♪ good morning. welcome to "street signs" live from london and the banks of lake como. i'm joumanna bercetche. >> and i'm julianna tatelbaum. these are your headlines this morning. european equities push higher in trade after the surprise jump in u.s. unemployment with the expectations the fed will hold rates this month. >> people are going back to work

and the economy is resilient and balanced. we see that balance in the labor market. that's why inflation has come down. s shares in country garden hu hit a three-week high after they extend a deal pushing asian equities higher pushing the hang seng leading the charge. and the italian deputy prime minister saying they could pull out of the initiative as he visits china for a fresh round of talks. >> the european countries are working better than us. italy, we decide if we stay or not stay. plus, the european economy commissioner telling cnbc he is confident in the europe growth

rate despite concerns germany is facing a slowdown. >> please don't call this a recession. we can avoid recession. we have in the second quarter of the year limited growth, but not recession. good morning. welcome to "street signs." u.s. is out for public holiday today, but we are monitoring the price action on friday closely. all eyes on the nfp print. analysts saying something was in it for everybody because the headline job creation number was slightly higher than expectations. at the same time, we are seeing droves of people returning to the work force. the unemployment rate ticked up slightly. hourly earnings fell a bit. a mixed bag.

a reaction from the market was positive. what we are seeing is the positivity is translating through over the weekend as well. asian markets were positive with further stimulus from authorities in china and further easing from home buying and good news from country garden. all in all, a better picture for the stoxx 600. we're up .70% building on from the stoxx 600 gains last week. let's switch and look at the individual boards. every one of the majors is trading in positive territory. the ftse mib, the italian index, up .20%. steve has been in chernobyl over the weekend talking about the political situation on the ground and coalition and the reaction to the surprise banking tax introduced and dialed back

again over the course of the last month. today, that is our focus in terms of coverage. the reaction in the market has been positive today in terms of price action. dax is up .60%. annette is out at the conference and will talk about autos. cac 40 is up .70%. the ftse 100 is up .60%. one thing that stuck out to me in the uk on friday were the huge upward estimates to growth. really significant and it does show the uk is no longer the worst performing g7 country since the pandemic. that is notable. the weekend press picked up on that. it tells you,s pe perhaps, some the nurmbers were under estimating how fast the economy was growing. every sector trading in the

green. basic resources up 1.1%. tech sector up 1% as well. we continue to see good momentum in the chip names in europe. industrials up as well which shows strength in the german market. thank you, joumanna. germany july exports fell 0.9% in july. this showed deteriorating expectations in the country. stateside, u.s. unemployment rose in august as the summer of 202 2023 neared a close. non-farm payroll closed above 187,000. the unemployment rate topped estimates at 3.8%. the highest since february of 2022. the unemployment measure that counts discouraged workers and

those working part-time, jumped to a 15-month high of 7.1%. another sign that inflation pressures are easing. national economic council director brainard says this shows resilience in the economy. >> we have a strong labor market picture. if you look at the number of people coming into the labor market, that is encouraging. that number is a reflection of the great jump in participation in the labor force. people are coming back and going to work. the economy is much more resilient and much more balanced. we are seeing that balance in the labor market and that's why inflation has come down. shares of country garden hit a three-week high since november.

after the chinese property developer won creditor approval to postpone payment on the yuan bond. it received a further boost to the economy giving buyers access to loans regardless of credit history and loosening down payment rules. we have more every day from asian authorities. we have a strong performance. hang seng up 2.5% this morning. in related news, italy's deputy prime minister has told cnbc that italy could withdraw from the belt and road initiative. let's get to chernobyl where steve joins us now and he has been speaking to policymakers. steve, we have all been waiting to see how giorgia meloni's

government would handle the best and road initiative. she has been outspoken to the initiative. what did tajani have to say about it? >> reporter: how about this? i was talking to tajani and he was getting on the plane after speaking to me and attended to beijing to explain to the chinese over the next few days what the problem is. the problem is it hasn't worked for italy. it was a different era. it was a populous government and government reeling from recession after recession. a government fed up with the relationship with the eu in many ways. it was looking for new growth avenues. if the belt and road initiative pays off, we get loads more imports and exports and acts as a boost for the italian economy

