Transcripts For CNBC Worldwide Exchange 20140529

Issue basically in france right now, 11 unemployment. Japan suffers the first negative effect of the sales tax hike in april. Retail sales in the country fell at their fastest pace in three years. Youre watching worldwide exchange. Bringing you Business News from around the globe. A warm welcome again to todays edition of worldwide exchange. Lets get to one of our top stories straight away. Apple is buying beats electronics for 3 billion to boost its music business. Streaming services encroach on itunes. Apple doesnt only gets beats streaming service and its market leading highend head phones but high profile talent. Beats cofounder jimmy ivin and dr. Dre, too. Now, apple expects the deal to close in its fiscal Fourth Quarter. Tim cook tweeted this photo, saying, sharing a laugh with jimmy and dre. Interestingly for apple here, what do you think of it . I think its an interesting move. Because over the sort of past 20 years apple has been very much seen as a product innovator. And this is the first time that i can think of where theyve actually bought somebody who is a product innovator. In the overall scheme of things, for apple, 3 billion is not a huge sum but it is an interesting move. Theyre seeing theyre having to make moves like this as well. A lot of heads being scratched about the price tag right now. If they want to get into the streaming business its perhaps going to cost them a lot more to not be in this business at this stage or at least going forward. From that perspective it makes sense. Absolutely. I think thats probably the major reason theyre going for this. They want to get away into the streaming business. They see that as very much the future of the music. They want exposure to that. I think also the point you made about some of the talent theyre requiring as well and the people is also a reason for the deal. What about more broadly, the number of m a deals were seeing as a sign or at least underpinning the equity markets right now . Whats your take . I think it is underpinning the equity markets. I dont think its a real surprise. There has been a lag in m a deals since this sort of 2009 recovery. I think a lot of people expected to start in 2013 and it didnt. I think now that businesses are getting more confident, maybe chief executives are thinking that the Global Economy wont grow quite as quickly as theyre used to. They have to look to buy revenue. Theyre having to make acquisitions. They also realize the low Interest Rates may not stay there forever. They want to take advantage of that while theyre still there. I think its a combination of things. The deals we are seeing are very large. And i think that youll probably see more of them over the next few months. What weve seen has been primarily dominating the tech sector and pharma sector. Where specifically would you be focusing right now . I think weve seen it in the industrials, gec looking at alstom. I think there will be a broader pickup in m a deals as ceos get more confident for the outlook, the economy in general across the globe. As i said, as they look to buy, look to drive revenue through acquisition. You can read more on apples purchase of beats and why some experts think its all about new models in music on our website. Dont forget to check that out. You can see, the ftse 100 gaining around 0. 3 and losses for the mather markets today. The ftse mib, the only one really gaining. Thats europe but what about asia . Lets check in on the Market Action over there. Sri is in singapore for us. Sri . Hi there, julia. The markets here did start out in a reasonably resilient footing despite that wobble that we saw on wall street overnight. We are starting to see a lot of these markets succumb to selling pressure. Let me start with the nikkei. We are consolidating around this level of 14,700. We did see fairly retail Sales Numbers. It remains to be seen whether this is going to be repeated in future months. I think one of the big unknowns is really whether well see meaningful increases in real wages. Thats really going to be the key factor thats going to unleash the animal spirits amongst the japanese consumer. In the here and now, some are saying we continue to see weak consumer sentiment, weak retail Sales Numbers and that could be who want to see more accommodation from the bank of japan. Elsewhere, the broad weakness is confined to the southeasternationen markets, especially the philippine benchmark, the underperformer today. Down by almost 2 . A lot of these markets were in a Holding Pattern until we get a few more decisive leads externally, especially the nonfarm payroll. That will be key for next week. Back to you. We saw the u. S. Markets yesterday coming off a bit towards the close yesterday but we saw trading around these fresh highs particularly in europe, too, but all the focus really on whats going on in the u. S. Bond market. We saw the tenyear hit its lowest level since 2013. Now trading at 2. 43. The 30year trading at 3. 29 this morning, too. 12month lows for the 30year. A lot of questions being asked not just about the messages being sent but whats going on as far as the front end of the relative to the back end. Well be talking about that a lot more during the show. Lets get back to paul cedric. Youve given me lots of reasons about why were seeing this bull market being so unloved by investors. Yes. What changes that . Thats a good question. I think people i think the obvious things. People want to see confirmation that the Economic Growth is sustainable. They want to know whats going to happen, get a clearer picture when Interest Rates do start to move in the u. S. And the uk, how that pans out. And equity markets are all about earnings. Ultimately its earnings. Youve seen recently the earnings revision ratio start to tick up pretty much across most of the advanced markets. The uk, the u. S. I think the earnings season that just went through, definitely was encouraging. There were no there were no real upsets there. And in fact in the u. S. , they came out above expectations. Is it all about earnings, really . As you point out, zero Interest Rate policy covering half the world right now. Another 2 trillion worth of stimulus to be added this year, liquidity added this year to the markets. Its not just about earnings, surely. It was interesting. I was listening to jeff this morning first thing at 6 00. He was talking about the fact that he was pointing out the performance of the u. S. Bond markets and whats that telling people and the fact that equity markets are rerated so much in the past year where earnings havent really gone with it. He makes very good points. At the moment, most equity markets are of reasonable value. They dont look expensive. They done the necessarily look as cheap as they did. I do believe you need to start to see Earnings Growth come through and that will give people the confidence to continue to invest in the market. But you hear youre saying the pessimism is because people arent yet seeing earnings underpinning the rally were getting right now . I think thats part of it. I always think theres a psychological thing as well. I mean, the 200809 is relatively visible in peoples minds. To get over that and get the confidence back in the equity market is going to take a little bit of time. Does that explain the difference between what were seeing as far as professional investors are concerned and individual investors . As far as the professional investors are concerned theyre relatively bullish. If you look at investor surveys, like the aaii as you point out, twothirds of those polled in this market think well be at the same level or lower in six months time. I think thats right. But its a good Retail Sentiment is something you look for when you look for sort of markets topping out. Traditionally people say when the Retail Investor starts to get very bullish. The institutional investors, even so, they may talk about being bullish but a lot of the data i see and a lot of the surveys that i see indicate that they are still relatively underexposed to the equity market compared to history. I mean, Merrill Lynchs fun manager, for example, shows the average Pension Fund Manager has 5 of his portfolio in cash. Relative to history, thats pretty high. They may be talking a bullish game but they may not be following it through quite as much. Very quickly, this then looks like a Good Opportunity for investors to get involved. What should they be buying . You have to be exposed to we prefer good, solid Global Companies with strong balance sheets. Progressive supportive dividend yields. So if you do get the wobbles, which youre bound to do, you have the fundamentals underpinning you. Lets bring our viewers up to speed with other Corporate News today. We are watching king fisher on the slide as investors react negatively to weaker performance in key markets as well as promotional activity. Speaking first to cnbc earlier, the ceo was asked about the recent share price performance. On a longterm basis were very confident about the opposition in france. The French Economy, the french consumer. Short term, there is a confidence issue basically in france right now with 11 unemployment and uncertainty despite the more encouraging noises the french government has been making recently about how that economy is going to move. I think well ride out this period and maybe on the plus side, we wouldnt have had the opportunity to sort of look at this deal in the same way two or three years ago. Uk medical Technology Firm smith and nephew is trading higher on reports of a bid interest from stryker. Aggreko down 2. 