital scale i had a few good tricks to help hide my bladder leak pad. like the old "tunic tug". but always discreet is less bulky. and it really protects. 'cause it turns liquid to gel. so i have nothing to hide. always discreet.
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welcome back weakness from stocks last week and a continue over global currency wars is sending stock futures down this morning. dow futures are off 283 30i7pois
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s&p and nasdaq down, as well we're coming off the worst week for u.s. equities so far this year context is key the u.s. markets are still actually higher for the year remember, the nasdaq, s&p, dow, they're up for the year. over the last couple of trading days, we've seen stocks look a little shaky here. we're seeing stock futures fall, as well. as stocks go down, bonds get bought if we thought 2% was a low level for the u.s. 10-year, think again. this morning, the 10-year treasury note is yielding 1.76%. if we go back, basically to the beginning of the year, that is 2.8% not 28%. 2.8% we have just continued to fall i guess good news for realtors because we're seei ing mortgage rates come down with that. low level, 1.76% this time a year and a half ago, most of the market guests we had on were talking about 3% to 3.5
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bonds. they keep getting bought the currency story, that's the story of the morning, the chinese yuan, their dollar effectively, doing something it's not done in a decade, falling below 7-1 to the u.s. dollar this is an inverted chart. as this goes up, that is the dollar rising against the yuan we have seen the yuan in the last couple of really days collapse chinese government allowing that currency to fall below 7-1 you care because what that does is it makes the cost of imports into the united states go down, potentially mitigating any positive impact from the tariffs. china using currency as a hammer against those tariffs. joining us now is jeffrey kleintop, chief global investment strategy at charles schwab jeff, we've talked about trade fights, talked about the fed, we've talked about the health or lack thereof of the u.s. economy. suddenly, now, you've got what looks to be the beginning salvo of a trade on global currency
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war with china how do we manage through this suddenly big move in currencies? >> this is important currency moves can be destabilizing. we know the simple math. when tariffs go up, currencies go down. that's the prescription. it has some ugly side effects. one of those is companies that have borrowed in dollars in china, now their debt burden is greater than it was. we know there is a debt problem in china this exacerbates it, too it makes buying treasuries less attractive to the chinese. now, the prices are higher when denominated in the local currency three, it negatively impacts u.s. businesses selling into china. now, products are more expensive and have to be discounted or they have to take the hit to earnings that alone is a destabilizing impact it has broader global impacts, as well. >> somebody has been buying bonds, jeff. we're see ago ing a 10-year at % who is doing the buying? >> we've seen a global interest in treasuries, gold, as well,
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right? safe traditional safe havens have seen interest in the markets here one safe haven investors may not be considering some shelter from the trade storm are equities in europe and japan they haven't looked that good this year or this morning, but they aren't directly impacted by the slu.s./china trade war, and they may benefit somewhat from it the u.s. and china are shutting out each other's companies, for example, in 5g, but european and japanese companies may benefit japan has the 2020 olympics coming up. germany has a budget surplus, could cut taxes. there is stimulus coming there they could be a relative shelter in the trade storm. >> the japanese stock market is the cheapest in the developing world. price to sales, price to book, price to value, whatever it is, and the nikkei continues to fall youoptimistic. >> i do. on a relative basis, japan might
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look better than many other parts of the world they may see a recession, a technical one later this year in response to the sales tax increase again, looking to next year, a lot more stimulus from the bank of japan that may actually help banks rather than hurt them, as rates go lower qe program expanded there. again, i mentioned the 2020 olympics rising loan rates, falling debt. i think there are a number of things that could come together there. one thing i'll add is just as car auto finance rates have come down in the u.s., you mentioned the lower treasury, but it is across the curve in the u.s., auto finance rates are coming down, and it could help japanese car exporters. remember, trump seems to be fighting one trade battle at a time if this puts the auto battle with japan off, so much the better. >> jeffrey kleintop of charles schwab, you have a busy day. we appreciate you insight. looking at japan thank you very much. appreciate that. before we go to ""squawk
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box,"" what is happening on this busy monday morning? stock futures are down nearly 300 points dow futures off 270. the chinese yuan falling below 7-1 to the u.s. dollar for the first time since the financial crisis as jeff said, bonds get bought, 1.76% on the 10-year maybe mortgage rates will continue to come down. thanks for watching. we'll see you tomorrow "squawk box" begins right now. fgood morning china allowing the yuan to weaken to the lowest level in a decade investors asking if it is time to abandon hopes for a trade deal. treasury yields are falling as the price of gold and bitcoin jump higher. weekend of violence in america. responses pouring in from washington to wall street. president trump is preparing to address the nation it is monday, august 5th, 2019 "squawk box" begins right now.
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>> announcer: live from new york, where business never sleeps, this is "squawk box. good morning and welcome to squ "squawk box" on cnbc i'm melissa lee with andrew and mike joe and becky are off today. trade turmoil sparking a major global sell-off this morning, china allowing its currency to fall against the dollar. it is seen as a response to president trump's latest tariffs and a signal china may be abandoning hopes for a trade deal we'll get a live report in a minute first, things have been ugly pretty much every morning. equity futures red arrows across the board. s&p looking to lose more than 33 at the open. nasdaq down 117 at the open. dow jones indicating a lower open of 275 points treasury yields, take a look at this, remarkable levels. 10-year yield, 1.768%. we are seeing the lowest level since octo


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