Transcripts For CNBC Worldwide Exchange 20140604

Retailer is struggliing as he says he cannot promise that things will get better. And big discounter offers stock at 21 euros per share. Good morning or good evening if youre in asia. We kick off with another set of data before the ecbs meeting tomorrow. Its the final pmis for may, final services pmi 53. 2. Its a tick down from the flash of 53. 5. It is still nevertheless the highest since june 2011. And it is higher. Aprils was 52. 1. The final composite pmi has come in at 53. 5, a tick down from 53. 9 which is the flash april 54. We did see of course the french number coming down just a little bit as well. The german private sector growing for the 13th straight month in may. Well break down that but of course another key bit of data ahead of the ecbs meeting tomorrow. Theyre widely expected to take action. How much, of course, is still to be decided as they will come back, euro dollar around the 1. 36 mark we were yesterday. Before that, though, lets talk about the g8. What was supposed to be the g8, that was going to be held in the russian resort town of sochi. It is now going to be the g7 and it will be in brussels this after russia was ejected from the group after the issues in ukraine. There are other points of contention that might make for awkward meetings. The fallout of the european elections has seen a broad shift in recent days, both britain and germany have been in deep discussions over who should take presidency. The rhetoric between french officials and u. S. Regulators harshened as the spat over the fine for bnp paribas looks set to hit nearly 10 billion. Jules is there in the old location of brussels. Its an old one for you, jules. Yes, im used to this. G7 meeting later on this evening, in particular, the first time in 17 years that russia hasnt been present. Youve said theyve been excluded. People here i think would argue, the officials would argue that russia excluded itself with its actions in crimea. That point is moot right now. The message is as far as theyre concerned, on the Foreign Policy front ukraine tops the agenda right now. Of course, Vladimir Putin not present but very much setting that agenda as far as their process or movements in the ukraine, the influence in that region is concerned in particular. As far as its crisis is concerned, diplomacy dialogue has to be at center stage. The likely statement from g7 to say were still ready to apply additional sanctions if theyre required in this region. When i spoke to officials yesterday, they acknowledged the steps that russia is making, the softening perhaps of the tone, some level of acknowledgement right now in working with the new Ukrainian Government in particular. But of course theyre still saying they believe russia is inciting and influencing the violence were seeing in the east. Theres still a certain level of tension and concern about that. I think we have to look at well as what obama did as far as boosting military support from some of the eastern nato nations to, yes, dialogue is important but there will be a firm line beneath that. If you look underneath the front that the g7 portray over the next two days, we know the disagreement, theres going to be dialogue between cameron and putin, hollande and putin next week. Obama said absolutely not, hes not going to have any bilateral meeting with putin right now. It does seem that theres a Cold Shoulder from the country thats most concerned about the resurgence of a cold war in this region, ross. Back to you. Jules, thanks to are that. More to come of course from the g7 as it is now. Lets just recap the final pmis for may. Services pmi coming weaker than the flash, 53. 2, 53. 5 was the flash. The final composite pmi 53. 5. The flash was 53. 9. Heres the interesting point. The composite output price pmi 48. 8. 48. 7 was the flash. But the point is firms have been cutting prices for the 26th straight month. And its the low inflation yesterday, 0. 5 that has people all aflutter with the ecb. Joining us with his thoughts for the first time today, charles deeble. Charlie, good to see you. Good morning. The cutting of the prices is the key point here. France is back in traction as well. Yes. Where does this leave the ecb . It leaves them very much having to do something. I mean, that is clearly the consensus in the market at this point in time. But i think really the key was a comment we had from an official last week where we they started or seemed to be hinting that perhaps Price Expectations were becoming unanchored. Thats the real fear here. They do have an inflation target below but close to 2 . We spent quite a period a long below that. It looks like well continue do that now. The key will be in the star forecast we get on thursday. You know, theyll revise it down. How much they revise it down is really the key. Maybe a determinative of how aggressive they are. Without a doubt, you know, there is this vague hint, if youd like, that europe is turning a little bit japanese and faces this not necessarily just disinflation threat but could in time face a deflation threat. Can the ecb actually do anything about that . To some extent, yes, because inflation is a monetary phenomena. If they force money into the system, eventually you should be able to create inflation. However, that would require if you have a repaired Banking System that would be rather difficult. That obviously does need to be fixed. Thats all part of the process were going through with the asset quality review and everything else. You also have to take seriously at some point theyll have to do qe on sovereign bonds, not just on assetbacked securities. We dont expect it necessarily tomorrow. No. The euro down from 1. 40 to 1. 36 over a couple of weeks. Is it all in the price of the euro . Is the risk only here . The ecb apart from one occasion have a big history of talking big and delivering small. And thats fostering this expectation in the markets that there will be something of a disappointment. Unless they do wheel out guns that really people arent expecting such a sovereign qe. I think that is the risk well see. All right. We were talking about the ecb, the euro as we say has fallen almost 2 against the dollar in the last 30 days. Steve liesman has more on what may be priced in. The stakes are high for mario draghi and the European Central bank for its meeting thursday, a special ecb edition of the cnbc fed survey shows overwhelming Market Expectations for easing to be announced. 65 of survey respondents expect the European Central bank to take at least one of three substantial actions. Cutting the deposit rate or announcing a longterm finance option, or ltro. A quart think all three will happen. The leading choice, 55 , think the ecb will cut the refi rate with the average being 11 basis points from 25 basis points. 52 think the deposit rate will be reduced and the average there is a negative, negative, ten basis points. A third look for a longterm refi operation and a third say the ecb could do outright quantitative easing. Twothirds are also expecting a repeat of the guidance that rates will remain low for a long time. As for the u. S. Federal reserve, respondents look for less of a rate hike. The expected fed funds rate plunged to 0. 68 from 1 in the prior survey. Market participants now do not expect the fed to reduce its Balance Sheet until 2016 thats four months later than our april survey. Eurozone gdp is coming in at 1. 1 yearonyear. Inflation estimated to increase 0. 7 . And the euro, it seemed to go to 1. 30 to the dollar. It suggests that the ecb risk disappointing the market certainly if it does nothing but also if it takes just a single action. Back to you. You dont think thats going to happen, a single action . No. I think at a minimum, it would take youll see all three. Good at a minimum . At a minimum, yes. So theres a chance they might lay out what they would take to launch full qe then . I think theyre also probably going to announce something along the lines of how theyre going to structure the ab market and try and stimulate the lending profile within the eurozone. As you rightly pointed out, thats one of the key they goin sovereign qe . No. Are you saying are we looking at a restarting ltro plus the equivalent of a lending scheme . Its going to be targeted, for sure. Thats what theyll try and do. Theyll stop sterilizing the smp holdings. That is an injection of liquidity that arguably could come back out as people drain excess reserves and everything else. If its in a targeted fashion so that banks can start avoiding the negative deposit rate by perhaps proving they do contribute to an fls style liquidity support for smes, then, you know, i think that structure would convince people to a agree theyre serious. Charlie, stick around. We have Services Pmis coming out of the uk in 20 minutes. Youll stick around for that. We want to know how are you positioned to benefit from the expected job and asset markets . A rise in single currency . Let us know, join the conversation on worldwide exchange, email us worldwide cnbc. Com, twee tweet cnbcwex or direct to me rosswestgate. Now, tesco has posted its worst sales figures in britain in over a decade. Well look at the future for britains leading retailer later in the show. Over 1. 