U.S. dollar hits months-long high against euro on European concerns

The CNBC app, global market [music] news in one place. Customizable sections and personalized alerts. Stocks tracking, [music] interactive charts, and market insights, all in your hands. Stay connected, stay informed. [music] Download the CNBC app today. >> Welcome to Squawkbox Europe. I'm Karen Cho with Ben Bulos and Steve Sedri is at the Goldman Sachs conference this morning. These are your headlines. The dollar hits a 17-month high as soft [music] jobs data states side sees investors pair back their Fed hike bets. The euro hitting its lowest level since last May as potential political upheaval in [music] Spain adds to French debt concerns. Iran sets its conditions to fully reopen the straight of moose as [music] crude prices edge lower with Middle Eastern exports showing signs of recovery and [music] G7 nations agreeing to release 100 million barrels of strategic [music] oil and diesel reserves. Schneider Electric buys American software group PTC for almost $23 billion, a hefty premium. The French software group [music] enforcing its strength as a key supplier for the global data center buildout. And we're live this morning from the Goldman Sachs 10,000 small businesses, how Britain can win conference, putting the spotlight on UK growth and innovation. [music] I'll be speaking to key guests throughout the morning, including the Goldman CEO Kosio for international, that's Anthony Goodman, and the Octopus Energy Boss, Greg Jackson. >> [music] [music] >> We kick off the show taking a look at the foreign exchange markets because the euro has been under pressure. the contagion fears that are swept across bond markets now also just honing focus on the FX trade and in particular on the euro the mounting concerns about debt piles the situation of the spread differential between French paper and German paper amid some of the concerns in France now we're talking this morning about potential upheaval politically in Spain as well so in terms of what we're seeing as a reference point the market some quarters of it last week were talking about contagion risk and some of the worst spreads we now start to see since the Euro zone crisis. The market now very much taking focus at Euro dollar and you can see we're under the 112 level 111 at this hour and down half of a percent morning session. So we've come all the way off the 115 116 handle at the start of the month. Uh rapid moves in short space of time. Sterling dollar is what we've got 132 the levels dollar yen also jumping around 157.83 83 and uh as a result you can see the dollar Swissy trade is uh perched higher today. I want to take you to treasuries. The market has been first up looking at treasuries and what we're seeing across the curve. The escalation at the short end, the long end, but a fairly tame payrolls report has also again moved the needle on assumptions for whether we're setting up for another rate hike anytime soon from the US Federal Reserve. The short end with 4.80. The long end is where the pressure has been expressed to this term premium that has come into the mix. The paying more to hold paper for longer 5.62%. So the market is going to be again looking very closely at that long end of the curve for borrowing pressures. What we've got on European yields as we get going this morning. Let's just take stock of the levels we're at. So German bonds we are seeing with a green tilt but we're 3.5 uh 3.45. So we've pulled a little bit off some of the highs we've had recently. 4.8 86 on French paper. So again, it's a spread between those two that we're watching very closely. Italian paper 4.61 and you can see on guilts we're 5.36. So uh right throughout this week we're going to be tracking the bond markets. I want to take you to the US markets and what we saw Friday session into the finish. It was a positive finish and in particular take a look at the NASDAQ. The 1.21% that we saw inked to the upside. This was a fresh all-time high in session. So again, even though we've got concerns that are mounting a wall of worry that we're climbing elsewhere, we've still seen tech stocks now recover in this window of time and in fact very close to the all-time highs that we've got as the market again touches around those peaks. But when it comes to the Dow, I mean again, we're off the record highs to the tune of 6.5%. So this is very much a tech rally to the Asian markets and very thin liquidity this week. We've got a whole host of holidays across the region. China uh has a holiday. South Korea, Australia, a big state, New South Wales also a public holiday there. So very thin trading for the Monday session. Japanese stocks 2.3% firmer. That is a bounce that we've got for the tech heavy index and as you can see across the tex 2.5%. So the tech rally being displayed across in the Asian regions today too. The European markets as we take stock of some of the risks that have percolated across this region. We are seen down on the 50 futures 210 a little bit weaker on the DAX as well but the footsie here seen is seen higher by just over a third of a percent. What we had last week into the finish was again gain but over the course of the week it was a reversal in the round for most of these markets. Ben >> US hiring