6 as investors react to news that the company has poached an executive chris weston to be the new ceo. And saga has begun untraditional trading in london. They saw shares drop in conditional trading. Slightly higher this morning. 1. 87. New also on todays show, well head out to paris where frances biggest job related social network will attempt to lure investors with an ipo. But is the hunger for tech strong over in paris . Well be finding out. Meanwhile, egypts former military chief wins the president ial election with an astonishing 96 of the vote. With the opposition screaming foul play, just how reliable are those results . And a board thats far from boring. The side kick the edge are set to become Board Members for guitarmaker fender. All that after the break. Stay with us. Huh, 15 minutes could save you 15 or more on car insurance. Everybody knows that. Well, did you know that game show hosts should only host game shows . Samantha, do you take kevin as your lawfully wedded husband. Or would you rather have a new caaaaaar say hello to the seasons hottest convertible. Ohhh. And say goodbye to samantha. [ male announcer ] geico. 15 minutes could save you 15 or more. Youre watching worldwide exchange. Were seeing the first bite of japans sales tax hikes in april. Retail sales in the country fell that month at their fastest pace in three years. The number of cars and Electronics Sold declined in april showing consumers are trimming their purchases. In fact, the 4. 4 annual decrease in retail sales is the biggest drop since the devastating earthquake and tsunami in march 2011. Ed rogers ceo at ed rogers investments joins us now. The nikkei barely budged on these numbers. They were pretty much expected. You see this as a temporary blip and youre not worried at all. Is that right . Absolutely right. The markets saw this coming a mile away. It was well predicted. The reaction was so what. I think topix ended up slightly positive on the day. If we have three more months of worries like this, you should get worried. But im a bettingen and im betting thats not going to happen. This figure suggests that the underlying momentum of consumption was far weaker than it was in 97 when we saw the last sales tax hike. If youre going to draw a comparison to 97 i would say asia was crumbling around us, multiple countries. The currency crisis was taking hold. That was a far bigger problem. We look around asia today, there are far fewer issues. Balance sheets are healthy and whole. Many, Many Companies in many, many countries have cash on the balance sheets. I dont think were anything near close to having the problems, even if we have another quarter of bad numbers, frankly, in japan. Theres nowhere near the situation there was in 97. The reality is were far less worried. As far as investors are concerned, perhaps far more important is the governments restructuring plans, the progress as far as the tpp trade talks are concerned. Is that what we should be focusing on right now . Absolutely. The Bigger Picture number if you want to focus on a number was the First Quarter gdp at almost plus 6 annualized. Far better than anyone anticipated. We think that means that the underlying Investor Sentiment is actually quite positive. That will be reinforced over the coming weeks when we see the ldp reform plan, the government reform plan. The formal proposal is due out very, very soon that investors should be focused on. The tpp talks are absolutely ongoing. We think we will see resolution, positive resolution. We think its a very important agreement for not just japan and the United States but the entire asia region and, therefore, the world. Those are the things that were focused on when were allocating for our portfolio. Investors have responded to this downtick by putting more money into the market. Now is a great time to be getting more exposure, particularly to the hedge fund space. The hedge funds that were invested in are in aggregate down 50 basis points for the year versus the market down 10 still. When the uptick comes, we make 20 , 30 on the upside, which is quite conceivable, the next uptick leg. Investors want to be able to participate in that. Ed, do you think that the weaker Economic News may actually be good quite often they say poor Economic News can be good for the stock market. Because it means you get a response from the central bank. Do you think some of the Market Reaction today was a reaction to the fact they think the possibility that the bank of japan could increase their action this data could show that . Its a great question. When weve looked at this, we think that the news wasnt bad enough to warrant boj or government response. We think that the government sees this really, lets say the last five or six months in its entirety as confirmation that abeonomics is working. Were on track to 2 inflation. If you have a blip, especially in april, the march april move is going to be the most corporate intuitive of numbers to look at because really with the sales tax distortion, you just cant take these numbers as a serious number and base anything on it going forward. Another two or three months of this, absolutely. If we saw this continue, youd see bank of japan action. Were firmly convinced of that. We dont think theyll see that action. Thats a sign its worked, abeonomics is working despite news to the contrary or commentary to the contrary. Were on track towards 2 inflation. Thats the goal. I think its interesting that were talking about the possibility of the boj adding more stimulus. I hear theres informal debate right now in tokyo about just how they exit. They dont want you to make the same mistake as the fed made when they signaled an exit. Are you hearing anything like that right now . Look, i think the commentary is running as you say, more towards look, weve been very successful at this. We probably dont need to take further action. And what does that mean as far as how we do unwind . I would caution listeners to not overreact to that comment. Theyre not going to do anything until its very, very clear they were on track to 2 inflation. The goal is not to hit 2 and fall back again. They want a steady growth rate on the gdp and until thats achieved, you will not see anything that looks like an unwind on the part of the boj. Absolutely. Ed, great to chat to you. Ed rogers, ceo at ed rogers investment advisers. Paul, it seems like theyre in the sweet spot. They can sit pretty and see how the numbers go. Well, exactly. Japans been, obviously, its been talked about a lot. Its had a very difficult time over the last 20, 25 years. And this abeonomics as people talk about, theres a lot of stock being put by it to getting the economy recover again. He was talking about getting back involved in the markets. What do you think as far as the markets are concerned . Theyve had a slightly disappointing start to the year this year. Which is another one of the things that may have taken people by surprise. He seems optimistic that this is a Good Opportunity to get into the japanese markets. Not a market i focus on a huge amount. Obviously i watch it to keep an eye on the broad markets. It would make sense if the data continues to look in the way it is and the policies of the central bank are supportive, you would think this is a Good Opportunity for investors. Youre staying with us. Lets move on to our other top stories. U. S. Whistleblower Edward Snowden says he will attempt to extend his asylum in russia if he fails to reach an agreement to return to the u. S. He said he felt a moral duty to reveal the practices of the nsa. The reality is the situation determined that this needed to be told to the public. You know . The constitution of the United States has been violated on a massive scale. Now, had that not happened, had the government not gone too far and overreached, we wouldnt be in a situation where whistle blowers were necessary. I think its important to remember that people dont set their lives on fire. They dont say goodbye to their families, actually pack up without saying goodbye to their families. They dont walk away from their extraordinary, extraordinarily comfortable lives. I made a lot of money for a guy with no high school diploma. And burn down everything they love for no reason. Are you looking for clemency or amnesty . Would you like to go home . I dont think theres ever been any question that id like to go home. I mean, from day one, i said im doing this to serve my country. Now, whether amnesty or clemency ever becomes a possibility is not for me to say. Thats a debate for the public and the government to decide. But if i could go anywhere in the world, that place would be home. How anxious are you right now to make a deal to go back . I think my priority is not about myself. Its about making sure that these programs are reformed. And that the family that i left behind, the country that i left behind, can be helped by my actions. I will do everything i can to continue to work in the most responsible way possible and to prioritize causing no harm while serving the public good. Doesnt your asylum run out soon . The temporary asylum runs out, i believe, august 1st. Will you apply for an extension . If the asylum looks like its going to run out, then of course i would apply for an extension. Do you see yourself as a patriot . I do. Snowden faced Harsh Criticism from u. S. Secretary of state john kerry who said the whistleblower was taking dangerous actions. Hes hurt his country. Hes exposed for terrorists a lot of mechanism which is now affect Operational Security of those terrorists and make it harder for the United States to break up plots, harder to protect our nation. If this man is a patriot, he should stay in the United States and make his case. Patriots dont go to russia. They dont seek asylum in cuba. They dont seek asylum in