2 billion eyeballs are on us during the two weeks at wimbledon. True tennis fans want to know whats happening, they dont want to just see whats happening, they want to know and understand why its happening. Anybody can just put data up, but we want to get a reaction, make it far more interactive. We rely on the cloud to provide that immersive digital capability. Deep brewhos got two relahooves 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. 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. Were just an hour and 15 minutes into the trading day here in europe. Even stevens on the dow jones 600. The ftse was down 20 points yesterday. Theres a few individual corporates we can look at. The ftse this morning, first of all thank you very much is flat. As is the xetra dax and the cac current. The ftse mib is down 0. 4 . The dow snaps their win streak. They are up at record high. Just a small pullback from that. Tesco is very much in focus this morning. Shares up, they were up, theyre actually flat at the moment, just down a penny, about a third of a percent as you can see. The company has posted its worse sales in over a decade. Tescos likeforlike sales drop 3. 7 in the First Quarter. The ceo says he cant make any promises that things will get better. Other sales, the swiss travel retailer taking off, dufry making an acquisition, helping bolster its business in the mediterranean region. A newspaper suggests the groups ceo says it is a core asset. Up 2. 5 , coloplast. Denmarks fourth Biggest Company by stock market value. Finally, bouygues, down 3 , saying the stock is a reduce, previously a hold. The group is facing more challenges, including a struggling public works environment in france. Switch over to bond rates, treasury yields of course we saw last thursday down at this 11month low at 2. 42 . Yesterday during the session, a threeweek high. The yield is back down to 2. 57. Were looking ahead to adp numbers. We got the strong nonfarm payroll report. Will the same happen today . Adp will be a sentiment shift of an outlier number. On the currency markets, we showed you where the euro dollar is trading, just above 1. 36. Dollar yen, strong at 102. 61. Sri is with us out of singapore. Very good morning to you, ross. As you pointed out, the u. S. Markets took a bit of a wobble overnight. Sentiment on this side of the world in our region is weaker as well. But were not seeing wholesale capitulation by that token. Losses seem to be capped just under 1 . If you look at the Greater China markets and the s p asx 200. Twoweek lows youre looking at here despite the fact that we did see betterthanexpected First Quarter gdp. But its the miners one again that have laid the Australian Market low today. The similar story for the banks. Shanghai composite down as well, despite the fact that we did see fairly reasonable pmi numbers from hsbc, fourmonth low. But remember, that domestic diamond remains quite sluggish and thats down to what is going on in the property sector which has been weaker. And no surprises there. The property counts as both on the Hong Kong Market and the shanghai comp were weaker as well. Thats when we got the negative leadership from. All in all, fairly weaker session. A lot of these markets are in a Holding Pattern until we get some leadership from your side of the world from the ecb, what theyre going to do on policy and then stateside with the nonfarm payrolls. Back to you now, sir. Thanks to are that, sri. Catch you a little bit later. Well, deputy head of Corporate Investment banking at unit credit joining us from the milan. Thank you for joining us. Were wondering whether the ecb will take any more action, whether we can impair what is a broken credit mechanism amongst the european banking sector. What are you talking about . Well, i think its obviously recovery is coming back but its coming back too slowly in our opinion. This is something which is shared among all the agents of the economy at the moment. Theres risk for lower inflation, lower growth. We still live in the mark net europe which is fragmented, because the nonfinancial sector in the peripheral country is at higher rates. Obviously theres a case from the ecb to act. The question would be conventional to the most unconventional measures. Everything has to be taken into account. We cannot rule out any measure. We probably expect some action on the negative deficit. There is a strong case for further easing. There could be discussion right now to be open on asset purchases. Everything is open. The question would be how should it be distributed throughout the coming weeks and the coming months, especially facing the asset quality review as well. It has to be taken into account. Theres a strong case for the ecb to act. Yes. Now, were looking to see whether they will do their own version of what bank of england did with the funding for lending scheme to try and get credit for smaller businesses, medium sized businesses as well. Do you think that will be effective . And do you think there is what we discovered in the uk was actually it wasnt that there wasnt a lack of money so much as there was a lack of demand. I wonder what you think. I think theres its not necessarily a lack of money because there is a lot of money around. I think its coming from different fact. First of all, the ecb made sure in the past years up to now that all the markets would be open. If we can see whats going on now in the market in the european market, we have the banking market which is open, the Capital Market that are open and to a wider and wider in the numbers. Obviously, a lending scheme could be at the edge. I expect the ecb would take that into account, whether its going to be implemented right now or in the first year of the future is more of a question mark. I would say thats in any case there is a strong case for taking action. The action probably would be conventional starting with and we would go to the most unconventional one moving forward. And everything has to be taken into account because everything will be done by the ecb to make sure that the Downside Risk for growth and lower inflation is going to be stopped. How would you then describe sort of the flow at the moment for the Capital Markets, debt Capital Market flow . I think today we are hosting 200 investors for the italian investment conference. And we must say that audience, its 100 more than last year. Why that . Because theres a growing appetite for Capital Market, should it be debt or equity debt Capital Market. A great rebalancing of the banking market and the Capital Market. We had last year an increase of 50 of equity Capital Market issuance. This year so far, yeartoyear, an increase of 200 Capital Market in europe. That demonstrates theres a huge case for good Capital Market working. There is huge liquidity around, great news for borrowers. They can access the market through the capital structure. There is a great deal of opportunity for investors while looking for yield. In such a low environment for yield everything has to be taken into account and the opportunity has to be caught in order to fulfill the liability requirement in terms of yields. Thanks so much for joining us, olivier khayat. Thank you. Deutsche bank is expected to price its capital at a big discount today. The issue will likely price between 20 to 21 euros. Its a big discount to the Current Trading price. The german lender is looking to strengthen its Balance Sheets in light of pending cost cuts. The subscription rights will be allowed to trade immediately after the price has been set. Meanwhile, within the last hour or so, Goldman Sachs has upgraded its rating on deutsch, reflecting what it says has been a recent underperformance. The firm has upgraded Credit Suisse following the set. Ment of its u. S. Tax cases. Meanwhile, lloyds bankers withdrawing from a trade Financing Deal that involved rosneft. And restrictions placed on mortgage lending. This according to reuters. The nationalized bank will implement a capital four times loantoincome lending with a maximum term of 30 for all mortgages worth 500,000 pounds or more. Still to come after disappointing manufacturing construction numbers this week, can Britain Services industry buck the trended . Well have the latest breakdown of activity with the pmi numbers and reaction right after this. Youre watching worldwide exchange, bringing you Business News from around the global. More sanctions could be on the table for russia as president obama heads to g7 meeting in brussels. This as leaders squabble over the European Commission job. And frances foreign minister joins the course of criticism over americas potential 10 billion fine against bnp paribas saying the amount would be disproportionate. Ive never seen a drop like this for sales. Tesco admits the retailer is struggling as it tens to cut prices. Also saying he cant make any promises that things are going to get better. And Deutsche Bank is up to price its mammoth 8 billion rights share. It will be offered at a discount, around 21 euros per share. We have the latest services pmi out of the uk. Its edged down, just a smidgen, 58. 6 in may from 58. 7 in april. The poll was for it to be 58. 2. It is better than expected. It has meant the composite index has gone down to 51. 