that's all for this edition of "dateline." i'm andrea canning. thanks for watching. ♪ good morning and welcome to "street signs. i'm frank holland and these are your headlines. bbva turns hostile presenting an identical offer with the bank's chairman saying the deal makes sense while the spanish government voices opposition. chinese trade data returns to growth topping expectations and signaling demand at home and overseas. the bank of england gets se to deliver the decision with the

first rate cut expected. we will bring you the comments of andrew bailey. and the chip designer arm faces a disappointing forecast with fears of slowdown in a.i. demand ♪ welcome to "street signs." we open with the spanish banking saga bbva is making a hostile bid for the rifleval with the deal rejed by sabadell board. the spanish government says it opposes the move and the proposed merger could create a

financial instability. the deal with the two businesses makes sense to bbva and it is an attractive deal. we heard from the ceo yesterday who said there are challenges to domestic consolidation in the banking sector >> this is difficult to make a friendly transaction if you are in a position to be a 50 million euro market cap. this kind of transaction usually goes through a tender offer and probably more style than friendly that is how you do a deal. that is the reason p why it is o easy to do a consolidation this is something that is not so easy to do that's also what you have to remember at this point there is no bank at 10 billion

market cap just because you are giving a premium of 30%. the approach in the domestic consolidation is something that all investors remember in the domestic market. >> we have been covering this story all week long. bbva shares are down 5.5% on the news i spoke with the equity analyst for european banks at morning star and asked him for his thoughts on the proposed deal. >> we look at it from the bbva perspective. we thought it made a lot of strategic sense, but there was no margin of safety that bbva placed on sabadell we looked at the deal and it looked in line with the book value that generated up to 11%

r.o.e. those results seem in the ballpark where it should be valued it was not overly generous offer. it was a fully valued offer. >> we will have more with the develop developments as they continue. china exports beat expectations and it suggests that domestic demand is slowly coming back in the world's second largest economy sam baddas filed this report >> reporter: the chinese economy continued to point to improvement with overseas demanded beyond the headline, there is more under the hood. exporters are looking at the

uncertain economic picture at home which is raising concerns about profit margins as volumes have been at record highs. there are worries of the overcapacity story in china which the europeans have been pressing president xi on this week goods coming into china are surprising to the upside last month jumping out of contraction territory to 8.4% in april it comes after south korean exports are a key indicator that imports grew 10% economists noted stockpiling could be behind the lift as importers try to take advantage of commodity prices before they go up particularly as much of the material that's brought into the country is reexported in the future this speaks to china's industrial policies right now like president xi's forces campaign which aims to drive more high-tech with international competition in mind

that brought the trade balance to $72.4 billion in april. we have inflation data up next which is out over the weekend. in singapore, sam baddas, cnbc business news. you see a lot of green on the board -- excuse me red on the board we may see a change of momentum with the benchmark which is coming off the four-day win streak for the stoxx 600 we mentioned the bank of england decision is expected today let's look at the boards now a lot of action in spain looking for the ibex which is down 1%. we told but banking merger news and the developments there bbva launching a hostile t

takeover bid for sabadell. the ibex is the laggard. we are seeing the swiss index is up .25%. looking at the sectors today here and let's go to banks with the merger news weighing on the banking sector retail is lower. this is interesting. we saw a report weighing on this index. on the upside, we are seeing basic resources which is higher and oil and gas is the best performer. autos, by far, the laggard we will see pressure on the auto sector after reports from bmw and volkswagen which continues to weigh on that sector. let's go back to the earnings movers telefonica the net profit of 532 million

euro that is up 80% on the year the company said the first quarter was in line with the management expectations. it is on track to meet the targets for the year shares are in the red right now. earlier on "squawk box" today, the cfo gave her view for the landscape for the company. >> we need new regulation. this indicates us being regular ind regulated. we need a new definition of market we need every regulation through investment we are competing a lot with customer prices being very attractive we need regulation that goes to have stronger companies in europe which is needed

we are positive about that we see more payments rather than negative we are positive in this environment. returning to the top story this morning chinese exports grew 1.5% and imports beat expectations which suggests the demand is coming back we are joined by klaus baader now from society general >> good morning. >> tell us about the 1.5% increase which was above estimates. one report does not make a trend here how do you read this >> i think if you look at the composition of ex-poport and imr activity, you get a strong suggestion that this is part of the continued strength in the tech sector.