and give advantage over the european peers. it did not work out that way. there is more going out than going to italy. italy exports have grown to china, but not as much as imports from china have to italy. meloni is not the only politicians who thinks it is not working. in the era where the attitude of europe and the west toward china has changed from being a competitor to more of an aggressive geo strategic rival, things have hardened up. we spoke to a lot of politicians on the channel and we have to treat china as a rival. this is tajani with the mou signed in 2018 and it runs through to 2024 and carry on for another five years unless the italians pull out.

it underlines the fact that the chinese sold this as beneficial to a lot of countries. we heard horror stories from the african continent to sri lanka about how bri hasn't worked out for the countries. italy is the latest in a long line. i spoke to tajani about this. let's listen to his response sdpresponse. >> it is not difficult. it is important for us. the message, the italian message, is very clear. we want to work with china. we want to be present in the chinese market. we are ready for chinese inve investment, but as i said, it is important to level the playing field. the italian parliament is checking the situation and this moment, the countries are

working better than us. the european countries are working better than us. italy, if we decide to stay or not stay in the belt and road initiative, then many parties are against it. >> tough task for tajani to bring the bearer of bad news. it fits into the wider european attitude toward china being hardened. being concerned about i.p. or the auto industry and the ability to compete on the hardware on the drive to net zero. i spoke to gentiloni. former prime minister of italy and now the european prime minister. he made the comments about the position of europe in china, but the economic differences and challenges for both reasons.

listen to gentiloni. >> the situation is becoming more competitive. also because for a certain number of years, we had maybe in the eu an illusion similar to the one that we had in a completely different scenario, but similar to the land we had with russia that good trade relation could change things. now, we are also more demanding on trade relations. at the same time, i think we should not overestimate the china threat to us as an economic player because we have a lot of domains where we are partners and we can work together. yes, we have problems in the eu, but i think china has also its

own problems. it is not all good for their economy. so we have competition and rivalry. at the same time, interests and common partnerships and no interests at all in narrative of decoupling which is not only impossible, but very negative. >> reporter: that was gentiloni. i spoke to him about a lot of stuff. he is very generous with his time which you know. there are many problems with europe. the vast amount of money and capital spent rebuilding the digital and net zero economy in europe has got stateside. that is because the i.r.a. has been beyond successful. a measure that the biden administration thought would bring in $250 billion or $350 billion has cleared $1 trillion

now. we don't have anything to respond to that in europe at the moment. he is very proud of the funds about $800 billion generated. he is using that as we have this which is similar in size. listen to gentiloni's response where i was sucking in all of the capital. >> it is a messages you are wh -- it is a measure which has no cap. the amount of money is probably growing and growing in relation to the previous expectation. is this overall good? i think so because overall the measure is a measure incentivizing clean technology in a very important economy as the american economy. at the same time, i think it is a real challenge for europe.

the point is that we have now large amount of common funding and rolling with next generation eu plan. this is -- this will finish in 2026. so the question from my point of view is what's next because we, of course, can support green investment and digitalization now with european common funds, but these common funds will expire in two years from now. so, it's time to start the conversation maybe with the next commission next year. the conversation of what's next? >> reporter: that's the point. the common funds will expire. will there be appetite from the

northern european friends for european sovereignty bonds? we have thorny eu elections in the meantime. back to you. >> steve, thank you for the interviews. fascinating to get that interview with tajani before heading out. we are taking a break and we will hear from michael steiner next. ree porsche development dictor. don't miss that interview.