4. Anything around the 60 mark is a strong expansion. Hiring matching a 17year high as well. Charlie dieble is with us from Lloyds Bank Commercial banking as is our uk business reporter, julia ibrahim. These are still strong numbers, even though theyre slightly off the pace of previous months. And our forwardlooking indicators for the uk economy suggest that were looking at a pretty robust outturn for 2014. Something in the region of between 3 and 3. 5 gdp growth, compared to any other global comparison. Is it all in price for the pound . We think most of it is in the price. We think it could remain relatively well supported against the dollar in the short term. Moving forward as we start to talk about perhaps even more of a rebound in the u. S. And a shift in the u. S. Profile, then we can start to see the dollar improve. Were not looking for a big setback in sterling at this point. Yesterday we were talking about construction being slightly lower than expected. But this is, as you said, all expansionary, the uk economy as the ons was keen to point out yesterday. It is doing incredibly well. The question is, hiring, thats a very interesting point, is productivity beginning to return . Thats the big conundrum in the uk economy. While weve had rising asset prices like housing, people have been spending in shops but most of that has been done, lets not forget, by pilfering our savings and really the type of Wage Inflation thats going to drive the economy forward for the next year, 18 months, hasnt quite taken off. Even though we had slight Wage Inflation last time around, a lot of that was driven by bonuses. We dont want too much Wage Inflation, the bank will have to ratchet up Interest Rates more. I dont think well see an Interest Rate hike anytime yet. But Monetary Policy is not just about Interest Rates anymore. Its a whole suite of tools that the bank has at its disposal if i can get it out. In a couple weeks, well see all of these macro prudential tools potentially being used to tweak the housing market. Youve seen lloyds, rbs, trying to calm those markets down with loantoincome cap. You might see the bank of england sdoing similar things. Maybe they wont have to do anything if the banks are acting individually. Shares in britains biggest Retailer Tesco trading lower after posting the worst sales in its home market in over a decade. Down 3. 7 compared to last year. Chief executive Phillip Clark says hes never seen a sales drop like this before. He says he cant make promises that things will get better. First of all, those comments, quite extraordinary. Phenomenal comments from the chief executive on the press corps this morning. He was saying, look, weve got to take a lot of pain. Weve accelerated our turnaround plan. We knew this was coming. So its all okay. This is a very difficult industry. Its only going to get more difficult. The problem i think most shareholders will have is we have a turnaround plan that were 18 months into. The pain has got substantially worse. Weve got like for likes continues to tumble. What were not getting from Phillip Clark is any indication of when this is going to pay off. Lets bring in david on that point. Hello. Yes. I mean, i think obviously the numbers are disappointing. No more disappointing, in fact, less disappointing than people were expecting. The figures going around yesterday were penciling in a potential decline of up to 5 in the uk. The point to make is that part of it is due to the market, the markets are difficult. Its flat or falling food volumes, not much growth. The players are competing with each other. Theres also some of the problems with tesco, selfinflicted. Refurbishments causing disruption. General merchandising theyre doing. What they said today was were going to continue with this selfinflicted pain. Were going to continue refurbishing the stores and price cuts. Remember, you had this big move from morrison saying were going to spend a billion. You have the likes of aldi who have completely disrupted everyone. Theyre growing 20 to 30 in the last quarter in terms of market share from a low base but substantial growth. What we heard from clark today was, yes, weve had four waves of price cuts and youre going to see more. The question, david, are they on the right track . Is he doing all that he can . I would say that theyre on the right track. But its going to be slow, painfully slow. If you think about it, tesco in the last five, six, seven years, they went on an expansion spree, international, diversification spree. It takes time to turn a business of this size around. Store refurbishments take a long time. It will take a long time. Will we see more of the price wars . I wouldnt call it a price war yet. This is part of the market, part of a competitive market. I think well have to wait until later in the year to see if its a real price war. You know, sainsbury has been able to stand up for what we stand for. Theyve been less squeezed here. I would say so. Sainsbury has been clever to differentiate themselves from the discounter. Theyre focused on quality and brand ranges. Why cant tesco do that . Its more difficult for tesco. Tesco traditionally have been the value player in the uk. Dont forget, another grocer in the uk thats been being exceptionally well is the likes of watros. You have a sense of luxury. The problem for tesco is that traditionally in the uk, they were seen as the cheapest people to shop with. And thats no longer true. Yes. Any thoughts on this, charlie, before we let you go . It shows you how there is this sort of the hollowing out of the middle ground which if you want to macro that up, that is exactly whats happening in the u. S. The high end and the low end are doing very well but its the middle ground that is being lost. Thats why we continue to see such disappointing housing data in the states. Good to see you all. Thank you. Charlie dieble. Thank you. Helia, thank you as well. An hour and 38 minutes into the trading session in europe. Equities flat to slightly down. Ftse 100 off 0. 2 is headed lower past that surface pmi number. The ftse mib is off 0. 4 . They have come back slightly, 2. 57 . We did hit 2. 6 yield yesterday but remember we were down 11month low on the thursday around what are we talking about, 2. 42 is what i wanted to say. On the currency markets, sterling, the reaction post that pmi number, sterling dollar off slightly, 1. 6721 this morning. Euro dollar still on 1. 36. Now some news for you. California governor jerry brown is facing republican challenger Neel Kashkari in the november midterm elections. Well keep our eyes on that and have more on that in the next part of the program. All eyes very much on the European Central bank tomorrow for global investors. Its widely expected to give the eurozone sluggish economy a boost at its policy meeting. One of the potential tools is negative interest raitts. How would this move into unchartered territory help . Katherine boyle is here to explain. The ecb currently has three rates that it set, the margin lending facility, currently at 0. 75 , the refinning rate at 0. 25 and the deposit facility rate which is currently flat. The ecb is rumored to be preparing a package measures, including a cut to that deposit rate had which would turn it negative for the first time in history. The deposit rate is the return banks get for parking their money at the ecb an a cut to this rate would mean any bank that holds cash in this account would pay interest to the ecb rather than earn it. This action is men to the kick start banks into enlding to businesses and households rather than hoarding their cash. The question remains whether it will have this desired effect. Ahead of the most closely watched ecb meeting for some time, how should you be positioned . Head to cnbc. Com to find out how to trade Mario Draghis moves along with a full breakdown of the action the ecb could take tomorrow. We tan to the know how youre going to benefit. Email us at worldwide cnbc. Com or tweet to me rosswestgate. Now, japans life insurer is buying protective. Daiichi life is looking to buy all outstanding shares of protective at 70 a share. The firm plans to finance the deal by issuing new shares up to around 2. 