46-year-old joseph martin has been in jail since last year after a former fifth grade student accused him of molestation and other students then came forward. martin initially faced 150 counts involving 14 boys. his first trial ended in august after the jury acquitted him of charges involving three students but were split on the other counts. the chp officer accused of sharing nude photos taken off the cell phones of women he had arrested turned himself in today. officer shawn harrington has been accused of removing nude photos from the phones of at least two women and texting them. harrington, who resigned from the chp on wednesday, is scheduled to be arraigned this afternoon. ♪ happening now -- a funeral service in roseville for sacramento sheriff's deputy danny oliver. oliver and placer county sheriff's detective michael davis were killed in the line of duty last month while investigating a suspicious vehicle. thousands of law enforcement officers are expected at today's service. some from as far away as europe. the funeral procession beep gins after the service at -- begins after the service at 1:00, this will likely impact traffic along southbound 880 to a cemetery in sacramento. services will be held for detective davis tomorrow. turning to our election coverage as voters get ready to head to the polls tomorrow. right now a pre-election forum is happening at a private school in oakland with the top candidates for mayor debating the key issues facing the city. alex savidge is live with the focus for those candidates. >> reporter: tori, good afternoon. yes. the top five candidates for mayor of oakland right now are taking part in a forum that's happening here at head royce school as we speak -- in fact, i understand it just wrapped up a short time ago. they are weighing in on a variety of topics. one of the most critical is public safety here in oakland. the forum is going on inside the gym here. it was organized by the head of the debate program here at this private school. he invited the top five candidates based on the most recent polling. that includes mayor jean quan, counselwoman rebecca kaplan, libby schaaf, brian parker and san francisco state university professor, joe tuman. before everybody headed inside, this morning we talked with mayor quan's four challengers about how to reduce crime and put more officers on the street. >> that's the most urgent need, more police. i have tirelessly studied other cities like particularly los angeles that's reduced violent crime by more than 80%. if they can do it, so can oakland. >> for me, that's the predominant issue in this race. it's the thing that has the greatest negative multiplier on other challengers like education, business investment in the city, creation of jobs. >> if we truly want to be safe, we have to go beyond adding police. we have to make sure that we're investing in education and puts people back to work. >> i would move immediately to restore the working officer beat to every beat so we had a consistent beat presence throughout our city. so would have a chance to get to know people in the community and deter crime with their presence. >> reporter: mayor quan didn't have time to talk with us on camera before the event. there are a total of 15 candidates on the ballot. but not all of them were invited to the forum. most of the audience was head royce students. 6th through 1 pth graders, not of voting age, although there were a fair number of people community members and neighbors and parents in attendance today. live this afternoon in oakland, alex savidge, ktvu channel 2 news. >> all right. thank you, alex. turning to the south bay, seven-term beam mike mon da and ro khanna are -- incumbent mike honda and ro khanna are urging people to head to the polls. mon dawn says he's running on -- hon dawn -- honda says he's running and stay with you for continuing election coverage. you can go to ktvu.com to find your polling place. look under web links. b.a.r.t. trains are stopped. investigators are looking into the discovery of a body on the tracks. brian flores just heard from a b.a.r.t. spokesperson and joins us live from the north concord station with an update. good afternoon, brian. >> reporter: good afternoon. i want to give you an update as well from the b.a.r.t. service or about b.a.r.t. service. it has resumed from the pittsburg bay station. as for the gates here, they opened up within the past five minutes or so. but again, b.a.r.t. service slowly returning back to normal after a body was found shutting down service from the pittsburg baypoint station to pleasant hill for about two or three hours. but a county bus bridge was set up in both stations. want to go to video from newschopper2. the body covered in stawmp on the southbound tracks, the nearest intersection where it was found. the body was discovered before 9:00 in between the condord and north concord station. it remains unclear if that person was hit by a train. a b.a.r.t. station operator said no one reported hitting anyone. there was blood on the tracks. that's when the police found the body before 9:00. >> part of the investigation will be what exactly happened. we don't know if a train hit the person or the person was deseatsed from other -- deseats -- deceased from other means. i can't confirm if it's related to the 422 a.m. incident. all of that is being determined, including how the person got on the tracks if the first place. >> reporter: for commuters that are taking b.a.r.t., again, between the pittsburg baypoint and pleasant hill, service is resuming back to normal. there is a bus bridge set in place. that will be there for another hour or so. in terms of the investigation b.a.r.t. is looking into whether a report from a citizen seeing someone on the tracks at 4:30 a.m., it remains unclear whether there is a connection there. i just heard from a spokesperson that said there was blunt force trauma to the body found on the tracks. we'll keep up updated at ktvu.com as well as twitter and facebook. we're live from the north concord b.a.r.t. station, brian flores, ktvu channel 2 news. plans to extend b.a.r.t. may not happen as originally planned. while the trancy system is extending into the south bay, future stations may be eliminated because of funding issues. janine de la vega joins us live from san jose to tell us why. good afternoon, janine. >> reporter: good afternoon, tori. we're here near the bart tracks which will travel near san jose. this project is come igging along smoothing and funding is secure for the station that stops 59 berryessa -- at berryessa. here is a map of the 6.1 extension into san jose. one station stops in alum rock neighborhood near 28th. then there would be two stops in the downtown area. the last stop would be in santa clara near the university but the valley transportation authority is considering foregoing plans to build the alum rock and santa clara station. it comes down to money. the vta is competing with other organizations and federal officials may require local agencies to have at least 50% of the needed funding. >> we have to be competitive financially that manes that the anticipated cost per new rider can't be more than $4.50 per new rider. and that means do we -- do we save money by eliminating a station or two of the planned four stations for the final segment or are there other ways to reduce costs? >> reporter: simly convalley leadership ceo and chair of the commission thinks it may be financially feasible to build the extension by eliminating one instead of two stations. this news is hitting the community near a church hard because a proposed station is supposed to be located behind it. the city has been planning an urban village with residential units and businesses to revitalize the area. >> there would be no development there. no revital ill station, nothing -- revitalization, nothing. >> reporter: transit officials are expected to submit the proposal in the coming months. there is a community meeting to talk about all of this scheduled for november 12th. reporting live from san jose, janine de la vega, ktvu channel 2 news. gas prices at one bay area station now down to 2.85. we'll tell you where and what analysts say is behind the lower prices. mild conditions around the bay area today. ktvu's rosemary orozco is tracking a warmup and will be here to tell us when we'll see the warmest day of the week. family and friends remember 29-year-old brittany maynard who ended her life over the weekend. the national discussion she sparked about death with dignity. new details now on that terrible halloween hit-and-run crash in santa ana that killed three 1 is idea girls out trick or treating. two victims were twin sisters. the los angeles times today identifies the suspect as 31- year-old jaquin bell. he was arrested outside of a motel yesterday. the girls were walking in a crosswalk around 6:45 at night when they were hit. a uc berkeley fraternity is planning a memorial for one of their members who died while attending a concert at oracle's arena. 20-year-old zachary bradley was at a rave on hall when wean night when he fell about 20 feet from a restricted area behind the stage. the alameda county coreny ner's office is -- coroner's office is investigating the circumstances around the event. another student at the same event said she was surprised to hear what happened. >> personally, what i saw, the security was really, really tight that night. so it is really shocking for all of us. >> a spokesperson for oracle arena is not commenting saying the investigation is being left up to police. bradley's mother is making arrangements to headache his body back to his -- body back to his home state of arizona. the woman who sparked a national stalks about death by dignity ended -- debate about deathby dignity ended her. 29-year-old brittany maynard was diagnosed with a stage 4 brain toucher last spring. after being told -- tumor last spring. after being told it was terminal, she made the decision to die with a doctor's prescription of medications. >> i can't even tell you the amount of relief it shows me that i don't have to die the way it's been described to me that my brain tumor would take me. >> she moved to oregon to are access to the death with dignity act. more details now about efforts to pass the death with dignity law here in california. over the last 25 years, there have been six attempts to pass the same law here. the most recent was in 2007 and 2008. there is now a renewed effort by the nonprofit organization compassion and choices to get the law passed. right now the group is lobbying for support to get the issue on the ballot. fire investigators are now trying to determine what sparked a garage fire early this morning. it happened around 3:30 on san carlos avenue near clayton road in concord. this photo of the garage engulfed in flames was tweeted out by the contra costa county fire department. firefighters say three people lived in the home but no one was hurt. an unexpected surprise at some local gas stations this morning. as one gas station at mckee and 33rd lowered the price of regular unleaded to 2.8 a. the manager says -- 2.85. the manager said the price went down 12 cents to compete with a flabbing gas station selling gas for 2.90 and says the price may go lower depending on what his neighbor does. customers have been lining up saying it's been a long time since they've seen such low gas prices. >> i haven't seen 2.82, 2.85 in over -- years. it's been years. >> reporter: how does it feel? >> it feels great. i felled my van for $76. usually it's $10. >> some people are so happy, they are taking photos of the pump and spreadingth word on social media. media. a whistle-blower contacted 2 investigates with major concerns about safety, inside a busy san francisco tunnel. an employee of the san francisco public utilities commission says there are still serious issues at the broadway tunnel. he says a retrofit project meant to save money and make things energy efficient wasted thousands of dollars and made the tunnel too bright. >> it was clear that something had gone wrong in the design process. somebody's gonna get hurt hour killed. >> tonight at 10:00, 2 investigates uncovers the money trail and the response to the concerns raised by its own employee that efforts to fix the problem did not go far enough. the new eastern span of the bay bridge may end up with a deficit of $35 million or even higher. that's because there's still a lot of unbudgeted work that needs to be done according to the project manager. in addition, tearing down the old span is expected to cost much more than originally estimated. previously caltrans predicted the project would cost less than a budgeted 6.4 billion. pleasant weather shaping up over the bay area this afternoon. we do have a mix of sunshine and a few high clouds. giving you a live view into san francisco, you can see there, the bay bridge. if you look up above you can see the mid and high level clouds. we'll turn to the satellite and i will show you where the clouds are coming from. coming in from the northwest and that's pretty much how our flow is going. you can almost see how the clouds move in this direction. i will back it up and show you where the clouds are stemming from. we do have a ridge of high pressure over the pacific. you can see how the clouds are sort of being shifted right into the bay area. eventually, this ridge is going to shift a little bit closer to our coastline and as it does, the ridge is going to continue to bring us a warmup. so for today, in and out of the high clouds, temperatures a few degrees cooler. but a warming week will happen. i think wednesday and thursday. we're mild today, a little warmer tomorrow and by midweek wednesday, some of us nearing 80 degrees. i will show you that in the extended forecast. outside the doors right now, 60 degrees in san francisco. low 60s in oakland. 67 for you concord, 65 in livermore, 66 in the north bay in novato. 65 for santa rosa. along the coast, partly cloudy skies. 63 half moon bay. and into the south bay. san jose, you are checking in at 65 as well. the afternoon highs for today, going to near spent for some. 6 expected for sonoma -- 68 expected for sonoma. upper 60s in sausalito. beautiful day along the waterfront as well as in san francisco. 66 for alameda. you have a nice day coming your way. upper 60s to near 70 for antioch and brentwood. how about the south bay? gilroy, you will go to 72 for the second half. 68 expected for san jose. 69, santa clara and upper 60s for cupertino. san francisco, 66 for today, low to mid-60s expected along the coast with mostly sunny skies. the extended forecast here again showing you this warmup that will will continue for wednesday. tuesday, we'll look to hold steady on thursday. the weekend, temperatures drift back but not by a whole lot. low to mid-70s around the bay. pupper 70s inland. plenty of sunshine. i would like to see some rain on that extended forecast. but those numbers look nice. >> okay. all right. enjoy the sunshine. thank you. >> you are welcome. if you played this weekend's powerball lottery, check your ticket. we'll tell you how much it's worth and where it was sold. stocks moving between slight gains and losses as investors brace for losses and news including the european bank on whether it will stake more steps to stimulate the economy. the dow and s&p 500 closed at record highs on friday. the dow is currently down 26. the s&p is also down 1. the nasdaq, though, is up 4. apple fans are gonna have to wait a little longer for apple's new smart watch. the company planned to launch the apple watch early next year. but now the site, 9 to 5 mac says it will delay this until the spring. according to reports, the company wants to improve the device's battery which currently needs to be charged every day. cal cal poly says that bite peter oppenheimer and his wife are donating $20 million to the school's college of agriculture, food and environmental services. they are both cal poly graduates. peter oppenheimer was chief financial officer for apple and is currently working at goldman sachs. someone in the bay area may be holding onto a power ticket worth $360,000. it was sold saturday night at the spoke for less store in san pablo. it matches all five numbers, only mitch it's mig the powerball -- only missing the powerball. here's a look at the winning numbers. they are 1, 3, 13, 25, 38, the powerball is 17. music legend and bay area resident carlos santana is opening up about his new booking. the book traces his life from his childhood in mexico to a young adult and the path to his successful career. in his book, he says he strives to to provide his fans with something you a thenty kit. >> we are living in a time when everybody sounds like disposable sound bites. i don't want to be that. i want to create melodies and tones like bob marley and michael jackson. >> the book is already out in stores. a warning tonight for anyone on the street. tonight on the ktvu news at 5:00, why this is considered one of the most dangerous days to be on the road and how authorities are working to keep you safe. thank you for making ktvu your choice for news have a great day. - ( helicopter whirring ) - ( roars ) ( siren wails ) ( pop music playing ) ♪ when you're ready ♪ ready, ready, ready ♪ come and get it ♪ get it, get it ♪ when you're ready, come and get it ♪ ♪ na na na na ♪ na na na na na na na ♪ ♪ when you're ready, come and get it ♪ ♪ na na na na... female announcer: it's a great big world and it can all be yours. here and only here. ♪ come and get it. - [voiceover] on this episode of xploration outer space." the key to everything we do in outer space begins with rockets. we'll see how rockets ignite, how they fly, and go behind the scenes of a launch that's headed to the international space station. when the rocket ride is over, a unique way to travel that could hold the key to deep space missions. that's all next, on "xploration outer space." - [voiceover] welcome to "xploration outer space." i'm emily calandrelli. we're here at nasa wallop's flight facility in virginia for an antares rocket launch that's headed to the international space station. but before we blast off, let's go learn the basics
instrument in the tool belt. >> the protests in bangkok gathered steam as demonstrators defined new security laws and surround key government limits in a bid to top trillion government. a boost for investors, the spanish oilmaker strikes a deal with argentina over a price for the stake in ybs in 2012. and shipping into gear, crisis as it intend toss lift shares on the new york stock exchanges. the automaker's ipo plans will likely be delayed until sometime next year. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. >> announcer: you're watching hello "worldwide exchange" bringing on today's show, we're joined sclus you business news from around ively by the the globe. >> announcer: you're watching "worldwide exchange" bringing smiping manager of oocl. see anna looks to approve ads 3 billion capital increase we're going to enter in as well as the new san paolo chief carlos sanchino attends his first management meeting. we'll get the latest on the winter storm threatening to cause havoc ahead of the thanksgiving holiday in the united states. we'll be in new york for a preview of earnings from tiffany and find out how the luxury jewelrymaker is placed in the run up to the key holiday shopping season. but first, european central bank rates will stay low and they could be cut even further. this accord to the ecb executive board men benoit kurr. he spoke to cnbc and began by saying he agrees that the bundes bank's approach in the asset quality review. >> i think that the bundes bank president is right to set it as an objective. there is no reason why any particular kind of asset should be treated asterisk free by banks. that's the general principals that deserve to be supported. now, with that said, it is not a european issue. it is an a international issue. there is no reason why german bonds, european bonds will be treated differently from u.s. bonds or japanese bonds. so it is an important discussion, but it takes place in basul committee for supervision. it's not a european discussion. >> you've gone on the record to say that the european union, the eurozone is not on the path to a deflationary spiral. but we're talking about the prospect of lower oil prices, especially in light of the deal with iran and this growth divergence between germany and the periphery. could disinflation actually turn into deflation? how big of a threat is that? >> we don't see it as a very likely prospect that this inflation would deepen, would worsen in the eurozone as growth recovers, which is our main scenario. inflation will pick up gradually, and we will gradually come back to the 2% objective of the ecb. so this is the most likely scenario. that said, we've seen inflation cutting closer to zero. we have this safety buffer that protects us from entering into the danger zone when it comes to inflation numbers. and we'll be monitoring very carefully these numbers. the governing council of the ecb has been clear, saying that he's ready to keep rates at a low level for an extended period of time and if necessary, lower, if we see this safety buffer being further eroded. but that's not the most likely scenario, in our view. >> if a deflationary spiral is not something of major concern to you, why are your fellow policymakers citing the need for possible negative deposit rates? >> well, negative deposit rates is a possibility. we've been clear already a month ago that this has been discussed technically investigated, legally investigated, so the ecb is ready. now, that said, that's only one instrument is a toolbox. so we have a range of instruments that we would be ready to use if we see further rates to price stability materializing. but as i said, the main scenario is a scenario where inflation would value austerity. >> joining us for the first part of today's show, stephane eglacias. we've heard from noise this week. expecting rates to stay low for longer. they've got the forward guidance, but it's rather woolley forward guidance. how important is the ecb going to be for assets in europe? >> i don't think they will be very supportive. we don't think actually the negative rate, for instance, is very likely. we would argue that deflation is a rate but is not a central case scenario. so you're likely to see other action from the ecb, but only if inflation goes down further than what we expect. i do not expect any very big step from the ecb in the immediate future. next year will be different. they would probably need to bridge the year. but, again, in the immediate future, i don't think there will be any big surprise. >> so where will investors in europe be taking their direction from? from our point of view, we will have a recovery. and if you have a -- a very slow one. >> i was going to say, france looks like it could be back in recession. >> france goes back in recession. but if you look at the leading indicator, they are clearly above 50 for the pmi. we do think there is a recovery in europe for the time being. that's why i don't think the ecb needs to do much in addition to what they have done already. so from our point of view, we still believe that the stock market will continue to rally on the back of the european recovery, the u.s. recovery, and so we feel like -- for the time being. >> it's an interesting point, this recovery. the fist couple of attempts of a percent growth. >> yeah. >> well, i mean -- >> i mean, i get the marginal rate is important. the magical rate of change. >> i think there are two -- there have been two steps. the first step is we advice to go long european equity at the very beginning of july. the reason was we thought they would be stabilized and what was was a very, very low outcome. so you had this rally. and if you look, the rally was only on the p because the earnings have not progressed. growth rates are very weak. basically, it was a risk rally. people were pricing on the scenario. the scenario was mediocre. now is not enough. if you want to further rally, because europe is small value in our model. you need the proration of earnings. and then you need the progression of gdp at some point in the future. and that's the best. and i agree that q3 was not terrific, to say the least, but we do believe that when the futures and earnings -- we think next year earnings will start to improve because we have 1.1 point continue in europe. we have 1.1 for next year. again, it's not great. it's a mediocre number. but if i give you 1.1 with the leverage of the company, that's enough to generate some earning momentum. i think you need earnings. >> all right. stephane, stay there. we'll come back to you. we'll talk about the risks in the fixed income market, as well. meanwhile, protesters have been clash, police on the streets of kiev as authorities have moved to remove. eu official condemned russia's action and says the trade offer remains open. there appears to be no end in situ anti-government protesters in thailand. the protesters want to disrupt the government work in a bid to topple the prime minister. he's face ago two-day confidence debate in parliament, but still holds a strong majority. her opponents accuse-other corruption and are trying to whitewash the record of her -- a former prime minister. with the latest on the protests from bangkok is paul gambles. that's around half an hour from now. tensions between china and japan continue to simmer over china's self-declared air defense zone. this requires all planes to submit air plans. japanese airlines say they will do no such thing. meanwhile, the nikkei newspaper reports japan and the united states will step up air surveillance in the area using drone aircraft. right now, it's time to bring you up to speed with the global markets. we kick off in europe as ever with the dow jones stoxx 600 and we are weighted to the down side at the moment, around about 5 to 4. but we are at the session low. the ftse yesterday was up some 20 points. we saw slim gains for the dow and the nasdaq, similar to the s&p overnight. the nasdaq over 4,000 for the first time in many a year, about 13 years. right now, the ftse today, let's take a look at that and the rest of the bourses, just down 17 points. the xetra dax still near the all-time highs at 9,300. the cac 40 is down 0.2%. the ftse mib is off 0.8% as you can see. a number of individual stocks we're focused on today, axa surging after bayer made a bid for the nor norwegian drugmaker. repsol, up 4% after a deal has been reached to compensate the company for nationalizing its energy firm last year. and remy cointreau down almost 9% because of a sharp slowdown in china. talking of which, we'll bring you up to speed with how those asian markets have fared. is s&p/asx fairly flat. just show on you where we stand with that. that is actually okay. just up 0.75%. the hang seng was fairly flat today. shanghai composite also fairly flat and the nikkei 225 down slightly. we did see some relief for the yen today. we'll get on to that. but it's still pretty much down at four-year lows against the euro, five-year lows against the pound and six-month lows against the dollar. we'll come on to that. show you where we stand with bond markets. keep your eye owes treasury yield right now. yields lower once again and on the currency markets, let's show you where we are. dollar/yen, 101.36. we got to 101.90 with that six-month high. euro/dollar, 1 is.3550. and the u.s. dollar down slightly. some on her news we're following, as well, sylvia berlusconi has plead with italian lawmakers not to kick him out of parliament. this week he faces a vote that could see him expelled from the government, but the former prime minister has appealed to lawmakers to consider their actions. >> translator: don't take this responsibilities, that would be a burden forever on your personal history, on your consciences, a responsibility that would become a shame in the future, something to be ashamed of in front of your children and your constituents, in front of every italian. >> that's silvio berlusconi. just 35 days until the new year. we've heard stephane say he's overweight equities. what does he think of fixed income? >> fixed income we don't like. we think that -- our economies believe it will start in january. so you should have a sell off in fixed income. to give you an order of magnitude, my fair model is 3.4 for the treasury next year. we're looking for something like 70 basis points sales. a nice forecast with yield going to 3.4 never happen like that. you're probably going to have a correction on the stock market when that happens. >> the fed doesn't want this to happen. >> no. >> and i mean, i know -- and we started in -- when we had the rise in rates in the summer, we started from a lower base. we started at 2.7%, 2.8% yield. we shouldn't go so high. >> well, if you look at the sell-off each year from the top to the bottom, from the bottom to the top, we have 88 basis points. from june, you have 85 basis points. will we have a big accident next year? probably not. if you look at the sell-off we've done before, it's 150 basis points. i'm talking about 70 basis points. so in the big scheme of things, let's say for the sake of the argument 50 basis points, obviously, will be a very big shock for the market, but we're not talking about the disaster by any means. the stock market, by the way, was down 6% to 7%, the s&p during may and june. >> so will that knock equities if we go -- >> if you have a big champ like that, yeah, probably. i think a number of investors positioning themselves for the correction at the end of the year because the market has rallied a lot during this year, i don't think there will be a correction. because if you think by tend of the year the reporting season is over. as i say, the ecb will not -- so i don't see any big news -- >> something to knock us off track until the new year, basically. >> exactly. and the next year, it will rise and you have a tapering in january. >> when you have to revert back, gains right now the s&p up 26% for the year. i mean, exceptional performances. you can't keep having exceptional performances. so how do you revert? are you going to revert back toon a average performance. >> well, our point of view is that the s&p is very close to fair value. so the p is close to long-term average. and if you adjust the earnings for the trend, you would be also at very close to the long-term trend. so the point is, i think the s&p is very close. >> you could argue the margins have gotten exceptional things. >> yeah. >> very low tax rates, very low cost of borrowing and very cheap labor. >> yes. >> and those two things look to be on the wane. >> yes. so i think the story next year, to give you a number again, we have a six-person epf growth rate for next year. what could happen, for instance, cap ex. that's one of our theories. if cap ex speaks up, that's it for the margins. that would be another argument. but the margin would become pressed. if you do cap ex, top line for another company, you would have a recovery which would be stronger than expected. and then, indeed, we've done a 35% average on average every year. i don't think we're going to do 35%. >> stephane, we'll take a pause. still to come, china anchors itself with a 230 million euro deal in kabul. we'll have an exclusive interview with the greek shipping minister, coming up. you really love, what would you do?" ♪ [ woman ] i'd be a writer. 