slowed sharply last month. The September jobs report on Friday showed non-farm payrolls increasing by just 29,000. That's well below the 84,000 analysts had been forecasting and the 133,000 jobs added in August. Friday's figure raised doubts over the resilience of the labor market and the outlook for interest rates going forward with hiring decelerating across multiple sectors especially healthcare. And this is one of those situations where I suppose bad news for jobs uh equated to good news for equities and uh the expectations around what the Fed might do next because we saw in the immediate aftermath of that jobs data uh the bets on a Fed rate hike next month or later this month um were massively paired back uh with that then giving a real boost to equities. one of those really odd situations where what you might perceive as negative economic data actually resulting in a in a positive outcome for certain certain assets. >> Bad news is good news story. The 64% chance of a rate hike was where we were sitting about a week ago down to 20% is where we got to in terms of the market expectations. Uh December hike that's still there. The the market's still looking out to whether we do get a Christmas hike from the Fed. I think what's interesting this morning is that we've spent the last number of weeks very closely watching the data out of the US, very closely watching the US Treasury market, but now the fears seem to have all moved over to this side of the world. And if you look at how the euro is traveling this morning, a 17-month low, the lowest level since May 2025, the bond market angst has now become an FX story as well. At times, it's been an equity market event as well. We've seen selling across in various quarters of the market last week. 2.2 off the French market. Nothing extreme at this point. But what's cited? It's a whole host of issues. I mean, there's so much bundled up into the concerns around Europe. Uh gas storage levels. The fact that we are at lower levels coming into winter. We haven't solved the Middle East situation. Energy prices are still high. The Europeans have been pressured to release gas stock diesel stock piles to try and smooth over some of the waters for the US president. Competition from China. The Europeans are not winning. We've had this conversation month after month about European competitiveness. You've got a a situation in Germany where the chancellor's weakened. You've got a situation in politics where there's a a Spanish uh election potentially going to be caught. And you've got a problem, as we know, in France when it comes to the budget. So, I mean, that's a whole host of issues for the market to try and wade through. Steve, >> look, let's make this very simple. This is not an issue that um wasn't foreseeable at some stage as well with the debt piles increasing so much and of course uh the actions of the president whether it be through tariffs or whether it be through war creating inflationary impetuses. So let's scenario plan. Let's go first of all for caterisibus all other things being equal let's say that the debt dynamic stays the same the war situation stays the same the inflationary impulses stay the same. So what happens then for the markets? Well, one of two things happens. One, the markets continue to take fright and we see an exacerbation of this crisis. Or two, the market attention moves on. And I wouldn't put it past the market attention moving on because the fact of the matter is this is not a new scenario. We have been talking about debt dynamics. We've been talking about deficits and we've been talking about inflationary pressures for months and months and months if not years in many ways. So that's Karus Priebus. That's the first scenario. It can go either way. Now if things change and this is where it gets more interesting as well. Will governments a do nothing and the deficits and debts continue to rise or b do something about it in which case the economic scenario of the medium-term despite the short-term pain will improve as well and then how will the market react from that but clearly the market is saying we don't like two things well three things maybe one we don't like the inflation dynamics two we are very concerned about deficit levels and three as we pointed out there is an awful lot of debt issuance to choose from at the moment there is that competitive threat coming for the sovereigns now as well. So there's a lot of scenarios that can go forward, but at the moment if we work on all other things being equal, it's pretty much a toss up where we are at the clearing price for global yields for investors to get more excited about them or actually this will continue to go on. >> In the meantime, we may have more follow the uh announcement just crossing the wires a couple of minutes ago. The Spanish prime minister has announced an institutional declaration at 9:00 a.m. local time amid speculation about an early election. So, we are again on heightened alert as to whether we're going to get a snap election in Spain, an early election at this point. And as you can see, as we take a look at Spanish paper, it is perched 4.09%. So, it is a fairly stable morning session, but we're going to be watching Spain closely. Steve, >> thanks very much, Karen. Well, let's move