5 billion. Faced with an aging and shrinking market back home, daiichi hopes to broaden its business overseas. Its expected to continue growing. This deal gives the firm a foothold in a promising market. With the addition of protective, they will gain 45 billion of premiere income, pushing it on par with nippon life. Thank you for that. Have a good evening in tokyo. A hong kong billionaire is reportedly reviving talks with russias vimplecom. If all goes well for vimplecom and hutch, the next step would be to convince regulators that it would serve the interest of consumers. China ramps up security and sensorship on the 25th anniversary of the Tiananmen Square protest. Well be in beijing with the latest after this. [ female announcer ] theres a gap out there. Thats keeping you from the healthcare you deserve. At humana, we believe if healthcare changes, if it becomes simpler. If frustration and paperwork decrease. If grandparents get to live at home instead of in a home. The gap begins to close. So lets simplify things. Lets close the gap between people and care. The dispute between washington and china has intensified. Beijings reacted about i saying it was strongly dissatisfied and warned that it could worsen trade relations between the two countries. It stems from a petition filed by a Domestic Company called Solar World Industries america. Thats not the only point of discord between beijing and washington. Cybersnooping. According to the peoples daily, Tech Companies like yahoo cisco systems, microsoft and facebook threaten the cybersecurity of the mainland. Facebook is currently blocked in china but it said last month it may open a sales office to support local appetizers reach outside of the country. And this is all happening as we also approach the 25th anniversary of the Tiananmen Square crackdown and the security operators are on overdrive as part of the governments campaign to silence its critics as eunice yoon reports, many are still haunted by the events of that day. Reporter as an i. T. Entrepreneur, john also thinks about the future. These days hes reflecting on the past. Jong was a student in beijing on june 4th, 1989 when the government cracked down on prodemocracy protesters at t Tiananmen Square. I made calls to my classmates to ask about their safety he says. This event is something a generation of chinese will never forget. In 1989 thousands of students marched to the square, calling for a more democratic government. Soon, the demonstrations attracted other citizens, ballooning to an estimated 1. 2 million. Then on june 4th, the troops fired on the protesters, killing by unofficial accounts anywhere from hundreds to thousands. Veteran china watcher James Mcgregor worked here as a journalist the following year. Everybody was scared. They didnt know where the government was going. They were still rounding up people. It was a very tense time. Reporter 25 years later, the Ruling Communist Party is still tense about that day. This is always a politically sensitive time of the year. This year, on the 25th anniversary of the Tiananmen Square crackdown, the Security Apparatus is on overdrive. The square is crawling with police. Journalists have been warned not to report from the square. Its all part of the governments campaign to silence any discussion with the protests that took place here in 1989. Reporter now, china is in many ways a different place. The economy is almost unrecognizable. The government pushed through reforms, opening the country to the world. Today, chinese shop at foreign Branded Stores and drank lattes and people like jong had free to start their own businesses. Protests now focus on issues such as the environment, land and ethnic rights. The government response has been tighter control over the internet, dissidents and unrest. Now, tiananmen is another piece of baggage the party doesnt want to talk about that is still dragging behind. Theyre running as fast as they can to get away from it. It will catch up someday. Reporter until then, jong says his generation will remain haunted by the governments silence. That event in one way did end, people died, things calmed down and it seems that what followed was prosperity and peace for china. However, at the same time, it brought with it a lot of negative consequences, he says, and as long as these exist, that event will never truly end. Eunice yoon, cnbc, beijing. Eunice joins us in beijing. A sensitive subject as you said. Talking about these reports of the Chinese Media accusing u. S. Companies of spying. I just wonder today if you were going to be on google or an internet Search Engine in china and you typed in Tiananmen Square what youd come up with . A blank page. I was trying to get into my gmail and its totally inaccessible. Its something that already was happening because of this particular week but also now we have heard of some anger and rhetoric through the Chinese Media about some of these u. S. Tech companies. You mentioned google as well as facebook. So the two, the combination of the two cant be welcome news for u. S. Tech companies. How do the Chinese Government deal with this historical event . I mean, clearly they dont want to talk about it. Its not like the people are going to forget. Reporter no. The people wont forget but actually our conversation is already being blacked out. People wont even hear our conversation within the country. China has defended itself today. There was a Foreign Ministry spokesperson at a regular press briefing that said the countrys leaders took the right path at that tile for the sake of its people and basically spent ti time the economic prosperity. Thats the legacy of Tiananmen Square in 1989. It was seen as a day when the government made a statement about its view and attitude towards political reform versus economic reform. It would not tolerate political changes but at the same time, would push ahead with economic reforms. And that is a big question for china going forward. For the next 25 years, its looking to embrace these deeper economic reforms, even as weve seen xi jinping, the president of this country, consolidating his power, hes also unveiled a broad liberalizing agenda for the economy. But are the two really compatible . That is the big question that a lot of people have here. Yes. I suppose well see what happens there. Eunice, thanks very much indeed for joining us. Thats the latest from beijing, cnbcs eunice yoon. The u. S. Real estate and Office Sector has been slow to recover from the recession with weak jobs growth and skittish employers leaving many spaces vacant. With bigger tenants harder to come by, Office Landlords are looking to change their business model. Krshss diann cnbcs diana o. Reporter more than a dozen Small Companies barely stick out from each other, but they are plugged in. What were doing is doing it top down from here. Lets dangle all this money in front of the highgrowth companies and make them a compelling offer. Reporter venture capitalist paul singh has funded hundreds of startups but recently he noticed a new niche. The gap now is in the middle, whether you have revenue, a million bucks in revenue, seven or ten people working for you. Its hard to raise the money you need at that gap. Where do you actually put them . Reporter if youre singhs new 50 million Crystal Tech Fund you put them here in a collaborative work space owned by one of the nations largest publicly traded reits which also happens to be an investor in the fund. Crystal city has always been and will continue to be a strategic valueoriented location. We happen to have 26 buildings, 8 million square feet in this location. Reporter the shrinking federal budget cost lost some of its tenants. So they sought new tenants. The creative types, the stem types, science, technology, engineering and math. Reporter types like patrick smith. We are creating a network of chefs that make healthy meals. Reporter smiths power supply is both a beneficiary of the Crystal Tech Fund and a vornado tenant. I can talk to one of the other companies or ask paul his opinion. Theres synergy among all of us. When people look back at sort of what were doing here, i think this will be kind of viewed as sort of the diagram. Reporter vornado is planning to convert one of its Office Buildings into a 250unit apartment building. So some these new tech workers could have a very short commute home. Diana olick, cnbc, crystal city, virginia. Short commute is always a good idea. The u. S. Senate has approved former treasury official tim massa to be the next chairman of the commodity futures trading commission. He hes tasked with overseeing the options and futures market. The senate also signed off on two other nominees to fill vacancies at the cftc. The u. S. Utility nrg energy is close to a deal to buy north americas biggest wind farm for more than 800 million. The wall street journal reports the purchase could be announced today. The move comes just a few days after the Obama Administration unveiled plans to reduce Carbon Emissions from u. S. Power plants by 30 in the next two decades. The rules would likely impact coal fired plants the most. Nrg stock in frankfurt doesnt seem to be trading at the moment. Elon musk says he plans to stay on as teslas ceo for at least another four to five years. Hes told shareholders at the companys annual meeting that hes committed to be with the firm through the production launch of teslas coming Third Generation car which could start by the end of 2016. Musk says tesla may Start Construction on three sites as well for its giant battery factory or gigafactory. Hes also planning a controversial announcement involving teslas technology patents. The stock up a percent this morning. And sothebys is holding anilia Online Auction in new york of john lennon original art and manuscripts. The work called you might as well ask is the largest private collection of lennon items ever put up for sale, featuring pieces from two books that the ebeatle wrote and illustrated. The 89 lots range in price from 500 to 70,000. Something for everybody. If youre a beatle fan. Ahead of the u. S. Open a little bit later, European Equity markets down on the session lows, the ftse 100, xetra dax off 0. 