tv Street Signs CNBC June 27, 2022 4:00am-5:00am EDT
there's a saying that it's like trying to hold onto water in your hands, and the more you squeeze, the more you lose. i was squeezing so hard, i lost it all. good morning welcome to "street signs." i'm julianna tatelbaum with steve sedgwick at the summit in germany. these are the headlines. >> g7 leaders working for a price cap on russian oil and import ban on russian gold our nations are standing at an inflection point in history the choices we make now are setting a direction for the
world for several generations to come. russia nears default on the debt for the first time in nearly a century the stoxx 600 hits a two-week high as mining and auto stocks jump. the rally is set to continue on wall street. and the large energy firms in france are urging to conserve after tensions for next winter unless reserves are replenished. very good morning. welcome to "street signs." steve is on the ground covering the g7 summit. i'll get you to him in a moment. these are the headlines just in.
g7 will commit to timely from vision of equipment and advanced weapon systems to ukraine. this is according to the white house fact sheet g7 to issue steps on tuesday to raise pressure on russia to set global price cap for russian oil. the goal to starve vladimir putin of his main source of cash they will work on russian oil price cap with countries around the world and including the private sector according to u.s. officials. g7 working on implementing price cap on russian oil that can be achieved of curbing russian revenue and easing impact on the world. car targeting services is a promising avenue to deny russia
re revenue. a lot of questions over this story that what a scheme would look like of a price cap on russian oil. g7 will align on tariffs to ensure russia pays for the war they will impose sanctions for those responsible for war crimes or human rights. they will provide budget support for ukraine and g7 leaders to target those engaging in invasion and backfill. that is coming through now out of the g7 summit steve is on the ground and will break it down in detail. those are the latest comments around the potential russian oil price cap. president biden called for the group to stay together to get
agreement across the line as the leaders meet in the bavarian alps and covering transport crude would be limited to europe talks on the proposal will continue today i brought you the latest lines out moments ago. let's get to steve steve, i hope you had a chance to piece through the latest comments from u.s. officials tell us the meaning of the price cap and what else is on the agenda in the alps >> reporter: we can't reveal the details because we don't know. i heard the prime minister and i could not get details either u.s. and nato have to be careful. the battle for the hearts and
minds of the globe and south and emerging markets and india and china is not one at the moment this is seen as a western battle supporting ukraine against russia to change that narrative is a very,onundrum for the g7 and allies. they are hoping if it is a global price cap, that would help alleviate that sanctions are creating a cost of living spiral not only in the west, but on a global basis. how it would work is just the start of the questions what kind of price cap would there be practically thinking about it. julianna, we can pick an arbitrary level for the price cap. how will it work $70? $80? $110 what would happen if the oil price goes up aggressively or
down aggressively? how do you get buy-in for some of the energy importers on the planet including the indians and what would happen if russia says no and says we won't sell anyone with a price cap any oil and sell at a discounted rate? you still get the cost of living spiral in the west, but other countries would benefit. russia would know there are divides with the west and other nations on the global basis. that is why countries such as south africa and argentina and india are here as part of the outreach program to win hearts and minds. the mechanisms are extraordinary and difficult to work out at the moment can they turn it from a western oil price cap into a global oil price cap? that is fraught with enormous
challenging which could thwart it in its embryonic stage. the price cap would be this is what we are doing to work on the cost of living issues. with that work, is it suffice to halt the u.s. is skeptical given the report in last 24 hours? what about the regimes russians are looking at the meeting and saying is there unity? is itfraying at the end? there is domestic populations don't want to see the economic ramifications of it. boris johnson is trying to sell this as something important to have otherwise it is a greater crisis down the road
for people seeing food bills going up and utility bills and mortgage rates go up as the central banks have a response to this, it is a very hard pill to swallow. the authoritarian regeimes are watching this. the west hasn't got an appetite for the long term. we talked about this which is the partnership for global infrastructure and eveninvestmet is it new money? that we remains to be seen the idea is to go out and compete in the emerging world and in the south with the chinese or have the initiative offering some finance to a lot of countries this one would be without the