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welcome back to the show. chinese automakers are out at the iaa conference in miunich. the number of chinese manufacturers attending the german motor show has doubled from last year with 41% from asia. annette asked for views on the global economic outlook. >> despite interest rates, we have competitive pricing for

customers. and while we have all of the challenges persisting, we have a robust business model. our growth outlook that we announced three weeks ago, we put them up on the margins side as well as the volume side. currently, it doesn't look too bad for us. >> it is absolutely clear that the central banks in europe and also in the united states are going to go the distance in terms of getting inflation under control. so we will have to expect some cooling down of economic activity. i don't know how long that will take, but it seems like the central banks are willing to go the distance on this one. >> let's get to annette who is joining us from the iaa conference. annette, you have to think of the themes of the competition

from the chinese ouautomakers o the car front and batteries. >> reporter: exactly. i think the batteries are tying in with the fact that the chinese competitors can produce the mass market models at cheaper costs because they have state subsidies with the batteries. of course, on the ground in munich, sports cars are a thinking theme as well as suvs. i'm joined by the head of r&d from porsche. we are saying there are loads of themes here on the ground. perhaps you can tell us what are you working on at porsche currently to move the company forward? >> we are in the middle of the transition in the industry and for porsche, it is the same. we are moving to e-mobility.

that will come next year to the market. we are working on an electric cayenne. we are joining the luxury car. besides that, we take care of the 911. we develop a hybrid sport for the 9911. we are getting more efficient software. we are also in the middle of the transition, but we do it the sporty way. >> reporter: does that mean you do it faster than your competitors? what do your customers say about what they want to see from you? >> if it comes to porsche, the expectation is always that we are earlier and better in terms of performance. if we develop electric car, we are looking for a better battery cells with higher energy density and power density to have faster

cars. it is the porsche way. faster cars that we develop perform better. >> reporter: we have said china is increasing the battery capacity tremendously right now. also because they get a lot of statesubsidies. is that something you are confronting? >> definitely china is the most important competition and growing very fast and better in cell technology. for porsche, we are looking for better cells with the higher energy density and we have our own auto company cell first group where we develop and produce a well produced cell for performance cars better than the mass cells and batteries you could buy. >> reporter: what is different for the high performance cars for the market? >> it is about power-to-weight

ratio. you always have to look not only for power, but for low weight. the power-to-weight ratio makes the car sporty and agile. a . >> reporter: let's talk about cars. many customers like the 911. you are introducing a hybrid? >> we are in the middle of developing a sporty hybrid version of the 911 that will make this car more agile on the pedal. that will support the 911 to be future proof in terms of regulation and things like that. we are working on the hybrid for a 911. >> reporter: another question on the bigger suv. many of the luxurious competitors have huge suvs on the market. much bigger than the cayenne. >> we plan to have a more luxurious and bigger car than

the cayenne. fully electric car. luxurious suv. it will have a sporty shape. once again, it will be the sportiest car in the segment. >> reporter: one more question on the macro economic environment. luxurious customers are not impacted by high inflation, but do you still feel there is a bit of reluctance as well among your clients? >> our clients would have the capacity to buy cars, but if the economy is unstable or if you have severe events like 9/11, we see also a slight downturn as you do not need to buy such a car if the economy is bad. in principle, we see it as a more stable purchase.

>> reporter: thank you very much. guys, back to you. we have more from the iaa later today. >> annette, fantastic. she spoke to the ceo of scotus and asked about the threat to ev makers. >> the battery plan relies on electricity cost. that is the biggest cost driver if you produce battery cells. this is where europe still has to catch up. electricity costs from china to north america are too high. a lot of discussion on whether wit we can bring that down with subsidy. you ask about the position of battery cellcells. that is the challenging part. within the vw company, we have battery cells and we have scaling that with the unified cell which is something which is promising. they he ann-- announced in cana

of a gigafactory. in terms of supply, we are in a good spot. when it comes to expanding the footprint with the factories, europe is not in a good spot at the moment. >> many talk about the i.r.a. it has been faster than the european side with the particular response. so far your assessment with the political will in europe being there, but are they moving fast enough? >> of course, they are not moving fast enough. if you look at the inflation reduction act and investment into north america with 380 billion mrs. companies. this is a huge factory that change the game at the moment. the u.s. has done something where we have a little bit more

wiggle room in terms of subsidies. it is nowhere near what you get investing in north america. >> a couple of highlights. first is competition from china and the second is the competition from the i.r.a. all of the incentives the americans are giving means there is less incentive to invest in europe. >> that doesn't bode well for european automakers. >> interesting coverage from annette. you can read more on cnbc.com. we will have more on how pri prime minister giorgia meloni's government is doing as we have an a an interview with carlos

carlittoi coming up.

