her and knowing who she was. that's all for this edition of "dateline." i'm craig melvin. thank you for watching. ♪ good morning and welcome to "street signs. i'm joumanna bercetche. >> and i'm julianna tatelbaum. these are your headlines. european equity losses accelerate with the stoxx 600 on track for its biggest daily drop since mid-march as the luxury sector hit as new low. core prices climb to their prices since march 1992.

the debt ceiling standoff continues after another round of talks between the gop and the white house ends without a breakthrough with just over a week to go until the june 1st deadline. and as the european central bank marks its 25th anniversary, we'll speak to the vice president vitor constancio at 10:30. cbt. well, good morning, everybody, and welcome to "street signs. geerng to kick off the show taking a look at markets as you can see behind me, almost all of the heat map of europe is trading in the red with all of

the three majors ending in the red last night the handover from asia also in the negative investors are very concerned about the upcoming debt ceiling. the soft deadline of june 1st is still approaching and there's still no agreement in sight among the u.s. congress and president joe biden. here in europe we have some idiosyncratic stories to talk about. this is the biggest drop since mid-march. it does tell you that the sentiment today is very, very negative indeed. starting with the ftse 100, the indention is down more than 100 points we had a big upside surprise to the uk inflation prints. we're going to be talking more about that investors are now looking at another hike as you would expect, not good

news for any of the homebuilders the one spot of green, though, is mns still you can see very, very risk off cac, we're seeing a down rate. they're coming under selling pressure today, down about 2 percentage points. building on from yesterday's losses, some down 4 to 5 percentage points. xetra dax down as well and finally the italian index down two percentage points really, really, a lot of reds and broad-based indices. a lot of sectors trading in the red. real estate down 2.5 percentage

points then basic resources, anything commodities, high-beat cyclical coming down. travel down two percentage points as well the fresh data out of the ifo institute is not going to help much. the business climate index, which is one of the most closely watched components of the surveys, it came in at 91.7 in may versus expectations of 93. that is weaker than expected here is something that's actually brighter than forecast though the ifo expectations index has come in at 94.8 with expectations of 91.9 softer than expected but expectations slightly better in terms of current conditions, here is some serious weakness. the current has come in at 88.6 in may versus the consensus forecast for 94.8. a massive miss on the current

index. really interesting dispersion across the different measures. this terms of the overall review, the economist from ifo has said that the german economy is treading water and q2 is going toward stagnation. we've seen a strong collapse in expectations in industry, which is striking. probably significantly fewer new orders so fairly downpete data out of the ifo institute. >> i think ifo is always an interesting one to watch out for because so far it's been the bright spot. if you look at it, we had the pmi numbers showing significant weakness in the manufacturing sector we had the zew survey. the ifo for the last few months has been a positive point. it's been a bright spot. today's numbers suggest otherwise. that's something to watch out

for. >> let's dig into the details with the president of ifo. wonderful to speak with you. pretty interesting set of survey results this time around i guess the first question for you, what is the driver in the dr drop in personnel? >> i think it's one of two factors. one, the incoming orders declining very fast. people still have a stock of orders, but there are fewer orders, and it seems that probably restrict active monetary policy is now showing effects. so rising interest rates are reducing investment and are reducing demand and now has an impact >> i see one of your companies who aims to increase prices in may falls further.

it looks to me we're seeing an impact and final demand taking a hit from the higher prices what does this all mean for the inflation outlook? >> well, it ee good news for the inflation outlook, but we have to see that core inflation is still rising in the eurozone it's rising in germany and other areas of the world as well, so we are facing this stagflation idea monetary policy cannot ease because inflation is still too high, but maybe we are now at this tipping point where it does become very important for central banks to strike a balance between further tightening to fight inflation and confining the message that banks are determined to fight inflation and not going too far. >> clemens, i want to go back to

today's figures. the ifo's expectation numbers came in at 94.8 versus 991.9 expectations have come in higher, but current conditions is where the downside is coming from what do you make of the disparity between how the people that you surveyed are viewing the current conditions versus expectations about how things are going to look like in a few months >> well, my assessment is that we have seen fluctuating expectations in particular in the ifo index in recent months, whereas, the assessment of the current situation for all sectors taken together has been relatively stable. what's deviating from this pattern now is manufacturing where we see a very steep decline in expectations and also decline in the current

situation. so in a way it seems that manufacturing, which has supported economy early in the year is now losing this road. >> what i'm to understand is we know in general global trade has picked up because of the china reopening. we know supply chain pressures have started to ease energy prices have come down why is this not more of a tail wind for the german economy? why are we not seeing it in german manufacturing >> that's another question i think we have seen some of the tail wind in the earlier month when energy intensive sectors like the industry were recovering, but now the restrictions are increasingly coming from the demand side, so incoming orders are weak in fact, german exports have been very weak in the first quarter especially in march.