we saw that also in the trade numbers from taiwan and trade numbers from south korea it is just really strong demand for basically anything a.i. related. particularly semiconductor and pc parts saw it we saw it in china with the import numbers we see those import numbers looking at a brightening export number it was a positive number overall. the import numbers beat expectations more than the export numbers i don't think that it's that kind marks a substantial upswing in the economy. >> one trend doesn't make a trend. does this one report tell us about overcapacity in china? you mentioned the imports above

expec expectations >> it tells us something about the domestic demand. i don't think it tells us a lot about consumer demand. you see, i think there are two things that need to be kept in mind here. the first one is that foreign trade has, over time, become less and less important for china. if you look at export and imports relative to industrial production, you will find more and more of what china produces is aimed for the domestic market in the sense, you could say china is deglobalizing, but i think this deglobalization story is a bunch of humbug what really matters for china is the real estate sector here, i think there is cause for optimism because the government has launched a number of initiatives. none of them seem to be the big

story, but last week, the government announced plans they are intending instead of building more affordable and social housing, but to buy the overhang in the market and use that for affordable housing. that, if you can stabilize the real estate market and particularly house prices in china, that will lead to a recovery in household demand >> you know, the property secrsector has weighed on the economy overall. that is an interesting data point. i want to go back to humbug. deglobalization. when it comes to the rise in imports, tell me about the chinese consumer and how much of these chinese consumers are switching from the global brands like apple and mcdonald's and buying domestic brands competition in the coffee

business and a china burger creating competition from mcdonald's >> that does play a role it is more important when you think about telephones and apple is losing market share to huawei, et cetera. i don't think that's the principle driver of what's going on in the chinese economy. the fact is housing is a really important part of household portfolio. that's under pressure. that's undermining private consumption in china the point i made earlier about the decline in relative exports and imports compared to the domestic economy is a system consequence that the chinese economy has and continues at the same margin and continues to grow far faster than the global economy. it is natural that more and more

of china's production is directed at the domestic economy. >> klaus, we have to go to the bottom line. this report does not make a trend. what does it tell us about overcapacity and the chinese factories? many were selling at break even or a loss according to reports what does this give us on th read of overcapacity >> i don't think it gives us a lot of read on that one. you know, given that exports were stronger than expected. it is a positive sign. overall, you know, the prospects for the chinese economy has improved just months after a strong start to the year with gdp, we upgraded the forecast from 4.7% to 5%. that would be a dramatically d disappointing number years ago,

but today is a good one. it is looking better the problems of overcapacity particularly in the construction sector is reflected in relatively weak demand for iron/ore which suggests the overcapacity problems are still there. as far as the production at a loss, that is becoming increasingly political bone of contention with the european union considering launching an investigation with unfair competition, et cetera, with a suspicion they are subsidized. >> klaus, thank you. we turn to another developing story you are looking at live pictures from xi jinping in hungary he expected to hold talks with

the hungarian prime minister president xi is continuing the trip to asia he visited serbia and france these talks are interesting especially because china is an ally with russia and hungary vladimir putin is visiting china next week. a lot of geopolitical ramifications. you are looking at the pomp and circumstance xi jinping is set to hold talks with viktor orban. these are live pictures of the welcome. we will continue to bring you new developments as well. and coming up on the show, we give you an update on the stoxx 600 as it notches a new record stay with us when we started our business we were paying an arm and a leg for postage.