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[ male announcer ] fedex one rate. simple, flat rate shipping with the reliability of fedex. when you think of luxury marketplaces in the uae, the capital of -- may not be the first place that springs to mind, but government development programs and a focus on tourism means luxury tourism is on the rise and the city is increasingly competing with dubai. happy gamble has been out investigating. >> reporter: dubai's prowess as a tourist market is undisputed. but now nearby areas are on the rise. >> i think for retail, the market currently is on the supply when you look at the spending power of the population in terms of the incomes and the population here. but this is a limited product. there are a number of big malls currently in the pipeline. so they will be coming up in the next three to five years. for that to be sustainable is dependent on new job growth and an increase in tourism arrivals. >> while dubai currently accounts for 33% of the luxury market, abu dhabi is picking up the pace adding top international brands to its portfolio. >> when you look at international brands, is it a given that you would have a major presence in the middle east and in abu dhabi specifically? >> yes. the customers here, they know what they want. if they can see our cars in beverly hills or london or geneva, they would to be here. abu dhabi is a maurnlg jor metr and center of activity as well as luxury corner this new mall here. >> and it's not just luxury brands like mclaren that are putting abu dhabi -- it's become a major fund-raising pit stop for finance and business leaders alike. >> that the track is barely used the rest of the year makes little difference to the oil rich emirates where giants of private equity rarely make the pilgrimage to the uae capital in a hopes of getting a piece of the action. so as government led officials get a green light to spend on the finer things, abu dhabi could put the emirates on the right track. cnbc news, abu dhabi. >> now, spain is heading for its first current account surface since 1986. this according to the country's central bank governor. the year-end surplus will be give lent to 2% of gdp thanks to exports and the return of int internationinte international investors. they said a recovery is taking root. meanwhile, in greece, the finance minister said they are nearing agreement with the troika over the nation's 2014 budget gap. speaking with greek television, it was said despite ongoing negotiations over the figure, the government's shortfall was only 1 billion euros. this marks a sharp drop from the previous estimate which greece's incident er national parliament insisted was close to 2 billion euros. at the same time, china's giant shipping costco has closed a $230 million deal with the country's port authority. this will guarantee 4.75 million containers will come into the greek port annually from the chinese shipper. costco will build a fuel dock for the transport authority, which is expected to be repaid in 22 years. joining us now exclusively is the greek shipping minister. thanks very much indeed for joining us. my apologies for slightly getting your name wrong. good to see you. thanks for joining us. how important is this deal with costco? >> well, it's the single and biggest foreign direct investment in greece since the crisis erupted. so it's very, very important. it's very important that greece is accumulating new investments. and a quarter of a billion investment for us is very crucial. this is becoming one of the biggest ports in the mediterranean, doubling, going up to 6.2. but double the number of ship that's are calling our port and, of course, increasing the jobs in the area. >> i mean, this is a controversial investment, other people didn't want chinese investors. >> well, the people that don't want, they're our competitors. so it's not easy to tell. the only thing is that this investment is still under the approval of the european union. we have to -- our way with digicom. there's the agency of european union. and i think that we are going to have a positive outcome within the next few weeks. >> we'll know before christmas, do you think? >> hopefully. hopefully. we try to put the european union to take a decision fast. because we really need investments in greece. >> what is -- what do you do? is there any hope that this investment, albeit from china, rightly to other investments, is that the idea? >> well, no. the idea is that for the first time we are using our geographical location to attract investment. in our port, in our wailway system, and our transportation system as a whole. and now we are going after the approval of a european union, then we are going to call for the privatization of the whole and we are moving forward with the other ports. >> how long would it take for that process to be -- >> hopefully within 2014 everything will be completed. >> and you hope to list in 2014? >> yeah. >> yeah. how much -- how big a stake will you process, a whole lot or you retain a minority stake? what do you think? >> well, probably, we are going to go for the whole 67%, which is the absolute -- >> what do you make of the progress they're making in greece, stephane? >> well, the progress has been recently quite impressive because they were talking about spain. it's very close to balance now, has been reduced quite a lot. so we were starting to see what has been done in the past, i think. so in this kind of investment, are showing that you're probably close to the bottom now and you're probably seeing the economy recovery. >> thank you for your kind words. it's the first time after a long period of time that we're having a budgetary surplus. and it's the first time also the unemployment has been stabilized and the last of few months, we've seen a rise in employment. i don't think -- i can't say that everything has changed, but definitely the trend, as stephane has pointed out -- >> is stabilization. >> is we tried to pull it up. >> and this -- how close -- your speaking today about this gap between the troika and the greece has come down to 1 billion euros on the budget. what do you think is going to happen next? >> well, this is up to the european commission to decide and the numbers will be out in april. but definitely today way we are measuring things, it is much better than it has been in the past. >> no more certain, no more steady, do you think -- >> well, it has been a long period of austerity. what we say is that we can't put any more taxes in the greek economy. greek economy is overtaxed. now we want to facilitate investments and we want to attract a lot of money in our country. and we have seen the trend changing because there is an increased interest about what's happened. >> are you happy with the contribution that greek shipping is now making? i mean, i know there's this sort of voluntary agreement that they're going to, you know, 90% standing on the -- under a foreign flag has come off the pace of money. but is that enough? >> a double tax for the next three years. well, it's very good that it's a voluntary contribution. and that we don't have to impose it by a lot. and they come and they play by themselves. i don't say that this is going to solve our budgetary problems, but definitely, it's not going to send a message to the shipping community that they have to flee away. like it has happened in other countries, shipping and shipping business went away, went to eastern asia. >> yeah. how much is shipping still worth in this country? >> it's worth more than 7% of the gdp. and it's actually createding more than half a billion -- half a million jobs in greece, which is a very important number. the most important is that all this period of crisis, the greek shipping hasn't lost its position. it hasn't been affected. therefore, we can say that we are still the european champions in one of the economic sectors. >> and just on a final note, there was a period when we were worried about greek activity. those fears for now have been put to bed. but the politics in greece, because of the high levels of unemployment and the far right movement are still very to know toxic. what is going to happen with the government and the -- and the opposition? >> well, it was only two or three weeks ago that we had the confidence in the parliament. i don't think -- although it's really toxic and it's really -- we have a rise of the far right, the extreme right. we have a neo-nazi party in the parliament. half of their mps are in prison right now. but, anyway, they are still accumulating 6% to 8% of the polls. still, the government is very stable. and we are confident that we are going to have another year of political stability. >> good to speak to you. thanks very much indeed for joining us. we'll take a short on break. still to come, europe and asia are planning to bmd on record highs on european equities while the ecb board members says there are still options left to spur a recovery. >> negative deposit rates is a possibility. we've been clear already some months ago that this has been discussed, technically investigated, legally investigated, so the ecb is ready. now, that said, that's only one instrument in the toolbox. >> bangkok protests gather steam as demonstrators define new security lawes and surround key government limitaries in a bid to topple the government. plus, there's a bid to boost investors as the spanish oilmaker strikes a deal with argentina over a strike in ypf. european equities, down a bit. 2772% fort treasury yields. gilt yields, 2.77%. italian yields, 4.08%. on the currency markets, dollar/yen has just come back from its six-month high. we hit around 101.90. but the yen is still penned down against four-year lows against the pound. euro/dollar, firmer today, up to 1.3550. and sterling/dollar is around 1.61 is 80, just over 1.62 during monday's session. board members, meanwhile, bank of monte de paschi are expected to approve a 3 billion euro capital increase as the italian lender struggles to avoid capitalization and get approval for its 4 billion euro bailout which was agreed earlier this year. the capital hike, higher than expected, paves the way to launch a rights issue in early january. reports share fall over 7%. currently down 10%. today will be the first meeting of san p aolo manager with the new ceo at the helm. but what about the future of european banks? what does it mean for investors? stephane is still with us from ubs. still got a concern about the health of the european banks, particularly as we go through the asset qualities review. we wonder what is going to happen with the impact while we wind down the rto. >> i think the asset could be quite -- next year. as you say, we need to find the problem or the stress tests will not be credible. if you look at the way it will be done, they've negotiated a lot of room for maneuver. but i do think -- and they know they have to be critical. so i do think they will have an asset quality review and stress test which will be largely credible. but then the problem is a number of banks might fell and then we don't have a clear path of what we do with that. the option is banks recapitalize by asking for the markets, but if the market doesn't want it, then what happened? do you do a baiting disruptive for the market or do you do recapitalization by the government and you don't want government to be involved, etcetera, etcetera. but that's the risk. there will be banks failing, but we don't know how we address that issue, then we have problems. a few weeks ago a letter was published from draghi, a secret letter from draghi to the european commission and they are arguing bailing. so we know on this topic the ecb and the european commission do not agree. and that's the risk. so i think what we're seeing is -- >> and what the germans or french might agree or disagree on. >> yeah. but that's the problem. at some point, you need to put money in some of the banks and nobody will agree with -- >> nobody knows where the money comes from. >> exactly. the volatility or markets become nervous once again. i think that's the thing to risk. as much for the end of next year, because as you know, that is quite a -- of top of november, we don't know exactly. but that's an issue i think should not be -- >> wa do you think should -- do you have any idea what the answer should be? should money come from the sm, should there be a new fund? should there be bailin? >> what's happening is you see a number of banks raising capital. you are talking about the italian banks. so maybe what will happen is banks will be preemptive. >> if they're smart they will be, right? in a market they're still willing to give you some money. >> exactly. maybe to end up with asset quality saying there was this bank, this bank failing and guess what? the banks would have recapitalized. that would be the perfect scenario is you have done the hard work before the the syndication of that. so you need to do a lot of wishful thinking for this scenario, unfortunately. >> yeah. this is one of your sort of alternative scenarios, one of the risks. besides that, what else sticks out of this as potentially a big problem? >> well, the big risk for me is your first question half an hour ago about the curve. i think at some point it's almost an avoidable. no, that's the big risk in terms of probability. we're in a sense almost certain that at some point you will have an accident. >> the fed is doomed to fail, is it, in its quest to convince the markets that even when we taper, don't get worried, rates are staying low. is it doomed to fail in that quest? >> yes and no. you're not talk about 300 basis points like in 1994. so you're likely to have a -- but a small one. if you want a big accident, it would be a credit event in china. we think it's a very good probability. that would be a disaster. >> stephane, good to see you. thanks very much. if i don't see you before, have a good -- we've sort of just about going thanksgiving this week. >> happy turkey. >> happy turkey. thank you very much. >> thank you. the japanese government will its end four-decade long rights subsidy policy as early at 2018. fushiko toshiba has more for us from tokyo. >> hi, ross. it's the subsidy program that was originally introduced the domestic rice farmers from lowering prices by limiting production and giving cash handouts. rice farmers would agreed to produce less grain receive 15,000 on yen per 1,000 square meters of land. the new bills allow them to grants to farmers will be cut in half by next year and will have scrapped altogether in 2018. the government will, on the other hand, take steps to prevent rice prices from tunnelling by sdpanding s iexpa subsidies to farmers and preserve farm lieutenant in mountainous areas. with the prospect et of the ppd deal opening the door to chief rice imports, the government is hoping to protect the highly priced rice industry to impending stiff competition from foreign farmers. ross, back to you. >> all right. thanks very much indeed for that. let's remind you what's on the agenda in asia tomorrow. what would normally away ho-hum event in china is now taking on importance in the risk on of capital flight. textile chemicalmaker yongsheng advanced materials makes its hong kong trading debut. meanwhile, in the uk, george osmond has been talking about financial policy committee has requested the bank of england to review the role for the leverage ratio within the capital framework for british banks. he's suggested the fpc may need to set baseline ratios that are higher than that which is in the basul minimum for uk banks in some cases. the priority is to bring greater certainty on mead yaum term capital framework. and mr. carney says he agrees that it's time to look into role of leveraged ratios for uk banks and they think the spc will be able to complete that leverage review in around 12 months. the chancellor said he's open to the idea that it may need power. so a little discussion going on between the chancellor and the bank of england governor about leverage ratios. they are going to look at it. the ecb remains committed to doing whatever it takes, including negative deposit rates. if it sees further risks through price stability. in an interview with chloe cho, he said he's not concerned about disinflation. >> we're not concerned about the prospect that disinflation would deepen, would worsen in the eurozone as growth recover which is our main scenario. inflation will pick up gradually and will gradually come back to the 2% objective of the ecb. this is the most likely scenario. that said, we've seen inflation coming closer to zero. we had the safety buffer that protects us from entering into the danger zone when it comes to inflation numbers. we'll be monitoring very carefully these numbers. the governing council of the ecb has been very clear saying that he's ready to seek rates at the low level for an extended period of time and, if necessary, lower if we see this safety buffer being further eroded. but that's not the most likely scenario in our view. >> if a deflationary spiral is not something of major concern to you, why are your fellow policymakers citing the need for possible negative deposit rates? >> well, negative deposit rates is a possibility. we've been clear already some months ago that this has been discussed, technically investigated, legally investigated so the ecb is ready. now, that said, that's only one instrument in the toolbox. so we have a range of instruments that we would be ready to use if we see further risks to price stability tooirl materi tie materializing. >> some of the other stories today, peugeot has confirmed carlos savaras will replace phillipe ascio. peugeot shares ended the day higher amid expectations the appointment would help secure funding from chinese partner dongfen. fiat is working on an ipo for the first quarter of 2014. the public offering is expected to help settle a dispute over the carmaker's value between fiat and the united workers health care trust, the biggest orthopedic of chrysler. shares of fiat down over 2%. argentina has reached a preliminary deal to naturalize its energy firm ipo back in 2012. repsol was seeking approximately 10.5 billion in the deal. shares are up 3.5% today. buyers made a 2.4 million offer to buy norway's algeta. the german pharma teamed up in 2009 to create a new prostate cancer treatment approved for sale back in the u.s. in may. if the deal goes ahead, bayer will get outright ownership which sold for nearly $17 million in the third quarter. bayer stock pretty flat. algeta up 30%. still to come, down near an 11-week low as anti-government protests show no signs of slowing in thailand. could it represent a buying opportunity? we'll have the latest on the situation with investor reaction. i'm only in my 60's... i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i got a medicare supplement insurance plan. 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[ male announcer ] fedex one rate. simple, flat rate shipping th the reliability of fedex. tensions between china and japan continue to simmer over air defense zone. this requires all aircrafters to report plans. but japanese airlines will do no such thing. meanwhile, the nikkei newspaper reports japan and the u.s. will step up air surveillance in the area using drone aircraft. there appears to be no end in situ anti-government protests in thailand. several protesters have surrounded key mip industry buildings yesterday. the protesters want to disrupt the government work in a bid to topple the prime minister. she's face ago two-day confidence debate in parliament, but still holds a strong majority. her opponents are accusing her of corruption and are trying to whitewash the record of her exiled brother, a former prime minister. joining us on the telephone now is paul gambles, managing partner at mbng international. paul, thanks very much for joining us. we talk about the process, talk about the occupation of government ministries. what is it like in bangkok at the moment? >> it's probably not as bad as you think in a lot of ways. i think it's sort of gone from a situation last night where maybe it felt a little bit like high drama. it's a little bit more i think like comic relief today. the focus seems to be much more on the proceedings in parliament, on the debate. we've had the head of the opposition accusing the prime minister of being the center for -- i think he said center for corrupt practices in thailand. and to a lot of people, i think that sounded like it was an educational establishment, a lot wanted to sign up and join the center for corrupt practices, i think. >> that's one way of putting it. what is the risk of this getting bigger and putting off investment in the country and the japanese taking fright? >> obviously, i think today there is just a sense of the tensions are easie ining slight. i think the next flash point could well be there's an arrest warrant issued, heading the protests. a lot of it will depend on how smoothly his arrest or passage into custody, how smoothly that goes. but i think there's generally a much -- you know, sense of greater calm today. we seem to rally in the market a little bit. we've seen it bounce a little bit. we've seen the bot stabilize. when you bear in mind how bad the currency has been beaten down, i think that's an indication that maybe people are start to go worry if this is a low point, if maybe the end is in sight now. >> do you think ying is going to stay in power? >> yeah, i'm pretty sure of that. the majority she's got is so strong, if she called an election tomorrow, i'm sure that the party would find a way of winning that. so i don't think that barring any constitutional means because, of course, there is this challenge that the amnesty legislation that was put forward was in breach of the constitution. but barring any legislative means of removing her, then i think we would expect to see a hold on to power, either in the current government or if she calls in the election and wins that. >> so, paul, from an investor's point of view, what is the take away? you seem to be saying this is more of a repeat of 2010. is there a buying opportunity here? >> yeah, i think there is. unless anything untoward happens, this is from high drama to pass, i think this could be a reasonal entry point. we don't always get the news through the government sources. but i think you have to watch it minute by minute. if you do, if you think that the worst is over, you know, we're going to go back to the normal business of doing business, which most of the country has been doing. even most of the capital has been doing, to be honest with you. even in the central business district, we're about a mile or so away from the area. and the protests have been confined in there. i think getting towards the end of the drama, i think to a reasonable entry point to go and pick up on the way to the stocks have come off by 5% or so this month in the way the currency has come off this month. >> paul, good to talk to you. thanks very much, indeed. paul gamble, managing partner at mbmg international. things aren't very smooth for the french cosmetics company reporting a fall in first half profit of $18 million. earnings are down on foreign exchange losses. christine tan sat down with the ceo and asked him about the weakness in his biggest market, japan. >> there is an economic crisis in japan. it's difficult. the currency declined very much. and i think there is a phase where you question yourself, how you do business, how to approach things. it's not only us, it's many companies who look at this. so i don't blame anything, anyone, so we just see how we are going forward and how we are going to do better again in the future. >> what's your outlook on japan? do you expect sales to deteriorate further? >> i think we have reached the bottom. i think it's going to improve now. >> are you doing anything to mitigate a slowdown coming from japan? >> worldwide, there is an economic crisis. and our financial situation is very healthy. ow property is still reasonably good and we, therefore, thought that we can continue to invest as we planned before. this means invest in the brand, but at the same time, all of -- many of those investments are just coming off of the bottom line short-term. >> could things surprisingly pick up in the second half for you, do you think? >> i'm always optimistic. i think we will have a fantastic christmas because we are not only a accuse mettics company, we are versus very gifted. still to come, goldman sachs raised its for the hang seng next year by 1,000 points. what is the european market outlook. we'll get to hear from peter oppenheimer. the second hour of "worldwide exchange," coming up right after this. just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's. wiggle your toes. 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[ female announcer ] today cisco is connecting the internet of everything. so everything works like never before. ♪ stacy's mom has got it goin' on ♪ ♪ stacy's mom has got it goin' on ♪ ♪ stacy's mom has got it goin' on ♪ [ male announcer ] the beautifully practical and practically beautiful cadillac srx. get the best offers of the season now. lease this 2014 srx for around $369 a month with premium care maintenance included. ♪ negative deposit rates are a possibility. we've been clear already some months ago that this has been discussed, technically investigated, legally investigated, so the ecb is ready. that said, that's only one instrument in the toolbox. protests in bangkok gather steam as demonstrators define new security laws and surround key government ministry necessary a bid to topple the government. a boost for investors in reptol as the spanish oilmaker strikes a deal with argentine in over the price for the stake in ypf. and shifting into gear, chrysler says it intends to list shares on the new york stock exchanges, but the automaker's ipo plans won't happen until the fist quarter of next year. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. a warm welcome to you. welcome to the start of your global trading day on cnbc. we saw the doe up 0.1% yet, the s&p down 0.1% and the nasdaq crossing 13,000. futures today, just three points above fair value for the dow. about 1 point above fair value for the nasdaq and the s&p is about 3 points above fair value. the ftse yesterday was up 20 points. this morning, it's down 23 points. the xetra dax, pretty flat. not far away from the all-time high we hit yesterday. just above 9,300. just below it at the moment. the s&p/asx is fairly flat today. there's a feeling that the prime minister will stay there. so the index up 0.4%. the shanghai xotit down 0.1%. and the nikkei ending up down around 0.6%. we see some of the pressure of the yen coming up there. slightly negative for the nikkei. meanwhile, european central bank rates will stay low and could even be cut further. that's according to the ecb executive board member benoit couret. he told chloe cho he's not concerned about the threat of deflation, but he did begin by saying he agrees with the bundes bank's asset quality review. >> i think that the bundes bank president is right to set it as an objective. there is no reason why any particular kind of asset should be treated asterisk free by bonds. and that's a general principal that deserves being supported. now, with that said, it is not a european issue. it is an international issue. there is no reason why portuguese bonds, greek bonds will be treated differently from u.s. bonds or japanese bonds. so it is an important discussion, but it takes place in the basul committee for supervision. it's not a european discussion. >> we're talking about the prospect of lower oil prices, especially in light of this deal with iran. could disinflation turn into inflation? how big of a threat is that? >> we don't see it as a very likely prospect that disinflation would deepen, would worsen in the eurozone as growth recovers, which is our main scenario. inflation will pick up gradually and will gradually come back to the 2% rate for the ecb. so this is the most likely scenario. that said, we've seen inflation coming closer to zero. we have a safety buffer and we'll be monitoring these numbers. the governing council of the ecb has been clear saying he's ready to keep rates at a low level for an extended period of time and, if necessary, lower if we see this safety buffer being further eroded. but that's not the most likely scenario, in our view. >> benoit couere. housing starts and building permits are out at 8:30 eastern. at 9:00, we get the september case-shiller home price index. price res forecast to rise 13%. and at 10:00, it's november consumer confidence, expected to pick up nearly two points from last month. hormel, tiffany, and barnes & noble among those reporting results before the open. hp and tivo report after the close. meanwhile, our next guest has been long equities since march last year and he doesn't see that perspective changing as we move into 2014. joining us is peter oppenheimer, european equity strategist at goldman sachs. thanks so much indeed for joining us. we've had a rerating of the stock market. gains next year will be predicated on real earnings, right? >> i think that's exactly right. the drivers change. last year was very much about the kind of hope phase with most of the gains being driven by multiple expansion. and as we go into next year, we believe that you'll get slower gains but driven by fundamental profites and dividend growth. where is that profit coming from? how is that being generated? it looked like france was going into recession if you believe the latest out of pmis. >> well, i think there are a couple of things here. first of all, the corporate sector in europe has exposure toes different parts of the world. so if you look at sales weighted gdp, it's picking up and that should generate better top line growth. moderate, but still positive for the aggregate corporate sector. and also margins have been cyclely depressed in europe whereas they've hit record highs in the u.s. and in the context of coming out of recession, we would expect some rise in margin toes drive earnings, as well. >> this margin story is an interesting one. because in the u.s., you could argue there's been big benefits on margin that are waning, the ability not to pay too much tax, the fact that labor has been cheap and, of course, corporate borrowing. is it different in europe? >> yeah. let me be clear. the u.s. market, of course, over the last couple of years is has outperformed europe, largely because profits have gone to record highs, so have margins. margins are plateauing in the u.s. at a high level. we expect european margins, have have been cyclely depressed because of the deexpression you to start recovering. in line with moderate income growth, but also because you've had quite a lot of growth cost savings particularly vis-a-vis the labor market in the last year or two, which will start to feed through. >> okay. so you -- it's weighting european equities over the u.s. as a whole? >> yes. when we look at our global views for next year, we expect higher returns outside of the u.s. in fact, stronger returns indeed in japan than in europe. but stronger returns outside of the oou u.s. than in the u.s. not because the u.s. economy is not recovering, but because the market has priced in more of that recovery than we've seen elsewhere. >> much, of course, on what else will also depend on the bank not only from a portfolio performance, but also, you know, how healthy they are, how they get the quality reviews and whether they themselves can contribute to an economic recovery. >> we have an overweight position in european banks. there's a balanced risk here. obviously the ongoing relatively modest growth in europe will prevent very strong lending growth. on the other hand, you have got above positioning cycles coming through, you've got lower cost of capital because of the asset quality review and a move towards more european banking integration in terms of supervising -- overall supervision. and generally, we think that banks will benefit from a recovery as modest as it may be in the broader european economy. >> all right. we'll pause there. peter, stick around. more to come from you. meanwhile, chrysler plans to list its shares on the new york stock exchange under the ticker cgc. on monday, the automaker postponed plans until next year saying it wouldn't be practicable to list shares in december. the time sg being pushed back so chrysler can work out a tax issue with the irs converting the firm to a c corporation, which is what most public companies are and that would subject chrysler to more taxes. a judge will issue his decision on whether detroit is eligible for bankruptcy production next week. but unions, retirees and pension funds objected, saying city officials didn't negotiate in good faith and that michigan's contribution protects their preparations from being cut. during a trial that wrapped up earlier this month, detroit sought to prove it is bankrupt. the trial includes a rare appearance from a governor on the witness stand. and what would you pay to pray? the first book ever plushed in the united states is expected to fetch a record amount on the auction block at sotheby's. it was printed in 1640, just 20 years after the pilgrims arrived at plaintiff's exhibit yoymouth. sotheby's estimates this copy could sell for between 15 and $30 million. . why are they touching it if it's worth so much? we want to know, what book excites our viewers. so if there was a first edition copy tomorrow, wa title would you pay handsomely for? would it be a first edition of one of ian flemings's bond novels, for example? worldwide@cnbc.com, tweet @cnbcwex or direct to me @rosswestgate. still to come after the break, we'll hear more from peter sax. ♪ i want to spread a little love this year ♪ [ male announcer ] this december, experience the gift of unsurpassed craftsmanship at the lexus december to remember sales event. some of the best offers of the year. this is the pursui of perfection. ya know, with new fedex one rate you can fill that box and pay one flat rate. how naughty was he? 