so it seems that the difficulties that came from the supply side for a long time are now increasingly shifting to the demand side. that's what you would expect in an environmental restrict ive policy. >> thank you very much for coming on our show today clemens fuest coming in from ifo. prizes rose 8.7% on the year down from 10.1% from march, moving in the right direction, but arabile, not quite as much as people thought. one of the surprises we see here is the big jump in the core of cpi. it's going to have an impact on the bank of england. >> yes, it is. that was reported in the month of march

the 6.8% is going to hurt an perhaps influence the decisions then by the bank of england who will look at it and think to themselves do we have the need to hike interest rates again of course, there is some thought that the last interest rate hike put forth by the bank of england was perhaps the last one they needed to do but could they be looking at another interest rate hike beyond that 4.5% mark. yes, of course, the headline figure of 8.7% does catch the headline what has been driving this, well, still much of the same food and nonalcoholic beverages. 19% still with regard to how much impact it's having on consumers pockets then alcohol and tobacco still 9.1% there. restaurants and hotels people, yes, they're continuing to go out, but it is getting a whole lot more difficult for them more than 10% when it comes to

the impact from health as well as furniture and household good. a lot of hurt still coming into play energy costs, that's dropping off a fair bit, and that might be the key reason for the drop-off to 8.7% really, and that's because the price cap that the uk government had put in place has come off the prices and you're seeing that fallen, energy prices coming into play certainly the bank of england, a lot to consider here. >> definitely a lot to consider, and we're seeing it. 2-year gilts up. when i spoke to the bank of england governor a few weeks ago, one of the first questions i said to him, what is the outlook for further interest rate hikes because it seems like there is more work to do he said we're not giving a steer on where rates are going, but we are going to remain very response irv to incoming day

tachlt you've got to think when data comes through with core inflation to the upside, there's only one thing left to do, and that's to continue with the rate hikes at this point. >> we also got some pretty hawkish signals in the uk. the divergence we're seeing across the uk. the survey sector noticed there's this growth spurt happening within services in which they're not able to meet demand and they're having to not only offer higher wages but charge more for their services, and that's only going to add to the inflation picture and inflation problem. >> you 've got to think it's no just about core inflation services but wages they all go hand in hand since the last bank of england meeting, it came in a smidge below expectations

6.7% versus 6.8% we're still talking close to 7 percentage points. it doesn't seem to be the time yet for the bank of england to say our work is done here before several successful prints are falling in the right direction but core inflation is not going in the right direction. >> you put that in there about how do you pull that down without triggering a massive recession. >> the summer months for the economy are going to be significant. the governor did admit there were, quote, very big lessons to learn after the sales forecast failed to recognize the rapped rise in persistence and inflation. bailey said policy bankers were no longer following the bank's model when figuring in pricing increases. he added they're revising the outlook. it tells you how difficult it is to forecast inflation in this environment, and to be honest,

the track record has been terrible. >> absolutely. we have to take a quick break. when we come back, they're talking the talk but not walking the walk as we talk about the late on stthe debt ceiling negotiations just ahead. has no idea she's sitting on a goldmine. well she doesn't know that if she owns a life insurance policy of $100,000 or more she can sell all or part of it to coventry for cash. even a term policy. even a term policy? even a term policy! find out if you're sitting on a goldmine. call coventry direct today at the number on your screen, or visit coventrydirect.com.