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welcome back to "street signs. the stoxx 600 is lower right now, but the index closed at

another record yesterday driven higher by a gbumper earnings season we have silvia with more on the earnings season. >> that's right, frank what we see in the first q1 report of 2024 is the upbeat momentum for the european equities europe is having the worst earnings season since the onset of covid that was after the q4 reporting. things have changed for european equities let's show you the numbers from deutsche bank. they highlight what is happening in europe at this stage. earnings growth is up 9% on the quarter. looking at the breakdown and if you were to exclude banks, you would see a 2% growth there. what does that mean? that means european banks are playing a critical role with the performance in the q1 reporting.

let's show you how they are trading relative to the stoxx 600. we are hearing momentum from european banks which is translating into the share price reaction since the start of april, european banks are up 5% clearly out performing the stoxx 600. there are two reasons why european equities are moving higher in this first quarter of 2024 first, the expectations were pretty low as we await to hear from the companies and on top that, economic performance has been above what analysts were expecting. the critical question, frank, is this going to continue will we see european equities continue to beat analysts' expectations we have to wait and see. deutsche bank increased guidance for the 12 companies so far and

5% cut guidance. let's see what 2024 has in store for us so far, it has been positive >> silvia, thank you very much. we will switch to the u.s. first quarter earnings stateside is resilient with 80% of companies so far beating estimates despite wider inflationary pressures and higher interest rates. there is intense debate with th macroeconomics pressure weighing on pricing power our next guest says the consumer is expected to stay stable this year good morning >> good morning, frank. >> you are bullish on the u.s. consumer we are talking about the strength of the u.s. consumer in the show we have high-income consumers and moderate-income consumers and lower-income consumers

higher-end consumers are keeping the market going >> we have seen that in our portfolio. we really skew in our company toward the higher-end consumer and we see strength in our sales coming from our consumer portfolio right now. where we had middle and lower income exposure has been the areas that have come under weakness that gets back to what you were talking about with inflation if you think back three years, yes, inningflation has come dow. if you stack that over three years, that is stacked from q1 from 2024. that has eaten up purchasing power. the direction of inflation is going to dictate whether the united states consumer can hold up and if the economy can grow it is underpinned by the an

flut affluent consumer. >> the market has been reactive. now softer reports were good for the market we have the jolts report come. we will see the latest information. the last jobs report the unemployment rate ticked up slightly we saw wage gains 4% higher. what does that mean as you go forward as you look at the economy and the markets? >> by background, we just came out of our first quarter and we have ten subsidiaries. i talked to all ten of the ceos. what came out for the first time is the employment market feels more balanced. the job openings we have are by

design rather than we can't fill those jobs wage gains at 200 to 300 basis points has come down to 100 basis points historical average. there is a real relief happening on the inflationary pressures. that will be a positive. you are starting with the markets reacting to the negative information. that's because the forward expectation for rate cuts are coming clearly into view my personal expectation is as long as the labor markets are as imbalanced in 2023, we were not going to have inflation pressures ease, but we see a pullback in the first quarter. we changed our opinion and our house view is there will be more rate cuts in the back half of the year than currently priced in i think that bodes well for equity prices. >> with all this said, i'm sure you are aware of the bank of

england decision today, with more clarity on cuts and the consensus we will get cuts -- where would you put money to work right now i don't mean regions, but sectors within the regions >> i would favor small caps right now. if you look historically, the divergence with the mega-cap tech companies with a lot of monopoly power and cash flow generation, that is the highest gap to small caps in the history of the market. that has to converge there is hype around a.i. and productivity that's going to come from that we believe that's going to, you know, come into generic companies over time. we're looking at a.i. and adoption of that to become more efficient. how can we get faster speed to market in products that we are

introducing? how can we create more efficiencies within the company? right now, the general benefit has gone to the microsofts and nvidias of the world that feels like it will broaden out to companies that are going to adopt this technology and get real margin benefit as a result. >> i listen to what you are saying sounds like manufacturing production opposed to services is the next leg. >> that's our and advertise ta anticipation >> thank you for being here. still to come on the show, we look ahead to the bank of england rate decision with the timing of the first rate cut in focus. stay with us the decision's coming up in two and a half hours we put our heart into celebrating moms. we are local farmers, bakers, florists and makers who grow and create with a passion. 1-800 flowers.