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[ male announcer ] fedex one rate. simple, flat rate shipping with the reliability of fedex. the european central bank tells cnbc deposit rates could drop below zero. chrysler intends to list shares on the new york stock schapg, but not until the first quarter next year. protesters surround thailand calling for the governor to resign. george osborne, the chancellor, the british finance minister made a request for the bank of england to review leverage ratios within the capital framework for uk banks. mr. carney, currently speaking in front of the treasury select committee says they expect to be granted leverage powers shortly after a year. they would be able to complete the leverage review in around 12 months. and the spc, the financial depository committee has been set up to regulate banks in addition to the monetary policy committee is there to set rates. we'll keep our eyes on any more views than that. while we're talking about that, the economists are fairly split on whether the british government's to revise scheme is helping the market or going too far and creating a bubble. what do we think at goldman sachs? peter is with us in the studio. are we going too far? are we create ago bubble? do we care if this is an investment opportunity for house builders in the short-term? >> i think they're separating the opportunity to create and build more housing, which is really what we're looking at here. first and foremost, we're pretty positive of the uk economy. we think we're going to see 7% growth next year and the year after. in that environment, you would expect to see quite strong housing activity. it's worth noting that the housing builders have had a strong rebound in 2011. but since april of this year, they've been relatively flat against the index. we think there's a good upside opportunity there and a good way of really positioning for a decent recovery in the uk economy. >> the uk pmi is nothing but a heart to heart, the highest series in a world, anyway. it's extraordinary. you clearly think that the growth is sustainable because you said it was going to repeat that growth pattern for a couple of years. >> yes. obviously, you have to look at where the uk economy has come from. it's had a period of substrend growth for quite a long time. so you've got a big output gap and that allows this relatively attractive combination of a cyclical rebound in the economy. we're still with relatively low inflation and, therefore, still pretty accommodative policy. and that combination we think will be pretty good for growth and for assets sensitive to a cyclical rebound in the economy. >> you are, though, downgraded industrial. you've talked about upgraded banks. downgraded industrials. you believe the commodities is over. so there are parts of the market you don't want to be in. >> absolutely. i think that in general what is like cyclical exposure, particularly to developed economies because we think this recovery will come through. on the other hand, we don't particularly like cyclical exposure that's very en sensitive. and also very sensitive to commodity and demand because we think that commodity investment is going to slow, industrials tie in with that to some degree. we think given a relatively slow recovery in the em market, it's appropriate to be underweight there. >> just a final point, earlier it was said the yields in penetration are going to go up to about 3.4% next year. clearly, it's still the biggest risk for investors globally, what happens to treasury yields and tapering. where do you think is a point where we get to where it becomes an impediment? >> spike in bond yields would be a risk given that they're pretty much back to average valuation. but the key question i think is what would drive bond yields higher? if it's a moderate rise, i think equities could still do pretty well under those conditions. but if it's about investors panicking and a rise in the risk premium in the bond markets, that would away different story and would be undermining the general positive outlook for equities that we would have. but i think getting bond yields up to 3.5%, to 4%, if it's gradual and real interest rates rising, that would probably be okay. but beyond that, i think we would have a problem. and if it was a rapid adjustment upwards, then, again, i think that would be more negative for equity investors, too. >> peter, thanks very much for joining us. still to come on the show, less pair rather than paperless. we'll meet the ceo of a company vying to help people manage their virtual filing cabinet pes. 0 that's a good thing, but it doesn't cover everything. only about 80% of your part b medical expenses. the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, they could save you in out-of-pocket medical costs. call today to request a free decision guide. with these types of plans, you'll be able to visit any doctor or hospital that accepts medicare patients... plus, there are no networks, and virtually no referrals needed. join the millions who have already enrolled in the only medicare supplement insurance plans endorsed by aarp... and provided by unitedhealthcare insurance company, which has over 30 years of experience behind it. with all the good years ahead, look for the experience and commitment to go the distance with you. call now to request your free decision guide. o0 c1 you get your coffee here. you get your hair cut here. you find that certain thing you were looking for here, but actually you get so much more. when you shop at these small local businesses, you support all the things that make your community great. the money you spend here, stays here. in this place you call your neighborhood. this saturday is small business saturday. get out and shop small. just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's. wiggle your toes. [ driver ] and it got his okay on treatment from miles away. it even pulled strings with the stoplights. my ambulance talks with smoke alarms and pilots and stadiums. but, of course, it's a good listener too. [ female announcer ] today cisco is connecting the internet of everything. so everything works like never before. if you've just joined us this morning, futures are indicating fairly flat. the s&p up around 26.4% so far this year. meanwhile, nasdaq's executive eric knoll is leaving the exchange to be the ceo of brokerage and technology financial firm convertix. he oversaw a deal to buy an electronic bond trading platform. he had been seen as the leading candidate to eventually succeed the current ceo who recently signed a five-year contract extension. nasdaq's board has been working on planning. nasdaq's omx stock down 2% in frankfurt. evernote is a process designed to help people access and manage files from nn location. the company says it can help users in everyday activities such as remembering people you have met or food you may have enjoyed. phil livin is ceo and is joins us on set. good to see you, phil. >> great to be here. how healthy is the sector at the moment, do you think? >> i think it's great. there's a good fund-raising climate, a good capital climate, the best time in the history of the universe as they try to make the start up. >> really? >> i think so. >> how much is the fact that the healthy client is aid by the fact that it's pretty low hurdle rate, bond yields have been low after generate returns of savings. does that cost more money or not? i think that's a small part of it. i think there's a lot of things that come together to make this perfect soup, this perfect set of conditions. a big part of it is where the conditions are. because of smartphones and app stores and social media. if you make something great, the whole world will hear about you and be able to buy your product. >> you say they want to build a 1 00 year start up. you're only five years old. what do you mean by a 100 year start up? >> i think it means what it sounds like. the 100 year part means we want to make somewhere durable. we want to make something that's literally around for a hundred years. a company that outlive tess people in it i think is a very interesting way to think about it. we want to be a start up at that point, we still want to be innovative, a company that can still be in love with. >> that's hard to do. >> we're not trying to optimize for what's easy. >> you look at all the companies created in the '80s and look at them now. they're big corporate and it's hard -- it's hard to keep the innovation going, isn't it? >> it's hard, but i don't think it's impossible. and the fact that it's hard makes it motivating. there's many companies that weren't innovating for a long time sdmou they're back. i think nike, apple, google. >> what do you think of like ge? >> yeah. i think i'm probably not the best qualified person to talk about ge. >> i don't know. these are 100-year-old companies. but, you know, so is coca-cola. and they are innovating more now than they were before. 20 years ago, they probably were not an innovative company, but they are now. it goes through cycles. >> are you going to list? >> i think so. but its still two to three years out. >> everybody is talking about wearable technology. i can't -- you know, i don't want to wear a phone to my wrist. actually, i prefer to wear a watch, unless it looks good. wearable technology has to look good, right, if you're going to wear it? >> it's going to look good. more importantly, you have to look natural using it. i don't think anything can be mainstream if you look like a dork when you're using it. and all the stuff is going to go through a phase where it's awkward and bulky and only extreme nerd whose don't care what they look like like me are willing to wear it. >> you can test it. >> i can test it for the rest of you. but at some point, i think it's going to happen in two years. it's going to meet that threshold and you can look natural in it. then i think the wearable devices are going to become super mainstream. right as soon as they cross that threshold of just looking and feeling normal. >> i could chat with you for a very long time. unfortunately, we're out of time. good to see you, though. still to come, the nasdaq and dow closed at new highs on monday. how long can the bulls be in the ascendency? more after this. you're watching "worldwide exchange." i'm ross westgate. your headlines today from around the globe, europe and asia fail to build on record highs on u.s. equities while the ecb members tell cnbc that the ecb still has options left to spur a recovery. >> negative deposit rates is a possibility. we've been clear already some months ago that this has been discussed. technically, investigated, legally investigated, so the ecb is ready. now, with that said, that's only one instrument in the toolbox. >> chrysler does intend to list shares on the new york stock exchange, but the ipo may not come until the third quarter next year. and the spanish oilmaker strikes a deal with argentina over a price for the stake in nypf back in 2012. plus, the protest necessary bangkok gather steam as demonstrators defy new security laws and surround key government ministries in a bid to topple the government. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. >> if you've just joined us, it's a softer session for european eths. right now, we're down 23 points. off about a third of a percent. xetra dax, 9,300, just above that. the cac 40 is currently down 0.2% and the ftse mib at the moment is down around 0.2% of 1%. as far as u.s. equities, we've seen the dow and the nas dax, slim gains yesterday on the s&p, slim losses. the nas dax yesterday creeping through the 4,000 level for the first time in 13 years. at the moment, it's around 2 points above fair value. the s&p 500 a little bit above fair value by 2 points at 1800 and the dow at the moment is some 10 points above fair value. are u.s. equities now too expensive, particularly relative to earnings growth? joining us is michael pervis, global strategist and head of equities research at weeden and co in new york. nice do you see, michael. thanks very much indeed for joining us. are we going to continue to grind higher? >> i think we are. certainly at least into year's end. and there's a couple of key factors going on. first is a lot of important funds, a lot of hedge funds, a lot of long only matters, as well, are trailing their benchmarks. and, you know, if you look back over the last several years, the stronger the january through october performance, often the stronger november to december period. so you have whether it's fear or greed driving this, there will be people really wanting to make sure they grab every little bit of -- they can into year's end. but there's a second factor, too, which is for the first time in several years, the investors can point to flows coming into equities. and there's a -- it's not an enormous stream of flows, but it's a steady stream of flows. that's something that's been talked about for several years, but now it's becoming a reality. valuations are getting stretched here. so i think the key one will be a little bit more interesting. >> yeah. it's an interesting discussion on valuations. because, you know, the bulls will argue stocks are cheap, they're only trading 15 times, you know, estimates and that is pretty close to historical long-term average. is that the wrong way to analyze things? >> well, i think at the starting point, if you look at the multiples, they are aligned with very long-term averages. but the problem is that the amount of earnings growth that we're eeking out today is about one-third of what it is what you'd expect to see in a mid to late stage bull market such as we saw back in 2005 to 2007, '93 to '95. you had much stronger epf growth. you had higher nominal gdp, and you had operating margins. and we've had margins that have been plateauing and coming down. and, you know, there's -- it's a world where we're having -- you know, companies are having a hard time really getting pricing power, you know, across a wide range of industries because of these deflationary components happening. so i think it's hard to see a market, you know, exploding to the upside based purely on earnings growth. it's simply a lower gdp, lower nominal gdp world we're working with right now sfp. >> what's the trade right now, then, michael? >> well, my trade right now is simply to buy upside calls on the s&p 500 or some other broad markety index like the russell 2,000 or the nasdaq. and, you know, into year's end. however, having said that, one of the other trades is to sell the vix in december. but i think there's going to be a lot of up side in volatility in q1. >> stay there, have a cup of coffee. see you in a few moments, michael. the fda has limited restrictions on the drug avan did i a saying it no longer includes heart risks. avandia was one of the world's top selling drugs, but sales began to fall in 2007 after researchers questioned link toes heart attacks. last week, penny's reported a wider third quarter loss in weak sales and margins, but uhlman said sales trends are improving. officials say the health cacarev website won't be working perfectly, but it will be able to handle 50,000 users at a time, which is the volume it was originally expected to ham when it launched. still to come, chrysler is tapping the brakes on its ipo plan. find out what's hold onning up the automaker's plans to go public, next. ya know, with new fedex one rate you can fill that box and pay one flat rate. i didn't know the coal thing was real. it's very real... david rivera. rivera, david. 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[ male announcer ] fedex one rate. simple, flat rate shipping with the reliability of fedex. america's east coast is preparing for a major winter storm. sleet and freezing rain is expected. joining us for more is the weather channel's keith carlton. how is it looking? >> it's not looking good. the timing of what we're calling winter storm borious here is awful. we have heavy rain across the panhandle of florida into the atlanta, georgia, area. into the north, a bonus round here is snow into the western suburbs of boston and just to the west of the new york city across eastern pennsylvania. but we think the real problems will start tomorrow. obviously, tomorrow, the busiest travel day of the year. so today we've got that rain and ice. and tomorrow, it depends on your location, but some of the biggest hubs in the northeast and mid-atlantic from boston to new york down into maybe washington, d.c. here is going to be dealing not only with some rain, but also some very heavy winds, as well. it looks like the heaviest of the winds will be to the east of borious. that will be over cape cod, massachusetts, maybe down into the east area. on the other side of this storm is the winter side. cold air will filter in. we'll be looking at snow and ice, the highest snowfall total hes. then this area year in the purplish color, that is going to be your freezing rain and ice area. that will be a big problem. so as far as the snowfall total in the forecast, between, good news is we're staying away from some of the biggest hubs here, boston, new york, down to d.c. but we have some significant snowfall off to the west, western new york state 5 to 8 inches, to the east of buffalo another 5 to 8. .then 3 to 5 in general here across much of central parts of new york state. so the timing on this storm is definitely awful. back to you. >> yeah. so the message is, go now. take an extra day, go now if you're going to travel. >> yes. >> good to see you. that's the weather channel's keith carlson. the vix has fallen in multi year lows. some investors are setting up positions to profit from a jump in it. ahead of the fomc meeting in december. and he rejoins us. michael, you were just talking about this in the last year, as well. how much of this is dictated by the risk from the fed? >> well, i think clearly the tapering risk has been sort of the dominant volatility theme in the u.s., the u.s. markets and arguably many global markets this year. i do think we will get tapering at some point next year. it's a guessing game, of course, as to when that is and how that is structured. the options market is suggesting that it's going to be given sometime in the spring if you look at the structure of the s&p volatility right now. we're getting up much more so in the spring than it is in the near term. but i want to make one other point here, is that the second time around, unless it's something absolutely severe, is likely to be much less. it will be noticeable and i think there will be a lot of people really focused on if we do get a tapering, say, in march, wa conditions are applied to that? because what we saw last summer is that when we had that first spike up in raids is that a lot of economic metrics reset lower and that, of course, helped set up the reversal of that september tapering, which we never got. so i think we have to -- it's going to be a very nuanced tapering and it's probably going to be much more focused on treasuries and mortgages. >> yeah. you have made the note that in the near term, treasury bond volatility is declining, not getting more. right? so -- >> correct. >> does that pose a problem for you? >> well, i think the treasury bond volatility spiked over the summer. i think while the it has come in, it's set to expand once we get into q1. the move index, you know, the lifetime low of it over 20 plus years is 48 and we're right now around 60. and if you look at the precrisis levels, its was noticeably higher here. we should normally see some mean reverse higher than that. i think as that happens, that will lift volatility in the spring. but i also want to make an important point, that the nature -- we talked about the valuation on the s&p 500. i think the nature of the markets are shifting from one of straight up a wall of worry climbing to more of a flow driven market with high valuations. and that's going to bring on more volatility and equities, as well. so it's a combination of those two factors conspireing to lift volatility higher in the spring. even if the equities trend higher. i think you can see volatility trend higher. >> good to talk to you this morning. thanks so much indeed for joining us. and a recap of the headlinesed in, the european central bank tells cnbc deposit rates could drop below zero. cry chrysler says it intends to list shares on the new york stock exchange and protesters surround ministry buildings in thailand calling for the government to resign. now, chrysler had hoped to return to the world of publicly traded companies before christmas. but those plans have been shifted back a little bit. kayla tousche is at cnbc hq in the states with more. hi, kayla. what's the new plan? >> well, ross, chrysler issued an s.e.c. filing late yesterday saying it intends to list its shares on the new york stock exchange under the kicker cgc. but earlier, it postponed plans for an ipo until early next year. the company's majority owner fee ya says it wouldn't be, quote, practical to conduct an ipo next month. the time sg being pushed back to chrysler can resolve a tax issue with the irs. that involves converting the firm from a limited liability company or llc to a c corporation which is what most publicly traded companies are. as an llc, chrysler has few shareholders and can pass on responsibilities pore paying taxes to its owner in this case fiat. but a c-corp. has is its taxes and shoulders a great er tax burden. in an interview monday morning, it was said the fiat ceo has long opposed an ipo to begin with. he repeatedly said he would prefer to merge fiat and chrysler. chrysler was forced to file paperwork in september after failing to reach a buyout deal with the uaw trust. prepping for an ipo could allow the two sides to agree on a buyout price. looking atrophiat shares, they're down by just 0.25%. the value of chrysler, between $10 billion and $1 1 billion base odd what underwriters are saying. but as far as when the market can stomach that ipo, it looks like it will not be until next year. it's a big week as we know with thanksgiving, kayla. one of the pilgrim father's books have going for sale. this week. but what would you pay to pray? the first book ever published in the u.s. is expected to fetch a record amount on the auction block at sotheby's today. the 300 page based on book, only 11 copies are known to exist. only five in complete condition. sotheby's estimates this copy -- i'm not sure why if it's so expensive people are allowed to tux it without any gloves on -- they reckon this could sell for between $15 and $13 million. so we've been asking, what first edition charter would you pay handsomely for? mike took to twitter to say he would buy common sense by thomas baines. and jay schuman says there's only one book he would be interested in and there's only one log book, the eye titanic." whoouk? tweet or e-mail us. still to come, will there be a lot of blue boxes under the tree from tiffany's this christmas? the luxury retailers reporting openings before the opening bell. we'll have a preview, right after this. e announcer ] this store knows how to handle a saturday crowd. ♪ [ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track. the power tools introduce themselves. all the bits and bulbs keep themselves stocked. and the doors even handle the checkout so we can work on that thing that's stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. so everyone goes home happy. [ female announcer ] today, cisco is connecting the internet of everything. i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare, you may know it only covers about 80% of your part b medical expenses. the rest is up to you. call now and find out about an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, it could save you in out-of-pocket medical costs. call now to request your free decision guide. i've been with my doctor for 12 years. now i know i'll be able to stick with him. [ male announcer ] you'll be able to visit any doctor or hospital that accepts medicare patients. plus, there are no networks, and virtually no referrals needed. see why millions of people have already enrolled in the only medicare supplement insurance plans endorsed by aarp. don't wait. call now. you get your coffee here. you get your hair cut here. you find that certain thing you were looking for here, but actually you get so much more. when you shop at these small local businesses, you support all the things that make your community great. the money you spend here, stays here. in this place you call your neighborhood. this saturday is small business saturday. get out and shop small. it was a flat close for u.s. equities yesterday. a flat open that's been predicted for u.s. futures. as far as the agenda today stateside, we've got september and october housing starts out at 8:30 eastern. the september report was delayed because of the government shutdown. at 9:00, we get the case-shiller home price index. then at 10:00, it's november consumer confidence. it's expected to tick up nearly two points from last month. also before the opening bell, tiffany reports third quarter were eggs. the luxury forecaster is set to earn 358 cents a share. we'll be closely watched at how well high end items are holding up in the u.s. >> joining us with his few, phil. wa do you think they might say about china? we've heard from remy quantro, a big profit warning because china sales aren't what they thought they were. >> analysts expect china to continue to be basically the market that gives tiffany the push it needs. last quarterer it did really well. the chinese tourists help lift tiffany's sales in europe when they go there on vacation as well as in the u.s. so there is the expectation that the chinese consumer continues to spend at tiffany stores. >> what's going on, meanwhile, in the u.s. and will what's going on in china offset a fairly sluggish market? >> well, you know, the u.s. still is tiffany's biggest market by far. the probativeny has had in the last year is that shoppers on a modest income have been pulling back about 25% of tiffany's sales come from jewelry items that cost less than $500. so it's not just the high ticket items that tiffany sells .those have been sluggish and what's hurt tiffany, as well, is they've had designs that haven't really caught on with shoppers and they've brought in a new designer this year to help them fix that. but, you know, consumer confidence took a big hit in october with the government shutdown. and jewelry is one of the first things that shoppers will pull back on when they're not feeling comfortable about their finances because you can do without a piece of jewelry, but you can't really do without other staples or even clothing. people want to update their wardrobe more often than they want to pick up a new piece of jewelry. >> if they talk about the number of visits they want with their flagship stores, will that get into how other department stores may be faring? >> certainly the flagship on fifth avenue, which by the way looks fabulous in its holiday presentation right now, generates 8% of the company's overall sales. but it's very important in terms of the overall company's image. but tourists are here in big numbers. so far this holiday season. and that, of course, is a big boom for burgdof goodman, part of neiman marcus group. so it's the very high-end stores look like they're going to do quite well this holiday season. >> phil, we wish you the best. thank you very much indeed for that. that's about it for today's edition of "worldwide exchange." coming up next, of course, "squawk box" the countdown to the opening of markets stateside. keep it here on cnbc. whatever happens, we hope you have a very profitable day. good-bye for now. avo: the volkswagen "sign then drive" sales event is back. which means it's never been easier to get a new passat, awarded j.d. power's most appealing midsize car, two years in a row. and right now you can drive one home for practically just your signature. get zero due at signing, zero down, zero deposit, and zero first month's payment on any new 2014 volkswagen. hurry, this offer ends december 2nd. for details, visit vwdealer.com today good morning. there's no shortage of market excitement. the nasdaq flirting with levels not seen in 13 years. today's economic tests include key reads on real estate and consumer confidence, plus quarterly results from a couple of retailers as well as a tech giant and weather watch, a dangerous winter storm is threatening thanksgiving travel for millions. it's tuesday, november 26th, 2013 and "squawk box" begins right now. >> good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. we're going to start things out with the markets this morning. we know that the dow and the s&p have been posting record numbers. but yesterday, it was the nasdaq stealing the show. the tech heavy index rising above 4,000 for the first time in 13 years before failing to close at that level. u.s. equity futures at this hour at least. if you want to take a look, you'll see that right now you see some modest advances. right. the dow futures are up by about 1 1.5 points above fair value. s&p futures up by 1.5 points. joe mentioned there are a few tests for the markets today, so why don't we take a look at the calendar on the economic side. we'll get the s&p case-shiller index-home prices for september