on to one of our other top stories, and that is Yemen's government has launched a counter offensive against Houthi militias in the country as it looks to recapture territory lost to the Iranbacked rebels over the last decade. The Yemen government, which is backed, of course, by Saudi Arabia, has been operating out of the southern port uh city of Aiden since the capital Sana fell to the rebels in 2014. Earlier this year, Houthis seized control of the Bab al-Mandab Strait, increasing, of course, that strangle hold on regional shipping lanes. The Houthis, though, have vowed to retaliate against the government offensive uh and claim they have attacked two Saudi Ramco sites with ballistic missiles and drones. Iran also says that the Straight of Hormuz will not reopen until seven conditions outlined in June's memorandum of understanding with the United States are met. The country's parliament speaker made the statement according to state media. Meanwhile, Thran's foreign minister said Iran hopes the US will choose diplomacy, but is prepared to respond if there is a return to military action. And G7 countries have announced, of course, late Friday, uh that they will release 100 million barrels of diesel and other refined products over the next four months in an attempt to bring down soaring prices. Uh this followed a threat from the United States to stop exporting diesel altogether if the Europeans did not use their own reserves first. Diesel prices, as I'm sure our viewers are all aware, because they're all consumers as well, have hit record highs across the US and have surged across Europe amid reduced refining capacity due to the wars in Ukraine and of course the Middle East. >> Well, Steve, let's pick up on this conversation with Benedict George who has joined us, head of European oil products at Argus Media. Benedict, thank you so much. >> Thank you. The word blackout was used by some of the the European members looking at this campaign that effectively forces the Europeans to open the diesel gates just at a time when they're going into winter otherwise face an export ban. How did you view the situation? >> Well, I think the I think the market was waiting for the European governments to follow through on commitments that they made back in March. So back in March, the IEA coordinated a 400 million barrel global release of strategic stocks. And in Europe, there was uh I think some confusion over why that stock never really materialized. And I suppose the reason for that is probably that the European governments hold their stock in a really risk averse manner quite differently from the US. the Europeans hold the stocks in case of the apocalypse, like the worst case scenario when there's a real shortage, petrol stations are running dry, that kind of thing. And as bad as the crisis has been so far, that hasn't really happened. So the Europeans seem to have hoarded their stocks and held on to them in case it gets worse. Now you wonder where do we cross the line? whether Europeans have to release the stocks and whether it was because the US put pressure on them, whether they were thinking about doing it anyway. It's very difficult to say from outside Brussels, but the Europeans seem finally to have bitten the bullet and they're going to release some >> drawing the threads together that we had. We know that the US president was under some pressure with diesel prices in the United States as he heads towards the midterms, hence the reason he was talking about whether there should be an export ban on diesel to try and bring the price down. As we probed that story a little bit more, it felt as though that was a very difficult path to take because it would provoke all sorts of other consequences. So, where does this leave Europe though? If we can just come back to Europe for a bit, where does it leave Europe as it taps this so-called emergency supply? Does it leave it in a dangerous situation if we see the Middle East conflict persist? >> Well, as I say, Europe has not been anywhere near an actual shortage. I mean, what you might call actual where petrol stations actually run dry. And I think there are various reasons for that that have actually postponed the the really deep crisis we were maybe worried about earlier in the year. And one is that the US has released so much stock and is and is expected to release more before the end of the year. The US has released at one point more than a million barrels a day of crude oil and a lot of that came straight to Europe over the sea and Europe refined it and produced more diesel and more jet fuel and helped to meet its own its own uh its own supply gap. European governments, not the UK. so much. But other European governments have also cut taxes at the pump for fuels and that's helped European consumers to compete in the international market to attract more diesel from other sources. And another factor that has really helped Europe so far which is going to expire soon and I think a lot a lot of people are not quite aware of is that consumers of heating oil so households basically in Germany, France, Spain where they use a product very like diesel to heat their homes, they have not filled their tanks over the summer in the way that they normally would. That has alleviated a huge amount