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country standpoint to have a stronger player which can operate in the european and global context i am very confident the government will appreciate the value of the transaction over time. chinese growth data signals demand at home and overseas. the bank of england is set for the latest rate decision we bring you the conversation with andrew bailey at 4:00 p.m. london time. and arm reports a disappointing revenue forecast calling on fears of an a.i. slowdown good morning welcome back to "street signs. let's turn to the european markets. it is a mixed day. we continue to see the ftse 100

moving higher. the best performer is the swiss index. the dax is trying to move higher the ibex with the banking news weighing on the ibex let's look at the sectors this morning. i want to turn to currency right now. we are seeing a bit of a decline across the currency markets. i'm sorry. these are the bonds. i apologize. look at the currency market. we see the dollar make gains on the swiss currency the pound is making gains on the u.s. dollar ahead of the boe decision thoughts of the weakening of the currency if there is a rate cut. the dollar is making gains on the yen up .25%. the euro is falling a bit to the dollar right now speaking of currency, the bank

of england is looking for the result of inflation with the yen weakness after the central bank april meeting. one official said there is a chance of rates going higher, but some moderates should be considered to avoid rapid hikes once the inflation target has been met susan collins says returning to target will take longer than expected and doing so will require a slowdown in economic activity to better align demand with supply. collins is optimistic with the reasonable length of time and the policy is positioned well to respond to incoming data ecb says the central bank has room to cut by 50 basis points wunsch says keeping rates too tight for too long now is a risk and robert holzmann says the ecb

decisions would be influenced by the fed. he described the u.s. central bank as the gorilla in the room. he said there is no reason to cut too quickly after the likely cut in june. flagging the forecast at the september and december meetings. after the decision yesterday, we saw the sweden bank looking to a move the boe is expected to hold steady with investors looking to hold signals with the timing of the first cut. markets are split and close to even on the june cut with a 75% chance of the first cut by the end of its august meeting according to lseg data markets are pricing in 50 basis points of cuts, but economists are going further projecting 10

basis points of easing we have matthew from bnp with us now. >> good morning. >> what else are you expecting from governor andrew bailey? hawkish or dovish? >> we think the bank of england is gaining confidence that disinflation is under way. we think that will come in the comments from the press conference we don't expect them to put it in guidance. we feel it is unchanged from the previous meeting we are looking at the press conference for how confident they become. >> what progress will they point to here? in the u.s., that has sparked talks of a possible rate cut what do you think the bank of england is seeing in the situation that will lead them to what you believe is comments with inflation easing >> we feel that will happen most

of the next two years. we feel that will remove the judgment from the february forecasts with inflation persistence will be lower. we have no acceleration, but a flat line of 2%. we feel that reflects what they are seeing with the data and less concerned of the stickiness with the looseness in the labor market another point on that is we have seen the curve in the uk pricing in fewer cuts than the february report we feel that mention the bank of england will have inflation be wil below target >> how is the bank of england view recent economic reports with the return to moderate growth in the uk pmi is better than expected and construction the pmi hitting a 14-month high. the goal is 2% inflation however, generally, when you see economic re-acceleration, that

leads to more inflation. >> one thing we are seeing is while growth is increasing, the labor market is loosening. we feel that will feed into weaker wage growth we expect that to come down for the course of the year we see other costs coming down, particularly labor costs and energy passing through the supply chain ultimately helping the uk get back to the 2% mark. >> economic growth with fewer jobs how often does that happen >> that is an unusual set of ev events we have been hit by a big shock and one thing that does look to be the case is firms held on to labor during the pandemic. that is shaking out as growth improves there is loosening in the labor market with mismatch of the pandemic easing. it is all generating loosening in the labor market. that is what the bank of england favors. >> we will see at 4:00 p.m.

london tomorrow. how does the bank of england view the plans to diffiverge frm the u.s. fed >> we feel the bank of england will base policy in the uk on the inflation prospects in the uk we feel the policy path is more like the ecb than the fed. we expect the bank of england to cut in august and cut three times this year. 75 basis points of cuts in total. we do just think the macro economic back drop in the uk and europe is a compelling one for uk rather than the u.s we have june initially and then one cut per quarter with 75 basis cuts. >> you see the bank of england waiting one more meeting after the ecb. the ecb doesn't influence the bank of england, but they are watching and waiting. >> exactly our forecast particularly for services inflation will be a