and the tropical island of puerto rico cuts the debt to junk status and warnings of more downgrades. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. and a warm welcome to today. you're wearing green, very appropriate. >> exactly. >> the final pmis out of the eurozone, january final services bmi, 51.6. it was the flash, 51.9. so it has come down slightly. new business pmi, 51.8, the flash is 50.1, and the final composite, 52.9. a little weaker than the flash of -- i was trying to pull up the french number, as well. >> the composite employment pmi in line, as well, on that one is worth pointing out, as well. >> so it's the high final reading since june 2011. it separates expansion from contraction. a little weaker than the flash number. but an encouraging start to the year, so says chris williamson in for market who was in on monday. we'll get the visit breakdowns on that. i'm very interested in the french number in particular. hang on. 47.8. january services pmi, 49.4, stronger than the forecast, as well. so the french number, encouragingly a little better than we might have thought. euro/dollar, 135.14. now, plenty to get through on today's show. >> and gente suffers from a drop in profit. we'll hear from the ceo a little later and hair how he's dealing with markets like brazil. and nadella will get nearly double the salary of his predecessor, steve balmer. is he worth it? more on that, coming up. >> just over an hour and 20 minutes into the doppler radaring day here in europe. advancers outpacing decliners at the moment around 6/3 the. 3/2, in other words, and matching julia's dress. i'm not allowed to touch the wall, but i just did. they don't like it for some reason. the head of our technical development gets very upset. the ftse 100 is up 16 points at the moment. it was down some 16 points yesterday, so flat over the last two sessions. the xetra dax is flat. as is the cac 40 and the ftse mib up 0.5%. yields, 2.58% later on monday's session. we'll move this on for you, it will magically appear here. we have nudged up from those three-month lows on the yield. as have ten-year bund yields, as well. oi ats, 2.655. very important services pmi number coming out in the uk in around about 30 memberships time. of course we'll keep our eyes on sterling as a result. 1.6310. slightly weaker today. aussie/dollar, a big bounce yesterday after the rba came in and look and said we're getting rid of our easing. 86.60 was our 3 1/2 low. currently 0.8903. dollar/yen, 101.26. and euro/dollar, 1.3512, not far away from the two-month lows that we hit on monday. what about what's happened in asia and in tokyo after that big sell-off previously? adam is with us out of singapore. hi, adam. >> good morning, ross. we saw a rebound here today as we saw markets pretty much normalize after the previous day. we actually really did see a volatile trading session for the equity markets here in japan with the major benchmark, the nikkei 225 meandering out of positive and negative territory. and if you overlayed a dollar/yen rate versus -- with the nikkei 225, it was pretty much a move that mirrored or moved within the shadows of the currency. in the meantime, there's a lot of caution in the equity markets up in japan. we're a long, long way off for making up for that huge beating we saw at the beginning of the week with the index climbing back up. many of the technical analysts suggest that the 200-day moving resistance is providing a significant resistance to the equity market. that stands about 14,425. so we did see the dollar/yen bounce back at already the euro/yen. however, in the course of the trading day in asia, we've seen those gains unwiped. we're almost back to where you just put it at the 101.20 plus levels for dollar/yen. notwithstanding that pullback, we saw a very strong session up for japan. the showstopper had to be panasonic. up at one stage, almost 18 plus percent as it unveiled its nine-month numbers, back to the black, first time in three years. very strong showing, up about 20% profits to about 700 million u.s. dollars. sony in focus on media reports suggesting that the company, according to people familiar with the matter, may be looking at selling off its pc business and could reap in about 40 billion to 50 billion yen, the company obviously not confirming those reports, but thursday sony will be coming out with october to december numbers. many expectations, including that of bank of america merrill lynch that they could potentially reduce their full year estimates for the second time in as many months, as many as three months. in the meantime, a number of corporates coming out with profits today in japan after the market closes. so you want to watch out for the orders, particularly mazda and mitsubishi and fantastic numbers, just like toyota, which was a stellar performer in terms of market reaction today. their numbers moving up five bold in terms of net profits, mazda like toyota hiking their full year forecast for net profits and also operating profit on the back of the weaker yen. the operating profit numbers have been tremendous, obviously, because of the weakness in the japanese yen and the october to december quarter. the dollar/yen was standing at about 100 to the u.s. dollar. as you well know, they have fallen a lot more since then, down to about 105 levels, ross. but we've come back from the 105 levels. so long as abe-nomics is going to work, japanese -- will want to see a weaker yen and those outlooks rather rosy. >> adam, thanks for that, joining us from tokyo. british retailer top shop is betting even bigger on the u.s. the fashion chain has unveiled plans to unveil five new stores. you're a better person than helia to brush us up with that. >> yeah. actually, it's a massive expansion and it's a huge stop on fifth avenue. it's 40,000 square foot. that's huge. it's all about phillip green's international expansion. >> no ego. >> no, why would i say that? topslop, a really profitable nd of arcadia. in the last few years, he's been pushing forward in the u.s., especially after the 2012 deal with leonard green, who bought 25% of arcadia. >> he's in a good mood, isn't he? >> he's in a very good mood and i caught up with him yesterday asking about this expansion plan. >> well, i think it's sort of -- you know, this store, fifth avenue, probably one of the most relevant streets in the world as far as retail, tourists, local people. it's our second biggest store after this store. so pretty key in terms of building our u.s. business. >> how is the tie up with nordstrom going? are you still in business there? >> we're in discussions to grow there. i think we can do business in a way inside the department store and our flagship stores will be different. different piece of business. >> and what about other brands alongside topshop, will there be rooms for things like wallace and dorothy perkins? >> it's not on our radar at the moment. and there's been some talk of a deal with macys. is that o cards inspect. >> i think there are discussions going on from time to time with different brands to see what we can do. i think those are ongoing and if something comes to fruition, we'll do it. >> you said your u.s. expansion is going to deliver you $1 billion in sales in the near term. is that realistic? >> no, not this year. these five stores are opening over i think 15 months and hopefully we grow our online business. i think we have a bit of a way to go. >> you said one of your regrets wasn't moving into emerging markets fast enough. you're now in honk hong kong trying to recreate the success of h&m. has a recent slowdown in those markets and concerns about emerging market currencies, does that worry you? >> well, if it was a slowdown, why would we regret it? we would be happy. >> but are you still as enthusiastic as growing your business and -- >> i think the answer is we're enthusiastic about going to market. we think we've got long-term sustainable growth, not doing anything crazy. and as those opportunities arise, you know, when we're offered, we'll have a look at them. we're currently negotiating on a couple new stores in hong kong. it will take us to three. we continue having china dialogue. we just haven't got there yet. no doubt we will. >> you've achieved a lot already. are you still ambitious? >> 40,000 feet on fifth avenue is not ambitious, is it? >> as well as very serious subjects like the emerging markets, i also asked phillip green about his recent meeting with kim kardashian. >> last week, you were -- you had lunch with kim kardashian. >> did i? >> apparently. apparently she flew into london just to see you. >> not that i know. >> you did business with her and her sisters with dorothy perkins. could there be an opportunity with the kardashians and top sddz shop going down forward? >> no. >> definitely not? >> who knows what the future holds, but that wasn't the purpose of our meeting. >> what was the purpose of your meeting? >> do you have lunch? >> what did you eat? >> what did we eat? i can't even remember now. some fish. >> he also had a go at the government over business rate taxes. they're paying lip service. he also went ahead and talked about internships, unpaid internships, he's been a big advocate. obviously, top of my agenda was asking about his tie-up with these women. >> he didn't know where to put himself, did he? he was shifty eyes and then smiling the whole time. >> is he still working with kate moss? >> i think he -- not at the moment, but they -- obviously, they have a very successful tie-up. and they had a tie-up with the kardashian sisters with perk yips. he said nothing is on the line. but arcadia last year, the results that they had down by bhs and some of the other brand. hopefully, topshop will be the flag ship in boosting those earnings. >> he was quite coy about emerging markets, wasn't he? >> he must be very relieved, right? >> yep. >> sometimes it's better to be lucky than good. sometimes. not all that often. >> like helia. >> she's good and lucky. moving on. now, good thing you're not doing an interview today because commuters in london are facing chaos because of 48-hour tube strikes protesting the closure of ticket offices on the underground. we're be outside a central london underground station later in the show to check on all the people who aren't there. so we want to know, who do you think has the best public transport infrastructure? oh, yes, with who has the best public infrastructure and why? please e-mail us, worldwide@cnbc.com, tweet @cnbcwex or direct to us @rosswestgate or @jchatterl @jchatterleycnbc. there's plenty of new cities, singapore, the transit system in london, any of the big major capital cities. >> the gap between the train and the platform. >> you wouldn't know. >> exactly. how would i know? >> jules has no idea. >> got my heels stuck. >> and when i tie my horse up, i don't really care, either. >> his chariot. >> look, we want to know what you think. still to come on the show, we're going to be in basul. an 11% drop in his company for syngenta. emerging market turmoil? that's something new. welcome back to "worldwide exchange." let's have a look at where markets are recapping right now. we're in the green. completely unwinding the losses we saw in yesterday's session. the italian market adding to yesterday's gain between 0.2% and 0.7% in trading today. joining us now, the chief investment officer of axis investment, johnny, good morning. >> good morning. >> in your notes, you said you're still comfortable right now being long large caps, equities and property. heading into futures and options right now is very cheap. tell me what your net position is right now. >> i think we've had this ongoing debate as to whether the equity market has rolled over and is it time to consider the party over. on a long-term view, it will be difficult to replace the asset holdings. one could argue bonds have had a bit of a resurgence. it's been a spliet flight to qu. we don't view sovereign debt as having any long-term value. irrespective for your forecast for long run inflation, i can't see any value of having long-term debt. as a third long run, third place in our portfolio, we probably have corporate bonds. >> how hedged are you at this moment? what is your risk profile looking like? >> we're probably majority hedge, i'd say probably at least 80% hedged at this point. we do vary it. we ran a few different variety of spreads. and we had the ten-year u.s. treasury. those are the authorities we use to endue late ourselves from unforeseen events. >> you're accumulating -- out sectors. >> i like to do that. >> which is the staple, the caps, the drillers. what kind of time horizon are you looking at there? >> we would be comfortable holding even medium term. so our universe is always a quality run business universe. we don't really do a dash for trash. that's not the thing we tend to go for. the reason being is that the margin for error and the scope for disappointment with a company that's so highly valued or so niche, it's too risky for us. e even with a huge amount of money, the expectations for a company that's so high and you have that with all companies with these hundreds of pes and peg ratios. you'll find the smallest amount of disappointment or the slightest bit of investor nervousness is going to result in a 5% to 10% growth. >> do you have a view on acadia? obviously, the pe multiple is rather different. >> i watched it. and i have mentally screened it out of my universe completely because so many years have gone by with no revenue that i can pretty much, you know, value. it's nice they've done a deal with morrison. morrison is a company we might see as having a bit of a self-help story. but ricardo, i'm not key. >> we're going to come back to that. don't move a muscle. we want to get a quick earnings update. swatch is trading at the top of the stoxx 600 after the watchmaker reported a 20% drop in profits for 2014. shares in the swedish banking group seb jumped after the company posted a better than expected profit of 5 billion swedish crowns for the fourth quarter. the group says it will pay out four crown aes share for 2013, way above analyst expectations. don't forget, at 10:40 cet, the qfo of seb will be speaking to cnbc about the company's results. a 6% fall in revenue for broker icap. the british banker activity is reducing activity and new regulations hurt the firm. meanwhile, syngenta has announced it will step up its cost cutting exercises. carolin is in basul and has been speaking to the ceo. this is an amazing market for turmoil yet he seemed to play it down. >> not really. syngenta has long been everyone's darling, shares have done fairley well except for last year. so far, everyone has been banking on those markets. 20% of the revenues come from brazil. with the brazilian real falling steadily since last year, it creates a huge headache for the company. part of that is also unhedged. so i spoke to the ceo this morning. mike mag told me that despite those headwinds, he's fairley sanguine about those markets. >> 52% of our sales now in emerging market, it has what has powered the firm's revenue up. we've had exposure all along. we've been here before with brazil, we've been here before with argentina. we've got some hedges, sure, and that's cost us money. by and large, this is something we've seen before. >> it's not just emerging markets, but it's the fact that commodities have come down drastically. corn and wheat are trading at multi year lows. that gives farmers less incentive to invest in crop protection. the ceo says there is concern about that. there is plenty of concern out there. on that note, back over to you. >> thanks, carolin. thanks for sticking around. >> shares in london petroleum are trading down. they did return to profit in the last three months of the year. joining us first on cnbc is ashley heppenstyle, the ceo of lundin petroleum. that's the wrong still, but anyway, ashley is with us. revenue, $282 million versus 246 million a year ago. why has the revenue fallen? >> basically, our revenue is pretty much in line with last year. oil prices last year close to $115. this year we're slightly below $110. our production is down about 5% to 10% this year from last year. and what we'll see, that will double over the next year as we bring new projects on stream. >> as you produce more oil, what's happening on the cost side? what will happen to your margins? >> this field we found in norway has probably the lowest cost in the industry. this is the largest discovery made in the north sea since 1985. it will have cost curves in the bottom part of the lower quartile. obviously, when uven 250 million barrels of oil brent based in the north sea clothe to infrastructure and a cost for barrel higher than what you would have seen still very low relative to our deep water and harsh environment projects. >> ashley, there's been uncertainty still around the project, the cap ex, the production. can you give us any further clarity on that and what we're looking at over the next 12 months in particular? >> yeah. well, the front end engineering product has been awarded to acker. ourselves and our partners are very much aligned and ready to move forward with that project. i think what we have said, there will be more details available when that announcement is made, but this field will produce at over 500,000 barrels a day when it reaches plateau. that will represent between a quarter and a third of all norwegian oil production. so it's material not only for norway, but for ourselves. >> it's a very transitional time for the company to a full cycle ent business, and i guess that takes time for the value to be monetized. the stock fell over 32% last year. is this a case of the shareholders needing to stick with you? >> very much so. my opinion is that the future for the company looks fairley bright. we'll double or projection. by 2015, we'll exit at 75,000 barrels of oil per day and that will probably double. i think that the international independent enp sector has been badly hit as the u.s. counterparts have done very well. the valuations for some of the other independents look quite compelling at the moment. from a business perspective, things are going extremely well. i think when we deliver on this is projects, then the market will take care of itself. >> ashley, great to chat with you. ashley heppenstall, ceo of lundin petroleum. services pmi, 58.3 in january, 58.8 in december. there was an expectation it might actually kick up to 59. that's the lowest since june. the expectations component, up to 74.3 in january. that's the highest since march 2010. the composite pmi as a result down to 59.11 is in january from december's 59.4, the lowest since june, as well. the survey suggests the uk economy is on course to grow. although that's a tick down, the long run averages of the services pmi is 58.5. so we're still very much above the long run average. sterling just coming down to 1.6293. joining us is russ walker, senior economist at ubs. ross, a little tick below what the consensus was going to be there. but nevertheless, are we in a very sustainable growth phase for the uk? >> well, that depends what you mean by sustainable. if you're talking about the next 12, 18 months, then yes, i think there is enough short-term momentum. confidence is improving. the strong employment data i think will underpin some recovery in consumer spending. beyond that, there are still these underline structural imbalances in the uk. there's still a lot of debt in the household sector. i think the supply side of the uk economy has some serious problems, which policy hasn't really addressed over the last few years. but over the next year or so, yes, i think we'll broadly maintain the pace of growth we've seen since the spring. >> yeah. you mentioned -- okay. fine for a year and a half. but if you look at the underlying problems, is that the going to be the thing that stops the bank moving on rates earlier? because there's plenty of houses now saying that they could go, you know, the end of this year. but if you've got those concerns, you wouldn't, would you? >> no. i mean, i think the outlook for monetary policy is more dovish than what the consensus is expecting and what the market is pricing in. partly because the bank of england keep telling us that, you know, whatever the intermediate thresholds, whatever the unemployment rate is doing, they're still not convinced that recovery has not taken root. and the poll signal is still dovish. so lower rates for some time and because of this huge sector debt stop, once the bank of england begins to signal that a rise is coming, monetary policy and expectations of rate rises i think will have quite a powerful and quite an immediate effect in reigning in consumer demand. yes, a delayed rate rise, probably mid 2015 and once rates starts to rise, that will happen at a fairley cautious pace. >> are you taking into account in terms of policy for your investment? and how much does it matter what happens to the banking of the uk investment? >> well, i think the bank of england is clearly a factor. but i think we've heard what carney thinks already. i think the uk is on a decent path. i'm not particularly fussed about this pmi data. >> do you look more at the ftse 650 or the ftse 100 or -- >> if anything, it will be the ftse 100 in the uk. but our perspective is global, is completely global. good quality prices covering good quality liquidity. it wouldn't be very difficult for us to be nimble in this escape essentially. >> we're going to talk more about this after the break, but property, where specifically are we talking about? >> principally, still the uk and principally still m-25 region. >> great tour. >> good to see you. thanks for that, johnny. ross, stick around. we'll come back to you in just a few moments and more breakdown on the uk policy. here's a word you should keep in mind "unbiased". some brokerage firms are but way too many aren't. why? because selling their funds makes them more money. which makes you wonder. isn't that a conflict? search "proprietary mutual funds". yikes!! then go to e*trade. we've got over 8,000 mutual funds and not one of them has our name on it. we're in the business of finding the right investments for you. e*trade. less for us, more for you. the fund's prospectus contains its investment objectives, risks, charges, expenses and other important information and should be read and considered carefully before investing. for a current prospectus visit www.etrade.com/mutualfunds. european markets edge into the green. >> and a volatile day of trade visited by strong earnings from panasonic. >> growth is ticking along nicely for swatch. the ceo is telling cnbc that he's seeing strong sales in china. over the tropical island of puerto rico, s&p cuts the u.s. territory's debt to junk status and warns of more downgrades. >> european equities a little firmer today. the services pmi, a tad weaker than we must have thought. the ftse mib is up 0.75%. we are higher than we were 30 minutes or so ago. >> in line with the eptment we're seeing in the equity markets, we're seeing bond markets trading tighter in terms of the yield. we've got ten-year gilt yields, a couple of basis points higher in terms of yields. >> and as far as the currency markets are concerned, we are lower on dollar/yen. but below that low we hit on tuesday. euro/dollar, just above the two-month lows of below 1.35. pmi back to 1 .6274. harvard economist larry summers has repeatedly criticized george osborne's plan a of economy cuts. george osborne says that he wasn't convinced by the economist's accusations. >> i'm not whole by persuaded as a sector stagnation argument as larry summers and other have advanced. because i think it's too pessimistic about the potential of western economies, he principally is referring to the united states, but the uk and others to be centers of innovation. >> chancellor osbourn warned that britain's housing shortage is likely to persist for at least ten more years. however, he defended the actions in the property market and played down fears of a bubble forming in residential prices. ross, weigh in here. we keep suggesting that the bank of england could use macro prudential tools in order to cool the housing market if it has to. interestingly, bank of america suggested this week that that is not going to be sfusht and rauf. >> yes, i'm sympathetic to that view. mark carney keeps talking about monetary policy being the last line of defense in dealing with financial stability issues, including housing, market and credit issues. i think at some point that will have to be supplemented by higher interest rates. if you raise the price of credit, you'll limit the demand for it. so, yeah, at in point, i agree monetary policy will have to be tightened. but i think it's still 12, 18 months down the line before we get there. and it's certainly too early to be talking about a problem in the housing market. either a price bubble or mortgage borrowing racing away. mortgage borrowing is still rising at let me tell less than 1% a year. the borrowing, the credit situation is still quite muted. in your note this week, you're talking about phase two of forward guidance for mark carney and for the bank of england. what does that look like? if they start to pull in a number of different factors in order to guide policy, doesn't it actually become less clear and less able to guide the markets in a sense? >> it does. it was regarded as a real proxy for the real economy and because it was a variable which normally you would expect to change gradually and in a predictable way. well, of course, since they've adopted it, it's done anything but that. i think that will caution them either from trying to find a single replacement or from reversing back to a much more -- a much looser form of guide yaps. wh guidance. i think what they will probably do is adopt a rate forecast. i think that would be the simplest way of signaling the policy outlook and it's also a variable that the bank of england controls. they don't have the problems they have with the bank of england rates performing in a uncontrollable way. >> that's what been a failure or not? >> i think it's a problem they'll be quite happy with. we've got a recovery in growth. the labor market is improving and inflation is back to target. so in a sense, i think they would probably have this situation than one in which you have a weaker economy. in general, i think they'll be happy. >> ross, good to see you. thanks for that, senior uk economist at rbs. shares in swedish banking group seb have jumped after the firm posted a stronger than expected rate in the fourth quarter. the group, which has a dividend policy to pay out 40% or above per share said it's going to pay out a 59% payout ratio, a long way above analyst expect ages. joining us on the phone from stockholm, jan erik back. what are you confident about? >> well, i think we have built our balance sheet in a good way over the past few years. so i think we're -- you know, we're sitting today with a very sound capital situation. so it's just a reflection of that. >> how would you describe your loan loss portfolio? >> we've been very quality minded for a long time. loan lows today are extraordinarily low. we've been there for a couple of years now and i think this year is not going to look very different. asset quality is good throughout. that goes for the baltics, as well. at 35, 40 basis points, you know that's where that's going to be. asset quality is something we're quite comfortable with. >> you mentioned the baltic region had a significant increase in predictions as far as lithuania is concerned. can you give us a bit more speculation? >> i think what's coming through there is the ramp up of some of the assets that we took over in terms of property assets during the crisis. >> can i ask you about the recent volatility that we've seen and how concerned you are about that potentially impacting numbers in trading activity going forward? >> well, you know, for us, it's all customer flow driven so it's no proprietary trading. and it's really coming as a result of confidence coming back into the market. i think we can see from some of the measurements done in this market that consumer confidence is pretty good and so -- and that's true in the corporate sector, as well. and as soon as confidence in activity levels pick up, you know, that generates the flow of business into our trading business. so that's where it's coming from. and i think that is -- it's at a much better level than it was previously in 2013. >> jan, when we spoke to your ceo back in november, she said there's so much liquidity out there, but it's tough to find the right kind of demand. bearing that in mind, would an announcement of further liquidity from mario draghi be the right move, do you think? >> yeah. it probably is the right move. i think europe still needs quite a bit of support. now, where we operate, it's northern europe and scandinavia, primarily. we do feel the liquidity sensitivity in a german operation, primarily. but where we're up in sweden, norway, denmark, finland, that's less pronounced. .i think the underlying business that we're aiming for is to deepen your relationship with the customers. so we're not so much lending driven, which is a good thing. we're more towards commission and customer driven trading income. and that's less sensitive to liquidity flows. >> interesting. thank you so much, jan. great to talk to you, jan erik back, the cfo of seb. now let's cross over to asia. expecting to post fg profits is mazda ucako ohno has the story. >> yes. mazda revised up its net profit for the year more than three times on the year. global sales are quickly recovering thanks to its eco friendly sky active technology. enjoying greater sales in the u.s. and other foreign markets in which the company had formally been outnumbered by its rivals. the weaker yen gave a boost to its sales. the carmaker announced today that it will be paying out dividends for the first time in four years. a mere one yen, but the president told reporters today that paying out profits to investors had been his top priority and vowed to keep it up for next year onward. that's all from nikkei business report. back to you. >> thanks for that. good to see you. still to come on the show, it's been a bumpy ride for asian markets as the nikkei managed to climb out of the red, as we heard. we have your asian markets, right after this. activity in india's all important services sector continued to shrink in january albeit at a slower pace than the month before. the data comes in sharp contrast to a rebound in manufacturing where activity grew at its quickest rates in ten months. aggressive rate hikes appear to be hitting the brakes on indonesia's rapid growth. the emerging economy slowed to 5.8% in 2013, down from 6 of.2% in the year before. it's the slowest pace of growth we've seen in four years. a cooling commodities market has also helped to slow the country's growth. and north and south korea are making another try at holding family reunions. the two enemy nations will allow some war torn families to rejoin. north korea continues to call on seoul to cancel military drills with the u.s. let's give you a look at what's on the agenda in asia tomorrow. it's another big earnings day in japan with sony, renesas and suzuki. we've got singapore airlines and starhub releasing results while over in the philippines, the central bank makes its latest policy decision after sounding warning on inflation. it's been a volatile session for the nikkei starting the day in positive territory, then dipping below the 14,000 level for the first time since october only to come back again at the ends of the day ending 1.2% higher. this ends the japanese government's four-day losing streak. mark from jewulius baer joins u now. mark, it's rare to see a more than 4% drop for this market. what's going on here? what is in the cards? >> well, i think there's two things going on. there's an economy where they've firmly put deflation behind them. i'm very confident that they're going to get about 20% eps growth this year for now it's about 11 times price to earnings. so a very fundamentally decent looking market. but on the other hand, a very harry market in terms of the volatility. and i think it's been exacerbated by external events. it's nothing to do with japan internally, but it's the emerging markets contagion. people have been buying yen and that's pushed it back to 101, thereabouts. wherever the yen goes down, there seems to be an inverse correlation with the nikkei. just general risk aversion takes the hot money out of japan. and i can't deny that there is hot money in japan, but i still think that, you know, if you can look out six, 12 months, i feel it's the most conducive story in asia. >> the relationship between dollar/yen and the nikkei, either the nikkei is too low and dollar/yen is too high. will that continue to work, do you think? >> well, i think so for the very simple reason that the u.s. is going to probably clock in decent gdp growth of anywhere oo i'll say between 3% to 4% this year. the fed should continue its tapering program. meanwhile, the bank of japan is, you know, continued to affirm that they're going to maintain their quantitative easing program. so if i just put the two together, i don't -- i also don't see that happening. so, you know, if the yen weakens, that's nice. if it doesn't, i still think they're going to be clocking at some decent earnings growth this year in japan. >> yes. so, mark, you know, we're going to get some decent earnings growth. we've had these falls, what's your core strategy, then? what's the key? >> well, i mean, we as a house are long japan. we're staying long japan. as i said earlier, it's a harry asset to own. it certainly gets your heart pumping with these wild gyrations. but i still think it's worth owning. as i said, 1 1 times for approximately 20% eps growth. i actually can't find that anywhere else in the world. so, you know, japan is a good market and elsewhere in asia -- >> i suppose what i'm asking, mark, is how much pain are you prepared to take? how much conviction have you got? >> i've got a lot of conviction in japan. you know, i -- i think, you know, if you look at the rest of the world, the u.s. looks quite heavy this year. it's in the midst of a correction. but statistically, if you back date to 1930, thereabouts, years when you've had a january is down as much as the one we've had down now, we're probably not going to be out very much in the u.s. europe still looks good, i'll give them that. but here in asia, i think japan still stands out and, therefore, i'm willing to tolerate pain. >> brilliant, mark. great to chat with you. now, the manipulation of the foreign exchange market could be just as serious as the libor reading probes, according to the uk's financial watchdog. the sca's chief executive martin wheatly said that the allegations that traders colluded to rig prices were ever bit as bad as they had been with libor. the global investigation into forex manipulation has prompted at least 15 banks to cooperate with regulators in london, europe and the u.s. and s&p is cutting puerto rico's debt to junk status limiting its access to the markets in coming years as its obligations pile up. it's suspended much of its bond program last year after yields on its debt soared. it jumped more than 10% on tuesday after s&p's move. around 70% of the u.s. muni mutual funds hold puerto rico securities. commuters in london are facing chaos this morning thanks to a 48-hour strike. great data, ross. i'm going to save it until after the break. but what we've been asking is which city do you think has the best public transport infrastructure and why? mark anderson tweets, the best public transit is in tokyo. if you want to join the conversation here on "worldwide exchange," get in touch with us by e-mail@worldwide, @cnbcwex or directly to us @rosswestgate or @jchatterl @jchatterleycnbc. >> they have the people with the bullet trains where they are pushing them but they have the guards on each door, they're pushing people in. it is one of my favorite transport pictures is this man pushing this woman in to close the doors. >> i thought you were going to say one of my favorite ways of taking transport. >> no, no, but it's -- >> the picture only. >> it's sardine like, just like being on the central line. still to come, is it time to start kicking the bottom? >> we'll get the lowdown from the chief global equity strategist at goldman sachs coming up aet aftfter this shor break. to manage your money. that's not much, you think except it's 2 percent every year. does that make a difference? search "cost of financial advisors" ouch! over time it really adds up. then go to e*trade and find out how much our advice costs. spoiler alert. it's low. really? 