3 . Second quarter gdp matching a 17year high. Elsewhere, the pmi is slightly disappoi disappointing. Contraction in france, italy ticking up on that. Where does that leave us as far as u. S. Future are concerned . This is the we closed lower yesterday after being fresh record highs on the monday session. Here on wednesday, were called higher for the dow, up by around 24 points. The nasdaq currently called lower by 6 point. Still to come, the second revision to the eus gdp reading will hit the wires. Well break that down. Second hour of the program, coming right up. Youre watching worldwide exchange. Im ross westgate. Headlines from around the globe. More sanctions could be on the table for russia as president obama heads to a g7 meeting in brussel brussels. Frances foreign minister now in the course of criticism over americas potential 10 billion fine against bnp paribas. He says the amount would be disproportionate. Ive never seen a sales drop like this. Tesco ceo admits the retailer is struggling as it continues to cut prices. He also says he cant make any promises that things are going to get better. And Deutsche Bank gears up to price its mammoth 8 billion euro rights issue. They are offering shares at a discount, around 21 euros per share. Youre watching worldwide exchange, bringing you Business News from around the globe. Growth numbers out of the u. S. That in just a second. Also a comment from president obama whos wrapping up his trip to warsaw in his fourday visit to europe. He says hes discussioned with the ukrainian president elect poroshenko a plan to restore peace. He says hes discussed with mr. Poroshenko a plan for reducing ukraines Energy Dependence on russia. That would be rather key and the ways the u. S. Can help train Law Enforcement and military as well. He says poroshenko was a wide selection to lead ukraine during this period. Well keep our eyes on that. That press conference just finished. Meanwhile, the latest snapshot of gdp for the eurozone. First quarter gdp unrevised at 2 quarter on quarter. Unrevised at 0. 9 yearonyear is expected. Fourth quarter gdp was actually revised up slightly to plus 0. 3 from the 2 quarteronquarter as well. Producer prices down 0. 1 on the yield. 0. 1 on the month, minus 1. 2 on the year. And that is pretty much as we were expecting as well. Exenergy, ppi up 0. 1 , contracted 0. 3 on the year. Thats the latest snapshot of eurozone growth. Its not massively strong. Joining us with his thoughts, peter sengec. A slight tick down. France very much in contraction territory. Is growth going to get stronger anytime soon . Not unless the European Central bank does something about it or contributes their growth. The recovery has been very weak. We only saw 7. 2 growth in the First Quarter. And there is a big diversity aproduct europe. Germany was growing but france is experiencing contraction. The recovery which started three, four quarters ago is fragile. And may not continue unless the ecb actually steps in. Can the ecb put growth into the economy . Or is it actually the governments issues that need to do this . Bo edge are necessary conditions for growth. In the short term, the European Central bank we expect it actually to reduce the policy rate and perhaps move into the negative territory. It wont have much meaning, will it . Probably not because the main target, the ecb would be to boost lending across the eurozone. Boosting lending equals increasing investment and in the short term, this should help the growth. In the long run, the structural issues, the labor market is still a huge problem with unemployment rates 11. 7 . So to boost lending, the ecb probably would have to be inventive. Some sort of quantitative easing has been discussed but its not probably going to be effective on the open market. Because sovereign yields because of the transactions and the bond market, the Corporate Bond market is small compared to the u. S. What the ecb could potentially do, they came up with longterm refinancing operations years back. Those are being paid back at the moment. Yes. They might tweak them to come up with a funding for lending scheme which weve seen in the uk, targeted to provide lending to firms, especially in the weaker economies in southern parts of the eurozone. It remains to see how effective that will be. The ecb expected to enact on some policy. The euro has fallen over the last 30 days as investors price that in. Steve liesman has been looking at exactly what is expected. The stakes are high for mario dprag i had and the European Central bank thursday. A special ecb edition of the cnbc fed survey shows overwhelming Market Expectations for easing to be announced. 65 of survey respond enthes expect them to take at least one of three substantial actions, lowering the refinance rate, cutting the deposit rate or announcing a longterm refinance operation or ltro. 48 of the 30 respondents expect two of these three to be announced and a quarter think all three will happen. The leading choice, 55 think the ecb will cut the refi rate with the average being 11 basis points. 52 think the deposit rate will be reduced and the average is a negative, negative, 10 basis points. A third look for a longterm refi operation and a third say the ecb could do outright quantitative easing. Twothirds are expecting a repeat of the guidance that rates will remain low for a long time. As for the u. S. Federal reserve, respondents lack for less in the way of rate hikes and asset sales in 2015. The expected fed funds rate in the survey plunged to just 0. 68 for the yearend 2015 from about 1 in the prior survey. And Market Participants now do not expect the fed to reduce its Balance Sheet until march 2016. Thats four months later than our open survey. Back to europe, eurozone gdp coming in at 1. 1 yearonyear. Inflation, estimated to increase 0. 7 and the euro, its seen dropping to 130 to the dollar. The survey could be worrisome to mr. Draghi. If it takes just a single action it could be disappointing to the market. Back to you. You think the ecb will launch all three actions there that steve was discussing . What is interesting, hes saying the fed not expecting to reduce its Balance Sheet to march 2016. The problem is the ecb has reduced the Balance Sheet massively. Its the only central bank that has contracted its Balance Sheet. Thats a problem. That is a problem. Its actually an interesting consequence of the ltros, because the banks started returning the loans provided by the ecb. This is actually the cause of the contraction of the Balance Sheet of the European Central bank. We see some sort of divergence of the monetary policies, the fed and the bank of england may increase Interest Rates while the ecb is ready to do the opposite. It should definitely do something and the Market Expectations are running high and markets would be disappointed if it didnt do is there any way the ecb could exceed Market Expectations . At this stage, i cannot imagine more types of monetary policies that have been discussed already. I think the ball would be in the court of the policymakers at the government level. These are the structural issues, both in the labor markets and with respect to banks which are still weaker than, lets say, banks in the u. S. I think this is pretty much as much as the ecb can do. Petr, good to see you. Director of european economics at moodys analytics. As far as the agenda on the United States today, big number out today. The may adp employment report is out at 8 15 eastern. It did forecast a big jump up in nonfarm payrolls reported last month. It will swing sentiment today. 8 30 we get april trade deficit numbers and revised First Quarter productivity and labor costs. At 10 00 a. M. , the may ism Services Index, the fed beige book report at 2 00 p. M. Also, earnings reports, brownforman, the maker of jack daniels and Southern Comfort. Never tried them. And home builder ho eer hovnana reports. Officials think that mary barra will be cleared of all charges in the gm recall. It will name executive, employees and departments responsible for the faulty ignition switches. The report will recommend broad corporate and personnel changes. Barra cleared a major hurdle last month when u. S. Safety regulators fined gm the maximum 35 million for failing to report the defect in a timely manner. Gm stock up 1. 2 in frankfurt today. Its too close to call. Mississippis Republican Senate primary race is likely headed to a runoff. Incumbent tad cochran and Chris Mcdaniel are locked neck and neck. Mcdaniel is one of the tea partys last chances to have a major candidate on the ballot for the full midterm elections in which the gop has a fighting chance to regain control of the senate. Elsewhere, pimco executive Neel Kashkari has won the republican nomination for californias governors race. Hell face off with democrat incumbent joe brown whos favored to win. And still to come, president obama has thrown his support behind ukraines president elect after a meeting in warsaw as he prepares to head to a g7 leaders meeting tonight. All the details on that, next. Drivers want to go further with their electrical vehicles. But you cant take a trip from lisbon to stockholm if you cant plan and recharge along the way. The European Commission is using cloud to make this possible. Creating a single charging and Billing Network across 28 countries. So drivers can travel as far as they want to go and when they want to go. Youre watching worldwide exchange. Recap of the headlines. European squabbles on the agenda as obama heads to a g7 meeting in brussels. Its not fair, frances finance minister calls the potential fine against bnp paribas disproportionate. Chinas in a security crackdown as the world marks the 25th anniversary of the Tiananmen Square protest. North america, a quick look at u. S. Futures for the open. Indicated a little bounce higher at the open after selloff yesterday. We closed at fresh record highs. The dow futures indicating a move higher by 24 points. The s p at the moment is 4 points below fair value. The nasdaq at the moment is 7. 