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whelcome back to "street signs. i want to take you to pacwest that's been in sharp focus over the last several weeks yesterday stock surged nearly 8% now this morning we're looking at premarket moving higher at 78.3%. this is after we got notice pacwest would sell its real estate loans this is clearly being seen as a comforting step for the pacwest sh shareholders yet we saw the likes of comerica and keycorp and others move

higher beyond the regional banks, let's take a look at u.s. futures and what's happening stateside this morning we're looking right across the board but fairly contained. also there's the steep selling we're seeing in europe this is after the nasdaq and s&p both lost more than 1% in tlad yesterday. negotiations to nail down a debt creeling are still failing to yield a result. representatives for joe biden and republicans met on capitol hill for two hours on tuesday and met a standoff house speaker kevin mccarthy's top negotiator said no additional meetings have been set up commenting on the impasse, senate nigh north leader mitch mcconnell said a deal would inevitably reached and everyone needs to just calm down >> i think everybody needs to relack the last ten times we raised the

debt ceiling, there were things attached to it this is not that unusual and it's almost entirely required when you have divided government despite what may be talked about on a day-to-day basis, the speaker will reach an agreement, it will ultimately be passed on a bipartisan vote in both the house and senate. let's switch over and talk about the energy markets the saudi oil minister has struck ow out at market speculators telling them to, quote, watch out as he reiterated his warning about the opec plus output decisions they're now questioning whether the group will move toward other production cuts after lowering output by 2 million barrels per day in october you can see the reaction and wti up one or two percentage points. i believe the exact wording he

says, we will cost investors an ouchy. the technical term, very colorful language. again, if you go by the price reaction we've seen ever since the opec had been cut, you know, we had the 1 million barrel per day price cut and 2 million barrel per day price cut, every day we've seen energy prices dropping, it does tell you oil would be much lower. it also encapsulated the mood and the demand is very, very weak well, investors cashing in on fiscal and financial hedges have gone to speed there's been a, quote, great destocking and commodities complex will set up for a rise

goldman will report a return in the next 12 months. let's get a check on market. we want to keep you up to speed with the latest. real estate continues to be the laggard, down 2.3% autos not far behind basic resources also travel measure also taking a sizeable hit telecons down. food and bev another defense irv basket of stocks every single sector in europe is trading lower this morning. in terms of news in the health care space, vaccine makers are trading higher amid reports of a fresh wave of croh coronavirus infections in china that they could 40 million infection a week this month and 60 million

by june. yesterday biontech rallied 8.2%, pfizer 5rks.2, and moderna was the best performing stock at nearly 5%. obviously china hasn't leaned into the western vaccines as of yet, but clearly they might do so. >> i'm not psychologically prepared for another wave of coronavirus. >> absolutely not. >> we have been speaking about the strength of china's opening and what it means if there's another setback. it could be another setback for the economy as well. let's talk luxury. luxury came off the boil losing a combined $30 billion in market cap. it carried shares of 5%. it comes after the major markets surpassed $5 million propelled

by a boom in chinese demand. lvmh yesterday dropped 5%, the behemoth, massive selloff in lvmh you look back at the strength, the sector is up 20% on average to date driven in large part by strong rebound in china, domestic demand specifically and more resilient growth in europe. now the weakness, joumanna, seems to be around the concerns of the aspirational consume never the u.s. >> i just want to take a step back and remind viewers how well the stocks have done this year lvmh achieved the valuation, but it's still up 25%. hermes, 24% year to date the way i see yesterday's price action, julianna, there are concerns about the demand outlook outside of china, but

also one other thing to identify, we're getting closer to the debt ceiling deadline and that is on june 1st. so what do investors do when you approach a deadline like that? you trim out long positions. i see this actually as position trimming in the market. >> it's a really good point. i was reading this morning one of the analysts' notes circulating out there that european luxury is a crowded long if you're looking to take profit and reduce risk in your portfolio, maybe this is an attractive place to do i deutsche bank put out a note earlier this week. they specifically say slowing to negative year-on-year growth is of growing concern it's interesting to see where the debate is now shifting in luxury toward aspirational consumers who are going to be

much more affected if they do see a downturn it comes when the data was actually strong, the macro data. >> just to your points about aspirational, it's telling that hermes is the one that has done best because that particular consumer hasn't really been affected by what we're talking about with global headwinds, whereas, the aspirational

bunch. on the downside, real estate is the worst performer and basic performers in autos, both underperforming. travel also taking a hit down more than 2%.italian t10-year t.