little bit above the bank of england in a couple hours time we feel they won't have the confidence to cut in the june meeting, but by the time we get to august with more disinflation, another data print in hand, we feel that is when they will be ready to go. >> one factor here we know the ecb is watching the price of oil which has stayed stable does the bank of england watch the oil market and other inflationary issues like the supply chain you mentioned commodities prices are rising as well are they keeping their finger on that i know you said it is a different situation in the uk and europe thro those are the factors here in the uk >> completely. the bank of england put an upside risk on the forecast in february since then, governor bailey suggested geopolitical tensions may have less consequences than

they previously thought. we the feelfeel there is a good they remove that risk. they are putting a lot of weight on near-term expectations. that will move food and energy prices. >> one more question for you what is your play on the dollar with the rate cut expectation? >> we expect it to raise for 2025. >> matthew, thank you. great that have you here your forecast is the bank of england has the first cut in august thank you. don't miss the coverage of the rate decision due midday london time before we hear from governor andrew bailey starting at 12:30 we will bring you the conversation at 4:00 london time here on cnbc turning attention now to the u.s. president biden says the u.s. will stop providing weapons to

israel if they launch the invasion of rafah. it is the strongest invasion as israel is looking for a ground assault. andrea mitchell has the latest >> reporter: in the rebuke of the ally, president biden halting a weapons shipment to israel as israeli troops are targeting hamas in rafah. >> we stopped one shipment >> reporter: hearing israeli forces to drop 2,000-pound bombs on rafah as it did last fall. >> we have concerns over what that would mean for the civilian population there when you look at how israel has conducted operations in the past >> reporter: the move is angering republicans >> that is an irresponsible decision there should never been a question of america's commitment to israel.

i think biden's treading on thin ice. >> reporter: israel official saying there is deep frustration over the decision and rift over the humanitarian aid and the border crossing occupied by israeli tanks and aid not getting through. that is unacceptable that comes despite secretary blinken's comments last week >> it is imperative they get the food they need and water they need and medical supplies. >> reporter: new reporting cia director is back in cairo for cease-fire talks is israeli official denies it the state department said agreement that could halt the fighting and bring home the hostages is within reach coming up on the show, arm shares decline in pre-market trade after lackluster revenue

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welcome back to "street signs. arm shares fell in trade after guidance missed expectations the u.s. forecast of revenue of $3.8 billion the company beat expectations with a near 50% jump in revenue. don't miss the interview with rene haas coming up. >> i love arm then and i love arm to this day. everybody now realizes what a great franchise it is here look, it would still be a great franchise inside nvidia and still putting a pitch out there. kidding. i love working with them they're great for the world. robinhood stock jumped after the net profit that topped wall street expectations. the earnings beat comes on the

back of the crypto business. the company reported net income of $157 million with revenue rising year over year. the ceo said the company is seeing strong retail inflows. >> it was actually well diversified from other brokerages that was in the range of $3 billion to $4 billion. it was quite strong in terms of normal customers that were depositing from their bank accounts it wasn't any one thing we can point to, but crypto was strong. across the board, the business is growing and we're just getting started. airbnb reporting a 13% jump in revenue to over $2 billion, but holiday trips fell in trade after weaker second quarter

guidance the company is experiencing demand for travel ahead of the peak summer season and paris olympics we will hear from brian chesky at 16:00 cet. uber had stronger results after lyft this week after the changes in the equity investments. guidance for the bookings came in softer for the quarter with the point below expectations uber's ceo said it is not related to the business itself >> the biggest reason is we got a significant equity stake in didi and others out there. we had to take a markdown of $700 million for those equity stakes it has nothing to do with the operating business we did have to mark down the equity stakes that resulted in a loss we don't expect that to keep

happening going forward. >> we welcome our research strategist >> great to be here. >> we heard from dara khosrowshahi saying that loss was due to the change of value i want to talk about the mobility business for this company. you saw the revenue jump 30% i want your view on the increase we're past the revenge travel and in your mind, how do you view these roesults is this a weak comp or strong comp >> i think it is a weak comp because the q2 guidance was diminished a lot that took the stock down they did 66 cents of earnings in the fourth quarter last year and they booked the summer growth. everybody was thinking now we can count on 25% or 30%

annualized growth and mobility that is not the case here. the other thing is delivery was 4% year on year growth the freight was minus 8. you have to ask if there was a sweet spot with travel that will peak here and that is what they are catching and riding the revenge travel wave and it is about over maybe they get through the summer, but it is taking off the euphoria in the market they will get some growth out of it 15% year on year revenue growth is nothing to sneeze at here in all things considered, they saw the market was weaker than expected and they would have a miss they decided to throw the equity write downs from the businesses in china and russia and other places where the minority partners are not doing well.