5 points below fair value after being down three days in a row for the tech heavy indice. European equities down, the services pmi in the uk, 58. 6 hiring in the uk, that seconder up matching a 17year high. And some Corporate News for you to follow. Shares in tesco have been down a little bit today. The retailer posting its worst liketolike sales in the british home market for over a decade. Liketolike sales in the uk in three months, down 3. 7 compared to last year. Now, as far as currency markets, euro dollar 1. 36 ahead of the ecb tomorrow. Hasnt moved much. Dollar yen, slightly firm at 102. 60 and gdp came in faster than expected. What has happened in asia . Sri has the wrap out of singapore. Sri . Very good morning once again, ross. You saw the wobble on wall street overnight. Thats affected sentiment which as you can see is quite negative. Losses seem to be contained below 1 , so its not capitulation. If you look at the Greater China market and the aussies benchmark, the s p asx 200. We had a betterthanexpected quarterly gdp for the first three months, theyre somewhere backward looking. The market concern right now is about the iron ore market. Weve seen capitulation in that market, price is well below 100. No surprises. The banks were weaker. That brought the broader index down. As far as the Greater China markets, it was the property counters that led the downturn on the shanghai composite on the hsi, on the hang seng as well. Remember, this is interesting. Because the hsbc pmi factory activity earlier on this week showed us that the pace of Manufacturing Activity yes, a a fourmonth high. The external demand was better, having said that, domestic demand is quite sluggish and its been blamed on the weakness still in the property sector. No surprises that the property counters were weaker today. Want to talk about nikkei 225. Were seeing consolidation today for Japanese Equities above 15,000. I think the next kicker for the japanese market is really going to be what the massive Government Pension Investment Fund does with its near 1. 3 trillion. Are they going to allocate it more aggressively into the stock market . 12 currently. Are they going to take that up to 20 . Thats really one of the big corner stones of abeonomics. Abe has been pressing the pension fund to take a more aggressive stance in the equities market. Things seem to be quite positive in terms of moving into that direction. If we see confirmation from the Investment Committee of the gpif, of more aggressive allocation into the stock market, that will clearly give the nikkei its next leg up. As for the here and now, were pretty much in a Holding Pattern with a lot of these markets until we get more clarity from your side of the woods, ross, with the ecb, what that stance is on Monetary Policy. Are we going to see more accommodation and stateside with the nonfarm payrolls, the big mama of all the data points. A good way to finish the week as always, sri, thanks for that. President obama says ukraines president elect, Petro Poroshenko was a wise selection to lead the country during this period. The president met with poroshenko and the polish leader. Obama says he discussed a plan for decreasing ukraines independence on russia for energy as well as restoring peace and economic growth. This as the president prepares to fly to brussels for a meeting of g7 leaders tonight. The president says the meeting will be important to show the International Community stands behind poroshenko and ukraine. The meeting was supposed to have been a g8 gathering in sochi. That plan was changed following russias perceived involvement in the ukrainian crisis. And julia filed this report about what we can expect. Reporter as you said, this is g7, not g8. The first time in 17 years that russia hasnt been part of these discussions. But Vladimir Putin certainly central to the depate thats going to take place over the next few days, be it about ukraine or Energy Policy and security in particular for europe. I think theres an acknowledgement coming into this this at this stage in the crisis it now has to be about dialogue. It has to be about diplomacy. Theres been an acknowledgement from the officials that ive spoken to that yes, the tone is softened, we are seeing troops being moved from the border but at the same time more work needs to be done. Theres a belief that russia is inciting violence in the east and of course the elephant in the room is still the situation in crimea. The g7 are going to say they stand ready to enact more sanctions should they be needed. Theres no clear guidelines on just what could insight those further sanctions right now. So on the surface, agreement between the g7 but there still seems to be mixed messages being sent. We know cameron and putin will speak later in the week, hollande and france will do the same with putin, too. Obama sticks out like a sore thumb. Hes saying hes not willing to meet Vladimir Putin and that is how the situation stands, a Cold Shoulder it seems from the country most sensitive to a resurgence of the cold war. For now, back to you. Thats jules with a look ahead to the g7, which was supposed to be the g8. China ramps up security on the anniversary of the prodemocracy protest in Tiananmen Square. Well have the latest from beijing. Its more than that. Its perfect. Introducing curved Ultra High Definition Television from samsung. A dip yesterday for u. S. Equities after the s p and dow posted gains. The s p is around 5 points lower. And the nasdaq is around 9 points lower at the moment. U. S. Just departments planned 10 billion fine of bnp paribas would be inequitablineq this is cording to the French Foreign minister. She said it wouldnt be possible or acceptable to intervene in the proceedings and criticized the fine as disproportionate. They are looking into whether they evaded sanctions against sudan and syria between 2002 and 2009. Deutsche bank is expected to price its 8 billion euro increase at a big discount today. Sources have told cnbc the issue will likely price between 21 to 21. 50 euros a share. This according to marketing materials scene. Its a big discount to the Current Trading price, currently 29. 52. The subscription rights will be allowed to trade immediately after the price has been set. Meanwhile, within the last hour, Goldman Sachs upgraded its rating on Deutsche Bank from neutral to sell which has been an underperformance from the lender. This follows the Bank Settlement of u. S. Tax case. And that swiss lender is now on goldmans conviction list. This year marks the 25th anniversary of the Tiananmen Square crackdown and the Security Apparatus is on overdrive in china as part of the governments continued campaign to silence its critics. As eunice yoon reports, many are haunted by the events as the events on that day. Reporter as an i. T. Entrepreneur, jong also thinks about the future. These days hes reflecting on the past. Jong was a student in beijing on june 4th, 1989 when the government cracked down on prodemocracy protesters at Tiananmen Square. I made calls to my classmates to find out the latest and to ask about their safety he says. This event is something a generation of chinese will never forget. In 1989 thousands of students marched to the square, calling for a more democratic government. Soon, the demonstrations attracted other citizens, ballooning to an estimated 1. 2 million. Then on june 4th, chinese troops fired on the protesters, killing, by unofficial accounts, anywhere from hundreds to thousands. Veteran china watcher James Mcgregor worked here as a journalist the following year. Everybody was scared. They didnt know where the government was going. They were still rounding up people. It was a very tense time. Reporter 25 years later, the Ruling Communist Party is still tense about that day. This is always a politically sensitive time of the year. This year, on the 25th anniversary of the Tiananmen Square crackdown, the Security Apparatus is on overdrive. The square is crawling with police. Journalists have been warned not to report from the square. Its all part of the governments campaign to silence any discussion of the protests that took place here in 1989. Reporter now, china is in many ways a different place. The economy is almost unrecognizable. The government pushed through reforms, opening the country to the world. Today, chinese shop at foreign Branded Stores and drink lattes and people like jong had free to start their own businesses. Protests now focus on issues such as the environment, land and ethnic rights. And dissenting views happen more online than on city squares. The government response has been tighter control over the internet, dissidents and unrest. Now, tiananmen is another piece of baggage the party doesnt want to talk about that is still dragging behind. Theyre running as fast as they can to get away from it. It will catch up someday. Reporter until