rates are up by 30075 basis points since july. nagel's comments came as the ecb celebrated a 259 anniversary

former president told cnb employeeser political union is in the future. >> i'm confident with new challengers, new threats, we will respond in a way which would be very bold it seems to me very likely they we will make new important progress in political union and that means, of course, some kind of political federation with single movement treasury be large decent organization that would coincide for the duration, and, of course, we should have also at a time united diplomacy and a united defense. >> the key here is that when the euro was created, the eurozone

was created as a monetary union. to that effect it's marking its 25th anniversary with president christine lagarde expected to address it this evening. the euro started trading on the 1st of january, 1999 from the global financial crisis to the block sovereign debt crisis last decade as well as the covid pandemic and russia's invasion of ukraine. when you put it like that, there's certainly not been a shortage are they expect or is christine lagarde expected to be giving the ecb a pat on the back after surviving this long? >> reporter: yes, i think so if you look at the track record of the central bank, they actually managed to keep inflation at bay over a longer temp much better than the national central banks

i guess the ecb's mandate is keeping inflation for a long time at 2% below it now it's 2%. i think now they will be quite happy with the performance or the track record of tit it was all started as a political project. even though we don't have political union. the key question as mr. trichet was putting it, the price is actually triggering more will for more political integration to discuss this and of course also look at the legacy of the central bank and the ecb and where we stand now, we're now joined by the former vice president, vitor constancio. good morning, sir. >> good morning. >> perhaps we dive into that big question of whether this crisis has actually enough power to

push politicians on the european level into a more willingness to even integrate further when it comes to the political union in europe like mr. trichet has at least hinted at. what do you think? >> i don't want to speculate on the long-term future that i also share in terms of objective, but we are still far away from that, the element that could, indeed, point to more integration would be the threat coming from russia about the war in crew cain, which points, of course, to a more integrated defense system for europe i would not characterize the

present economic situation, fighting inflation, as a sort of quasi essential situation. it's in a way more familiar to central banks, which is to tame inflation and normalize the increase in prices according to the defined objective. >> reporter: let us also look a little bit at the current consideration and the biggest challenges the ecb is fighting now. you're referring to the existential threats during the debt crisis were not like the existential threats territory right now, but still there are loads of challenges. which are the biggest in your opinion? >> well, it's still, of course,

to tame inflation, which is ongoing, i think and in terms of monetary policy, everyone is expecting a further hike in the next meeting but i wouldn't share the view you merged in your program that (#

is a very important contribution to the defense against climate change but not so much in monetary policy itself the possible greening of the portfolio that the changes with security that ecb did, in the end, there will be a shrinking on testify balance sheet, and the meaningfulness of that will not in quantitative terms be very significant of course, in quantitative terms, it's a symbol of the concerns that humanity must have with the issue of climate change, but it will not amount to meaningful effects on the problem. the problem must be addressed

much more force flybe the government and the private sector, which, by the way, in europe, i think, it's happening. >> yep vitor, thank you so much for joining us to mark this momentum occasion aan anneta, thank you. coming up, ron desantis is expected to announce a run for the white house. we'll discuss more after this break. ah, these bills are crazy. she has no idea she's sitting on a goldmine. well she doesn't know that if she owns a life insurance policy of $100,000 or more she can sell all or part of it to coventry for cash. even a term policy. even a term policy? even a term policy! find out if you're sitting on a goldmine. call coventry direct today at the number on your screen, or

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. welcome back to the show florida governor ron desantis is expected to announce he's running for president on twitter tonight. according to nbc sources, elon musk and desantis will host an event on twitter spaces, the host platform at midnight cet. u.s. markets closed lower tuesday as investors grew increasingly concerned about ongoing debt ceiling negotiations those declines look set to extend we'll get minutes from the fed

meeting earlier this month later on today. former federal chair ben bernanke says they still have work to do bernanke who led the central bank through the 2008 recession argued the labor market needs to slow down, suggesting they could lead the economy through without tanking it othersal noted inflation has evolved since hitting a 40-year high last summer and is now being primarily driven by a rise in wages goldman sachs ceo david solomon told the council summit there could be a tightening this year as it affects growth. >> no doubt the peak of inflation has dropped off. i sense that it's going to be stickier it's come off its peak, but it's going to be stickier and more resilient, which is why, you know, we're kind of managing and expecting that while the fed may