same strings attached according to the west. lots of ideas floated on gold and sanctions and infrastructure how many are new ideas and how many are workable? that remains to be seen. back to you. >> steve, thank you for your coverage we look forward to you coming back later in the program. stoxx 600 is trading 1.3% in the positive territory did last week, we saw recession fears grow instead of taking a toll on equities, it pushed bond yields lower and equities higher. the story being that if recession fears are degreconomi moving, it seems the expectations have been adjusting in the last few sessions putting it all together, stoxx 600 is trading higher this morning. from a regional perspective, this is what the boards look
like germany 1.8% higher for the dak. we saw under performance last week as investors priced in concerns of the potential cut off of russian gas as germany moved into the alarm phase we are recovering the under performance. we see a lag in the markets as well as the swiss market cac 40 up 1.4% it is a broad based rally. from the sector perspective, green across the board basic resources is up 3% we saw a strong performance in asia particularly in chinese stocks overnight. we saw industrial numbers come in better than expected. positive developments with the covid situation in shanghai. that is boosting a sentiment and moving to basic resources. and technology is support 2.8%
on the down side, more defensive food and beverage. similar for utilities and insurance and health care and telecom. steve mentioned the report out in the last 24 hours the bank of international s settlement is worried of the international inflation trap it is finding it difficulty to return to steady growth and out of inflation the central banks called for tough action for policymakers even if it means recession freddie joins me now freddie, wonderful to see you. how are you looking at the global economy last week, we saw recession fears really mountain that looks like it is changing people's
view of the policy path from here >> good morning. it did feel like a different week last week we had a huge move down in markets and bond markets there is a little bit of stabilization. the markets are rallying today i think the position we were in a week ago was the odds of recession induced by inflation and the policy responses were almost 100% implied by markets it is still a probable outcome, we are not sure. there is a chance we avoid it and have a shallow recession of growth and that pulls down inflation. the goldilocks scenario. markets are taking that pro probability from zero to 10% or 20%. it is a chance with natural slowdown in the economy, we could see a peak in inflation
rates and the fed's job and bank of england's job expected. it is a bit of a stabilization a welcome one. >> freddie, we have june cpi numbers for germany, france, italy and eurozone what question are you asking with numbers coming in focus later on this week >> the key thing is are we still accelerating from here is the rate of change worse or better it feels like, to me, and our research team, there are components of inflation which peaked and lagging effects come true the cpi and pc data in the next two to three months housing and rent and those metrics around the world are key at this point. housing market is one of the few assets that hasn't fallen. it may not watching the rental yields move
higher which drive a meaningful component of cpi and has a reflect on consumers and individuals and how they behave in the market is the important component from our perspective quite a lot of it is lagging at this stage you have to take a mark from the underlining prices in the market and feed through to the inflation prediction in the next two months >> freddie, i want to talk about your portfolio recommendations later in the program in terms of the market as a whole and where we stand now, do you think it is using to call the bottom to compare the depth of the bear market to historic bear markets >> i think as you are probably expecting me to say, calling the bottom is a mug's game you never know where it will be. last year it shot to the upside.
we could see it go lower the question you should ask yourself as an investor is do the fundamentals now justify making a larger investment in that stock or sector or asset class? comparing this bear market to previous bear markets is a rational starting point. market falls 30% every five for ten years. you really need a financial shock and major recession to get the market to fall 50% or more comparing it to history and understand it repeats itself, i think is relevant. this bear market is a reasonably sized one. not a shockingly bad one, but about the right size if this turns out to be a resetting of overvaluation. price multiples contracted which
needs to happen, but not major recession. that's probably not priced in and it is not what we expect it is helpful to compare to history. i would argue that on any historical norm, the levels of the market are at already are starting to point to more a track attractive bargains. >> freddie, thank you for the conversation we will get into the personal picks later. freddie lait coming up, french energy ceos urge consumers and businesses to cut back on power consumption to prepare for a looming crisis we'll have more after this break.