venezuela, they fight their cause here. There are many a patriot, go back to the pentagon papers with dan ellsburg and others who stood and went to the court system of america and made their case. Edward snowden is a coward. Hes a traitor and he has betrayed his country and if he wants to come home tomorrow to face the music, he can do so. John kerry pulling no punches. Still to come on the show, egyptians go to the president ial polls. Will the vote end the countrys controversial turmoil. As different people, we are able to express ourselves and where we are able to accomplish our ambitions. Youre watching worldwide exchange, bringing you Business News from around the globe. An apple a day doesnt keep the doctor away. The u. S. Tech giant finally puts a 3 billion bid on the table for rap star dr. Dres head set and music streaming business, beats. More Home Improvement needed for king fisher. Shares sink as the diy chain disappoints after First Quarter numbers after a poor performance in some markets, including france and china. Were confident about the opposition in france, the French Economy and the french consumer. Short term there is a confidence issue basically in france right now with 11 unemployment. Japan suffers the first negative effects of the sales tax hike in april. Retail sales in the country fell at their fastest pace in three years. And think like a freak. The authors of the hit book freedo freakonomics say thats a good thing. People we pay the most are about as early as good as a monkey with a dart board. The uks largest Building Society nationwide has urged the bank of england not to take any immediate action to curve mortgage lending. The lenders say there could be unintended consequences for house prices outside of london. Were also waiting for data from them this morning on house prices. Joining us now is simon rubinson. Paul sedgwick is still with us. Simon, were obviously focusing on the Housing Market. Take us through the numbers. Essentially with london, what were finding is the buyer appetite seems to be losing some of its momentum. Its still strong and at a relatively high level compared to where it was. Actually what were finding now, theres a few constraints kicking in. Wherever its linked to affordability, we know how far prices have moved up. Whether its linked to the introduction of the proposal following the mortgage market, the recommendations. Wherever its linked to perhaps some lenders, lloyds, for example, beginning to talk about Mortgage Finance not being available on quite the same terms for london buyers or the bigger borrowers which was the case previously. And there isnt that much supply still out there. All of those factors, perhaps dissuading buyers and the combination of a drop in buyer momentum and a lack of stock means were seeing indications that perhaps price momentum will continue to slow. What does that translate to in terms of price increases for the rest of the year . I think the back end this year, were seeing price gains, at least 5 plus, probably 5 to 10 . As you go into 2015 where our lead indicator kicks in and we see a slowdown, we could see the yearonyear price gain very low single digits. We had the bank of englands funding for the First Quarter, 2 billion pounds, thats data from the bank of england. Tote outstanding funding at 43. 3 billion. Doesnt look like theres any money available there from the uk government. There clearly is still a lot of money around. There is discussion about whether the Interest Rate stance is appropriate. I think their reflection of a broader economic issue, rather than specifically related to the Housing Market. The bank of england is focused on whether it needs to do anything to address some of the challenges we are seeing in housing. Absolutely. Paul, comment here. What do you think . I think obviously getting the Housing Market moving was very key to getting the recovery, the uk economy was starting to recover to give people the confidence and that sort of thing. There still seems to be a supply side shortage of housing generally across the uk. So i think there will be a reasonable demand. I think uk House Builders look reasonably attractive in terms of investment proposition. I think i feel london is possibly a little bit of a different case. Would you like to see cooling in the london market . The thing is my personal view is, i dont know how much of the london mark set driven by domestic money, people looking to part money overseas. Simon . That overseas driver a couple years ago was strong. Im not sure those three borrowers are a lot of the borrowers for overseas money. I know its heading for the center. Their cashing into oversea buyers into the center of london and moving to the outskirts. Absolutely. A combination of overseas buyers and domestic cash buyers has played an important role. When theres focus on the use of macro prudential policy doesnt have impact when youre talking about cash braving the markets. Simon rubinsohn, thank you for joining us. On a programming note, following the dominance of an antiestablishment and antieu parties, nigel farage will be speaking with Michelle Carusocabrera at 12 30 cet, 6 30 eastern live today. Another complication for carnie and cameron there. Looking out for that interview. Focusing on apple, buying beats electronics for 3 billion to boost its music business. Streaming services encroach on itunes. Apple gets not only beats streaming service and marketleading highend head phones but high profile talent. Beats cofounders jimmy iovin says ceo tim cook told him he wanted to buy beats at a meeting two months ago. Speaking at the cotechnology conference, apples media boss explained the motivation behind the deal. We have a lot of customers, we know what they listen to. We have al gagorithms. We have a great relationship with artists. We deal directly with artists. We work with them to market that content. We think all of those things when you put them on together its on steroids with us together. Apple expects the deal to close in the fiscal Fourth Quarter. Quick check on apple stock, down 0. 5 in the German Market trading today. Tim cook tweeted this photo saying sharing a laugh with jimmy, dre and eddy cue. And apple isnt the only Company Looking for star power. Fender will name u2 front man bono and the edge to the board today. Fender which has helped give birth to the modern electronic guitar is in the midst of a turnaround. In an email, the edge says some of youtubes biggest hits feature fender stratocasters. He thi what rock star would you choose to promote your company . If you want to join the conversation on worldwide exchange, get in touch by email worldwide cnbc. Com or via twitter cnbc. Wex or straight to me, jchatterleycnbc. As you can see, gains for the ftse 100 0. 3 . Smith and nephew speculation, the German Markets, french markets 0. 2 higher and the tfte mib higher by 0. 3 . We saw a rally innen b bond pri yesterday. We have the italian spreads trading at. 294. A lot of focus on the irishyearoiriseyirish yields yesterday. Euro dollar trading around the. 136 level. Seeing a few gains there, too. Similar story, dollar, broadly lower on the session this morning. The egyptian president ial elections were extended for a third day yesterday. Apparently because of low voter turnout. Does the low ballot number raise doubts about the level of support for the man still forecast to win . Former army chief el sisi. We are joined from dubai with more. Well, julie, the victory of el sisi in this election according to provisional results is in the a real surprise. As you pointed out, what would be a surprise is the low turnout which is just over 40 is less than half of what sisi himself called for just last week. Several factors and variables playing into that. You have obviously a segment of the population is boycotting the results. Youre also looking at voter apathy, voter fatigue. Some people tired of being called to the voting booth several times over the last year. All of that, of course, creating an ambiguous picture. Investors show their reaction on the Stock Exchange yesterday which lost 2. 2 . They were concerned that the lack of a broad popular mandate for sisi would prevent him from tackling the important structural Economic Reforms that he needs to do. Also the market trading to the downside at the open this morning. Now, also watch out for that central bank decision, which is due today. Analysts divided about whether the central bank will keep the rates on hold or slash rates to stimulate lagging Economic Growth. I was in cairo recently and i sat down with some of the top Industry Leaders to get their take about the political process. One of them was the ceo of Telecom Egypt. Heres what he had to say. To tell you the truth, you know, what i have is i have an extraordinary sense of pride. Lets look, for example, at some of the western markets. That are reasonably stable or flat erb. Lets see the dynamic behind this. You see much of the dynamic is related to population and the quality of the population in terms of production and wealth. Now, if you look at our parts of this, youll see growth. If you want Foreign Investors to be part of that success story, then they need to be convinced that this time round the government is not going to fall within a year again. We have a young population and our democracy is very young as well. So we are going in different directions. But in fact, we do so because simply we expect we as egyptian people, we expect a more where we able to express ourselves and where we are able to accomplish our ambitions. Remember that Telecom Egypt has a 45 stake in vodafone egypt. Now that the firm is moving into the mobile spectrum space it needs to do something with that stake. It hasnt made a decision on that front yet. It has a year to do so. Also Telecom Egypt overseeing much of the countrys Telecom Infrastructure which by the way has significance globally as well. We took a 4. 