pause and it may be down at the pendant, you might need to see higher rates maltetly to control it some more. >> julian, great to have you on the program again. looking at the market weakness that we've seen recently, a lot of people are quick to pin it down to uncertainty and positioning around the debt ceiling. what is your take? is that really a central event >> it won't be we know roughly the exit date and when things need to be sold by in order to avoid chaos around as a result of that based on the comments we got from the white house and from the negotiator, the market is starting to price in at more or less chances of a success. and the problem is when you

price it in ahead of time, you find yourself especially now that the consensus is we're going to have a deal, once the announcement is made, you have the type of event where the market has to worry about something else and there is no room left for further upside and in the meantime as people get more excited about the potential for a deal, you also wish to see some upset such as the one we have basically yesterday and a few days before that that has not been reached yet. >> fair enough we show the indices that are all high ore an 30-day chart to your point it looks like a lot of the optimism is priced in let me ask you about the data. yesterday we got strong data stateside and yet equities sold

off. does that suggest we're in a regime of strong data that's bad for markets because it means the prospect of rate cuts later this year becomes less likely >> i would argue there are other factors here if you would say good data is bad for markets, you would see it intact. it's been mostly tied to the evolution of interest rates. i think it's a combination of a few factors, but there are clearly a repricing happening on the fixed in side where the market has been pricing cuts for the second half of this year, and as the incoming data shows, it might be delayed and, therefore, pricing in those cuts might have been too optimistic in a way, so we have this repricing going on, and i think it may require some adjustment

on the equity side but to be fair, the equity market has been fairly resilient despite this repressing, which is encouraging. >> julien, i do want to ask you, we have been talking about the prospect of a recession for so long now with respect to the u.s. economy if it does actually happen, how much of a shock is it going to be to equity investors what type of a pullback can we expect >> i don't think it's going to be a shock to anyone, because as you rightly pointed out, everyone's expecting it. we expect a recession in 2019 when they first inverted prior to government and progress the same session that is -- you know, that we've been waiting for since then so it won't be a shock to people in the sense that it's going to happen the key is knowing how deep a recession if anything it's going

to be. we're probably on that side as well it could be much pronounced. if it's as the market is already anticipating, it shouldn't be much of a shock. >> i'm kind of in that camp as well julien, thank you so much for joining us tofrmtd. let us take you tow to european markets because we're seeing a significant down day for all of these this is the biggest down day since march when those u.s. regional issues started flaring up all of the majors are trading deeply in the red. we're seeing big declines in the luxury space, autos, anything that has cyclical exposure and homebuilders taking a bit of a beating, this after that. >> this is the picture

joumanna mentioned the key performers real estate the worth perform ore f the bunch. we have bounced a uf the slaw lows but still down more than 2% it's the uk homebuilders which are performing worse the stronger than expected inflation print clearly driving rate expectations higher if we're looking at higher rates for longer, we're potentially looking at higher rates and mortgage rates for housing that's the impact it's having. >> of course, we're seeing a big move in gilts. 2-year up 20 basis points after that hot inflation brand. >> that's it for "street signs." thanks for joining us for a packed show. i'm julianna tatelbaum. >> and i'm joumanna bercetche. "worldwide exchange" is coming up next. he snores like an angry rhino you've never heard an angry rhino baby i hear one every night... every night. okay. i'll work on that. save 50% on the sleep number limited edition smart bed, plus, special financing and free home delivery when you add any base. only at sleep number.

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intelligence, who's in control. >> artificial intelligence is going to create a productivity boom that we've only seen a few times in the last 75 years. >> i feel, yes, it's moving fast, but moving fast in the right direction where humans are more in control. >> we're doing everything we can to make sure we're ready for autonomous when it comes you may be surprised when it comes that it comes a little faster than you think. it's 5:00 a.m. here at cnbc headquarters and here's your "five@5. we begin with one week and one day with no deal in sight. the negotiators say they've hit yet another speed bump there are growing calls of a coming recession in the next 12 months goldman sachs david solomon weighs in. and a new warning from ceo of the most valuable chipmaker and their impact on the u.s.

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