of demand for a product very like diesel. And if those households try to fill their tanks before the winter, as presumably a lot of them will, a lot of demand is going to re-enter the market very quickly. >> That's alarming. Uh Benedict, Steve's got some questions for you. He is just down the barrel of the camera. >> Benedict, just a very basic question from me actually. I I hear a lot of commentary from experts such as yourself of why diesel prices are so expensive in the United States when of course they are one of the the big exporters. They are in many ways independent. Why are American consumers, many of our viewers, actually suffering the same, if not worse, than consumers around the world? >> Because the US is a free market. So the US will export if the price in the international market is good enough. So that means if you're a US consumer, you're just someone who buys diesel from a US refinery. That's the same position that I'm in in the UK. It's the same position everyone is in the world. And if the price is better in the international market, the US refinery will export that and won't put it in a in a a petrol station in in Texas. So, you're just in the same position as everyone else, unlike China, for example, where you really are, if you're in China, you're under very different rules from everyone else because the government intervenes all the time. The US government doesn't do that. It lets refineries sell to whoever pays the most. And I guess my my second question then is well if there were to be a US export ban which at the moment appears to be the threat alleviated as well. What does that mean for the abundance and perhaps the storage of all kinds of products? Because of course when you refine diesel you refine a lot of the other products as well from basic crude. >> So that's the concern. Yes. And I think uh the president himself conceded this explicitly last week that if diesel exports were restricted, refineries in the US might need to reduce the amount of diesel they were making. And it might be that the only way to do that would be to reduce the amount of everything that they were making, which would tend to reduce supply of gasoline, petrol, and jet fuel and all sorts of other things for US consumers as well. So you might have petrol, gasoline prices rising at pumps in the US and everyone I think in the market thought that that might be a big enough reason for the US not to restrict diesel exports. Anyway, then the threat of an export ban morphed, you know, became a part of a conversation with Europe about releasing European stocks. Uh Benedict, are you surprised the price hasn't come down further given there reports around that uh Gulf States exported 17 million barrels per day of oil and refined products in September contrary to what the Iranians are asserting that the straight remains closed. There are clearly ways in which oil is getting through even if other products like LG perhaps aren't getting out as easily. I think if you look at some data on crude exports from the Middle East, you might be surprised the price hasn't come down further and we have had conversations like that. But a couple of really important things to be aware of are that the data on crude exports from the Middle East is very different from different sources. There's an enormous density of fog over this. So I think last week two different marketleading data sources on exports from the Middle East ship tracking software were showing millions of barrels per day different numbers of exports. So in some way nobody's very confident on exactly how much oil is coming out of the Middle East. And another thing is that most of that is crude. There's much less diesel jet fuel for example Napa LPG coming out of the Middle East at the moment. and supply of those products and especially diesel as we know is still massively restricted by other things around the world like the war in Ukraine and so on. >> And I suppose the other factor is you know the there's no sign of um Ukraine or Russia backing down from their attacks on on each other's energy infrastructure. >> Exactly. If anything it sounded in the last few days as if uh things might be intensifying. >> Okay, Benedict, thank you very much for your insights. Benedict George, head of European Oil Products at Argus Media. Let's just uh recap the news that's breaking this morning. The Spanish Prime Minister, Pedro Sanchez, saying that he will make uh an announcement this morning, what's being described as an institutional declaration at 9:00 local time. So that's uh what about 40 minutes or so from now. Uh there has been widespread speculation that he may call an early general election, a snap election. This is uh after two flagship housing uh bits of legislation were defeated in the Spanish parliament last week. These were measures designed to deal with issues around soaring costs, soaring housing costs, which is a real issue, is a real concern for Spanish voters. Um the attempt that legislation failed, which is the shortterm trigger for this speculation. We'll of course bring you uh that update and significant lines and developments as we get them. Uh you can see that is causing pressure uh that development on the euro. It has sunk to a 17month low uh against the dollar. Of