that was a slower pace than the month before it is also as factory activity restarts in some manufacturing hubs covid curbs are weighing we got shanghai numbers and that is boosting sentiment. prosus has a full year fall in earnings and announced a major share buyback saying it will sell down 30% stake in the chinese giant tencent. it has moved in lock-step with ten tencent. we are up more than 13% this morning. massive step higher on the back of the news. ceo of money transfer company wise plc is under investigation after being named on a list of tax defaulters.
the executive is cooperating fully with fca wise shares are showing resilience to the move under performing versus the market it is priced in. wise is down 15 basis points eu energy commissioner said russian gas imports in the block are half from a year ago the commissioner called for eu member states to work together in pooling gas demand saying it is key to negotiate better prices here is the energy majors. key names showing a mix this morning. we have out performance in engie up 1.06% this is as businesses are urged to wcut back on power consumption. the executives of engie and
totale are warning it could cause energy shortages charlotte has more on the story. charlotte, last week had focus on the german response for the potential for the cut off of russian gas into germany how is this in comparison? >> reporter: this is different scenario because of how the make of the french energy comes from. that is why the call from the i french ceo is hainteresting abo the stark warning of the price is threatening the political and social couhesion they need a collective effort you need concrete gesture. very different from what we heard from the energy minister
j there is no shortage for this winter we heard a slight change of tone saying they are looking at energy and welcoming the call from the ceos of total energy and engie. they were meeting with the ceo of total energy and asking him to extend or increase the price of reduction at the pump which had been put in place. we saw from the french government with the electricity price cap since last year. it will be extended until the end of the year. remember it is state owned energy prices capped at 4% inflation in france is lower than the eurozone countries. it would be around that measure for the rest of the year there is a concern for the meaning for households
you have the crisis looming and one of the greatest crisis of the macron government because it started with higher energy issue and the worry this could trigger some new protests and concerns for the winter they are watching this again remember, the government is in negotiation to get into agreement after the election when they lost the absolute maj majority they are talking to groups in parliament the first law by the new government is next week. it is a cost of living package they will present to try to tackle and resolve the concerns from french voters which includes a cap on rent price increases capped at 3.5% maximum this year. all of these measures will be presented next week and they hope the government will get on
board with other political parties to bring the majority in government on the key issue. we know the talks for macron's party in parliament is difficult. they will rtry to get other parties on board for the crucial issues in background they are looking for solutions one of the interesting things is restarting coal fire power plants in the east of france nuclear power plants have issues with corrosion julianna >> shacharlotte, thank you for breaking that down french lawmakers are preparing a package to boost the energy power. it could apply to energy and pension payouts. let's get back to freddie.