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[buzzer] dangnabbit. geico. fifteen minutes could save you...well, you know. welcome to "worldwide exchange." i'm julia chatterley. >> and i'm ross westgate. the headlines today from around the globe. >> european markets heading into the green taking cues from asia and the u.s. as investors start to buy back into the market. japan's sell-off comes to a halt. the market closed at session highs after good earnings from panasonic. a chill falls over the tropical island of puerto rico as the s&p cuts its debt to junk status and warns of more downgrades. and investors get a fresh snapshot today on the labor market. expected to show a slowdown in private sector hiring last month. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> if you're just tuning in, thanks for joining us here on the show. let me give you a look at always at how the markets are fairing ahead of the u.s. open today. we saw a rally yesterday. a bit of paring into adp. we've got dow futures indicating lower by around 45 points right now. this morning, we've got the nasdaq, indicating lower by around 14 points here. and the s&p 500, did nice to gain around .75 of a point yesterday. right now indicating up by around 6.2. that belies what we're seeing for the european markets. we did see a bit of a negative open to the session this morning, but right now we are trading higher into the green. we've got the ftse 100 gaining around 0.4%. so adding to some of the gains that we saw in yesterday's trading session, too. the german market relatively unchanged. same story for the cac 40, g around 0.4%. and we have the ftse mib, the italian index here higher by around 0.7%. this is the outperformer here this weekend in particular, gaining around 0.7% yesterday, too. a bit of a volatile session in asia, too. so, again, a bit of a mixed bag. >> that's okay. we've had a bit of a sell-off. you blend very nicely. we did see, of course, equities a little higher. the yields just coming off lows. ten-year treasury yields, just below 2.62%. 2.58% is what we hit on monday, a three-month low for treasury yields. today, gilt yields, 2.67%. services pmi came in a tick weaker than we might have thought. 58.3 last month. it was 58.8 in december. still, the longer average has been 55, so still above that long-term average. sterling is weaker on the news, down to 1.6269. aussie/dollar, it had a big bounce yesterday, up over 2.7% post the rbi coming out with dropping easing by. just come back a little bit. dollar/yen, 101.10 is where we stand at the moment. 101.6 was the 11-week low that we hit on tuesday. 1.35, not far away from 1.3477 which is a two-month low from monday. back to european trade, let's recap what happened in asia particularly, as well, out of japan. adam is with us out of tokyo. adam. >> hi, ross. good morning. it was a positive day for japanese equities, but, you know, looking at the wall that you just displayed for us in terms of foreign exchange movements, the rebound that we saw in tokyo stocks could be short lived if the dollar/yen continues the trend it's been on for the course of the day. at the high, we struck 101.75. right now, 101 plus levels. we could see a lot of these gains, but a lot will depend obviously on what happens on wall street. back to the trading day, stocks rebounded about 175 points on the nikkei 225. that is a far cry from the massive data we saw on tuesday when the index lost 602 points and a technician suggests that breaking that 200-day moving average is a very stiff resistance. that sticks at about 14,425. moving to the stock movements, we saw no shortage of huge data in terms of gains, so some of the big ticket names, including panasonic. that was a showstopper today after they reported that their october to december numbers jumped 20% to 730 million u.s. dollars. the nine-month numbers returning to the blank black after being in lows for the past three years because of some of their less than known niche businesses helping to overtake their traditional television businesses. in the meantime, autos in focus, the world's biggest being toyota. their numbers were reflected in the positive optimism we saw in the share price today. a number of automakers did report an increase in operating profits, they are concerned about was happening in emerging markets, particularly in the hot spots where we see political troubles in thailand, which is certainly a big center for the auto production particularly with the japanese automakers. tomorrow, julia, we're going to get more numbers out and tony will be the one to watch, as well. you know the stories swirling around in the media is they might be jettisoning their loss making pc business. we'll see whether that manages to confirm that strategy tomorrow. >> wow, adam, finally. am i allowed to say that? we'll be watching, anyway. have a great evening. >> maybe daniel loeb will be happy about that. >> i'm sure he won't. great to chat with you. now we're joined by peter oppenheimer. joining us now on set, peter, great to have you here. >> thank you. >> there's a lot of things to consider be it central banks, be it general risk sentiment and the data. where are we now? lay out the land as you see it. >> well, i think the underlying trajectory for risky assets and equities in particular is still up towards over the course of this year. we are expecting to see a good rebound in global growth led by the u.s. through the course of the year. understandably, we've seen a correction, given the scale of the rise that we've had particularly towards the end of december. and the length of time we see markets with no correction and a very sharp fall in volatility that we saw at the end of the last year, so i think the combination of this, the slowdown in the macro data in the u.s. has led to this correction. but we think it's relatively temporary. >> we've seen a number of analysts come out now and saying that this opportunity in terms of valuation, particularly in emerging markets, i want to get your views because i know you've done some work on just at what point investors should be getting back into some of these real problem emerging markets, like the fragile five. >> yes. well, i think two things. first of all, it's important to differentiate between emerging markets. most emerging market equities moved closely together, despite the fact there are some with external deficits, some with credit status, some commodity producers, other commodity users. we think there will be more differentiation. in aggregate, though, i think it's still early to look at those coming under pressure because of external deficit. if you look at previous emerging market crisis, we found that generally you've needed to see much bigger improvement in underlying current accounts and balances. >> does that have to be the catalyst? it's not about valuation, it's about seeing the data shift? >> i think that's right. obviously, the valuations have improved a lot, and that will provide the platform, but i think you need more of a fundamental improvement to come through before we get that trigger. >> and give me an example. i know you pointed out the 3.5%. is that what investors need to keep in mind? >> that would be our view. if you look at the previous crises, that's very much the scale of improvement we've needed to see in current account deficits, before you get a rebound. coupled with re-evaluation, i think that will come, but it's probably a bit early yet. >> when is cheap cheap enough? >> right. >> for us risk you're taking abroad. we've seen some examples, obviously somewhat different, but in europe. european equities were cheap for a very long time. they were factoring in a lot of risks and there was a lot of risk. when you finally started to see an inflexion point in the fundamentals, and some sense that the systemic -- >> it was a break-up. >> then the underlying valuation attraction gave that trigger for a very strong rebound. but younied to see an improvement in the fundamentals first. >> what would an improvement. >> fundamentals to you look like? >> well, in particular for the countries where you're seeing big foreign exchange weakness, you would need to see quite big improvements in their external funding positions. big improvements in their current account deficits. i think the other hurdle, of course, is also related to u.s. monetary policy. if there is a concern that the yield starts to move up -- >> how about the data? did given the macro data, i don't think that is -- >> what about the fact that this time around, we've seen ten-year yields come down to 2.60 and em has not been given any respite on that. it feels different this time. we have the china wealth projects, too. having said that, what's the risk of a snap back at these markets? >> i think we need to know what's happening at the moment related to a number of different issues. in addition to that, you have some slowdown in the chinese economy and concerns about the shadow banking system. they're not entirely related. that combination has brawn down the long curve in the u.s., but it's led to a sense of the risk off given the scale of rises that we've seen up to that point. >> peter, you're staying with us. don't move a muscle. let's give you a quick look at what's on the agenda today in the united states. the january adp report out at 8:15 eastern. forecast calls for an increase of 190,000 in private sector payrolls, following a rise of 238,000 back in december. at 10:00 a.m., we get the january ism services index. a pair of fed officials speaking about the economy today, charles plosser and atlanta's dennic lockhart. we've got merck, humana, time warner reporting results before the opening and after the close, we hear from disney, twitter, allstate, green mountain coffee roasters, pandora and yelp. >> there you go. still to come, as well, we'll find out why france is hoping to make things a bit more taxing in the future of google. [ male announcer ] the new new york is open. open to innovation. open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses... we're open to it. start a tax-free business at startup-ny.com. we're open to it. some brokerage firms are but way too many aren't. why? because selling their funds makes them more money. which makes you wonder. isn't that a conflict? search "proprietary mutual funds". yikes!! then go to e*trade. we've got over 8,000 mutual funds and not one of them has our name on it. we're in the business of finding the right investments for you. e*trade. less for us, more for you. the fund's prospectus contains its investment objectives, risks, charges, expenses and other important information and should be read and considered carefully before investing. for a current prospectus visit www.etrade.com/mutualfunds. european equities are in the green despite lower than expected numbers out of the uk. puerto rico gets downgraded to junk status by the s&p. >> and we'll get a first look at the jobs market this week with the adp report due out later today. commuters in london are facing chaos today because of a 48-hour tube strike. that's the underground. tom mackenzy joins us from the streets in london. presumably the underground are quiet. how busy are the streets? >> the london underground is very quiet. the streets are packed with pedestrians, a lot of cyclists we've seen as we hot footed it from station to station today. this is all because two of the biggest transport unions in britain have decided that enough is enough. they are very sangry about plans by the overall transport for london, the organization that runs the london underground to close ticket office necessas in stations and to ax 247 jobs. it comes two drivers and train workers and people around the station have come out on to the streets today to express their anger. for london and the mayor's office said this is all about modernizing london's underground system, which is the oldest in the world. they say it's about making it more efficient by including technology and swipeless tickets and also just speeding things up basically making it easier to get people through the underground doors every single day. the problem for commuters is we've got another 24 hours of this and next week planned strikes on the 11th and 12th. commuters have having to rip up their travel bans and think again and they're looking ahead to next week with some trepidation. >> tom, where are you? which underground staying are you outside of? i can't work it out. >> it's london bridge, so pretty central, ross. just a few moments ago, the mayor of london was here to pay the picketters a visit, he actually went back on his word in 2008 saying that he wasn't going to close the offices, now he's saying he will. he says that's because of technology and advances in technology and he wants to modernize the underground. >> that's right. he turned up on his bike. i don't know how you're getting back, tom, but anyway, thanks for that. that's the latest on the underground strike. we've been asking, which city do you think has the best public infrastructure and why? charlie tweeted without a doubt vienna has one of the best urban transport systems in the world. in my humble opinion, the trams are excellent. >> it's a beautiful city. >> it is a beautiful city. e-mail us with your views, worldwide@cnbc.com, @cnbcwex. >> i cycle into work. so i'm not affected. >> handy. handy. let's take a look at today's other stop stories. microsoft will pay its new ceo nadella a base rally of $1.2 million according to an s.e.c. filing, more than 70% higher than steve balmer's base pay in his third yee as ceo. microsoft made him the third person to leave the company since it was founded in 1975. nadella will also get a stock award for the fiscal 2015 years worth about $13.2 million. amore group of investors reportedly pressuring yahoo! to change its pay practices. "the wall street journal" says ctw, part of labor federation change to win, wants yahoo! to take steps to ensure it won't overpay for talent. the chief operating officer will get an estimated $109 million for just 15 months on the job. ctw, which owns less than 1% of jobs wants mayer to give up her seat on walmart's board. yahoo! stock is just down 0.1%. goiogle is awarding eric schmidt $1100 in stock due to the company's performance last year. google continues to post strong revenue growth, alleviating concerns that the shift to mobile devices would hurt its flag ship surge business. google stock is up about 60% since the start of last year. meanwhile, google may get hit with a $1 billion tax about it bill from france. that's according to a report in france's magazine. stephane is in paris. oh, stephane, we thought that francois hollande was building a strategy to be kinder to businesses, a responsibility pact. he's going in the opposite direction. >> i know. but it's not secret that the finance ministry was looking at these internet giants to look at their fiscal optimization policy. this has been going on for three years and focuses on the strategy that google implemented not only for france, but for europe. in 2012, google declared a revenue of $193 million in france and paid $6 million in taxes. they were quoted this morning by the ifs news wire. without being submitted to the french taxes, but according to the fnl finaninance ministry, t unit should pay taxes in the country. the french finance ministry declined to confirm or deny on this report. google cede its company policy never making comments on rumors, so we just have to wait to watch the share price and to wait for -- to have some official announcement from the french finance ministry. over to you. >> and we'll wait with bated breath. still to come on the show after the break, we continue the conversation with goldman sachs's peter obenheimer. >> see new a moment. pay my bill. phone: your account is already paid in full. oh, well in that case, back to vacation mode. ♪boots and pants and boots and pants♪ ♪and boots and pants and boots and pants♪ ♪and boots and pants... voice-enabled bill pay. just a tap away on the geico app. ♪ huh, 15 minutes could save you 15% or more on car insurance. yup, everybody knows that. well, did you know that some owls aren't that wise. don't forget about i'm having brunch with meagan tomorrow. who? seriously, you met her like three times. who? geico. all right. the s&p up 13 right now the futures are suggesting we're going to snap back down. the s&p 500 currently 6 points below fair value. the dow around 44 points lower t opening call at the moment. the nasdaq concernedly called down 13.5 points. let's get back to you, peter. we were just talking about emerging markets. what about the influence of emerging markets in european stocks? it's not a new thing. we've seen a bit of underperformance. but to what extent is turmoil in emerging markets priced in some of these european stocks? >> europe is quite exposed to emerging markets, relative to, for example, the u.s. you've got something like 16% or 17% revenue exposure. i think it was important to look at the type of exposure for emerging markets. not something we had done in a recent report. companies in europe that are heavily exposed to the industrial sectors and the commodity sectors. these are the ones that saw a huge outperformance in the last decade, looming infrastructure in commodities and these are slowing. >> the ftse 100 is a key example, i guess. right. so we remain quite cautious from the miners, for example. which has had the highest exposure of any sector and the uk has large exposure to that sector and commodities forwardly. >> to quickly pick up on the report that was out earlier this week from reuters saying that there's $3 trillion worth of exposure to markets within the european banks. it set alarm bells off. what is your take? >> well, i think that it's important to differentiate between the types of exposures. and how capitalized the subsidiaries may be. our view is that if you take the emerging economies where the exposures are most risky at the moment, the countries with the biggest deficits where currency appreciation is quite significant, overall exposure is quite small. the overall estimates, for example, is less than 2% of equity. so that's the sort of asset exposure that you have. and although there's concentrated risk in some individual 2345i78names. in aggregate, that's relatively small. >> so some of these numbers were alarming. peter oppenheimer, brilliant. thank you. >> thank you. always good to see you. still to come, futures indicating we're going to open lower this morning. well, we'll look ahead to the day. [ male announcer ] the new new york is open. open to innovation. open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses... we're open to it. start a tax-free business at startup-ny.com. woke to "worldwide exchange." i'm julia chatterley. >> and i'm ross westgate. the headlines today from around the globe -- >> european markets edging to the green in early trade. taking queues from asia and the u.s. japan's sell-off was at a halt. the equity market closing the session higher after a volatile day helped along by stronger earnings from panasonic. a chill up over the tropical island of puerto rico as s&p cuts the u.s. territory debt to junk status and warns of more downgrades. and inest verse get a fresh snapshot on the employment data today. the adp report is expected to show a slowdown in private sector hiring last month. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> if you're just tuning in, thanks for joining us here on "worldwide exchange." let me give a look at how the markets are fairing as we head towards the u.s. open. and it was a solid day yesterday as far as the trading session was concerned. modest gains on relatively strong volumes, too, but it didn't seem to last long. right now, we've got the dow futures indicating lower by around 39 points. so far this morning, gains of around 0.5% in yesterday's trading session. the nasdaq indicated lower by around 12 points this morning and the s&p 500 right now lower by around 6 points, too. let me give you a look at the largest 300 stocks across the globe this morning in the trading session. a volatile session in asia overnight. ending the day up around 1.25%. let me give you a look, too, at the european markets are concerned. despite a weaker open earlier on in the session, we're now trading higher into the green this morning. the ftse 100 higher right now by around 0.4%. we've got the german markets relatively unchanged so far in trading this morning. the benchmark, 0.2% higher and the italian markets continuing to add to yesterday's gains were higher today by 0.6% so far. ross. >> yep. so european equities up, u.s. futures down. what's on the agenda in the states? we've got the january adp report out at 8:15 eastern. forecasts calling for an increase of 193,000 in private sector payrolls, followed by a rise of 238,000 in december. at 10:00, we'll get the january ism services index, a fair of fed officials speak about the economy. philly fed president charles plosser and atlanta's dennis lockhart. merck, time warner will report results before the hels. after the close, we'll hear from disney, twitter, allstate, green mountain coffee roasters, pandora and yelp. i'm not quite sure what -- green mountain coffee roasters. it is all one. >> we're together in that. >> a bit of a bounceback yet. treasury yields still around 2.6% mark. i think they're just going to wait now for the -- >> adp and payrolls, exactly. >> ism today, as well, nonmanufacturing. yes, that's right. this time yesterday, the u.s. saw the worst, the worst start to february. and i saw some great stats that said it was the worst start to the s&p since 1933. however, that year, it rallied 46%. and guess what was the best month to buy? >> february. >> february. >> there we go. >> smart. >> there you go. there's that. >> you never know. >> that is very well worth pointing out, the worst start since 1933 ended up being a great year. >> a great year. let's take a look at some of the earnings we've had out today. swatch trading near the stoxx 600 after the watchmaker earned a 20% jump in profits. meanwhile, shares in the banking group seb have jumped after the company posted a stronger than expected operating profit of $5 billion swedish crowns for the fourth quarter. the group says it will pay out 4 pounds a share for 2014, way above expectations. meanwhile, challenging conditions are behind a 6% fall in revenue for broker icap. reduced investment bank activity and new regulations hurt the firm. mean wile, crop chemicals manufacturer syngenta has announced it will step up its cost cutting exercise. the ceo mike smack said he was not overly concerned about the current emerging market headwinds. >> look, the emerging markets, carolin, had been a source of our growth. 52% of our sales now in emerging markets, it has what has powered the firm's revenues up. we've had exposure all along. we've had here before with brazil, we've been here before with argentina. we've got some hedges, sure, and that's cost us money. by by and large, this is something we've seen before. >> other stories we're following, morgan stanley has agreed to pay $1.25 kmillion ovr mortgage bonds it solved to fannie mae and freddie mac. it's the eighth bank to settle claims by fannie and freddie, the federal housing rating agencies. morgan stanley stock today, do we have it? maybe not. >> getting over -- oh, no, there it is. >> it wasn't really worth it when we got it, either. just up 0.2%. jpmorgan is paying $614 million to settle a mortgage fraud case with the u.s. government. among the settlement, the bank admits that it approved thousands of mortgages that weren't eligible for the federal housing administration or the veterans department of affairs. both agencies incurred substantial losses when those agencies failed. trading is slightly lower for jpmorgan, just down over 1%. >> think about morgan stanley and having to pay fines. it's amazing to hear what martin was saying yesterday in the uk about the foreign exchange, this brewing scandal. >> libor. >> and it's essentially much worse. in libor, they were just estimating. on fx, it's real trades, it's real spot prices. and it's a much bigger market. >> it's a much bigger market. imagine how much data you've got to go through to try and find that. i don't know. i think it's as long as a piece of string, but -- if we thought that we knew what banks reserves were going to have to be, if that explodes and it's bigger than libor, it's another whole ton of pain coming down the pipe. what does that do for their capital levels? >> it could be really painful. they have to find a way to measure it and i'm not sure. still to come, s&p moves puerto rico's debt to junk data. the motives behind that move and the impact it could have on investors, coming up next. ♪ [ cellphones beeping ] ♪ [ cellphone rings ] hello? [ male announcer ] over 12,000 financial advisors. good, good. good. over $700 billion dollars in assets under care. let me just put this away. [ male announcer ] how did edward jones get so big? could you teach our kids that trick? [ male announcer ] by not acting that way. ok, last quarter... [ male announcer ] it's how edward jones makes sense of investing. ♪ makes sense of investing. sometimes they just drop in. always obvious. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's 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. residents in the northeast united states are bracing for another storm. forecasts call for anywhere from a few inches to a foot of snow in some areas. the weather channel's reynolds wolf joins us now. reynolds, tell us what we should be expecting. >> you know, i think we're going to be seeing a bit more of what we have around me. a lot of snowfall. this is the light and very fluffy variety that we've been getting. much the snowfall really started during the late afternoon and last night really began to kick in to the tune of around about 7.1 inches of snowfall. by the time we get through mid day and that's when we expect the snow to begin to end. around 7 to maybe 10 inches of snowfall. a little bit more. i have to tell you, the city of indianapolis has handled it very well. the governor actually put out an order for over 800 trucks equipped with both the plows on the front, salt spreaders in the back and they've been servicing the roadways all around indianapolis and roads, all things considered, are in pretty good shape. government offices for now remain open. city schools are open. but outside of the city itself, it's kind of hit or miss with some of the schools. many of them will remain closed. travel is okay, again, under the circumstances in indianapolis. other forms of travel, especially the airport, that is also taking a hit from the winter weather. since 9:00 in the morning and earlier have all been canceled and now it's just a wait and see approach as we make our way through the mid day hours and beyond. now, the snow we've expected to end, this will come to a screeching halt. however, the cold air that's locked in place will drop a bit more. temperatures well below the freezing point over the next several days. in fact, we're not expecting an improvement in terms of the temperatures until next thursday. so what you have here on the ground will likely stick around for days to come. back to you. >> reynolds, thanks for that. good to see you. doing a good job there. thank you. puerto rico may be sinking under the weight of a mountain of debt, prompting the s&p to slash the island's credit rating. kayla is with us. a bit of a surprise. >> yeah, a little bit of a surprise. people thought this might be coming, but surely not so soon when s&p cut its rating to puerto rico to double e plus. that's an important distinction. the s&p sites the u.s.'s territory's inability to tackle debt in the coming years. it's been in recession for years and has a 15% unemployment rate. the government suspended much of its bond program last year after yields on that debt soared. yields on some longer term bonds rose above 10% just in the last day following s&p's announcement. now, the cut comes less than two weeks after puerto rico was put on review for a possible downgrade. rating agencies typically take up to 90 days to follow through with the action. but in an interview with reuters, the s&p analyst in question here, david hitchcock, said the decision was based on confidential information on the island's government, raising fresh concerns about its cash flow and activity. hitchcock said he felt he couldn't wait for the bond offering that puerto rico plans to put together in the coming weeks. he said he doesn't believe the downgrade will create a sustained risk in the coming market, but s&p's move may be followed by action from fitch and moody's. now, the junk rating is unlikely to cause a wave of forced selling by investors, but now 70% of the bonds to have exposure to puerto rico. many have limits to how much junk debt they can hold. the power shares insured new york's muni bond fund with 18%. that's a lot. puerto rico's governor is reassuring island residents that the government will operate normally and he's pressing ahead with economic development eft efforts. ross and julia, banks have been flooding into puerto rico and offering to underwrite bonds at extremely high interest rates. so it's not for lack of capacity. it's just can they afford what some of these bonds will end up costing. >> thanks for that. have a great day over there. european markets stay in the green, quite lower than expected services pmi numbers out of the uk. puerto rico gets its debt downgraded to junk status by ratings agency s&p. and we'll get the first look at the u.s. jobs market this week with the adp report set to come out later today. plus, after a five-month long search, microsoft as named na d nadella for its top spot. we'll is ask if he is the right man for the job. open to innovation. open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses... we're open to it. start a tax-free business at startup-ny.com. european eks are hours into the trading session, we have some gains on the board. the ftse 100 is up 0.3%. uk pmi came in a tad weaker than we might have thought this morning. still well above the long run average. plenty of expansion in the uk. the composite number pointing to quarterly growth around 0.8%. xetra dax is flat. the cac 40 is up 0.2%. the italian a little bit more than that. although u.s. futures have been suggesting a negative start this morning. and the wait, oh, yes, folks, the wait is over. after months of speculatinspecud i tell has been many months, microsoft has named satya nadella as its company's ceo. the appointment concludes a five-month search to replace steve balmer who stepped down last year. mean while, microsoft's founder, bill gates, announced he's going to step down as company chairman to assume a new role as a technology adviser. gates said there was no better person to lead the company. right. cnbc's gosh reed has filed this report on that. >> after a six-month search, microsoft ultimately chose an insider as its new ceo. satya nadella is a veteran of the software giant who has been working here for more than 20 years. supporters of nadella said he was the best choice. his background will help microsoft maintain momentum in the commercial side of the business. there are concerns about nadella, including how he's fix the major sides facing the company. >> i don't think this addresses the biggest challenge, which is consumer, whether it's consumer devices, consumer businesses or consumer software. consumers are looking to apple, google, and companies like samsung for those types of products and services. >> analysts say nadella either figures out how to win in the consumer space or exit those businesses. another worry, nadella has run various business divisions, buts has never worked as a ceo. >> i think for satya, not having been a ceo and stepping into what will be a 130,000 person company it's going to be a work in progress for a while ramping up. there's so much for him to accomplish strategically and operationally. >> bill gates will step down as chairman and into a new role as technology adviser. john thompson will assume the role as chairman. his record is mixed as ceo of semantic, he grew revenue ten fold, but oversaw the controversial acquisition of veritas in 2004. as for steve balmer, he remains on the board, at least for now. one issue for nadella, will he have room to operate as the ceo or will gates and ballmer try and dominate the board room? can nadella help transition to a company focused on technology? we'll soon find out whether he has the ability to take on the many challenges facing microsoft. josh lipton, cnbc, silicone valley. joining us now, danny, good to see you. it's an interesting one that with gates and ballmer still on the board whether, in fact, nadella does get the free reign that new ceos need. i'm just thinking of manchester united. alex ferguson stepped down, but he's still there looming over the manager who is not having an easy time of it. >> yeah. it feels like he has a short leash, to some extent. this is all part of the startgy with picking a core insider. the company looked for six months around the world and ended up pacificing some down the hall from steve ballmer's office. i think this is one that's going to be a slow step into the strategy, but with gates as the mentor, that's sort of the role, especially with him stepping down from chairman of the board. >> is it the right thing for the company? nothing radical is going to change, is it? one presumes. but it's going to be more gradual. but if you brought in an outsider, it would be somebody that could have a completely new look at the company. >> yeah. i mean, look, when this whole thing started, i mean, you were looking for the home run candidate, the outsider, new blood, a white board with nothing on it. instead, they went with an insider. again, you went for the home run pick, i'd call it a single or a double at best. that's kind of the issue here is that you feel it's going to be more of a status quo, is he going to operate it like we've seen in the next decade or is he going to have a new strategy with an outsider? i think that's the issue investors want to hear from him. >> daniel, what about the likelihood of more share buybacks here? i know they have the program, but they want to see more cash back, don't they? too much sitting on the balance sheet. >> yeah. especially with value act on the board. i mean, i could see more buybacks, you know, increase in the dividend. but again, the core issue here, it's about growth. the vast majority of revenue exposed to a pc environment which remains very sluggish. again, nokia's $7 billion they've spent, they really need to turn that around. they need to turn the tablet strategy around. that's been very underwomening th thus far. >> thank you for joining us, daniel. we have to move on. the january adp report is out at 8:15 eastern. forecasts call for an increase of 193,000 in private sector payrolls following a right of 238,000 back in december. we've got kevin evans from hinderson global investors here. kevin, what should we be expecting here? if we look back at the ism data we got earlier this week, the employment component was quite worrying. it's a risk here. but payrolls later this week in particular has impacted a gain by the weather. >> yes. and we certainly got that weather impact coming through in a lot of the data we're seeing right now. it's very hard to extricate what might be a small slowing in the economy. our view is that actually the u.s. economy will continue to make progress. it was doing fantastically well in q4 last year. so to come off the board a little bit is that that surprising, actually. that's probably weather related. >> yeah, look. it's amazing to look at the deals done at 2.58%. is that -- can we go lower than that? >> well, we can. we can and we have in previous times. but we think that -- >> yeah. the cycle. >> we think that we can go a bit lower if we get some soft data coming through, down to 250, below 250 to 240. but to go down to the 160s, 170s is unlikely. >> jobs number this friday? >> 245 is not impossible. >> what string of bad data would it take for the fed to pause tapering? >> it would take a really bad string of data. payroll numbers, a hundred or below on a kind of consecutive basis. i think the fed are very much set out that they're on this plan of tapering and they want to be very clear to the market they're on a plan and the taper process will have finished by the end of this year and it's going to take an awful lot for them to deviate. >> what about credit markets here. i know you invest in credit markets in particular. i had a couple tell me yesterday they feel quite fragile here. >> credit markets have done better than equity markets during this latest setback we've had. if you look at the movements in credit spreads, they've backed up a bit, but nowhere near to the extent the equity markets have backed off over the last three or four weeks. so credit, we think it's ongoing demand, definitely demand from investors who have no alternative from the near zero interest rate from their bank account. so that demand is still onbog. actually, the fundamentals of credit is still pretty good. companies are still generally in good shape. so credit is good, but it's not as stunningly good value as it was. >> kevin evans, thanks. great to have you. quickly look at the futures there. >> "squawk box" up next. [ male announcer ] first the cookie at check-in... then a little time to kick back. earn double hilton honors points with the 2x points package and be one step closer to a weekend break. doubletree by hilton. where the little things mean everything. good morning. welcome to "squawk box." the adp report is on the way with the government's employment data just two days away. at&t becoming the first olympic advertiser to protest russia's anti-gay laws with the opening ceremony set for friday. if you're just waking up in the new york area, better get your shovel. another snowstorm causing commuting havoc with me this morning. it is wednesday, february 5th, 2014. "squawk box" begins right now. good morning and welcome to "squawk box" here on cnbc. i'm sara isen along with andrew ross sorkin and steve liesman. becky quick and joe kernen are off today. we'll see them on friday live from pebble beach. wall industry rebounded yesterday given a boost to stocks in asia. the nikkei in japan closing about 11% higher. chinese markets remain closed for the lunar new year holiday. hong kong benchmark hang seng index finished lower following choppy trading. in europe european trading, we are seeing pretty mixed stock. the ftse 100 over in london, a little higher. 0.3%. not much movement, though. among the catalysts here, data showing output in the eurozone in the economy there, expanded at fastest pace since june 2011. a quick check here on u.s. equity futures early this morning. set to open just slightly lower. a rebound in yesterday's trading. today's big test for the markets is going to come from a jobs report. the january adp employment report.
make changes. >> is a spin off one of the options you are considering? >> no. we are not considering that option. >> operation shutdown. protesters begin a blockade in bangkok. major roads and disrupting traffic in an effort to oust their prime minister. >> two of europe's biggest -- numbers from metro. competing for a bigger slice of the emerging market. >> the wealth snags the golden globe -- wolf snags the golden globe. we are live in los angeles. >> good morning. welcome to "countdown." >> it is 7:00 here in london this monday morning. bloomberg reporters are standing by across the world ready to deliver the stories that will drive your day. ryan chilcote is focused on ubs. comments from the ceo of the bank. hans nichols is in berlin looking at metro and carrefoure. >> where is best place to put your money this year? manus cranny has exclusive sachs inom goldman london. caroline hyde is watching the latest trends in men's fashion week moving from london to milan. >> a bloomberg exclusive. sergio ermotti says ubs won't spin off its investment bank. issays the current model working. ryan chilcote joins us now for more. >> we already knew that sergio ermotti was reorganizing the business for wealth management. we knew that he was going to cut 10,000 jobs, that he had already closed most of the debt trading businesses. last week, medio backus said they are considering getting rid of investment banking altogether. in an exclusive interview with sergio ermotti in shanghai and he said that isn't the case. >> i think the investment bank is very strategic for us. we have been making a lot of changes to our strategy. the strategy is working. it is one that is focused on supporting our clients. very defined assets and capital that we want to put at work in the investment bank. therefore there is no necessity for us to make changes. >> is a spin off one of the options you're considering? >> no. >> the whole issue is, they want to boost returns, get return on equity. that is the measure of returns for investors, up to above 15% by the end of next year. in october they said that wasn't going to work out. regulators asked them to hold onto more money. they have all these litigation costs. they keep getting sued over mortgage backed securities and everything else. the thinking was that perhaps this is one of the ways they were going to achieve that. it turns out that is not the case. >> the swiss are tougher when they come to banking regulation. they have a role which is basically at the s percentage of assets which is probably going to be tougher than the global rule. this is another reason why many are suggesting they need to spin off this. >> ubs had two major strikes. first, the government bailout about four or five years ago and then we had just two years ago, they thought they were through it. that was a $2.3 billion hit when they were done unwinding the unauthorized trades. they have a lot of pressure on them including specifically on proprietary trading, investment banking. last october we heard from the finance minister saying maybe some of switzerland's thanks will have to get rid of their security -- banks will have to get rid of their securities. is he a little bit of pushback. >> they are cutting jobs and focusing on wealth management. >> he says it is working. it is worthwhile. >> ryan, thank you very much. >> metro reporting revenue in line with estimates. the store facing up with its cap part in france, carrefoure. us fromhols joins berlin. what did we learn from metro's earnings? >> we learned that the german consumer did not in fact save christmas through a massive amount of spending. you see german sales down almost 2%. overall this is the story, the challenge of european companies trying to expand abroad into emerging markets with a strong euro. you have seen some of their gains being eroded in the fx markets. overall, in line with estimates but the numbers are a little disappointing. here is what the ceo had to say in the report. he tried to put a brave face on it. our new financial year got off to a solid start in spite of the still challenging economic backdrop. soft christmas sales resented -- prevented better development. reported sales declined by 3.3%. this is basically due to negative currency fluctuation. quarter of last year, down 2% in part because the market here is more competitive. from facing challenges discounters and that is really their overall challenge. >> thanks. hans nichols live in berlin. >> showtime for the developed market recovery. that is the view of goldman sachs. what does that mean for where you put your money? manus cranny is at the goldman sachs global strategy conference in london where bloomberg has exclusive access. good morning. anna, we have a great day ahead of us here at goldman sachs. over 1000 institutional investors coming in here. we have bankers and researchers. it is a feast. we have peter oppenheimer. he is going to happen at 10 past seven. he is the chief strategist. well togot access as the hole japan story. mehy matsui is going to join in terms of abenomics. what goldman's view is in terms of abenomics, what foreign ownership -- you thought they were buying in size in 2013. we will get a statistic out of kathy matsui in terms of the size of foreign investors that could come. we then move on to an american focus. david is going to take us through his view for american equities. it is all about dividends and buybacks. also, interesting view on technology. we are going to drill into strategy with david at 9:40. then of course, it is all about the economic outlook for the u.s. the chief u.s. economist joins me at 10:00 -- 10:30 london time. i have those jobs numbers friday. any change or just a blip in the sand? all of that through the morning. it is going to be a cracking day. back to you. >> what a way to start monday morning. nana, thank you. , thank you. >> china is the battleground for the world's biggest car market. volkswagen outsold general motors there for the first time in nine years. it regained the top spot. they're making inroads into the luxury market. it treated in berlin. we are talking about a market with massive potential. >> you always hear about how big that market is in china. it has just become 20 million vehicles. the really key thing about china is that those 20 million vehicles are around 6% of the population. in the u.s., the, the vehicles sold every year is about 80% of the population. that gives you an idea of the massive potential in china. vw.it is so important for it just outsold gm for the first time in nine years to become the biggest carmaker in the chinese market. vw is trying to become the world's biggest carmaker by 2018. it has been helped by audi. audi is the biggest seller of luxury cars in the chinese market. they have been doing extremely .ell because of the a3 compact also, porsche doing well with sedans selling well. the question is going to be just in well their new suv sales the chinese market in 2014. they have a lot on that one as well. >> things, david. >> coming up, men's fashion week goes to milan. caroline hyde has the scoop. caroline. >> we are speaking to many a chief executive over there. now it is all about the autumn and winter for 2014 in milan. firm, asto montclair, well. -- ferragamo as well. ia, a men's suits company. that company saying, the chinese buyer still isn't spending as much. they are concerned about their sales for the first half of the year. we are also talking about share sales. we know that montclair came to the market selling shares last year. for such a still looking -- versace still looking to sell its stake. >> coming up, we have more from our exclusive coverage of the goldman sachs strategy conference in london with an interview with chief strategist peter oppenheimer. that is next. ♪ >> time for today's company news. alcatel lucent in talks to sell its enterprise business according to people familiar with the matter. the unit cell telecommunications equipment and services. it has attracted interest from potential buyers including siemens and a chinese investor. general can outsold motors in china -- volkswagen outsold general motors in china. this gives them a lead among foreign art a makers in the world's a guest car market. mercedes-benz is adding touchpad technology pioneered by the ipad to see class sedans. new features include an ipad- like display, a 360 degree camera and sensors to enhance systems. the carmaker unveiled the overhaul of its bestseller at the international auto show in detroit. welcome to "countdown." >> it is 7:15 here in london. for the developed market recovery according to goldman sachs. being hosted by goldman sachs this morning at their global strategy conference in london. bloomberg has exclusive access. manus, over to you. >> thank you. let's get right to peter oppenheimer. before he goes into meet and greet the investors. right to have you with us this morning. the world has moved. you are with us about a month ago and we are in taper mode. the ecb sounded pretty supportive the other day. has your thinking changed? you're broadly bullish on equities even though we are in taper mode. >> the fact that we are in taper mode and that uncertainty surrounding the issue in some ways is helpful. is that the central banks are still very accommodative in their language. we think they will be in their actions. that should become mind with a cyclical recovery in the global economy. should be pretty positive for risky assets and equities where our major overweight are. >> its talk about friday's report. everything i read over the weekend is that it is an anomaly. what would it take to set the fed a little more alarmist mode and backtrack on this taper mode? >> i think a lot of it really revolves around the parameters that they said. of course the unemployment number has come down again and is getting closer to the threshold. recovery, a stronger and unemployment came to more quickly, it could be that investors started to question the ability to keep rates on hold. >> a lot of strategies still predicate around that. out of 2016 in terms of rates being low. i love the peace. it is a long goodbye. we are now into the growth phase of this. define that for me. tell me what can i achieve as an equity investor around here in the u.k.? what can i achieve this year relative to last year? >> the longer by argument was predicated initially on the fact that risk premiums were so high in equities and so low in fixed income that you were being rewarded for taking risks a couple of years ago. valuations have moved a lot. valuation as a driver of returns is much less likely. our view is that we are transitioning from a typical hoped raven valuation phase which weekend to get at the beginning of a bull market into ofore sustainable phase fundamental profit and dividend growth. that is what should drive the returns. they may be a little lower this year but still positive. >> i like the piece on dividends. elated out that we had the banks join back. we were held back on that side versus the u.s.. or is a little bit of a shift in thinking. tell me the industries that could benefit this area -- benefit from this. >> it is worth mentioning that u.s. dividends have gone up by about 55% since 2010 and have been flat in europe he cause of problems in banks, you telecoms and utilities. we think the dividend pressures are total -- bottoming out. we should get reasonable growth across most sectors. our focus is on the companies that have strong enough balance sheets and cash flow to generate higher dividends. we think investors will be rewarded there. >> that punch through a few of these. call, overweight versus neutral. you can't buy every european in terms of that. >> last year was really two halves of the banks. the banks had outperformed a little bit. most of it was driven by the periphery as risk premium came down and the previously on intestinal was seen as an opportunity. vestable became an opportunity. be less focused purely on the periphery. >> i have to get to your underweight. cyclicals, chemicals and industrials. you question the validity of china. they have their. they have done their spending. perhaps we should review where we are. >> i think it is worth emphasizing that we generally like cyclical companies. that is true not just in europe but in other regions as well. we think investors have undervalued cyclical earnings growth because uncertainty has been high. the exceptions for us are industrial companies and commodity related companies where we think and markets are flowing in a secular way. although we are positive encyclicals, less so on industrials and commodity related companies. >> great to have you with me this morning. though face the whites of the eyes of your institutional clients. i hope you have a great day. see you later on. peter oppenheimer, chief global strategist here. we have a cracking day for you at goldman's hq. up next, japan and kathy matsui. what is her view on women in the abenomics? back to you in the studio. >> thank you very much. up, what was this lantern doing in singapore? we will find out after the break. ♪ ." welcome back to "countdown i am anna edwards. it is time for "hotshots." it takes guts to drive off of acapulco's most famous cliff. it may take even more guts to climb them. they spent hours scaling the 35 meter cliff, picking up rubbish and by tourists. that sounds like risky business. purple grapes and luscious vine leaves are in abundance here. these grapes are growing in israel. hasdding wine group developed here. a 10 meter horse shaped lantern was paraded through singapore's chinatown. the celebration included colorful displays and was part of the official opening ceremony for the upcoming chinese new year which commences the year of the horse on january 31. mark, back to you. >> last night's golden globe awards proved a big night for american dramas. from the amc tv series breaking the two films like american hustle and 12 years a slave. our news correspondent joins us on the phone from los angeles. good morning to you. i suppose the awards were fairly balanced. it was evenly split. you probably have to say that "american hustle" came out the big winner of the night. >> definitely. "american hustle" upon the most awards when it comes to the golden globes. it is thanks to the leading ladies. you have jennifer lawrence who has won back-to-back golden globes now. won an award for best actress. of course, it won best picture. the other big winner and i know you are a huge fan is "breaking bad." it has never won a golden globe for the television series or for bryan cranston. the lead actor took home his first golden globe as playing walter white. the series won best tv series drama. it was a big night for "breaking bad." >> it has left a massive hole in my life. how did tina fey and amy poehler do? i know they were popular last year. >> they were very popular last year and so far the reviews are coming in that they did a fantastic job again. that wee some times have seen ricky german ace host and we -- some felt he was too harsh on hollywood. tina fey and amy poehler still ran jokes making fun of hollywood's leading man. my favorite joke is when tina wasmentioned that "gravity" nominated and she said it is a story about how george clooney would rather float in space and die than spend one more moment with a woman off his own age. that got the biggest laugh of the night. these ladies know how to make fun of their peers but also keep it clean. >> ♪ >> i am mark barton in london. these are the bloomberg top headlines. blocking major roads in bangkok, adding pressure on prime minister yingluck shinawatra to resign. -- theonstrators government says it will deploy 20,000 soldiers and police to combat his blockades. sayshief executive of ubs it won't spin off its investment bank. sergio ermotti does the current model is working. ifspoke to stephen engle and -- in an exclusive interview in shanghai. >> we have assets and capital that we want to put at work in the investment bank. for us too necessity make changes. >> is a spin off one of the options you are considering? >> no. we are not considering that option. >> the female stars of "american hustle" take awards at the golden globes. jennifer lawrence won for best supporting actress. amy adams was voted best actress and a film comedy. they thanked the director for creating strong female roles. hello, welcome to "countdown." if you have ever seen an outfit on the street and wondered where someone purchased it, you are in luck. you ever have that problem? >> never. have, i assure you. if you can snap a picture, you can buy it in just seconds using a new app. we are joined by its cofounder. both are in town from dublin. >> that doesn't mean i am not interested. i am. >> welcome to the program. thank you for coming in. mark, i think you are the technology brings. but have a look at how this works. you produced a shoe. >> i have. >> it is every high-heeled. simply, if you see something that you like you can snap a picture and it will search through over 4000 brands to find a match. we use image recognition technology. >> you snap photos and once you have found it, you can then show it. >> it is almost instantaneous. once you take a picture, the system will search through hundreds of u.k. retailers and try to find it. you can filter by price so there is something to suit everybody's price. >> will you find the exact shoe were things that look like it? >> occasionally you will find the exact shoe. >> how long does this technology tech -- take to develop? >> we have been developing the technology for about six years. we are based in a university in ireland and i did a phd. , i have worked in the image recognition space. we were looking for ways and this seemed like a great opportunity. bobby, youas well, are the retail side of the equation. how are you going to commercialize this? >> there are lots of different ways. as far as retailers, it is a highly valuable field because it solves a huge problem for retailers. , for these people who are digitally native, the way that they are shopping is fundamentally different than ever before. that is a big problem for retailers. we solve that problem for them. the way that shopping is actually changing is the mobile phone. our technology is quite exciting and novel. it is something that millenial kids will engage with. we see this with the technology. we can push that forward. >> so everybody has a shop in their pocket. >> that is exactly what it is. whether you're reading a magazine or out on the street, we turn that setting into a shopping experience. i like her dress or i like her shoes -- you just snap the thing and we bring back a range of products. >> what is the etiquette surrounding this? do you ask the person first if you can take a photo because you like their clothes and you would like to find out where they bought them? i guess we will find out. what kind of reception have you got from the investment community? released.ally just the last one, we had tens of thousands of downloads. we had interest from not only retailers but from end-users as well. we are looking to bring this to the next level. we are working with investors to scale this. >> what are investors telling you? we have spoken to one in particular. what is so unique about your product compared to the competition? >> our product, we are quite confident of the technology itself. it is state-of-the-art. we are very confident. we have been developing it for snow long and testing it and we are confident that the technology is superior than anything else that is out there. >> out of the business model work? who pays the money? >> the most important point is the app is free for downloading. this can be downloaded on the apple and ios store. we generate a revenue from the retailers themselves. for end-users, it is completely free. very often we get discounts directly from retailers. >> what is your long-term ambition? how big you want to get/ how do you want to roll this out overseas? >> we're looking at the u.k. but we are also looking at the u.s. we would hope to the global. an image of the full item, don't you? i asked if you could take a photo of my dress but because i am sitting down, less possible. >> there are limitations. it helps to be relatively well photographed. if there are things in the way or the light is poor -- >> can you move this beyond fashion? >> oh definitely. there is a whole host of different applications. fashion is just an incredibly exciting one. we have met fantastic people. kate moss, as a matter of fact. there is a whole host of different applications to bring this technology too. >> gentlemen, thank you very much. edwardsou have met anna now. year in full new swing, some have made resolutions to focus more on their careers. it even last some of the biggest names in business, how they got ahead. jpmorgan's jimmy lee is known as the trillion dollar deal maker of wall street. >> number one, you have to work hard. there is just no getting away from that. to prepare you have like crazy. you have to be organized, you have to make lists. you have to be super a pair. i am a huge believer in preparation for performance. lastly, this probably sounds counterintuitive to the first and maybe the second, your family has to come first. whenever i give speeches on this topic, people say how can your family come first if you have to work all the time? if you are highly organized, you can actually do it. just put the kids' school play on the calendar. the soccer schedule. whatever it turns out to be. treat those sessions like it was a meeting. one of the things about dealmaking is preparation. going into that meeting with the ceo really knowing your stuff cold is critical. what would i tell my 25-year-old self? grow a few more inches, gain a few more pounds and try to make it in the nfl. the fashion spotlight moves from london to milan with men's fashion week. we caught up with some of the top italian luxury companies to discuss the trends in male clothes and luxury investment. here with more is caroline hyde. the slowdown in china, the role of the asian shopper in europe, all of that very much topical. >> still