5 hour nerve rattling bumpy road trip to the mediterranean coast to a sleepy village outside alexandria to take a closer look. This is where east meets west in cyberturns, connecting millions of people around the world. And its all controlled from the terminals in this room. Worldwide undersea cables carry 99 of intercontinental internet traffic in one of the busiest hubs is right here in egypt. Few people get to visit this facility. And with good reason. In march 2013, egypts interconnectivity was severely disrupted after an undersea cable was severed. Millions in africa, the middle east and south asia experienced severe internet disruption following the incident. And at the time, it was feared it could have been an act of cyberterrorism. That was just a little bit of a preview of what to expect from tonights show. Make sure you tune in to access middle east, 23 00 cet. Well be talking about the firms expansion plans and look back at the controversial decision to cut off egypt from the internet when it kicked off in 2011. An exciting episode. I expect to see you tonight, julia. Very exciting. I look forward to it, you receive. The closed door session is said to lay out strategy for securing the country and for propping up a stumbling economy. Data out on wednesday show thailands trade shrank in april and factory output fell for the 13th month in a row. It has now been a week since the army general took power. Over in japan, retail sales for april fell 4. 4 compared to last year, weighed down by the consumer tax hike that came into effect in the same month. We go to the nikkei for the story, live from tokyo. Sales fell for the first time in nine months in the sharpest fall since the massive earthquake and tsunami in march 2011. Consumers wanting to avoid the tax hike went on a shopping spree the month before, snapping up expensive items like cars, air conditioners and washing machines, sending retail sales soaring up 11 . It was exactly those same items that saw the largest decleans for april. Car sales dropped 10 while Home Electronics were also weak, pushing Machinery Sales down over 12 . Department stores who enjoyed a 25 increase in sales in march suffered a 10 fall. Supermarkets, Convenience Stores and other retailers that deal in more affordable products fared better, some even managing to increase sales. Japans central bank had acknowledged in a report released last week that the tax hike had led to a fall in sales but it also said the drop was within expectations and that in general, Consumer Spending continued to stay steady. Thats all from the nikkei business report. Back to you, julia. Thanks so much for that. Lets give you a look at who else is on the agenda. Lots of data, including jobs numbers, cpi and Household Spending figures from japan all coming out at 8 30 a. M. Tokyo time. 20 minutes after that, we have industrial output data and later in the day, over in india, well see the release of its Fourth Quarter gdp. Now, still to come on the show, the Brazilian Central Bankers put growth before inflation as it ends a yearlong cycle of Interest Rate hikes. Stay tuned as we ask if thats the right move, at least for now. Stay with us. Fame, makes a man take things over fame, lets him loose, hard to swallow fame, puts you there where things are hollow the evolution of luxury continues. The next generation 2015 escalade. Fame youre watching worldwide exchange. Welcome back to the show. The hit book is credited with bringing economics to the mainstream. The duo behind freakonomics gained popularity. Their latest book is called think like a freak. Earlier on this channel, the coauthor stressed the importance of skepticism when Financial Advice comes your way. The first important step is to figure out who has what kind of skin in the game. So you know, i will say this. We talk about the ability of experts to predict the future, whether the future is geopolitical or financial. And so if you look at, lets say, stock picking advice, specifically, you find that the experts, the emthat we most revere, the people we pay the most are generally about as good as a monkey with a dart board. You have all of these incredibly smart people. Thats why the markets are so efficient. On every side of the transaction youve got these good people doing it. The most freakish thing i can say about the market is that whenever a person at home watches this makes a trade or feels good about making a trade, i always tell people, theres something on the other side of the trade thats just as optimistic that selling you what you are buying will be good for them as well. Jack mars 8. 9 stake and the executive vice chairmans 3. 6 holding has been disclosed. The much anticipated u. S. Listing is set to raise more than 15 billion this year. Meanwhile, france is getting ready for its largest tech ipo since 2006. Stephen is in paris with the details. Its the only tech ipo, isnt it, since 2006 . Take us through the details. Any idea of size yet . Yes. Its going to be the largest one indeed since 2006. Its vdo, a french professional network which has announced its ipo. It started a process with ipo, wont take place until january 2015. We always try to be first on cnbc. This time, we give you the information well in advance. The company didnt say how much cash its planning to raise from the ipo. It will reinvest all the profits to develop its network in emerging countries, mannly in china. Based on the valuation of its competitors, nine times the annual sales for linked in and six times the annual sales for zing. It is to be valued between 180 and 200 million euros. The company is much smaller than linked in with around 60 million members. Thats to compare with 300 million for linked in. 50 of its revenue comes from subscription. 20 from advertising and the remaining 30 from Services Offered to corporate inuniters. We have plenty of time. Yes. Definitely first on cnbc there, stephan. Thank you so much. Are you on linked in . I am. She says with caution. Dont tell Human Resources then. I wont. Good at keeping secrets. Thanks, stephan. Brazils central bank has held the rate at 7 . Slowing growth is the greater risk to the economy than rising inflation. Michael henderson, senior emerging markets economy at maplecroft joins me now. Youd expect them to signal a pause here. Actually, they left the door open. Inflation, still a real problem, isnt it, irrespective of weak growth . There are no surprises from the Brazilian Central Bank last night. Interest rates left at 11 , bringing an end to the recent increases. Policymakers have hinted in advance this was going to happen. The impact in the market in the near term will be fairly limited. I think its a sensible move. Weve seen 375 basis points of hike since early last year, a huge amount. Thats one of the most aggressive rate hiking cycles in the developed economies. Really policymakers will step back first of all and see how that pans out. The impact on the real economy before committing to more action. Inflation is a big thing and because the rate of inflation at the moment, i think there is a chance policymakers will return to rate hikes later in the year. Perhaps towards the end of 2014, 2015. We think inflation has further to run. We think inflation will top the 6. 5 of the Central Banks target, perhaps in q3. It could stay there. That will push policymakers back towards rate hikes. Do we expect rate hikes in q3 . In the near term, perhaps the next four, five months youll see rates on hold. Any further tightening could strangle the economic recovery, growth is extremely weak at the moment. Also with elections coming up in october, further rate hikes will be politically unpopular, particularly among the business community. I think theyll back away for the time being. You said economic recovery there. A very sensitive one. Right. We tend to say about brazil, the economy is stuck in the doldrums. Its been there for a long time now. People have been predicting recoveries for a long time. Things are not going any better. If you look at the growth rate, thats 2. 3 . Thats way down in the 5 , 6 , 7 growth rate we saw in the after market, the Global Financial crisis. Evidence from 2014 is weak. Economic activity has been poor in the first few months of the year. We have q1 out pretty soon. That will show the Economy Group by 0. 1 or 0. 