they said let us throw everything out that is not going to work and clean out the balance sheet. >> you mentioned the delivery business with 4% year over year growth you are scoffing on that the u.s. consumer is under pressure with the middle income and lower income >> i don't understand how they get a 20% markup on delivery and trying to make money at it when you look at the leverage of their growth, the bookings returns year on year are similar to mobility. they did so little catch out of the business they have to deliver meals, not people it is a lot less profit for them in doing that. they just don't get the leverage they are a one-horse show here they put investments into freight. they bought a company in 2021. they have the deal with instacart for the delivery

business which is grocery to add to the restaurant mix. at the end of the day, the actual revenue miss of 55% mobility which used to be 50% means they are a one-horse show. that is the uber passenger service. >> i see the notes the 8% decline in freight is disappointing and troubling. the digital freight brokerage business is under pressure whether you are uber or anybody else i want to go back to the buyback. $5 billion in cash for the quarter. how do you view that as a buyback? that means the company isn't innovating they could be doing things with a.i. or autonomous driving >> it is interesting they did the buyback in february they said we're under valuing the business and then talked about compensating internally.

you have two worries the ceo that came in and cleaned up the business seven years ago brought in a team and brought in a lotcompensation. you are thinking they are cleaning up that internal stock. the other is the a.i. business they were in a.i. in 2017 and exited in 2020 they have been a first mover in a.i. and haven't monetized it. you don't know the usissue is why put a buyback on the table the stock hits $80 and you go out with a buyback and that's the total opposite time you would want to do it. the argument here is the one you made we have immense leverage with

the a.i. boom and travel bookings, we can take this way up to $160 you know, that's a real bullish bet in the market with the cyclicals working against you now. rates are still high in the united states. we have stories like starbucks and mcdonald's with the numbers falling. something doesn't smell right. >> the u.s. is a duaopoly. what is your outlook >> you have to be bullish. app-based services will stick around they are convenient. people have the screen base ability on the cell phone which is driving the business. since covid, everybody is focused on working remote. this is creating another source

of benefit i have to be bullish on the business i am just concerned they just don't learn how to build the business outside of mobility and outside of brazil and united states and india they say they are growth, but those are the three major markets where they make their money. with the litigation cost in australia and now they're going tolitigation in the uk means you have to wonder if they run out of markets with the ability to exit and enter with the money they're making that's my concern. >> okay. john with zacks research thank you. before we let you go, let's recap the lead story with the latest in the spanish banking saga bbva is making another play for sabadell the offer is presented to shareholders with the same terms as the deal rejected by the board earlier this week. the offer values shares at 2.12

euro the board's opposition to that deal has been stated the government opposes the move and this could pose a risk to financial stability with co consol consolidation. the bbva chairman says the deal makes sense and the deal is attractive for shareholders and clients. one look at the european markets. a mixed day right now. we saw the stocks lower. one quick look at the u.s. futures before we let you go turning to the u.s., the u.s. market will open in the red. it is it for us today. i'm frank holland. "worldwide exchange" is coming up next. go to 1-800flowers.com, find the perfect gift and wow the people you love. wow! wow! this is amazing. whether you want to say 'happy birthday'. so cute! or i love you. i love you too. thinking of you. wow! go to 1-800flowers.com celebrate the people you

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it is 5:00 a.m. here at cnbc global headquarters and here is your "five@5." i'm holland. not waiting on the fed attention turning overseas to another central bank possibly tipping its hand to an interest rate coming sooner rather than later. shares of arm holding sinking after the muted outlook and the fourth quarter beat. plus the bundle is back courtesy of disney and