freddie, keen to get your take on how to translate the macro views you outloined into a portfolio. you have an interesting mix of energy and consumer and retailers and big tech names what is the strategy >> i guess the overriding strategy we had is to genuinely diversify your portfolio the top ten in the portfolio have a lot of different aspects of potential growth for the returns of the future. that is the easiest and best way to be a genuine investor not to concentrate your investment in one style or theme or sector. within that, embedded within that, what is common to all the stocks and businesses we invest is the first one which is always and not because of the current environment, but ability to pass on the cost of inflation and
bargaining power with the suppliers and customers. it is playing out very well at the moment a lot of the businesses in which we invest have the embedded ability to protect from inflation and energy companies i think that is the first one. that is probably the broadest point. the concept of anti-fragility. what is going is the steady unwind of the very overoptimized of inflation and monetary policy when that universiwinds, we seet leading to any fragile stocks or countries really feeling the pinch. you want to invest in anti-fragile companies over whatever period of time you find yourself in. we own an array of businesses as
possible to diversify which cycle will work at different points in time we haven't made changes to the portfolio. we are content with its structure. we are not trading this. this is the business that can take opportunities and see through the long term. >> you have viewers for your information, a list of freddie's top ten on the screen. freddie, how are you thinking of the risk of profit warnings in the weeks ahead? i think of your holdings as long term if you are looking for entry points in some of the names, we are on profit warning watch in the u.s. over the coming weeks, if we get bad news, we could get it soon is that something to be concerned about? >> i would expect a large number of profit earnings over the next couple of quarters you need to be careful
that is coming there are two profit warnings and two outcomes there is something like walmart or target in the u.s they slightly messed up inventory. they had too much furniture. they had to discount that. these things happen. the stock fell 25% because it was over valued. the first thing to say on the outcomes is stock is overvalued, they are pricing perfection. if there is sa risk of profit warning, it is a stable place. value risk remains high and pressing for investors for the earnings season. pr profits. a lot of businesses could say we could raise prices in last six weeks to smooth out the cost of inflation or keep prices low to grow market share and build for
the future there will be a lot of that. a profit warning now for long term potential growth. you as investor makes a decision of the management team ability to make the decisions. i think they will carry on for the next few years with the volatility you have to be backing great management teams you will get a profit warning in left field and a company you were not having much faith in, you will struggle to hold on others will sell off quite hard. >> freddie, when times are good, it is easy to perform well when it is difficult, that's when the true colors come through. freddie, thank you. and russia teeters on default as the pressure is piling up on the country
signs. i'm julianna tatelbaum these are the headlines this hour g7 leaders ratchet up the pressure on moscow for proposals for a price cap are aimed at starving putin of key resources. >> we are standing at a general inflection point in history. the choices we make now will set a direction of our world for generations to come. russia is nearing default for the first time in history. and the world is reaching a tipping point on inflation with the central bank calling for urgent action. and stoxx 600 hits a two-week high as mining and auto stocks jump. the rally is set to continue on wall street.
we are about an hour into the trading session. we have green across the board european equities performing well dak up 1.6%. germany under performed grew about the potential cut off in russian gas. we are seeing a little bit of a lag in the markets with the ftse mib up .30%. decent gains for the ftse 100 and swiss market turning to currencies. look at forex markets. dollar down .30% we see strength in the euro against the dollar sterling above 1.23. let's look at wall street where the gains are set to
continue markets rallied last week. s&p rallied 3% on friday the biggest one day rise since may of 2020. u.s. stocks are on track for the worst first half of the year in more than 50 years i think the momentum is important here and we are looking at further gains this morning. now this just out of the g7. senior u.s. official says leaders have committed to a new package of coordinated action to starve putin of the main source of cash. after the meeting with justin tru trudeau, olof scholz talked about the nations. >> policies of the countries are aligned. this is a good message that we are taking tough decisions and cautious and we will have the ukraine as much as possible and we also avoid the big conflict
of russia and nato. this is what is of essence to be tough and thinking of the necessity tyies of the time we e living in. this is key to the cooperation >> russia is nearing default for the first time in near 100 years. the interest payments due last month expired. the kremlin has not been able to send money to bond holders because of sanctions and accused western nations to force it into artificial default let's get to steve steve, this seems like semantics here whether or not russia deserves the designation of default when it comes to payment on the debt it owes given the ratings agency pulled ratings on russia i guess more broadly, do you think that this is a sign that the western approach to the