welcome back to "street signs." we are live from london and the banks of lake como. i'm julianna tatelbaum. >> and i'm joumanna bercetche and these are your headlines. >> a surprise jump in u.s. unemployment cements expectations that the fed will hold rates this month.

brainard tells cnbc the economy is stable. >> people are coming back to work and the economy is more resilient and balanced. we are seeing that balance in the labor market and that's why inflation has come down. shares in country garden hit a three-week high after the chinese property developer reportedly strikes a deal for the onshore bond payments pushing the equity higher with the hang seng leading the charge. here in cernobbio, the prime minister says the country could pull out of the belt and road initiative in italy. >> they are working better than us. italy, we decide to stay or not stay. and ukraine's defense

minister resigns after president volodymyr zelenskyy announces the biggest shakeup since the russian invasion. tanya will speak to erik mose later this hour. the chair of the ukraine ministry. welcome back to the show again. the italian government could prepare to raise the budget deficit to gdp ratio above 4.5% which is targeted. according to sources speaking to reuters who cited the fiscal incentives for home improvement. it comes after tajani said they will stick with the 1% growth target despite weaker output in the second quarter. the leader of the itaeye tall -

italian azione's party carlo calenda spoke to steve sedgwick. steve, it has been a long time since anyone talked about the bonds. it got as wide as 220 basis points. today, we are sitting at 170 basis points. for so long, this has been a gauge of how people are thinking about the italian prospects. now people don't talk about it any more. should they? >> reporter: yes, absolutely. that's why we are on here. we have extensive bond experience. let's look at the numbers. you just read they will go north of 4.5% on the budget deficit. amazing. it is supposed to be 3%. stability in growth pact is 60% debt-to-gdp. italians have 144%.

it is okay. the deficit is not a problem. the stock of debt not a problem. if you have growth -- if you have growth, you can grow your way out of the deficit and grow your way out of the big debt-to-gdp. the problem is while i've been p here in italy, the second quarter figure was downgraded from 0.2 negative for the second quarter to 0.4% negative. they can grow at 1%. if you go into recession, your defendant debt starts picking up. if you can't refinance yourself and you aren't growing, you have problems all around. no one doesn't deny it needs reform in italy. you need to go to the stunningly rich area like where i am now. every house isseveral million dollars. stunningly difficult conditions in the south of the country in sicily and naples.

everyone in italy knows that. everyone knows you need to regalvanize the economy. everyone knows you need to have better government. speaking to the woman in charge, 68 governments in 75 years is not a good look. you need reform. are you going for the wrong reform and is meloni going for stuff that will not go through? you need 2/3 of the government or a referendum. i spoke to carlo calenda about the reforms happening and the reforms not happening. this is his response. >> this is the old story about italy's political arena in the last 30 years. everybody is saying they will change everything once they are in office.