front and center. last year we saw the slowest luxury sales across the entire industry. to bain andording co.. a large part of that concern has been about chinese consumption. we are speaking to some of the big players in italy. which is a maker of men's suits, they are worried about the chinese buyer. they say they are still not spending. , we don'tclair saying see the need to push too much. i want to give you a clip of what the chief executive of ferragamo told us. they are focused on shoes and bags. he is saying, italy is still a beacon of style for the chinese. the asians are really now [indiscernible] it will be an opportunity. still feeling pretty confident and it is going to be the smaller chinese where you start to see the ramp-up in demand coming. >> and monday was a big theme in italy last year. makersalian the jury value their independence. >> they do. the likes ofsaw with huge juggernauts and the luxury space buying up smaller independent brands. in italy, many of them want to stay independent. we have got the likes of montclair listing they sold shares in december. they're looking to expand but they want to expand independently. ferragamo too valuing its independence. they say they are able to outperform by remaining independent. those companies did sell shares. i have got shareholders. they have a wider base. doesn't want zegna to be swallowed up by a big luxury players. >> no, no, no ipo. we want to stay independent. we want to stay private. we believe in organic growth. feelseresting that he that to remain truly independent, they can't even have outside shareholders. update --felt an versace wants to expand and sell a stake. givendders haven't yet the final binding officers says the chief executive over at versace. they plan to get a quarter billion euros and start expanding. then they will go to the market and sell shares in an ipo. very different tactics being played at the moment. some feeling that selling shares -- >> you are confused by some of the sessions aren't you? >> a lot of planning going on. plaid going on. >> are they pajamas? >> you have to risk a little in life. maybe, maybe not. no, no, no ipo. that is my quote of the day. >> coming up, retailers may be looking to expand beyond europe. best company has the chance of success in those markets? we have that story next. ♪ >> time for today's company news. hasketchup maker heinz named a new president of its north american division. this is the third north america had in seven months. the shakeup is the second one since berkshire hathaway took over the company. i luxury brand expects to repeat last year's increase of about 50% sales volume in china. it is the carmaker's second- biggest market. the second-biggest technology consulting company will take over construction of healthcare.gov. debuted with crippling computer problems in october. the u.s. government awarded the company a one-year contract with an initial payment of $45 million. welcome back to "countdown." we are 14 minutes away from the start of european equity trading. >> we are. "on the move" starts at the top of the hour. francine lacqua joins us for a preview. that morning. -- good morning. what are we expecting? >> futures are gaining. this is after last week we had the first week of full trading in january and we saw gains. a debt limit plan for banks. look at a lot of banking stocks that may be active. they met over the weekend and were talking about capital requirements. lower than we were expecting. that is sending futures higher as well. we have stephen engle's interview with the boss of ups. we will focus on that during the show. >> watch out for ubs shares. they may move after sergio ermotti denied they will spin off their investment banking service. that is a story we are bringing you last week. today we have a great exclusive interview. watch out for the share prices not only because of what we are seeing in terms of capital requirements but because of what he said. talking oven investment banking, a lot of bankers have been talking about whether we will or won't see a boom in mergers and acquisitions activity this year. some news this morning. >> a lot of banks hoping that there will be a boom. amex today agreed to by the engineering company foster wheeler for $3.2 billion. they said that amex will see -- we will look at this deal in particular and look at whether the stock is moving. we are expecting them both to be higher. we will print it out and see whether there is more potential for m&a in 2014. >> thank you. francine lacqua will be back at the top of the hour. >> germany's biggest retailer, metro, reported revenue that was in line with estimates. the store is facing off with its counterpart in france, carrefour for a bigger presence in brick countries. hans nichols joins us from berlin. what did we learn? >> if you're going to go for bric countries you have to make sure your currency is weak. currency fluctuation really hurt their bottom line and also, the german consumer did not save christmas. it was a lot of talk among german retailers heading into this christmas season that the germans would spend more. from these figures, there is an indication that they didn't. in line with estimates, overall down 3.3%. , puttingare want to do a brave face on. offnew financial year got to a solid start in spite of this challenging economic backdrop. soft christmas sales prevented a better development. revenue down 1.9%. germany, downin 2.2%. that is what jumps out at me here. the german figures were down. the cash for kerry business was up a little bit if you don't have strong growth in germany which is 40% of metro's revenues, expanding abroad with a strong euro is a dicey proposition. we may see something similar when we get carrefour's numbers litter in the week. there has been speculation ahead of these numbers about whether investors are putting pressure on the business to sell assets. is that something you can update us on today? >> last time there was a report on this, the sales jumped almost 3%. the stock jumped almost 3%. as is indicated down anywhere from one percent to 1.2%. it does appear that the market wants to see metro broken up into component pieces. >> thank you very much. tocoming up, we are going bring you our top corporate story for the trading day. stay with us. ♪ >> welcome back to "countdown." >> a bloomberg exclusive now. chief executive sergio ermotti says ubs won't spin off its investment bank. he says the current model is working. stephen engle spoke to him in shanghai. i think the investment bank is very strategic for us. we have been making a lot of changes to our strategy. our strategy is working. it is one that is focused on supporting our clients and wealth management. have very fine assets and capital that we want to put at work in the investment bank. us tois no necessity for make changes. >> is a spin off one of the options you're considering? >> no. we are not considering that option. >> what would be next for you? of you happy with the pace asset reductions right now or is something else in the pipeline? >> we are at a forward target that we announced two years ago. a year ago, we announced an acceleration of that strategy. us tois no necessity for revise our targets. >> are there other potential assets? is there something else that would be a possibility at this time? have a veryhat we well-defined business model right now. i don't think that we -- some of -- they arere in coming off as expected. we are today the best capitalized bank among our peer groups. we have almost reached our target. a 13% ratio by the end of this year. we are on track. >> are you on track for that? there was talk that perhaps that target is going to be pushed back another year. >> no, we are on track. we will achieve our targets by the end of this year. >> ermotti of ubs there. enjoy your monday. >> "on the move" is next. see you tomorrow. ♪ . . >> welcome to "on the move." francine locke lab bloomberg european headquarters in london. we are moments away from the start of european trading and our markets team has everything covered, from companies to currencies. there with me now is caroline hyde, manus cranny, and hans nichols. futures are looking to a higher start. >> bad news being good news. far fewer in terms of payroll being added, just of the 4000. -- 74,000. unemployment is tapering. many feared it would be more than $10 billion coming off the bond purchases per month. that figure easing some concerns that we will not be going too fast, too quickly. >> the markets are expected to open in a couple of seconds. ryan, you are looking at ubs. >> we had an exclusive interview with the ceo this morning and he says at we are not going to spin off our banking business. that is after a report that they were considering doing so. that is not the case at all. is issue at the heart of it the leverage ratios. the finance minister talk about them needing to go to 6%. right now. 3% it is really a struggle. >> ubs, we are expecting an opening call. watch out for banks after global regulators diluted the debt limit plan for banks. amex agreed to buy an engineering company in the u.s. for $3.2 billion in cash to expand its oil and gas engineering company and it will also try and list in the u.s. manus, you are at the goldman sachs global strategy conference in london. >> i am indeed. we are going to have a great day down here. it is all about japan. that is in 20 minutes. -- we are going to get into u.s. investing just after 9:30. american economics, he is in town at 9:40. petere already had oppenheimer, a fairly bullish call on equities. more on that in a while. inlet's get over to hans berlin. you are watching metro. >> called at the open, just down a little bit. we are checking to see how it is reacting. sales were down 3.3%. overall, they have a problem in terms of currency fluctuate -- fluctuations. did not savensumer christmas. we will dig deeper into their quarterly numbers in 20 minutes. >> thank you so much. we have a little bit of retailers, a lot of cars. we are watching banks and ubs. terror line, we are watching men's fashion. >> the spotlight has been in london. now it is moving to milan. we are speaking to the chairman of montclair. of course,and versace, an update on ready industry is going. to keepaly wanting their independence for the likes of ferragamo. they sold shares, but they do not want to be snapped up i a bigger conglomerate. >> a lot of them have been snapped up. there is a resurgence of fighting back. we have to watch out for carmakers. he and w posted record sales, but they are saying there is a lot of headwinds in the market. sales, buted record they are saying there are headwinds in the market. , analysts saying that one figure does not make a trend. the fact that we only got 74,000 added in terms of payrolls, that was the lowest since january of 2011. maybe we should not be too worried about the u.s. data. certainly, it has given a little bit of these to the equity markets. we just go into the industry groups that are moving higher. expectations are that the stoxx 600, just again, the tapering, the leaning back of stimulus will not happen too quickly in the united states. keep an eye on financial today. .7% this morning. the reason, the global regulators making concessions to the banks on debt limit rules. you are not going to be hit too much. they want to see banks continuing to lend. the basel committee on banking supervision scaling back that debt limit, that is giving back to boost today, the best performer on the stoxx 600. let's look at currencies. interesting move, the fact that the jobs figure came in much worse than anticipated. that really affected the dollar against the yen. look at that move. yen really strengthening against the dollar. bas say the damage to the dollar will be limited going forward. let's have a look at what is going on with the euro. basically flat. merrill lynch saying expect weakening in the euro to continue as the u.s. economy will be growing much faster, whereas europe will only grow by 1% in the euro region this year. we are going to head towards parity at the moment. a long way to go down if that is the case. let's have a look at how bond yields are doing this morning. movement,en a bit of yields down ever so slightly for germany, but not across the bond market this -- as we speak. i want to get to some of the stock movers. &a.could see a whiff of m u.k. oil company, is buying foster wheeler. it is expanding its oil and gas engineering business and they want to get scale in the growth regions. foster wheeler does have exposure, particularly in the middle east. some $3.2be spending billion. keep an eye on evidence -- deben hams. a profit warning and they have lost their cfo. now sports direct is taking a chunk in it. ofy are taking a 4.6% stake 56 million shares. it will be a supportive shareholder. we could see exploration of opportunities. sportsms higher and direct is also up on the back of that. >> our next guest favors technology in health care sectors. the cross bridge capital chief strategist and head of investment. tank you so much for coming in today and happy 2014. will 2014 bring in terms of industry groups? you mentioned you like tech. >> tech and health care and financials. financials have been the story of 2014 so far. especially in europe. >> we will talk about ubs and basel. what would you be buying in technology? >> amazon and google are two of my favorite stocks that i have been recommending for some time. i think the upturn is not going to go away. a trend does not make and gdp growth is still in line. a questioning to be of how strong this year can be. >> do you like amazon? are you thing we will shop online a lot more? why not go for someone who provides the software because they can get much vigor in terms of logistics? that.annot comment on amazon is something i have been long the last two or three years. it is a very strong story in terms of where the market is moving. they are building a big warehouse and the earnings are going to come through. >> thank you so much for now. the chief strategist and head of investment at cross bridge capital. we will be talking about the banks. says thef executive company will not spin off its executive bank. ask its investment bank. and we will go through metro's sales, that are slowing in germany. ♪ >> i am francine lacqua in london. ons is "on the move" bloomberg television, radio, streaming on your phone, your tablet, and bloomberg.com. sergio ermotti says ubs will not spin off its investment bank. he says the current model is working. ryan chilcote joins us with the latest on this exclusive interview that bloomberg news had. tell us exactly what he said. >> let me give you some background first. sergio ermotti has been focused on reorganizing ubs to focus on wealth management. part of that reorganization has been cutting jobs. ubs cutting about 10,000 of them. sergio ermotti also cut some of the debt trading businesses back. that happened in 2012. to further advance that goal, banca --k that media banca said it might make sense for them to get rid of the investment bank. today, we asked sergio ermotti and he said it was not the case. speculation.been i think the investment bank is very strategic to us. we are making a lot of changes to our strategy. the strategy is working. we are supporting our clients in wealth management. defined assets and capital that we want to put to work in the investment bank and the business model works. no necessityere is for us to make changes. >> is a spinoff one of the options we are considering? >> we are not considering that option. >> i just got off the phone with chris wheeler and i asked him, how is it that they got this wrong? sergio ermotti saying they will not spin off the investment banking unit. sayingekend, media banca that this might be the case. he says this is sergio ermotti politicking. the background here is leverage ratios. the leverage ratio for ubs is around 3%. the rules of the game require ubs to raise its leverage ratio to about 4%. the finance minister has also talked about the need to perhaps raise it as much as 6%-10%. isfar as media banca concerned, the one way to do that is to get rid of the investment banking business. there is another way and that is something that sergio ermotti hinted at in this conversation, which is to deal with the problems in the lending units, specifically in terms of mortgage lending and corporate lending within switzerland. if they were to change or scale back that, then they could perhaps meet these ambitious goals that the finance minister alluded to. having said that, wheeler says it is not pragmatic politically speaking for ubs to scale back lending within switzerland. really, he is talking about something that is not going to happen here. in thel solution for ubs future is to consider getting rid of the investment banking. becauseng on the banks, a lot of the stocks -- ubs has gained 2.8%. stocks, in general, for banks, are up-to-date. the basel committee is diluting their rules and they are becoming soft -- softer. >> it has to do with leverage ratios. at ubs, it is about 3.2%. in june, regulators suggested that the way that leverage ratios are calculated good youeen -- could be tweaked, could make it more stretched. media banco estimated it could cause as much a 13 basis points, meaning that the ratio at ubs would be around 3%. of an about-le bit face. regulators are saying, actually, we are not going to change the way that those leverage ratios are correlated. so things are going to stay as they were. the risk has been removed from the outlook for banks in terms of how they make money. >> thank you so much, ryan chilcote. you can see the stoxx 600 banking index gaining 1.2%. we are back with the cross bridge chief investment strategist. thank you for sticking around. financials are one of your favorites. they have been outperforming. we still do not know the outcome of the asset quality review. there are still a lot of unknowns. >> in the peripheral bond market, one thing which is helping the angst a lot -- teh been the rally in spanish and italian banks. banks as a whole will benefit. is notong as there another crisis. >> of course. and as long as the ecb follows up on what it has been saying. if you see how the economy is we had the jobs report, which people are not pleased about. tapering is still going on. benefits are going to from borrowing short and lending longer. , would say that retail banks they are going to benefit. we are talking about the u.k. 1.25%, as some of the newspapers have reported. >> a lot of people are awesome it -- optimistic on the markets. this is assuming we do not have any headwinds. >> this is important. in thistill operating limit we are talking about. that is something we have to take into account. tapering,e fed starts that is an indication about nervousness on what the markets are due. >> i do expect that there will be some type of correction or downside move. year, if youof the have made only five percent by the end of the year, you can make 10% if you pick up the downtrends as well. overall, i am very positive for the markets. >> what do you like apart from financials? stocks typically have not done very well previously. this is down to the demographic change. roche has at least seven different medicines in states of approval. they have a very strong product pipeline. that is one stock i like very much. from the u.s. health-care stocks , they're not going to bring a lot of change and obama is still the president. >> do you prefer some of the health-care stocks to a teva hermeneutical's? >> i prefer the health-care stocks and biotech stocks. amgen, gilliard. >> and they are some of the best performers. >> it is getting expensive, but given the kind of work they are doing, i am very positive on those stocks. >> how much does it have to do with the pipeline and how much does it have to do with mna quest -- with m&a? both,is a combination of but it is more of a pipeline story. >> if we look traditionally, when stocks go up, m&a closely follows. there was not this correlation because markets were pumped. >> if you believe that the economic growth has caught up and you give incentive to ceo's to make acquisitions, it all comes down to positivity in the market and sentiment. >> anything in currencies? >> i like the dollar. the euro-dollar, the ecb weakened its forward guidance and we had a dad jobs report on friday and the euro rallied. it might be that the euro-dollar will stay in the range of 1.36, 1.34. i do not see a huge downside. if anything, i see downside to the euro and not the dollar. people are looking at the cpa number closely. the cpi is dropping. if inflation is dropping, that is a very positive sign. i think people are looking at growth ahead and that is a very positive outlook. >> thank you so much for all of that. , it is germany's biggest retailer and sales are slowing down. we will dig into metros numbers next. and as we head into break, let's hear from the u.s. vice president, joe biden. at ariel sharon's official memorial service in jerusalem. our reporter on the ground is listening in and we will bring any breaking news after this break he -- after this break. >> they have all played out on the campus, the state of israel's historic trajectory. ♪ >> welcome back to "on the move ." here are some companies on the move. catel-il lucent -- al lucent is said to be in talks to sell its enterprise unit. a sale would allow them to focus on more profitable network contracts. it would also bring the ceo closer to their goal of eurosting one billion from acid disposals by 2015. heinz has named a new president of its north american division. he is the third in seven months. the second management shakeup by berkshire hathaway. outsold general motors in china for the first time in nine years. largestes europe's carmaker the lead among foreign automakers in the world's largest car market. germany's biggest retailer, metro, reported revenue this morning. hans nichols is all over the numbers from berlin. a little bit of a disappointment today. >> a little bit of a disappointment in metro. these numbers are so interesting. it is the fourth largest retailer in the world. it gives a better sense of consumers both in europe and outside of europe. ae numbers are, we had disappointing christmas. that was true in germany and elsewhere. they were buffeted by a strong euro that hurt sales in eastern europe. overall, revenue is down 3.3%. the stock is moving on the back of those numbers, down just about 1% last time i checked. the ceo tried to put a brave face on the numbers. here is what he said. the an answer year has gotten off to a solid start in spite of the still challenging background." inenue was down almost 2% local currency. it was down in germany elsewhere. one bright spot was that sales were up slightly in their cash and carry business. third of theirone- revenues. a lot of talk before christmas about how the german retailer would save christmas. does not look like it happened. these numbers look more like the tesco and marks & spencer numbers in the u.k., pretty soft overall. >> what about the pressure to break up metro? would it be more valuable broken up? >> the market certainly think so. there is a report late last week that one of the main investors in metro wanted to break up the company and sell part of its divisions. the stock soared, up almost 3% the report was denied by the various parties. there was a clear sense that if metro were broken up, maybe sell off its russian division, it would be worth more, that its market cap would improve. no hand in these numbers that they have any plans to spin off some of their businesses. clearly, there seems to be some agitation for that. >> thank you so much. hans nichols with the latest on metro. coming up, we will go live to the goldman sachs global strategy conference. goldmanspeak to matsui, chief equity strategist for japan. a lot of the indices are flat. bank stocks are active after the basel committee on banking capitalion's announced requirements. watch out for ubs. this stock is on the move after the ceo denied that they will spin off their investment banking business to meet regulator demands. ♪ >> welcome back to "on the move ." i am francine lacqua at bloomberg european headquarters in london. these are the bloomberg top headlines. he will testify today before european parliament lawmakers. she is said to join the board of the ecb from her current edition is vice president of bundesbank. at the expense of its monetary policy clout. will curtail its nuke activities under a deal with world powers. in return, iran will benefit from some sanctions relief and the start of a 6-12 month timetable to reach a permanent accord. the deal still faces skepticism in u.s. congress. lawmakers are still pushing for more sanctions. thai protesters began blocking major roads in bangkok. offnstrators also cut access to a complex last night. the government says it will deploy 20,000 soldiers and police to combat the blockade. the fashion spotlight moved from london to malan -- to milan. we caught up with some of the top italian luxury companies to discuss trends in luxury investment. here with more is caroline hyde. what did they have to say? themes hummingme out from italian men's fashion week. montclair, down coats that saw them sell shares at the end of last year. another company that makes men in suits and accessories. remember, there is much focus on china and asia. that has been a key concern. 2013 was the slowest growth in luxury market. many pointing the finger at the chinese slowdown. many of the heads of these companies are pointing to the concern there, most notably the chief executive of xenia. say, look, the chinese buyer, they are still not spending. >> we were used to increased double-digit. carefulave to be more and we are getting to single digits. everything is relative. it is probably a healthy slowdown. slightly concerned about the first half of this year. they think that second-half sales will start to pick up and that the slowdown in china is a healthy slowdown. not so much over at ferragamo. that italy isying still seen as the beacon of luxury for the chinese buyer. continues to dominate the italian luxury seen. -- scene. many still value their independence. buying theseple smaller, independent firms to add to their own list of brands. much of italy wants to remain independent. coming out from a lot of the heads over there. versace is looking to sell a stake to raise about a quarter of one billion euros. they are only getting investment in, not looking to sell themselves as able. montclair sold shares last year to try to expand. montclair telling us, we still want to remain independent. it makes us more nimble. defined synergy. independent is something -- in the last 10 years, i think we make a good job. i think we will continue on this way. shares onir selling the first day of trading in early december. na, we heard from the chief executive a moment ago. they said that they did not want to be bought up by a luxury player nor did they want to sell shares. they said an ipo is not on the agenda. shareholders would remove some of their independence. strong words coming from the italian luxury sector. >> thank you so much. caroline hyde with the latest on luxury. manus cranny is standing by at the global sacks --the goldman sachs global strategy conference. >> you have a european perspective. the one fascinating area is japan. joining me now is cap the matsui, the chief japan creditors. great to have you with us this morning. abenomics, as it stands right now, you say steady progress, reform is on the way. you are fairly upbeat. arrows ofk that the reform and growth have been launched. prime minister abe and his regime. we have only seen one year of this administration, what they can deliver. there is more on the agenda that needs to be executed. we think the direction is very positive and very clear. of the reform agenda will be accomplished and implemented in a timely fashion as the markets would like to see, but we think a direction is very clear. >> do you think that we, in the west, expect so much from this third arrow that there is a reasonableness in terms of what can be delivered? inflation is 50% of the way there. when the you see it adding up to two percent? >> given the distortion that will be coming in and next few months from april 1, we will see 3% in thisse to current year. excluding the impact, it will take another year plus before we hit the core inflation level of 2%, the boj's target. scenario will be whether japanese wages grow or not. >> will they? >> a lot of investors were very skeptical about the prospect that wages would ever row up after they have been declining for seven straight years. if you think about the big picture, corporate japan is sitting on tons of cash, about $750 billion worth of cash. at the same time, they are earning 60% more profits than one year ago. >> so they can afford these wages. lex i think it is a sheer lack of confidence that the future might be brighter than today or yesterday that is holding them back. we think that attitude will start to change. -- iu have got a great love this. this is not 1997. you say it is a very different scenario. why? >> in three respects. asia wasthe rest of discouraging a gut wrenching currency crisis. we do not have that right now. >> we could have taper. >> we think that will be very gradual. second, we do not have a financial system meltdown domestically. third and most importantly, we do not have deflation. of japanesety shift people thinking, if i wait, it will get cheaper. way, it might get more expensive. that is driving the change in consumer sentiment. manageableat will be given that we expect wages will grow and the mentality of consumers will shift towards tomorrow will be a brighter day. >> into equity strategy. you say you will deliver better returns than the u.s. and europe. what is achievable in japan going into 2015? >> you think about who has been the main driver of this rally in japan today. it has been mainly the foreign investor community. aboutreign investors have $470 billion worth of japan. that is less than what they bought during entire rally between 2001-2006. none of my domestic investors have participated in this rally at all. we expect retail investors -- japan will launch version of buttocks. -- of products. we will possibly get the world's largest pension scheme. assets.llion in domestic equities could be shifting as well. >> have a great day at that conference. is it for me here. you aboute will tell american equities. you heard it from kathy matsui, could be a good year for japan. >> thank you so much. manus cranny at the goldman sachs conference. sergio ermotti says ubs will not spin off its investment bank. he says the current model is working. stephen engle spoke to him in shanghai. take a listen. >> it is a very small elephant and there is no speculation. the investment banking segment is very strategic to us. we have been making a lot of changes to our strategy. the strategy is working. we will focus on supporting our clients. assets andery fine capital that we want to put to work in the investment anchor and a business model that works. therefore, there is no necessity for estimate changes. >> is a spinoff one of the options you are considering? >> we are not considering that option. >> what would be next for you? are you happy with this pace of asset reductions right now? >> we are ahead of our targets that we announced two years ago. one year ago, we announced an acceleration of that strategy. i think that we are happy with the pace of what we are doing and there is no necessity for us to revise our targets. are there other potential assets that we are not talking about? is there something else that would be a possibility at this time in 2014? >> i think that we have a very well-defined business model right now. some of our assets are in our non-core organizations and they are unaffected. we are the best. lightbank among our peer groups -- best- capitalized bank among our peer groups. we have almost reached our target. we are on track. >> there was also talk that perhaps that target would be pushed back another year and