2 in the First Quarter. Its hard to see where a pickup is going to come from. Theres a lot of focus on the world cup. Well be talking later on about the Market Impact of the world cup. Just what impact is the tournament going to have on gdp . In economic terms, weve looked at this before and said the impact is probably going to be fairly small. Were probably talking about something of the order of a few tenths of a percentage point of gdp, certainly no more. Of course youll see higher tourist revenues, an increase in Consumer Spending. A feelgood factor. Businesses will scale back activity, partially shutting down as the tournament gets going. The historical evidence doesnt suggest these major sporting events have a Lasting Impact on the economy. Theres no evidence to suggest when we look back through the decades of olympics, world cups, those sorts of things, were expecting a slowdown in gdp growth this year. That will speak for itself, really. The other interesting question is the election as you also just mentioned there. The second runner right now in the polls are climbing and narrowing the gap. Whats the probability that we have a huge surprise in this election or even if we dont get a surprise, does the fact shes going to win by a lesser margin change policy after the election . Thats what we need, isnt it . I think maybe to a limited extent, clearly hes on track to be reelected. Shes still quite popular with her core support, having benefitted from the traditional cash schemes. As you mention, her nearest rival has picked up momentum, ben 10 Percentage Points behind. Which sounds like a lot but thats squeezed by half since the early stages of the campaign. Is she under threat . Probably not. Shell get in again. I think when if and when dylan gets back in, there will be more pragmatism, theyll have to reign in fiscal spending. A lot of work to do. Yes. Michael henderson from maplecroft. After the break, well be talking gdp, was it just the weather in the First Quarter . Stay tuned. Well be discussing, next. Welcome to worldwide exchange, im julia chatterley. These are your headlines from around the world. An apple a day doesnt keep the doctor away. The u. S. Tech giant finally puts a 3 billion bid on the table for rap star dr. Dres head set and music streaming business, beats. Snowed in, u. S. Gdp for the First Quarter is expected to be downgraded with the first Growth Numbers due later. Japan suffers the first negative effect of the sales tax hike in april. Retail sales in the country fell at their fastest pace in three years. And think like a freak. The authors of the hit book freakonomics tells cnbc that quitting your job is a good thing. They also talk about financial experts. The experts, are generally about as good as a monkey with a dart board. Youre watching worldwide exchange,ing before i you Business News from around the globe. Thanks for joining us on worldwide exchange. As always, a quick look at the u. S. Futures ahead of the market today. The stocks coming off the board into the close losing ground for 0. 2 . Not too much to talk about. Futures indicating higher. We have the dow higher by 30 points. The s p 500 around 3 and for the nasdaq right now, 8 points higher. We did see an intraday high of 1912 for the s p yesterday, too, but much of the focus is what was going on in bond markets in particular. Lets take a look at the european markets this morning. We have investors perhaps out in some of the core markets. Losing a bit of steam in the dax and the cac current, 0. 2 there. The ftse mib also taking back some of this weeks 4 gains so far. Lets complete the circle now and check in on asia. Sri of course is in singapore. Sri, whats going on . Hi there, julia. I think the big story today was really down to the japanese data retail sales were fairly negative. The markets seemed to take it in stride. The explanation for such weak numbers was the fact that we had the sales tax hike and that probably took a toll on the consumer and retail sales broadly. The big question is whether thats going to continue. The japanese authorities dont think that it will. They believe that the consumer is in fairly good shape. I think were a big part of this equation is whether were going to see further meaningful increases in real wages. That should have a trickledown effect, of course, on to the japanese consumer and help to unleash the spirits. Markets taking this on their stride. At the close, 14,681. Expect some fairly narrow ranges in the short term for the nikkei between 14,350 and around 14,700. Elsewhere in the markets, quite a negative session for the philippine benchmark, down by more than 1. 6 . Quarterly gdp data disappointed for the philippines. We saw heavy bouts of selling on the philippine market. Elsewhere, there are a few pockets of weakness as well. Following that stumble we saw on wall street overnight. Its probably going to be trading in the ranges for the next couple of days or so, heading into next week, until we get something decisive, including the ecb in your neck of the woods and at the tail end of next week, the nonfarm payrolls. Thats going to be the factors that will really inform the trading, help us get out of the range. Back to you now, julia. Very much focused on what the ecb does next week. The bond markets right now certainly anticipating action. What we saw yesterday in europe with the bond market rallying, including core market. The bund down to 1. 34. 2. 62, the yield there in ireland. Must point that out also. Also watching whats going on in the u. S. Bond markets right now. We saw the u. S. Tenyear down at 2. 44. Its right now trading around 2. 43, just under that now. The 30year also trading at 3. 29 right now, near 12month lows. Asking questions not just about the message that the equity markets are sending as relative to the bond markets, the longer end of the bond market but also some of the disconnect perhaps in whats going on at the shorter en6 the curve to the longer end of the curve. Ill be talking about that most definitely in the next hour. The other big piece of data is of course the u. S. Second reading of q1 gdp. Forecast suggesting the initial reading will be revised downwards. Joining us now is the president of arcadian asset management. Take us through the numbers. Im not shocked by it. If you think about the weather situation weve had in the United States, everyone stayed home. I know i didnt want to go out, it was so cold. To have activity down is really not surprising. Theres a lot of evidence it kind of got moved forward. Im looking athat the numbers would go stronger as we go forward in the year for sure. Were getting quite a lot of mixed messages as far as the equity markets and the bond markets, not just the two, of course but just whats going on in different parts of the curve. What is your take right now and how do you believe investors should be positioned . I think that is the central theme of the moment. The bond market seems to be signaling trouble ahead. I think what its really reflecting is trouble behind. People have been so traumatized by the markets over the last four or five years, people that saw markets making new highs in 2007, 2008, that watch their fortunes tumble as the market got crushed, are skittish about new highs. The market keeps making new highs. We can discuss there are reasons for doing that. But a lot of people that have booked a lot of profits did not want to give it back. Theyre skittish and theres quite a lot of money sitting on the sidelines. As we see things like the gdp number going backwards, looking to be revised down, people are playing it very, very close to the vest. Waiting to see whats going to happen. But i think the equity markets are moving up rationally. Were seeing the numbers looking much better. Earnings continue to come in good. Economies are coming back slowly, maybe slower than we like but they are coming back. I think whats happening in the equity markets is rational. I think were a way aways from the grand rotation everyone has been talking about. Theres still a lot of scared money on the side thats just kind of accepting low Interest Rates. As Warren Buffett famously said, sometimes the best way to double your money is fold it over once and put it back in your pocket. I think youre seeing that in the flight to quality in the bond markets. We can talk about the fear factor but the positioning survey, people are reducing duration, at least they have been over the last month. If thats the case, whos buying . Well, you have a lot of institutions out there. Youre right. Reducing duration is a smart thing to do. Because this fabled Interest Rate, whenever it is, it seems to be never ending pushout of time when its going to happen. But it is going to happen at some point. I think people are very, very scared about getting caught too far out on the curve. Youre seeing that. I think thats a very rational move. I think that investors right now are trying to play that balance between i cant get any yield but im afraid that if the markets making new highs, ive seen this play before and i dont want to get crushed again. You had a rough type of thing. Youre getting people begrudgingly buying into it. I do think that the equity markets in this spot now are not really markets that should be feared. We are seeing as i said before, growth coming back. I think we are seeing signs of corporations really loosening up cash. Were certainly seeing it in the m a world. Interest rates being low now but probably not forever. Chairman yellen chair yellen, excuse me, basically said were probably not going to see interest moves for at least another year or so. But that implies theyre going to move in about a year or so. Doing deals now and deploying cash, thats healthy for all equities. I remain kind of bullish. I still think well have a positive year, probably upper single digits. I think well have a positive year in the equities in the United States. The story of unloved markets, bullishness but being unloved. Its interesting. Great to talk to you. President of mercadian asset management. We also get weekly jobless claims today at 8 30 a. M. Eastern. Its forecast to drop by 6,000 to a total of 320,000. Then at 10 00 a. M. Eastern, april pending home sales, theyre expected to rise 2 . Weve also got Kansas City Fed president e president Esther George and look for earnings from Abercrombie Fitch and lions gate, the music studio. Weve just been talking about the brazilian economy and inflation. But also the eyes of the world are on brazil as were only 14 days away from the start of the world cup. What impact does the tournament have on equities . And can Financial Markets help us predict a winner . Going to tell me now is peter oppenheimer, the chief Global Investment strategist at goldman sachs. Hello. Great to have you on. Good to be here. What impact will the world cup have on stock market behavior, investor behavior . Its a difficult thing to predict the overall outcome of the world cup. We have a model that will do that. We think brazil will win. Statistically, the winner seems to have a feelgood factor in the stock market. It outperforms 2. 