they have to change their mind with international constraints or budget constraints. instead of moving from revolution to reform, they just keep on saying things without realizing. the problem is that there are very few with experience in management which is the key problem in italy of. it is the ability to make things happen. >> reforms takes all parties to take part or 2/3 in parliament or referendum. you know from the government how difficult that can be as well with. is it the fact that it is the government's problem with reform or the political system's problem with reform? >> this is true as far as institutional reform is concerned. whatever is touching the institution. there are other reforms you can implement. for example, as far as competition is concerned, we

don't have enough competition in key areas. also, reform of the public administration to cut the red tape and have lean process. f i think as far as the institutional reforms are concerned, it is very difficult for every government to implement that kind of reform in italy due to the process which you mentioned is pretty impossible to complete. if i were meloni, i would rather concentrate on the other reform that you can implement. competition, school, head service, public administration. this is what we are not really seeing happening. i think it's a huge mistake that

meloni wants to concentrate on institutional reform because she will not be able to carry on that reform and because that reform is not the most needed in italy. for example, if you look at institutional reform, it would be much better to focus on the relation between the local powers and the center power. our regions and central state are working together. >> reporter: did you hear a slight dig from calenda? the management is not very experienced. right. another man who tried to get through a lot of reform in italy. now trying to get reform in italy. the former prime minister of italy and now the european economy commissioner as well. i asked him about recession and concerns about germany and italy. let's listen in to gentiloni's response response. >> i think we can avoid had in

the year limited growth, but not recession. we had good figures in terms of labor market. w what are we facing? i think we are facing the impact of the double crisis. the second crisis from the geopolitical point of view impacted u.s. and all the world. from the economic point of view, it impacted seriously europe and germany in particular. so why after a strong rebound after the pandemic is our economy slowing down? i think because of the challenge to gain energy independence which was very costly for our families and fueling inflation and very difficult especially for germany.

>> reporter: and that was the optimistic gentiloni speaking to cnbc. that is it from cernobbio. our taxi to the other side of the lake has arrived. we will get in that now and say good-bye to you from the shores of lake como. >> steve, i see your luggage on the taxi. >> or is that george clooney? is that george? >> steve, it has been a pleasure wat watching. you have made us juealous with the lake. save travels back. we started out the week in the green. a strong start to trade on this monday morning. you have particularly a strong demand for those cyclical sectors. basic resources up 1.6%. travel is catching a decent bid. on the down side is food and bev. i'm happy to say the chief

strategist from ubs is joining us at an ththe table. thank you for being with us. over the last several weeks, it has become clear the economic picture is deteriorating. pmi has been weak. inflation data is surprising to the upside. valuation wise, european equities still look good on the relative basis. how do you think about them as a relative play here? >> relative is the key point. on the relative point, i would prefer european equities to u.s. equities. no doubt about that. i think equities are expensive in general. chinese equities are an exception. if you look at equities in general, compared to bonds, they are expensive. the equity risk premium is too low. in europe, it is much too low. i think europe, in absolute terms, should be coming off here. in relative terms, relative to u.s. equities where tech rebounded aggressively through

q2 and now you see the momentum falter, i think relative to the u.s., europe is in a better position. when you look at growth surprises, u.s. is at one extreme which is high. europe is at the other extreme which is low. there should be reversion. european data is extraordinarily unbelievably weak. when you look at german services pmi dropping five points. germany services is not that bad. that makes you feel you should buy equities. equities have ignored the weakness in the data. cyclicals have done well at a time when german factory orders is weak. manufacturing is weak. that leads me to believe around 460 around stoxx 600 is the case to sell equities rather than buy. downside in equities. i think the point for bond over

equities is the clearlier pic -- clearer. only two times in the period where bonds are cheaper. >> let's park that concept. let's go back to the other concept of immaculate disinflation. i hear that term thrown around a lot. the pmi numbers from friday suggest the ckconcept is comingo fruition. the fed is managing to engineer a fight against inflation and be successful without bringing about a recession in the u.s. economy. what is your interpretation? >> if you take a photograph or a static picture of the u.s. economy right now, it would be as good goldilocks as you can see. you look at real pc spending, it is strong. this is a static picture.