russia situation and invasion of ukraine is working >> reporter: it is hard to tell. that's a good question it is hard to argue the russians will repay this. if i was to give you 500 pounds because i owed you and i said i'm out of town and i can't pay now and give me your address and i don't give it. it is me in default? that is the situation. the russians are throwing off cash and that's all the talk here about some form of price cap. the russians are making so much money out of hydro carbon and gas and oil and other exports at the moment they would have paid if they could have done. the russians said they are locked out is it an art fificial default? yes. i was fascinated by scholz and
the u.s. with the new package of sanctions. a question remains and a question for the concept in terms of what it means for modern 21st century politics what is the oappetite for anxiousesanxiou sanctions and have a longer term effect on russian and the economy? i think is ambiguous to say it is an issue on the economy and capitalize on the economy. when you have hydro carbons trading, it will take longer what can they do about the price? it is fascinating is the answer. i keep hearing about the price cap and poring over the words of scholz and joe biden and others
here i cannot see anything at the moment of how the mechanism will work and what the price cap will be will it be a floating price cap? what is the appetite for players outside of the eu and others are the indians going to put at risk the cheaper imports at discounted price to join some form of global price cap what is the opec reaction? they found reinn vigoration what about the reaction from the seller if you say to seller, i'm putting a price cap on the products and the seller says i won't sell to you. you are at an impasse where the west is struggling to find substitute sources of energy
you can see a multitude of questions. i'm beginning to see the line coming out now that, no, we're not having a price cap announced at the meeting we will have potentially is more talks about what kind of mechanism would look like going forward with a price cap that is not a set of sanctions that is an aspirational to see where other countries buy in not when there is a g20 summit later on this year vladimir putin, if he were to attend the g20, what does that mean for the g7 leaders? will they take part? they will boycott the meeting because putin is there and he is the subject of the sanctions all kind of questions raised i would love to say this makes sense and this is going to
happen and this is the result. that is our job. at the moment, we have a concept and have no meat on the bones at the moment that is why the oil monkey is ignoring it today. >> steve, thank you. stick around we will be joined by tina fordham shortly. the ukrainian foreign minister kuleba is calling on for the sanctions. the chancellor scholz said the latest russian attacks showed unity in supporting ukraine. >> translator: we can say putin did not roeckon with this. the support for ukraine and also the ukrainian courage and bravery in defending their country. we stand together and support ukrainians to defend their country and democracy and freedom of self determination.
>> i'm pleased to welcome tina fordham. good morning events like the g7 summit and nato summit later this week is not always market moving events. they are interesting for geopolitical and analysts, but not for market participants. what about this time around? what, if anything, could the market move this week? >> you are absolutely right. for a very long time, investors have been complacent about developed market politics. g7 is that the description of how difficult it will be to come up with a meaningful move to curb russia's revenues from higher oil and gas prices is a perfect example of what i think we need to be expecting from the summit. that is one objective. it is to show and maintain
unity. if that means, you know, we don't get detailed proposals, then that is what it will be everybody understands the brief. no daylight between the positions of the leaders who are assembled today. with that in mind, that is not a market moving announcement what it is is a signal to putin that this isn't just a photo op against a beautiful back drop, and it is beautiful, these leaders are committed to doing whatever it takes in language purposely reminiscent of draghi at the european central bank to protect ukraine and maintain security in europe >> tina, i'm sure steve will get into the nitty gritty of the energy crisis. i'm curious about the line you put together as part of the
latest comments. the elephant in the room is the u.s. back sliding on the women's rights with the roe v. wade decision can you say why that matters and how that could affect president biden's approach to the issues >> well, this is a perfect example of what is different about my approach to geopolitical analysis for markets in the economy most investors pay zero attention to the culture wars for obvious reason there is no clear linkage whether it is guns or reproductive rights to the economy and the kinds of issues that turn up on our screens. i do think we reached an inflection point with the decision by the supreme court to reverse roe v. wade. as you know, i'm an american who has been living outside of the country for a very long time