5 to 3 after the month after the final. How long does that last . The fundamentals sta s star take over pretty quickly. It fades in about a month. It is a significant observation. Is there takeback beyond that one to threemonth period, does it underperform if its outperformed in that period . Typically it does. It depends a great deal on whats happening in the country and the macro fundamentals. In fact, on average, most of the winning countries have seen the stock markets underperform within about a year. Thats really dependent on whats happening fundamentally. Have there been exceptions to the rule . I know brazil in 2012 when they were having a currency crisis, deep recession, it didnt happen then, did it . 2002. 2002. Sorry. Was the one real major exception. They had a very bad time, currency crisis, economic crisis. The stock market fell about 20 relative to the world stock market within a month. But having said that, it did extremely well when it won in 1994. It outperformed the world market by about 20 over the following month then. The key signal is, if there is no real economic crisis or currency crisis, generally you get a pretty good feelgood factor thats reflected in the market for a short period. What about the runners up . Not such good news. Oh. The runners up seem to have a bit of a posttournament slum in confidence. Again, it doesnt last very long, about a month. Typically, the runners underperform the world market by 1 , 1. 5 . Speaking of runnerup, i was thinking about england. Englands chances are not that good. Looking at the probability we have thats looking at the overall chances of different teams competing puts englands chances of getting into the final at only about 5 . Its chances of winning about 1. 5 . 1. 5 for england . Im mortified. Are you a chelsea fan . I am a chelsea im a chelsea fan now that ive interviewed chelsea players. You went to meet four of the brazil players from chelsea. How was that . Very exciting, wonderful people. They were talking about their experiences of growing up in brazil, their passion of football, what got them into football and where they are now, playing for their National Team at home in the world cup. It was an amazing experience. A wonderful tune. The if we cross the probability of the market rallying after they win the world cup according to your model or likely to win the world cup, with the fundamentals right now, what do you think happens to the stock market . I think theres a good chance, theres been a bit of stability in brazil. There were fundamental problems that we heard before but i think they will win and hopefully that feeds through optimism in the 345shgette. You heard it here first, brazil is going to win. In other sports news, malcolm glazer, the man who pioneered the takeover of Manchester United Football Club has died at age 85. He was also the owner of the tampa bay buccaneers. Tiger woods pulled out of next months u. S. Open at pinehurst. Hes continuing his rehab after undergoing a back operation. Its the second major in a row that hes missed. Now up next, payday for dr. Dre. Apple is buying beats electronics for 3 billion to boost its music business. All the details, coming right up. Relax into childs pose. Sfx bing. Whos got two hooves and just got a claim status update from geico . This guy, thats who. Sfx bing. And i just got a. Oh no, thats mom. Sorry. Claim status updates. Just a tap away on the geico app. Im spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast . Go to ziprecruiter. Com and post your job to over 30 of the webs leading job boards with a single click; then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter. Com offer2. Youre watching worldwide exchange. Welcome back to the show. These are your headlines. Markets wait in wonder as u. S. Gdp figures for the First Quarter are revised. Apple confirms 3 billion seals the deal with beats. And japan retail sales fall at their fastest pace in three years. Lets take a closer look at todays top stories. Apple is buying beats electronics for 3 billion to boost its music business. As streaming services encroach on itunes. Apple gets not only beats streaming service and its market leading highend head phone but also highprofile talent. Beats cofounder jimmy iovine an dr. Dre will be joining the company. Speaking at the Code Technology conference, eddy cue explained the deal. We have algorithms, we have a lot of curation, we have a lot of customers that have an easy way to pay. We have a great relationship with artists. We deal directly with artists to give us incredible content. We work with them to market that content. We think all of those things when you put them all together its on steroids with us together. Apple expects a deal to close in its fiscal Fourth Quarter. As you can see today, down 0. 3 in the German Market trading session. Tim cook tweeted this photo saying sharing a laugh with jimmy, dr. Dre and eddy cue. Excited to welcome the beats to team to apple. Its all about the music. Apple isnt the only Company Looking for star power. The New York Times reports that fender will name bono and the edge to a contract today. In an email, the edge says some of u2s biggest hits feature fender stratocasters. He believes guitars are here to stay. We want to know what rock star would you choose to promote your company . If you want to join the conversation on worldwide exchange, get in touch by email, worldwide cnbc. Com, by twitter, cnbcwex or direct to me jchatterleycnbc. The numbers arent good for google. The company is 70 male and 61 white. Nearly threequarters of googles leadership is also white apparently. Companies in silicone valley have been reluctant to share diversification information. Theres been pressure for the firms to hire more minorities and more women. Alibaba is reportedly expected to reveal the name of 28 people who will control the company after its u. S. Ipo. The wall street journal says alibaba will identify the socalled lakeside partners who founded the company in 1999. In an updated s. E. C. Filing. Who they are has been subject to speculation and controversy given alibabas Corporate Governance structure. They will keep an iron grip on the company postipo as they have a power to nominate a majority of directors to the board. A u. S. Judge in chicago is holding a hearing to consider a motion on whether to consolidate all lawsuits related to gms ignition switch recall into one single classaction. At the heart of the claims is the argument that many gm owners say the value of the cars has dropped due to the press and scrutiny of models in the recall. Lawyers also believe the current, not prebankruptcy gm should be held liable. The judge is not expected to issue a ruling today. Quick check on gm shares, up just over 1. 5 , outperforming the German Market session. Still to come on the show, Edward Snowden says people dont set their lives on fire for no reason. The fugitive makes his case for whistle blowing in an exclusive nbc interview. All that coming up after the break. Weve just had auction results from italy. Theyve sold 7. 5 billion euros worth of five and tenyear debt. Both yields coming in at euro lifetime lows. This of course on the back of the success of renzi and elections this weekend. Growth and jobs this year will continue to go badly. A real dichotomy as far as the real economy is concerned and the market take on whats going on in italy right now. Quick check on u. S. Futures also this morning. We saw them coming off a bit. The steam as far as u. S. Markets were yesterday, losing between 0. 1 and 0. 3 . We did see a fresh high for the s p 500. Right now, gaining, you can see the dow jones around 29 points higher, the s p 500 just over 2. 5 points higher in those futures. Now u. S. Whistleblower Edward Snowden says he will attempt to extend his asylum in russia if he fails to reach an agreement to return to the u. S. Speaking in an exclusive interview with nbc news, he said he felt a moral duty to reveal the practices within the nsa. The reality is the situation determined that this needed to be told to the public. The constitution of the United States had been violated on a massive scale. Now, had that not happened, had the government not gone too far and overreached, we wouldnt be in a situation where whistleblowers were necessary. I think its important to remember that people dont set their lives on fire. They dont say goodbye to their families, actually pack up without saying goodbye to their families. They dont walk away from their extraordinary, extraordinarily comfortable lives. I made a lot of money for a guy with no high school diploma. And burn down everything they love for no reason. China has begun to downplay cyberspying since last weeks charges against five military officials for industrial espionage of u. S. Firms. A news agency said they should not let the dispute to become a rift. Do they have enough tension on their own door step without aggravating the u. S. At this point . Thats what many people have been talking about here. Its been interesting. Snowdens interview has been played up here in china. Theres a lot of people who are saying hes a hero, also saying that he is a real patriot. In fact, a Government Spokesperson today said that Edward Snowden only revealed what many people already suspected, that the u. S. Is the chief of all the cyberspies and it adheres to double standards. This comes after the u. S. Had indicted five Chinese Military officers and to highlight the american perspective, that governmenttogovernment spying has been going on