course, these concerns politically in Spain come on top of the concerns around the success of more extreme political parties in Germany, the uncertainty around the situation in France with next year's presidential election. Uh so all of that putting pressure on the euro. Uh stick around because we've got well to put it mildly a packed show for you today. After the break, we'll [music] bring you the latest from New York, where the former anthropic researcher whose expost sparked a new round of AI safety fears [music] is reportedly due to testify at a New York City council hearing about the technology. Plus, the hard ride causes an upset [music] in Brazil with Ja Bolsinaro's son leading President Lula in the first round [music] of elections. And don't miss our exclusive interview with the co-CEO of private equity giant Hamilton [music] Lane, Eric Hirs. that conversation with him coming up at 9:00 this morning, London time. [music] [music] Executive Decisions is the [music] new podcast from CNBC where I ask powerful leaders about their decisions that changed everything. I'm Steve Sedwick. Here's Miss Joe Malone, CBE. >> I started that first business of skincare. [music] That's when I knew that I was in charge of my own life. And then that's when the entrepreneur really, although I didn't know what the word entrepreneur meant, that's when the entrepreneur really took hold. >> That's executive decisions with me, Steve Sedwick. [music] Get it wherever you're listening to this. [music] >> [music] >> Welcome back to Squbox. Goldman Sachs is hosting an event in London this week called 10,000 small businesses, how Britain can win, exploring how British businesses can set the economy on a path to global success. And I am delighted to welcome to the show Asahi Pompei who is the co of um who basically isn't the coio is actually um if I can find your notes here. Here we go. The global head of corporate engagement at Goldman Sachs. I think they've given me Anony's title as well. Apologies for that. As >> I'll take it. >> You take that. Well, let's not tell Anthony. You never know. That might be in the in the offing. Um what are we doing here? Tell me about this event and why it's so important. Today we're hosting 450 of high growth entrepreneurs from across the UK. Um we're also having some of the largest companies, CEOs and other leadership together and we're talking about how Britain can win as effectively named. >> What does that mean? How Britain can win? >> Well, we're talking about how Britain can create more growth in the economy. More people, jobs, greater turnover. Uh we know that that uplifts communities across the UK and that is not about any post code in particular. It's across the country and we know Britain knows how to win. >> Well, it has done historically. I'm just wondering if we've lost that shutzpar now or or or or the ability to do so. What you've done a big survey as well. What were the big barriers to that growth to that innovation and for entrepreneurs? What were the barriers? >> Well, when we talk with business owners, they tell us a couple of things. one 97% of them describe themselves as ambitious. So in terms of the barriers, entrepreneurship, an ambitious attitude, innovation is not a problem. There's zero lack of it in the UK. In addition, 91% of them say, "I plan to grow in the next three years." So you've got ambition ticked, you've got growth aspirations tick. We know no business can survive without risktakers. And there again we're finding 733% of business owners would describe themselves as risktakers. So you've got the ingredients for growth there. Now of course every small business owner knows that there are barriers and hurdles. Access to capital of course uh is one of the hurdles business owners have faced historically. But that the fundamentals needed for growth are unequivocally there. You haven't mentioned what I think is one of the biggest barriers to growth and I think that is institutional and I think it comes from government and I think the guiding hand from government. You get a guiding hand from the market and as you say we've got these amazing >> young older people who can just build businesses and are willing to take the risk. Why is government not doing enough or is government doing enough? >> Well, look, I'm not going to speculate about what government um will do. We saw the speeches over the last over the last uh week. But here's what I will say. business owners tell us time and time again that they are poised for growth and in particular you know one of the things about the UK is you know British modesty and I will go there right um where we find that >> true I'm incredibly modest >> it's it's yes [laughter] yeah indeed >> I'm not sure that words as a statement but there you go >> u but but business owners 86% of them downplay their own success right um in addition 60% of them say what are the things that inspire me in fact hearing stories of success. So when you you have this issue of sort of a um a confidence gap in terms of really believing uh in what one is doing that can turn out to be problematic. Now here's what business owners also uh also say they've got the tools and the ingredients to grow and they're ready to do that. and those stories of success, if we want to have more of