what is waiting in the wings is the tightening. if you look at the rates in the u. u.s., it is 1.81 on the t two year. that's a lot of tightening that's coming. i think the picture is not in the dimmaculate disinflation. you will get a material slowing. if you don't get recession, i think recession is a high bar for the market and you don't need recession. if you get a slowing, earnings expectations are high for next year and that will tell on earnings momentum. >> why are u.s. equity investors comfortable taking risk at this stage given the outlook? earnings have been resilient as you say in particular? where does that come from? >> the macro numbers are weak to

mixed. if you look at the ism, it has gone up from 46 to 47. if you look at the company earnings and we live in a nominal world with margins still high, reported just fine. cyclical earnings with caterpillar close to an all-time high. the micro numbers are okay. you look at the discretionary companies, all of these companies have good numbers. a lot of this has to do with the fact this is a nominal figure. ironically, everyone is worried about inflation killing the stock market. it hasn't so far because the tightening hasn't bled through to the economy. high prices have done well. >> you mentioned that data coming out of europe which has been disappointing to the down

side. yet, inflation is sticky and core inflation back to levels from march. what does the ecb do? >> i think it is an important point. we need to distinguish. i think many people think inflation across the world as the same thing. you think this is happening in europe. disinflation is happening in the u.s. it will happen in europe in three months time. i don't think so. in the u.s., inflation has come down with oer and used prices. wages have come off nicely as well. in europe, there is a clear evidence and the uk said this and andrew bailey mentioned this. in europe, there is greater evidence of wage price memory. it is not a spiral. i think the ecb is in a the rer -- is in a difficult position. they will hike. i think they will hike in september. i think there is a small risk they will go again. that is not priced. the ecb price is wrong. >> we have to have you back in

september and october to talk about the ecb and what they do. >> i look forward to it. thank you for joining us. the chief strategist at ubs. still ahead, ukraine's stakes are still an issue. we have the live interview from erik mose after this break.

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welcome back to "street signs." ukraine defense minister submitted his regusignation aft volodymyr zelenskyy said he planned to replace him with the main privatization fund head. he helped secure billions of dollars of aid, but faced allegations. tanya has skrjoined us now. >> thank you. i'm joined by the independent

international commission of inquiry on ukraine erik mose. chairman, thank you for joining us on cnbc this morning. what impact would the change of defense minister have on the work that you are doing with your commission? >> i am not aware that would have any change whatsoever. we are working in accordance with the mandate of the council. we will continue our investigations in ukraine as we have done for the last one and a half years. the changes of political posts do not affect our work which is really a condition of inn quiry. we are trying to find out which

crimes were committed in ukraine. >> you have found violations of human rights crimes against humanity. can you please tell us from the report in march, what are the key findings and what are the latest investigations from your visit there? >> the key findings arencounter violations from russian forces. many amounted to war crimes with killings and torture and rape and other sexual offenses, et ce cetera. in addition, we found situations which may amount to crimes against humanity. we did not conclude. we need further investigation. as for ukrthe ukraine side, we

found few violations from their forces. >> chairman, of the findings, how do you hold the perpetrators accountable? >> this commission is a commission of inquiry with a broad mandate. we collect evidence and we store it and we make it available for other instances. for instance, international court and national courts. it will be investigators with the prosecutorial authorities. they may simply address us and we will then, subject to certain conditions, share our findings. this will lead to possible accountability by these mechanisms. >> what global organizations can actually bring the perpetrators to justice, chairman mose?

united nations -- russia is a member of united nations security council. a permanent member. >> yes, but our situation is simply to pursue a mandate established by the united nations human rights council. they asked us to do this work and the fact that russia was suspended from the human rights council or the fact that russia is still a member of the council is now relevance to our work. we focus on our investigations. >> chairman mose, finally, what shocked you most of what you have investigated there? >> i think it is -- no one can be unaffected by operating in conflicted areas. i find it difficult to measure

human suffering. let me simply say that this is a situation which leads me to say takes a toll on the population. if i were to report objectively to the human rights council. >> chairman mose live from kyiv ofkyiv. >> thank you. >> thank you, tanya. i'm julianna tatelbaum. >> i'm joumanna bercetche. thhe.sputoy e exchange" da wi t u. blic holiday. do stay with the channel for our programming.

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