for quite some time and everybody does it. But at the same time, governments going to spy and stealing secrets for their own companies is completely unacceptable. This distinction has been completely lost in china. This is a country that is dominated by the state. In fact, theres one Chinese Military officer who ran a commentary which said that the u. S. Spy agency is the one that needs to be indicted. Now at the same time, just in the past two days we have started to notice that the propaganda line has started to soften. And there hasnt been a really big question since these charges arose as to how long china could retaliate because the relationship between these two countries is so strong and so interdependent. Now, some of the state press has been running commentaries that counter some of the outrage and essentially are saying that this rowell over cybersecurity shouldnt undermine the cooperation between these two countries. Many within the American Business community are concerned they could be the ones who would become the political football between these two countries as china looks to retaliate against the u. S. s actions. Thanks, eunice. The alleged spying goes on on both sides. But well just move on. Well leave you with a look at how the u. S. Futures are trading ahead of the open on wall street. Ill get my false teeth back in. See you after the break. Welcome to worldwide exchange, im julia chatterley and these are your headlines from around the world. An apple a day doesnt keep the doctor away. The u. S. Tech giant finally puts a 3 billion bid on the table for dr. Dres head set and music streaming business beats. Gdp for the First Quarter is expected to be downgraded with the first numbers due later today. More info from alibaba, the chinese internet giant reportedly expected to reveal the names of 28 people who will control the company after its ipo. And think like a freak. The author of the hit book freakonomics tells cnbc that quitting your job is a good thing. We find that the experts, the people that we most revere, pay the most, are generally about as good as a monkey with a dart board. Youre watching worldwide exchange, bringing you Business News from around the globe. If youre just tuning in, thanks for joining us here on the show. As always, we give you a look at how the markets are faring ahead of the u. S. Open. Stocks losing ground by 0. 1 to 0. 2 . We did see a fresh intraday high for the s p 500. Gaining 30 points for the dow mini, 8 points for the nasdaq and a few points for the s p 500. The bond market, we saw the ten year hit at the lowest level. We saw the 30year hit the lowest level as well. 3. 28 the number there. David wu, head of global rates and Currency Research at bank of America Merrill lynch global search is on set with me now. Thats a bit of a tongue twister. Give you are your thoughts on why the longer enof the curve is immuned to tapering and data, what were seeing in the equity markets right now. Its amazing. Theres been a lot of debate about what is driving this rally. The bottom line is, i think its difficult to justify the price action based on fundamentals, especially given the fact over the last month, believe it or not, u. S. Treasuries have generally rallied on betterthanexpected data. Thats the most amazing thing about this, data has been surprising to the upside, if anything. And this treasury ought to continue. That leads us to think that actually you have to go away from fundamental reasons to explain whats going on here. I think the most likely explanation is that somebody has been buying a lot of treasuries for reasons it was still trying to fathom. Who is buying . You know, its difficult to prove definitively but i think u. S. Treasury data suggests that belgiums holding of treasury securities have increased by 125 billion. You know, in the first three months of this year. That is an annualized rate of 500 billion. This year, u. S. Budget deficit will be only 550 billion. So many treasuries acouldnt the for 90 of the financing of the u. S. Budget deficit financing this year. The question really is who may be buying and treasuries and keeping these securities with euro clear, thats basically headquartered in belgium. Who . You know i want to say china. I think theres a pretty good chance it could be china. Though again we cant prove it definitively. I think china is the only country thats large enough, that can account for the magnitude of the numbers were talking about here in belgium. How though . What are we talking about . We have a credit squeeze going on in china right now. Are you saying that sucks in investment . Is that the idea . You know, i think thats the most compelling, i think explanation. I think in some sense, at the end of last year when china started to tighten domestic liquidity. What extently happened it forced chinese borrowers to go somewhere else to borrow money. China corporatance marketed to Foreign Investors, now led to a surge in capital inflows, now forced the Chinese Central Bank to step in, buying dollars, weaken the currency. All these dollars had to go somewhere. I think it ended up going to u. S. Treasuries. When does it change . Are we looking at a signal from the chinese economy and the chinese Financial Sector in particular to see an impact in the u. S. Bond market . Theres some sense there was a time that u. S. This year, china will overtake the u. S. In becoming the Worlds Largest economy. In some sense, china, i would argue, whatever it does, will have a big impact on the rest of the world, especially on the u. S. Treasury markets weve seen this year. David, stay right there. Well continue this conversation. For now, lets bring you up to speed on some of todays top stories. After weeks of speculation, its finally official. Apple has snapped up beats to the tune of 3 billion. Josh lipton has more. Reporter during cupertino, california where apple did announce with will buy beats for 3 billion. I had the opportunity to speak to apples tim cook and eddy cue as well as beats cofounder, jimmy iovine and dr. Dre. Cook telling me it will be acreedive in fiscal year 2015. Why do this transaction . Cook told me first and foremost, this is about the music, a company that has a history, a heritage of placing emphasis on music. This is still a company that sits at that intersection of technology and the arts. Cook telling me there is no berlin wall between apple and los angeles. Its also about the talent youre bringing on board. Dr. Dre, jimmy iovine who knows this company very well. Jimmy iovine talked to me about how much he knew steve jobs, how close their friendship really was. If you look at beats and the two separate divisions, beats electronics, lets start there. Tim cook said they did 1. 1 billion in revenue, that division. Beats electronics. Important to remember, this is a company that dominates that head phone space, controls about 52 of the high end of the head phone market according to npd. Thats a space thats growing fast. It jumped about 20 in q1 year over year. Also of course youre getting beats music, thats a streaming service. I asked tim took whether he was concerned about entering that space. Obviously a lot of competition with pandora and spotify. Cook telling me he was not concerned about that competition. Rather his focus is on building the best product. You can see when it comes to music, that is where the growth seems to be, right . Last year, Digital Music downloads, actually decreased for the first time but meanwhile, streaming consumption actually jumped 32 according to nielsen and finally, i did ask dre about his feelings. He said, listen, hes excited about this transaction. He told me hes ready to roll up his sleeves and get to work for tim cook. Guys, back to you. Alibaba is reportedly going to reveal the names of the 28 people who will control the company after its u. S. Ipo. The wall street journal says alibaba will identify the socalled lakeside partners who founded the company in 1999. Based in an updated s. E. C. Filing. Who they are has been subject to speculation and controversy given alibabas Corporate Governance structure. They will keep an iron grip on the company postipo as they have the power to nominate a majority of directors to the board. Sprint chairman continues to make the case to u. S. Regulators for the deal to buy rival tmobile. Speaking at the Code Technology conference, they pledged to abide by Net Neutrality rules if sprint is given the green light. He also points to recent cable and telecom mergers saying u. S. Access to the internet is currently dominated by just three giants. He also says americans dont know how bad their Internet Service is. Beijing has a terrible air but people in beijing dont know this, every morning, its the same air. American people who live in america, using the internet every day and say, okay, this is the internet. But a guy like us who come from outside and use internet at the hotel or my home in silicon valley, i said, oh, my god, how can american live like this . Tech industry analyst mary meeker has put out our report on which trends are set to take off. The 164 pages cover everything from Media Consumption to health care and security. The standout call is on the rise of data creation from the sensors we carry around in our mobile devices. She says we are only just realizing the usefulness of the info gathered. Coming up, after the break, lawyers for plaintiffs in the lawsuits against General Motors are plotting their strategy. On just how to attack the automaker over its massive recall. Well bring you all the latest, next. Mine was earned in korea in 1953. Afghanistan, in 2009. Orbiting the moon in 1971. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Youre watching worldwide exchange. These are your headlines. Markets wait in wonder as u. S. Gdp figures for the First Quarter are revised. And apple reveals its bid for beats. The windy city will be a focal point today as a u. S. Judge in chicago could hold the key for what happens next in gms recall crisis. Morgan brennan is at cnbc hq with all the details. Morgan, good morning. Hi, julia. A judge is holding a hearing to consider a motion on whether to consolidate hundreds of lawsuits related to gms ignition switch recall into a single classaction. The heart of the claim is the argument that many gm owners say the value of their cars has dropped due to the present scrutiny of models in the recall. For example, the chevy cobalt. Lawyers believe the currents and not prebankruptcy gm should be held liable. That issue isnt expected to be addressed until july, though. Plaintiffs lawyers want the judge to determine where a potential classaction suit should be heard. One attorney who led suits against toyota over a sudden acceleration cases want the trial to be held in california where the toyota case was settled favorably. Now, a suspended gm engineer who, woulded on the defective switch told congressional investigators that he forgot ordering a Design Change. The New York Times say he didnt say anything to suggest that gm Ceo Mary Barra knew about the issue before they took the top job earlier this year. He was suspended last month. Internal documents show he signed off on the Design Change in 2006. Checking gm shares in europe today, they are up about 1. 57 . Julia, back to you. Thanks very much, morgan. Great to chat with you. Bill ackman is planning to tap the Public Market for his next investment venture. The Hedge Fund Manager is seeking to raise billions of dollars for a closedend fund that could list on the london Stock Exchange as soon as this summer. Ackman was reportedly in london last month to drum up support among european investors. Raising money separate from Pershing Square could let ackman lock up news cash thats not subject to redemption request from investors. The hit book is credited with bringing economics to the mainstream. The duo behind freakonomics gained popularity during sometimes controversial conclusions with an economic twist. Their latest book is called think like a freak. Earlier on this channel, the coauthor stressed the importance of skepticism when Financial Advice comes your way. The first important step is to figure out who has what skin in the game. I will say this, we talk about the ability of experts to predict the future, whether the future is geopolitical or financial. If you look at, lets say, stock picking advice, specifically, you find that the experts, the people that we most revere, the people we pay the most are generally about as good as a monkey with a dart board. You have all of these incredibly smart people. Thats why the markets are so efficient. On every side of the transaction youve got these good people doing it. The thing, the most freakish thing i can say about the market, whenever you make a trade, the thing i always tell people, there is someone on the other side of that trade whos just as confident and optimistic that selling you whatever youre buying is going to be a great choice as well. Todays second reading of gdp is tipped to reveal a shrinking u. S. Economy in q1 but was it just the weather . We keep asking. Stay tuned. The u. S. May just have lost a little bit of ground yesterday between 0. 1 and 0. 3 . Right now as you can see, the futures indicating higher around 30 points to the dow, a few points for the s p 500 and 8 points for the nasdaq in particular. Lets give you a look at whats on todays agenda in the United States. We have weekly jobless claims at 8 30 a. M. Eastern, theyre forecast to drop by 6,000 to a total of 320,000. At 10 00 a. M. Then, its april pending home sales. Theyre expected to see a rise of 2 . Kansas city fed president Esther George speaking this evening and as for earnings, we have a look out from retailers Abercrombie Fitch and the movie studio lions gate. Forecasts second the initial reading will be revised downward to reveal an economic contraction. Chief economist at moodys, Capital Market research and david wu, head of global rates and Currency Research at bank of America Merrill lynch research, also still with us. What are your expectations, john, what kind of revision are you looking for today . We think well see a decline of 0. 3 , the first such decline since 2011. However, i do not believe that this is going to become a recurring phenomenon. Well get a snap back in the Second Quarter. Nevertheless, the u. S. Economy is not growing as rapidly as had been expected several months ago. Instead of growing by 2. 7 at 2014 real gdp perhaps comes in just under 2. 5 for the year. When you say snap back, what are you looking for, looking at . I think in the Second Quarter we could see growth between 3. 5 to 4 . Thats foot going to last. What we should do is average that slightly negative reading for the First Quarter with 3. 5 to 4 growth for the Second Quarter. That leaves you with roughly 2 growth on average. In the grand scheme of things, thats lackluster. By no means is the u. S. Economy growing rapidly enough to materially increase inflation risks, to bring forward a hiking of the fed funds rate. David, whats your take . Revision today . We think it probably runs minus 0. 7. I think the important thing to remember is that this was the third most severe winter in the United States since basically 1950s, only behind 1977 in 2000. If you look at the five most severe winters, the main differential was over 4. 5 . I think q2 will be stronger and i think the most important thing is to focus ahead rather than behind. I want to take you back to the conversation we were having about whos buying treasuries. You said china. Talk to me about the impact of that chinese buying relative to tapering right now. Whats the net effect . Can you put a value on it . As you know, at the start of the year, the presumption of the market, this year was going to be define by fed tapering. This is why people thought higher basically bond yields and lower stock market perhaps. Whats transpiring is the chinese increased buying has more than offset reduction in fed purchases. Effectively theres been no tapering. I think the reason stocks are up here and beyond yields are up here, the question reading now at this point is when will the chinese stop buying . We know the fed will continue to taper. We still think the case for higher rates remain intact. Is it going to be a q3 story or a june story . Whats your bet. Right now the market, i think for a fixed Income Investor this has become the most difficult year they can remember. People are probably still short. I feel like right now in the next few weeks theres probably reason to think capitulation has yet to play out in course. I think were already overshooting territory and investors should be looking for lower yields to look to establish new shorts. Whats your thoughts on that . You heard the take on the bond market particularly relative to equities. Well, i think the bonds will continue to surprise on the downside. I dont think the market fully appreciates the extent to which the u. S. Economy is aging. Right now, the number of americans turning 65 years of age or older, growing by 1. 5 million annually, the younger segment of the population, working age population growing by 800,000. Theres a builtin increase for the demand for Treasury Bonds because of the aging of the u. S. Economy. And that will help prevent beyond yields from rising sharply. It will also prevent the u. S. Economy from overheating. The u. S. Today is an example of japanlike. We dont have deflation but well have disinflation for some time to come as the u. S. Economy turns greyer and greyer. David, come back on this. You told me beyond yields have nothing to do with fundamentals right now. I think the demographics, weve known that was coming for the last year. It can explain whats been going on the last, basically, couple of months. At the same time, i would argue. I agree, americans are definitely aging. But the fact that theyre aging also means that the work force will be shrinking which means actually theyre probably see actually higher wage growth much sooner than they normally would. Fundamentals out the door as far as the bond markets are concerned. A bit of contention here. Davids not talking. Fantastic to have you on the show. John and david, thank you. Thats just about it for todays show. I hope you enjoyed it. Contact us, tweet u us jchatterleycnbc. Squawk box coming right up. Good morning. A revision to gdp tops todays mark eight jen da. 2. 42 on the tenyear. Plus, making music. Apple indood announces it is buying beats. And Edward Snowden speaks out in his First American television interview. Why he calls himself a patriot and what he makes of u. S. Government surveillance programs. Well have more of that interview. Squawk box begins right now. Good morning, everybody. Welcome to squawk box here on cnbc. Im becky quick along with joe kernen. Andrew is off today. Our top market story is a revision to First Quarter gdp. Forecasters are expecting the data to show the economy shrank for the first time in three years. Polled economists are calling for a contraction of 0. 6 . We also have weekly jobless claims and pending home sales. As joe mentioned, it is Corporate News. Its official, apple is buying beats for 3 billion. Analysts say apple is try to catch up in the fastgrowing business of music streaming. Well have more on this story from jon fortt at the code conference in just a few minutes. Weve been waiting on this one. The video from dr. Dre himself already out there