i feel like that gives me an interesting vantage point. i was in the u.s. last week talking to investors who completely discounted this issue. i think the reversal of roe v. wade, first off, is a business risk for the u.s. when it comes to the elephant in the room and we saw disbelief from u.s. allies over reversing a fundamental right. this is where the u.s. is out of step with the oecd and g7 piepieeers we are still having arguments that were settled 100 years ago among the countries closest to that makes the u.s. an outlier and not in a good way. when it comes to statements with the gatherings that are about shared values, many people are saying how can the u.s. talk about a commitment to democratic values and civil rights and human rights if it is prepared to roll back the rights of half
of the population. >> tina, very good speech. let me roll back to the g7 and something you have been writing about for as long as ukraine has been at war with russia. that is not 2022, but 2014 you wrote about public opinion being the new political risk i have been talking about it with you ever since. it is a fascinating concept. you mentioned the key message here at the g7 is unity. no daylight between the west, of course,is echoed at the nato meeting as well it is not just for the international audience, but the dmomestic audience you are right. no daylight is the mantra here in terms of inflicting more pain on russia, that will inflict more pain on the economic basis or basis of the presidents and
prime ministers. they have tricky situations at home you mentioned the u.s. midterms coming up boris johnson under pressure inn fflicting more pain on russa do you think we will see a resurgence of the extreme? >> this is what everybody should be concerned about because dealing with the security situation is truly an existential risk as you rightly point out to meaningfully curtail russia will result in countries inflicting pain on themselves and populations and at a terrible time with the pandemic when growth forecasts are lowered and energy and food bills are going up this is what putin is counting on he is counting on losing resolve. in europe and france and
germany, you have seen energy companies already start to kind of gingerly warn the consumers to curtail usage i have a hard time seeing a message going down like that in the united states where consumption is almost a human right. putin is expecting us to lose our nerve and resolve. what i think we'll see is more creative efforts to find ways to push back on russia. where push comes to shove on this, as we enter autumn and winter and colder months, putin is hoping we give up and go back to our old ways. if we do in, the costs will be very high. >> tina, fascinating founder of fordham global foresight. for more on the ukraine conflict and we can take you to cnbc.com
protests have erupted across the u.s. after the supreme court overturned the roe v. wade decision ending constitutional protections for abortion that have been in place for over 50 years. the decision is expected to lead to bans in roughly half of the u.s. states. president biden said this marked a said day for the country urging voters to make it a
defining issue in the u.s. election chris pollone filed this report from washington. >> reporter: people filled the streets across the country this weekend. channelling anger. and expressing their joy after friday's supreme court ruling overturning roe v. wade which had been the law of the land for 50 years. democratic leaders are moving to protect access to abortion in their states and embracing for e influx of care >> a wall protecting the women of the west coast and the citizens that come from the other states >> reporter: since the friday decision, ten states immediately restricted access and many banning the procedure all together >> the supreme court did its job. it fixed the wrong decision years ago and returned the
decision back to the states. >> this decision and policy will kill people know matter what >> reporter: some democrats are u urging the white house like putting abortion clinics in federal buildings. >> this is not just a crisis of roe. this is a crisis of democracy. the supreme court has dramatically overreached its authority. >> reporter: the case decided. the debate just beginning. now the supreme court has ruled, the legal fights are not over. we can expect to see legal challenges from states challenging abortion laws. in fact, suits have been filed in utah and florida. in washington, chris pollone, nbc news if you are just tuning in and missed tina's comments around the decision could impact the way the rest of the world approaches policy with the president as he takes part of
the g7 summit, check those comments out we will post them online i think also interesting to note disney and morgan and apple coming out and saying they will support employees in seeking reproductive care if they need it back to markets. u.s. futures are pointing to a strong start to trade. dp dow jones looking to open higher s&p looking to add 20 points a lot could change between now and then that is it for the show. thank you for joining me i'm julianna tatelbaum "worldwide exchange" is coming up next.
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it is 5:00 a.m. on wall street here is the top five at 5:00 stocks coming off the best day in two years where do we go from here president biden at the g7. a live report from the meeting ahead. sticking with russia, moscow defaulting on foreign currency debt for the first time in 100 years. the financial fallout on deck. another summer weekend and headache at the airport. more delays and cancellations. not just
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