then, jong says his generation will remain haunted by the governments silence. That event in one way did end, people died, things calmed down and it seems that what followed was prosperity and peace for china. However, at the same time, it brought with it a lot of negative consequences, he says, and as long as these exist, that event will never truly end. Eunice yoon, cnbc, beijing. This is worldwide exchange, im ross westgate. Headlines from around the globe, president obama pledges help for ukraine. And declares the countrys president elect a wise selection. Hes now preparing to fly to a g7 meeting which he says will be important to show the world stands behind the country. French finance minister joins the course of criticism over americas potential 10 billion fine against bnp paribas saying the amount would be disproportionate. Knife never seen a sales drop like this before. Tescos ceo admits the retailer is struggling as it continues to cut prices. He also says he cant make any promises that things will get better soon. And Deutsche Bank gears up to price its mammoth 8 billion rights issue. Cnbc understands the lender will offer shares at a pretty big discount, around 21 euros per share. Youre watching worldwide exchange, bringing you Business News from around the globe. Very good morning. If youve just joined us state side, welcome to the start of your Global Trading day here on cnbcs worldwide exchange. We saw a slight pull back from record highs yesterday on the dow and s p. The dow down 21 points. The s p down less than a point this morning. The dow is higher on the futures. The s p is called lower by 4 points and the nasdaq this morning is currently called lower by around about 8 points. European equities have been down during the session. Ftse 100 is off 0. 3 . Pretty Good Services pmi came out this morning, 58. 6. It was stronger than expected. Pretty much matching aprils 58. 7 and hiring was matching a 17year high. All points are fairly strong, Second Quarter gdp growth in the uk as well. These were the may pmi numbers. Meanwhile in germany, fairly solid pmi composite. Xetra dax down 0. 4 . We saw contraction activity in france of 0. 6 . Ftse mib currently off 1 . Of course a lot of focus is very much of what will happen ahead of the ecbs meeting tomorrow. So in this environment, what are investors to do . Heres a recap of some of the thoughts weve had on the channel this morning. We need structural reform. I think with the ecb shifting the burden further, i think they are trying to tell the policymakers that were trying to do something as much as possible. Weve reached for the next Monetary Policy. We need to do something with the structure reform. Personally i fear theyre not going to lend smes. The french domestic market has been very, very tough for a number of years. Its sort of coming out the other side. You have a bit of a recovery story there which you dont yet have with tesco. The valuation is based on the Discount Online retailer which is something theyll float soon. If this recovery is as good as people say it is, wages should be going up. We see that at the margin that could be something that offsets. When Interest Rates start moving, thats because inflation is going up. One of the things that drive inflation would be real wages. Perhaps its not all that bad. Now, president obama says ukraines president elect, Petro Poroshenko was a wise selection to lead the country during this period. He was speaking after dinner in warsaw today where the president met with poroshenko and the polish leader. Obama says the u. S. Is absolutely committed to standing with ukraine. The president also said he discussed a plan for reducing ukraines dependence on russia for energy as well as a plan for restoring peace and economic growth. Now, the president is planning to fly to brussels for a meeting of g7 leaders tonight where further sanctions against russia are likely to feature on the agenda. Obama says the meeting will be important to show that the International Community stands behind poroshenko and ukraine. This was a meeting that was supposed to have been a g8 gathering in sochi. That changed following russias perceived involvement in the ukrainian crisis. Meanwhile, as the president is touring europe, this is whats on the agenda in the United States today. We have the may adp employment report. Forecast calls for an increase of 210,000 private sector jobs. At 8 30, we get april trade deficit numbers and revised labor costs and productivity costs. At 10 00, its the ism Services Index for may followed by the fed beige book. We have notable earnings reports as well, brownforman, the maker of jack daniels and Southern Comfort and home builder hovnanian are all reporting. The European Central bank is widely expected to give the sluggish economy a boost at its policy meeting tomorrow. Investors price in action ahead of the meeting. Cnbcs Steve Liesman has more on what is now expected. The stakes are high for Mar Rowe Draghi and the European Central bank thursday. A special ecb edition of the cnbc fed survey shows overwhelming Market Expectations for easing to be announced. 65 of survey respond enthes expect them to take at least one of three substantial actions, lowering the refinance rate, cutting the deposit rate or announcing a longterm refinance operation or ltro. 48 of the 30 respondents expect two of these three to be announced and a quarter think all three will happen. The leading choice, 55 think the ecb will cut the refi rate with the average being 11 basis points. From 25 basis points. 52 think the deposit rate will be reduced and the average is a negative, negative, 10 basis points. A third look for a longterm refi operation or ltro, and a third say the ecb could do outright quantitative easing. Twothirds are expecting a repeat of the guidance that rates will remain low for a long time. As for the u. S. Federal reserve, respondents lack for less in the way of rate hikes and asset sales in 2015. The expected fed funds rate in the survey plunged to just 0. 68 for the yearend 2015 from about 1 in the prior survey. And Market Participants now do not expect the fed to reduce its Balance Sheet until march 2016. Thats four months later than our april survey. Back to europe, eurozone gdp coming in at 1. 1 yearonyear. Inflation, estimated to increase 0. 7 and the euro, its seen dropping to 130 to the dollar. The survey could be worrisome to mr. Draghi. It suggests that the ecb risk disappointing the market, certainly if it does nothing but also if it takes just a single action. Back to you. That was steve with the look ahead. Joining us is lance roberts, chief strategy at Sta Wealth Management. Lance, thanks indeed for joining us. It seems to me almost impossible for the ecb to do more than is expected of them. What does that mean for strategy, do you think, if you look at European Assets . Well, i think the problem now becomes really for them, theyre facing still really high unemployment rates. Of course the deflationary environment thats really continuing to plague the entire eurozone. Theyre going to theyre being force nad a positid into do more work, much like japan and here, with the Federal Reserve qe programs. Theyre being pushed to the point that they have to do more. The question is, is it going to be effective . Weve done ltr programs in the past. Weve done more bond buying strategies and these type of things. They have an incremental effect on the near term but the problem is, its not fostering a longterm economic recovery and so its kind of were just continuing to chase our tail at this point. Weve got to focus on some ideas potentially that will start fostering some growth. Well have to see what happens. It is interesting, steve was saying, the ecb has seen its Balance Sheet been shrinking as ltro pays back. They are the only central bank thats been doing that. The reality is the fed wont be able to shrink its Balance Sheet within the next five to ten years. The underlying fact is that the economy isnt gaining that much traction here in the United States. Were still battling low rates of inflation. Weve had a little bit of an uptick recently. Its probably not sustainable. Wage growth is suppressed, employment still remains very weak. Its only growing at the rate of population growth. The ability for feds to raise rates and shrink the Balance Sheet probably isnt going to happen for at least two or three more years. Thats only if we dont get a recession before then. Do you think we stay at the moment with take a look at the treasury yields. They have bounced back from that 11month low of 2. 4 up to 2. 6 . Do you think we are now in a range between 2. 4 to 3 . Any chance of it moving higher than the 3 level in the short term . Well, i have to go back to june of last year. I wrote an article saying this was the best time to buy bonds because rates had spiked, really for no reason other than a Balance Sheet reset for emerging markets. Since then, rates have been falling as i expected they would. We got oversold a couple weeks ago on a technical basis. Youre seeing a little bit of a bounce. Rates are clearly in a down trend. This recent break below 2. 