them, we've got to celebrate those. And we've also got to give second chances to business owners uh that fail, that try. >> Oh, look, I mean, I've done my work on failure, whether it be Malcolm Gladwell, whether it be Matthew Side, there's there's brilliant literature out there. And and this is the thing. I've spent about 30 years of my 38 years in the city uh working for American companies. The bounceback ability of Americans and American corporations is legendary as well. It's a I will fall and I will learn and I will get up and I will improve as well. You talked about British modesty. Do we need a little bit more of that American attitude? >> Look, I think small business owners I talked to them around the world, Steve, and so um we've worked with business owners in over two two uh 200 markets and there's more in common with a British business owner has more in common with an American business owner. If you want, you know, an easy road, don't become a small business owner. So, small business owners are not, they know it's not for the faint of heart. They know it's going to be difficult. So, you're already uh dealing with a population that is no stranger to adversity, that is no stranger, um to getting up super early and staying really late. Um so, what they want to make sure is that that's being met, that ambition, that risk-taking uh is being met with the kind of environment that they need to grow. You are speaking later on with a couple of the the biggest CEOs in Britain as well as what are they what are these companies going to do for the young smaller companies out there as well. I mean >> they they have their shareholders. They have the amazing base. They are they've made it. What what can these individuals these extraordinary business leaders in Britain do for the small businesses? >> Well, I'm glad you mentioned that because the CEO of Tesco will be here. The CEO of British Air will be here um in in addition to a number of other companies. And why are they here? Why are they taking the time to be with 450 uh growth entrepreneurs? Because they realize that coming together, large businesses and small businesses coming together, sharing best practices, uh discussing what are the tools necessary for growth, that's how we're going to be able to propel that. And so they're committed uh to making that take place and that's the reason why they're here today. >> You are the global head of corporate engagement. So I I I've I've kind of compared and contrast a little bit the US and the United Kingdom as well, but what are you seeing that's better elsewhere in around Europe? In fact, all around the world as well because we know that there is a brilliant attitude to entrepreneurialism in the Middle East, in Asia as well. Have we become lethargic in the way we treat small companies compared to these amazing growth areas? >> You know, Steve, I'll say this. you go around the world and every market thinks the other one's doing it somehow better and they they've figured it out and and and that our market uh is not doing as well as we should. Um that's sort of the plight as you go from place to place. Um now I think that that muscle to look to see what is being done well elsewhere I think is a really good one and an important one. Um if you think about AI for instance, what we're seeing in terms of AI adoption across small business owners in the UK, it's a pretty remarkable story. Um you you reel back a couple of years ago uh you had less than 60% of business owners using AI. Now we have almost 90% of business owners using AI into their business. Some of them who have started to integrate it into their business. So we're moving from sort of adoption and experimentation to greater integration into business and they see the opportunity. >> Great point is a because AI is a luxury for a lot of small companies in many ways. Is it something that you're seeing now that these small small companies, these high growth companies are bringing in from the start or actually something a little bit later on when they're more established? >> Um, we're seeing the companies we deal with are more established uh companies. Um, that being said, what we're also finding it's not necessarily coming from the founder or the CEO of the company is saying I've got to like figure out ways in which we can use AI more. You're generally seeing, you know, from the bottoms up as well where employees are saying this I can make this more efficient. I can make this tool uh go better if we built this connection. Sometimes they're building a middleware and so it's coming from various parts of the company. But what we're seeing is that drive towards not only efficiency in terms of AI but effectively greater growth, new market share, new products, uh uh efficiency in terms of their operation and so British business owners are excited about that. >> Good. Well, it's nice to hear such a positive story as well, especially considering I'm such a commod normally about this stuff. So we we've started off on a very positive note. >> Well indeed it's how Britain can win and these small business owners. >> We got to be slightly less modest although not me. Asah lovely to see you. Thank you very much. Always Pompe who is the global head of corporate engagement at Goldman Sachs.