5 shows the economic weakness here in the United States is really far more than what some of the headline reports are showing out of the Economic Data. Theres an underlying drag within the economy, primarily due to the lack of wage growth and employment. And so rates could very well go lower this year. I think that may surprise a lot of people. Okay. Lance, stay there. Lance roberts from Sta Wealth Management. Just a reminder, these are pictures from the house of lords, always worth looking at. The queen is expected to arrive shortly. Its the official state opening of parliament. The queen will deliver a speech which Prime Minister David Cameron said he will be prowork and probusiness. Its the last queens speech before the next general election in may 2015. All looking splendid. Still to come, in the clear, reports suggest gm Ceo Mary Barra will be exonerated in the probe of the massive recall. Well have the detales after this. And china in a security crackdown as the world marks the 25th anniversary of the Tiananmen Square protest. Other stories were following today, its too close to call. Mississippis Republican Senate primary race is likely headed to a runoff. Incumbent tad cochran and state senator Chris Mcdaniel are locked neck and neck. Mcdaniel is one of the tea partys last chances to have a major candidate on the ballot for the full midterm elections. Elsewhere, former top overseer in pimco executive, Neel Kashkari won the republican nomination for californias governors race. Well ace o hell face off with incumbent democratic candidate joe brown. Massad is president obamas nominee to replace gary gensler at the agency which is tasked with overseeing the futures market. And gm ceo mare ry barra is expected to be exonerated in the companys massive recall. Bertha coombs is with us. She might escape. What happens to everyone else. Reporter that is the question. There will certainly be others who are implicated. Officials at gm increasingly believe that barra will be clear of any wrongdoing in the automakers recall crisis following a threemonth internal investigation. The New York Times reports that the probe, led by former u. S. Attorney anton velucias will name executives and employees and departments responsible for the delayed recall of faulty ignition switches which have been implicated in more than 30 crashes and at least 13 deaths. The reports will recommend broad, corporate and personnel changes. Barra who has been briefed on the investigation cleared a major hurdle last month when the national Highway Traffic Safety Administration fined gm the maximum 35 million for failing to report the defect in a timely manner. Reuters reports that gm has apologized for sending recall notices to the families of crash victims. Certainly not something anyone would have thought they would have done. The mother of one victim says gm could have identified the destroyed car through a simple check of vin numbers. Federal regulators believe gms death toll could be an undercount. Reuters analysis found at least 74 people have been killed in gm vehicles with keys similar key similarities to those the company linked to the ignition switches. Ken feinberg tells the wall street journal it will be a few more weeks before he can provide gm with options on just how to compensate crash victims. Feinberg who oversaw funds for victims of 9 11 and the Bp Gulf Oil Spill was reten by gm in april. Checking shares of gm in europe at this hour, theyre trading up, it looks like, just over 1 or so. Its a difficult, difficult case here, ross. Ken feinberg certainly has become the expert in these situations to try to get people some sort of compensation, if not justice. Back to you. Yes. Still a lot to come out. Still doesnt seem to have damaged their sales any. Isnt it amazing . Amazing. Far more than expected. More than 12 . I would imagine they have to credit their sales staff and a lot of those showroom floors. They probably had some pretty good sales as well. But it is quite remarkable just how strong their sales were last month. Maybe everybody figures weve had the problem. Its interesting, isnt it . Good to see you, bertha. Thanks for that. Elon musk says he plans to stay on as teslas ceo for another four to five years. He told shareholders that hes committed to stay through the production launch of teslas Third Generation care. Musk says tesla may Start Construction on three sites for its giant battery factory or giga factory. He also hinted that hes planning a controversial announcement involving the tesla battery patents. The president , barack obama has been in warsaw for the last 24 hours, hes on his way to a g7 meeting in brussels very shortly. But not before he concluded his trip to warsaw. Still to come on the show, well get the technical viewpoint on the jobs data after the break. What does it mean for investors in equities in a few moments . Drivers want to go further with their electrical vehicles. But you cant take a trip from lisbon to stockholm if you cant plan and recharge along the way. The European Commission is using cloud to make this possible. Creating a single charging and Billing Network across 28 countries. So drivers can travel as far as they want to go and when they want to go. 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Futures suggest a mixed start today for u. S. Equities after we saw a slight pullback on monday. The dow is higher by 24 points, the s p around 4 points below fair value and the nasdaq is some 6 points below fair value. Today on the agenda we get adp private payroll figure. Consensus estimates suggest the u. S. Economy added around 250,000 jobs in may. Lance roberts is still with us from Sta Wealth Management as well. Good to see you both. Carter, lets get to you first of all. We just dipped back from the record highs on monday. How is the jobs report going to fitter in this week . What are the key points we need to look at . The jobs report in principle has been something of a hollywood script, right down the fairway, every month, 200, 250,000. Yet its really not good enough in the sense that the equity markets are almost closed. Nothings happening. I think theres a great unease in the marketplace, not only in the u. S. But worldwide in the sense we know we have two things, a fairly maturable market, five years in the making. We also know the final year, at least the one we just finished was robust, up 30 if you will in the s p. After Something Like that you need to do what were doing, which is go quiet that quiet is either again the stall before some sort of unwind or the pause. Either way, i think this is normal. I dont think the payrolls have any bearing on market behavior. You think well get a stall before an unwind. Lance, what do you think . I agree with what he says, we always focus on the Economic Data points. The Employment Data has really been nothing more than the growth of the population in the country. That focuses through to where you see the jobs being created which as you increase the population, they demand more in service which is is exactly where the jobs have been created in the services area. So the problem here is that like 2011 when we were unwinding qe2, we were once again at a market that was elevated in price. Youre also taking liquidity, extracting that support out of the market. Youre kind of in this individual here because semiweak Economic Data. Its okay. Its not fantastic. But if you look at the underpinnin underpinnings, i said this a phi minutes ago, wage growth isnt growing. Were not doing the things that are creating stronger, economic vibrance. Carter, we have seen saw the nasdaq regain some momentum in may, of course, with the russell 2000 didnt. Is the russell 2000 going to play catch up or are the other markets going to head down towards that, carter . Thats right. There is an adage from the 1930s which i think applies quite well here, a market deteriorates under the cover of strength in blue chip stocks. We have a breadth issue. A lot of securities arent in uptrends anymore. The russelltype names as you cited, badly damaged. The mark set quite unchanged, still up on the year because of the cover its been given bit likes of apple and exxon, Johnson Johnson and berkshire. We think the real message is that the small cap stocks, the breadth issue, these are tells. We dont like it. Carter, thanks for that. Lance, thank you. Thats it for worldwide exchange. Squawk box up next. Thank you. Good morning and welcome. Mary barra will likely be cleared in the recall crisis at gm and the battle for mississippi. The Republican Senate seat is headed for a runoff. And Neel Kashkari, for real . For real. For real. Its wednesday, june 4th, 2014. Squawk box begins right now. Good morning, everybody. Welcome to squawk box here on cnbc. Im becky quick along with joe kernen and andrew ross sorkin. We do have an allstar lineup of Corporate Leaders on top today, including auto nations ceo mike jackson. We have rate van corporate leader turned investor steve case, former motorola boss, chris gal vin, lennars Stuart Miller and aigs steve miller along with mercks ken frazier. As well as gerry lopez. Lets get you up to speed on the days top stories. We are two hours away from the may adp report. The economy probably added about 210,000 private sector jobs last month. Also on todays calendar, april international trade. A revision to First Quarter productivity, mays ism nonmanufacturing index and the feds beige book. Check out the futures ahead of all of