that would affect the payouts as well. >> we are on track. we will achieve our targets at the end of this year as announced two years ago. benzoming up, mercedes- takes a page out of the apple playbook. bmwedes hopes to overtake using technology. ♪ >> i am francine latoya london. this is "on the move" on bloomberg television and streaming live on your bloomberg -- on bloomberg.com, your tablet, your phone, and any windows phone as well. i'm joined by guy johnson. , theancois hollande question is, will his private life affect wallace he? -- policy? he would deliver a major press conference tomorrow, outlining his plans to revise the economy. it will be watched around the world. we are going to learn whether or not the left-leaning french president will actually talk about cuts. that press conference potentially overtaken by problems in his private life. interacting atly the moment. some would say it is very french. i certainly would not say that, but it is an economic story as well as a front-page story. what else are we watching? airbus, we will cover that too. init going to fly higher 2014? back to you. >> guy johnson coming up with "the pulse" in about 15 minutes from now. here are some companies "on the move." accenture has won a contract with the u.s. government. it will take over the obamacare enrollment website. it has been granted a one-year contract with an additional payment of $45 million. it takes over from cti group. and a bloomberg exclusive for you. that ubs wasi says not spin off its investment bank. >> we have a very defined assets and capital that we want to put to work in the investment bank and the business model works. therefore, there is no necessity for us to make changes. >> is a spinoff one of the options you are considering? >> we are not considering that option. >> stephen engle spoke to ermotti in shanghai in an exclusive interview. adding asys is touchpad to the mercedes. radaraders include six sensors to enhance safety. the german carmaker unveiled the overhaul of its bestseller at the north american international auto show in detroit. for more on that story, let's get to hans nichols, who is standing by in berlin with the very latest. her sadie's betting -- mercedes betting on tech. >> tech, touch. these cars could be so easy to drive that even you could take them out for a spin. the s-class, first update in seven years. the are unveiling this at detroit auto show. matt miller, when he goes out there, is he going to figure out a way to crash the software or crash the car? of course, this is the battle between mercedes, bmw, and audi over who will be number one globally. bmw is number one globally, but s was the top selling brand in the u.s. of course, they are competing globally as well. is anothera battleground for carmakers. volkswagen regaining the top spot from gm or the first time in nine years. >> here is all you need to know about china. and thatn sales outpaces both the u.s. and europe. that is just six percent saturation of the chinese market. if they get 50%, what matters there is market share. all the auto companies are making big plays there. some have joint ventures. they are in for the saturation. it is a growth area and they see a lot of opportunities or big markets, both in the luxury and more downmarket cars. >> thank you so much. hans nichols with the very latest. bloomberg views will be live at the detroit auto show later. our guest includes the daimler chief executive. world statesmen have been paying tribute to ariel sharon at a memorial service for the former prime minister. he will be buried later today at his desert ranch. let's go to elliott gotkine. quite a lot of people in attendance. tony blair, joe biden some of them. >> that is right. has have already spoken, as president shimon peres, prime minister netanyahu. right now, a friend of ariel sharon talking to the audience. peres, his voice was trembling with emotion. joe biden described him as a man with command presence to fill the room when he entered it. he was indomitable, he said. sharon had a northstar that guided him and sharon's northstar was the survival of the state of israel. it was echoed by tony blair as well. he talked about the different person that he encountered in unofficial meetings and described him carrying his maps around to show the british prime minister exactly what israel wase was and how fragile it given it has been surrounded throughout its existence by enemies. right now, i can tell you that this is what is going on. we also spoke with a biographer of ariel sharon, who was commenting on if he had likelyd, it was very that we would have a peace with the palestinians. >> what else is planned for the rest of the day? >> after the ceremonies finished, there is going to be thehe procession will go to armed core memorial, a site where sharon was shot in the abdomen and had to be rescued by his men. from there, they will go south to the ranch that was sharon's refuge for all of his ears, the sycamore ranch. he is due to be buried there at around 2:00 local time. that will bring to a close these three days of official mourning that we have had. he is lying in state at the israeli parliament. he remained there on sunday after dying on saturday. that will bring to a conclusion the tribute to ariel sharon, who will receive a full military funeral at his beloved ranch, where he will be buried. much.nk you so elliott gotkine in tel aviv. we are back in just a couple of minutes. "on the move" continues after this. ♪ >> the australian tennis open begins in melbourne today. it is the first grand slam of the year. we will get some of the facts and figures behind the tournament. >> the world's best players have gathered in melbourne for the midsummer australian tennis open. over half a million spectators will attend. 350 million people watching at home. the competition will be hot. as if that was not enough, players will have to compete with temperatures that regularly reach over 40 degrees celsius. this week will be no exception. heat,bat the blistering medical staff are kept on standby to offer intravenous drips. the tournament even has an extreme heat policy, the only one to have this sort of measure. umpires can suspend play if they believe it is getting dangerously hot. the ball boys and girls, there are over 300 of them. they will be wearing special gel neck coolers. the temperatures are hot enough to shrink the tennis ball themselves. over 48,000 will be used, while a whopping 3600 raxckets -- rackets with the restrung. players will go through an estimated 30,000 towels. an estimated 35,000 bottles of water. with the prize pool boosted to 31 million dollars, it will be lucrative for the singles champion. the city of melbourne is also a winner. the state government estimates $214 million will be pumped into the economy. go, let's have a very quick look at what the markets are doing. we are over one hour to the trading session. this is the picture for the footsie, the cac, and the dax. aanks to the upside after debt limit plan for banks. guy johnson and i are back with "the pulse" next. ♪ . . >> a bloomberg exclusive. the chief executive of ubs says he won't spin off its investment bank. bankthink the investment is very strategic for us. francois hollande has his hands full but with a french president's private life get in the way of economic reform? >> airbus is set to announce record orders today. we will be live at its press conference. welcome. you're watching "the pulse
billion outflows were posted for last month. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. hello and welcome to today's edition of "worldwide exchange." it's hump day. we're going to be halfway through the trading week during the program. as for where we stand right now in europe, one hour into today's session, advancers just about outpacing decliners, the dow jones stoxx 600 by 5 1/2/4. some kind of ratio like that. the ftse 100 yesterday was up, what, 0.8%. we're up at a three-week high on the ftse. today, about 0.1% lower. the xetra dax is up 0.2%. the cac 40 is flat as is the the ftse mib, as well. we take a look at bond yields. the 30-year up the yield at 3.62%. the ten-year, 2.76%. auto sales surging from march a year ago, the ism factory, just shy of what we were looking for. and we'll keep our eye on gilts, as well. the construction pmi is coming out around 28 minutes time. on the currency markets, the yen has been down to a one-week low. we've been down at 103.93. stocks are up. the yen had been benefiting from safe haven flows. plus there's mounting speculation the bank of japan is going to act at some point post sales tax hike, as well. it has been up at these four-month highs of 93.10 on hopes of more chinese stimulus. euro/dollar, 1.37 was the one-month low we hit on friday. we've been looking to see if we get anything out of the ecb tomorrow. that's where we stand right now in trade in europe. what about the session in asia? sri has the update for us out of singapore. hey, sri. hello, ross. let me pick up on what you were talking about in regards to the japanese currency. that weaker yen against the dollar, certainly constructive for the equities market helping the exporters and helping boost the nikkei. we're up by 11%. but we were up much higher during the trading session by almost 1.7%. but a little bit of giveback towards the close. but still, this the is the highest close since around march the 11th. there were some stock-specific stories i wanted to talk to you about. that stock was up by almost 19% during the session. that's because it jumped on this report that apple is in talk toes buy a stake in its chip design unit. elsewhere, a fairley reasonable day for greater china markets. interesting developments with regard to the data, to the pmi, that's fast in the backward mirror down the rearview mirror. still, the markets are getting a lot of support from a lot of talk that we can see some stimulus, what form it will take remains a topic of debate. but in the meantime, it was really a property stock that led the way higher on the shanghai market on the hang seng, as well. that was after the state media reports of that home ownership restrictions may be relaxed in some cities. worth pointing out that the hsi, the subindex was at its highest since mid-december. we get the feeling that all these markets are in something of a holding pattern and they're treading quite cautiously. so we get a bit more clarity on where we stand with the u.s. data, of course, with the nonfarm payrolls at the the end of the week, ross. >> yep. big data week to get through. sri, for now, thanks. catch you a little later. we sort of match today. that's good. you got the memo. >> great minds think alike, sir. >> they certainly do. and if i find a great mind, i'll let you know. and in fact we're joined by one now, andrew goldburg from jpmorgan asset management. good to see you. >> you, too. >> stocks up at a three. week high here in europe. we've climbed lots of worries. kind of flat, though, on the year. >> yeah, kind of flat. it's funny, going into the year, we're still there. but overweight relative to the safe stuff. the tart of the year didn't go that way. it's important to remember that's going to happen. it's okay. this cycle is going to be a little different with this bull market in that previous fair value within. this cycle is going to go well beyond short value. you've got very little competition in the form of fixed income in terms of what those rates are offering. i think the market has plenty of room to run. i think this will go on two or three more years. >> you shouldn't -- you're not getting assets a long way beyond fair value. you're always at risk of a pullback. >> there is definitely a truth to that. one thing to remind you, the markets are more susceptible to a shock. there is no doubt that future returns can be well predicted generally based on valuation. if you buy cheaper stocks, the future returns are going to be better. if i buy a stock down here and you buy it down there, no matter where the market goes from here, it will be better. consumers are looking better. i would ride this wave. we're tolerating the wiggles. >> how are you riding the trends? >> well, the best way to be invested is still in overweight risk assets in particular. we like the u.s. stock market. the other way to do it, and i think it's important, is there has to be some rotation within that the equity allocation. in our view, it's time to -- well, i think you still have to be rotating towards the cycle stuff that's going to benefit from a stronger consumer and a better economy. >> stick around. good to have you on board. more to come from you. meanwhile, the kremlin has threatened to retaliate after it says jpmorgan blocked a payment from a russian embassy. the u.s. bank prevented the money transfer from the embassy in kazakhstan because it's part owned by bank loftia. in a statement, they said any act is likely to lead to countersteps. this comes as capital outflows from russia could hit $100 billion this year, while the world bank has warned that the russian economy could contract by 11 is.8%. the ukraine crisis led to a sell-off in the micex and it currently lags the market index. geoff has landed in moscow and he sends this report. >> as the russian business starts to count the cost of the ukraine crisis, the latest comments from the central bank downgrading growth estimates for 2014 to around 1% or less will not be welcome news. this comes on top of the news from moody's overnight that they have put ratings on negative review for moscow and st. petersburg. 2014 was always going to be a slower economy, but putting the ukraine crisis on top of that means that confidence about investing in russia has also been damaged, which is why some of the fdi outflow figures now look in the hundred billion dollar range for full year 2014. whichever way you look at this, russia is going to have a difficult year. the ukraine crisis is only going to make things worse here. >> that was geoff in russia. meanwhile, european lawmakers are under pressure to relax their policies. some are questioning whether france and maybe italy might ask russia for more breathing room. at the very least, measures for growth and jobs are higher on their agendas and are expected to remain a hot topic at the meeting of finance ministers. jules is there. she's in athens. jules, everybody always talks about growth and one wonders what that translates into in terms of policy. >> you're right, ross, good morning. they talk about it, it's on the agenda. the question is whether or not we get the follow through and is what's fixated a lot of the buzz going on here in athens is whether or not francois hollande is going so gain more from brussels. we've seen two extensions for them. he said over the last couple of days that growth needs to be considered when they formulate the budget. we've had the industry minister saying that brussels and the ministers have absolutely no idea where growth is concerned. it echos what we've already heard from the new prime minister who said again that growth in jobs needs to be at the forefront. yes, everybody has a lot of optimism about their reform process, but two crucial elements, i think, on this. one, that's perhaps not going far enough and the second one, perhaps the larger issue here is financing. i talked to italy's economic minister yesterday and asked him exactly that question. how will they finance reform. >> not all reforms have to do with refinancing. i guess what you have in mind is how we finance past cuts. the answer is very simple. we're going to finance tax cuts with permanent spending cuts. a new approach to public spending. >> and have you had the green light from brussels to allow you some fiscal slippage if you need it. >> we don't need a fiscal slippage. we're going to be keeping with the targets and with the commitment. both europeanes and italians due to the new budget law in italy, which is -- believe it or not, that what the european commission requires of us. >> there are talks that there will be allegiance between germany and italy to push more for more room is entirely wrong? >> the issue is that all members of the european union are in a single currency. we need to look more strongly at growth and expansion issues. this is not just for italy alone. it's for all of uts. >> what makes this different? 50% of the measures passed by monte's government were not implemented. why is this government going to succeed? >> the energy of the prime minister. >> he threatened to resign if this the senate reform doesn't take place. is that a sign of instability or a sign of his passion? >> italy has been growing at a rate of zero for ten years. with a huge debt mountain, you need to give some shocks. >> that was italy's prime minister adamant that they're not going to need any room for fm fiscal targets. more stringent than the mission will retire. the question is, are they going to stick to their own laws, ross? >> that's a fair question. stay there. looking to return to the market with a long-term bond. this is the first time since its bailout in 2010. according to some reports, the country is hoping to raise as much as $5 billion euros by the end of the year. we've seen this pull in the cash markets, interesting what they get away at cash markets. they're re-entering the market. does that mean that their debt is on a sustainable path? >> that the is the crucial question. right now, the troika, ross, think that the debt sustainability metric takes them down to 125% at 2020. so in around six or so years time. this reinforcing property in that they do actually manage to engage in getting others to buy the debt and that brings yields down. what i'm hearing is european officials have said look, if you think the market is willing to take this, you go right ahead. although the finance minister did deny the 4 to the 5 billion euros that seems to be doing the round right now. what i'm hearing is perhaps they'll look to do this sooner rather than later. so rather than looking to issue debt by june time for tend of q2, they could look to test the market over the last month or so. require respective of your key question, ross. >> jules, for now, good stuff. thank you. catch you a little bit later. andrew. what we have seen is a huge investor appetite for peripheral debt. ireland has been trending for those on the uk and the u.s. still a huge demand for spanish and italian paper. now greek paper is getting a bid. >> at the end of to 12, greek paper was trading at 30%. now after the end of that year, after mario's big countdown to 1011, now it's 6.5. i think you're right, there is a demand for this. part of it is there's still this need. our clients need income. there's an appetite for it. and so that is one of the reasons that people are going to look at this. this particular debt, that will be interesting. that will be a true test as to whether or not the market things that these reforms that have been implemented so far have been sustainable. my hunch is that is that auction is going to go the really well and be hit with plenty of appetite. it's really interesting. >> because the key risk, the biggest risk was that -- not a default. was there a break-up risk? >> sure. >> and if i believe that as genuinely has been taken off the table -- >> i believe it has. >> -- then you go and look at 3% or 4% or 6% yield, whatever it was? >> i think it's pretty clear that you've got the backing of the european central bank if you're buying greek debt. so that risk has been taken off the table. i guess the question now is are these yields so low that you're not getting paid for whatever volatility risk that there is. but i think that auction will leave with plenty of demand. >> is that the the reason why the euro has been held at such good levels, because international flow into -- you know, in some ways the ecb has been a victim of its own success. they've done a good job stabilizing the region. some of it has come back from emerging capital. that's the thing, there has to be some threshold for pain at the ecb with respect to how high the euro is going to be allowed to the climb. i don't know where it is. is it at 145, 150? i don't know. but we have long said i think the ecb should do something to counter balance that. they need a little help. >> okay. stay there. also still to come on today's show, we're going to head out to portland, oregon. we'll find out how they reinventing the golf ball. meanwhile, google launches its stock split. a new class of c-shares with no voting rights. that leaves the firm's founders with even more power. we'll take a look at that. after the break, asop has posted a drop in profits. the ceo is now putting his focus on markets outside the uk. we asked people a question, how much money do you think you'll need when you retire? 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(clears throat) hi mister tompkins. todd? you're fired. well, gotta run. geico. fifteen minutes could save you fifteen percent or more. your chance to watch full seasons of tv's hottest shows for free with xfinity on demand. there's romance, face slaps, whatever that is, pirates, helicopters, pirate-copters... argh! hmm. it's so huge, it's being broadcast on mars. heroes...bad guys... asteroids. available only on mars. there's watching. then there's watchathoning. ♪ marks & spencer is wrapping up its european expansion using stores to break into france, belgium and the netherlands, possibly italy and spain, as well. addressing investors in paris yesterday, they still plan to open 254 shops worldwide over the next three years. he is considering the company's strategy in china. the stock today, up 1.3%. it's down 7% over the last 30 days. and the online fashion retailer in britain, asos has posted a 34 jump in retail sales. the last 30 days, the stock down 26%. asos posted a 22% drop in profit, in line with last month's guidance. speaking first to cnbc earlier, the ceo nick robinson said the retailer remains a stock in growth. >> asos has been a growth story for nearly 14 years now and, you know, even the business in the uk where we have been established for 14 years, we're still producing growth numbers of 30 odd percent. i think the stock market respects that. >> joining us now, helia and andy goldberg is here, as well. hahul, is the drop in key profits regarding growth or is this about an online bubble bursting? >> i think the thing with all of these businesses is they had pretty good growth prospects. i think what asos shows you is that it's bumpy. it's the fact that we've got lots of growth coming, but we're going to put a heck of a lot of money behind them and that's how we're going to keep growing. then they're saying we have no more growth left. >> this is a company that's had a bit of margin compression today. they were talking about the investment they're doing in their new warehouses and how that's affected their chargins in russia and australia. its businesses in the uk opened a bit for them. they're a very popular brand and they've been incredible growth. i think 1600% in the laugh five years shares have gone up. but the question is how far can that growth go as you see today? when we talk about rookie results from companies, you don't normally mean a 34% rise in growth and top line income. but, you know, with asos, it is, as you said, a lot of people are banking on this doubling in size, really. >> i think the tricky thing is essentially they've got the awareness out in the uk. the problem is how do you get that awareness going in china, how do you get that awareness going in the russia where you are to spend money both in terms of getting the product to consumers, but knowing for them to get out there. i think you're going to keep getting that from time to time as they're going to new markets. >> when they -- in the uk, it was the stuff -- you know, they sort of used the -- to get the brand going. now they're starting -- >> well, of course, that is the the irony is the company that was created in order to market these clothes that celebrities are wearing and nobody was interested. all these big brands didn't care about asos or as seen on screen. and it morphed into this the incredibly fashionable -- >> but still, how do they get the brand known in china? he talked today, look, it's a tough month of the -- as we know. we're going to double the sales for the uk, germany and china. how do they make that return on investment pay in china? >> and i think it's very early in that you have to put in even more investment before you do that. the brand doesn't even register in places like china. they're missing sales in china. so i think there's a whole lot of work to do over there. you do it the way they built the uk, brick by brick. but you don't start with the advantage you had in the uk. >> you've got announcements from prada. they've consolidated results for january 31st, 2014, net income amounted to 607.8 million euros, up 0.3% retail. sales growth, 7% compared with the year-ended january 31st, 2013. full year net revenues, 3.59 million of 8.8%. >> as they're saying, again, how consistent. prada has maintained that 7% sales growth all year last year. which was pretty strong, actually. >> there's a big difference between luxury and where we are with asos. have you got any views about the retail aels space? >> yeah. one of the things we're thinking with the retail space is despite the slowdown with china and some of the questions about reform, it's not luxury. we think it has a lot of wind in its sails. you know, i know from a macro level, it's easy to say we're concerned about china because of x, y and z. but the underlying fundamental consumer story is still there. i think it's going to continue to ramp up over time. especially with these luxury brands. there's more millionaires being created in a country like china every day. >> i always remember the burberry story from last year. you make one slip and we get killed by investors. >> because everyone loves the space. and i think to a large extent, they are. you have to recognize that they were affected incredibly over the last three or four years. you've got to select your winners. the other thing is, china domestically the luxury consumer looks like it's flurrying. a lot of people in europe are now increasing by the nation. if you look at overall demand, 30% comes from china. >> it has just hit a 15-month record going up-and-up and up. >> good, that you can, helia. thank you for that report. nice to see you. andy, stick around. more to come from you. also still to come, google's stock split comes today. investors will get both class a and c shares. c will trade under the classic goog symbol. but the class c shares won't have voting rights. essentially it's boosting the cofounders to maintain control by stepping up their class b shares from being diluted. so how do you feel about buying shares with no voting rights? join the conversation with "worldwide exchange." e-mail us, tweet @cnbcwex or direct to me @rosswestgate. more to come on "worldwide exchange" right after this. righ. the headlines from around the globe, a poor start to the bang, european stocks are up but going to cap despite strong numbers out of spain. the italian economics minutester tells cnbc exclusively, policymakers should be going for growth as european finance ministers meet for a second day in athens. >> we don't need a fiscal cliff. we're going to be keeping with the targets and with the commitment. both europeans and italians used to the new budget law in italy which is -- believe it or not what the uk commission requires of us. >> the ceo of gm says sorry, but fails to provide what congress is looking for. mary barra is prepared to appear for a second day on capitol hill. >> i cannot tell you why it took so long for a safety defect to be announced for this program, but i can tell you we will continue to find out. >> and investors continue to pull money out of the world's biggest bond funds. they posted outflows of more than $3 billion last month. we have this some data out of the uk. i'll get to that in a second. first, the latest french government lineup in france. it's going to be announced at 11:15 cet. uk march construction pmi, 62.5. similar to february's 62.6. strong growth amongst house builders helping to maintain construction of a rapid pace of expansion in march. so in the 60s. a pretty strong pace, highest level in more than seven years is what we're seeing at the moment. some economists expected a higher rise. after being in the doldrums for quite some time, the construction industry appears to be back. european equities, meanwhile, have been up to flat. the ftse 100 is just up 0.2%. on bond markets today, we did see yields kick higher on treasury yields as far as the consensus of bund goes. and on the currency market, the yen was the one that's been affected, down to ten-week lows against the dollar. we hit 103.93. the nikkei up today, currently 103.84. euro/dollar, just below 1.38. we hit 1.37 last month. more u.s. data today, got the ecb tomorrow and, of course, employment reports on friday. emerging markets are staging a big turn around. seema mody is looking at what investors are saying about these markets in the new quarter. >> a big turn around for the emerging market index currently having its best nine-day winning streak since september of 2013. so what's behind the move? experts say the market has begun to assume that the worst of the geopolitical risk is over. plus, investors are resetting their growth expectations for china and other emerging markets. the big question is will emerging markets continue to outperform. well, a mixed opinion on the street while ubs sees the emerging market index gaining 10% by year-end. when it comes to emerging markets, it's hard to find a compelling story. there are signs the growth story in the u.s. and europe more exciting. now to the four bric markets, brazil, russia, india and china, dgig's dan greenhouse says he favors india. the country still faces high inflation. its current account deficit is narrowing. plus this is an election year for the country and market participants are growing confident that the opposition leader, who is considered pro business will win and become india's next prime minister. india's election results will be announced around may 16th. experts say it will be a decisive moment for the country. >> meanwhile, capital outflows from russia could hit $100 billion this year. the bank has warned that russia's economy might contract by 1.8%. ukraine crisis led to a sell-off and it currently lags the msdi emerging market index. it's down nearly 7% over the last six months. and geoff has arrived in moscow where he's been asking how russia can address its outflow of funds. >> maybe it is a good case for us. we have a lot of -- on russia. because i think the economy is out. so we need to support the local economy and maybe it's okay for us. maybe it's a case for the start up. but a lot of my friends move out from russia because they don't believe that they can build any business here. and i'm afraid that we have 70% to 75% of people who would like to do their first business in russia, they're out of russia. fdi is not a russian strong site. and that -- the scent of gdp. we expect them to remain alone. >> the miex ex is a pretty lousy indicator, i'm afraid to say, because the volumes are so small, a better indicator of what's going on in the bond market. and now we're facing a reality that corporate board rooms are going to have to assess whether it can make sense to continue to reinvest in a country that's quite possibly going to be isolated for a very long time. >> right. and you said this to me. that was a detroit hockey badge? >> it was a logo with the detroit red wings hockey. good old usa. >> you're not a fan of them? >> a fan of the detroit red whippings? no way. new york rangers. >> good. that sounds more like new york -- -- >> and totten ham hot spurs. >> that's interesting we have another guest from the states who is a big fan, michael bursa. >> oh, great. >> emerging markets, i think the difference clearly now is there was an overall emerging markets trade. now it's gone back to being judged with merit. >> every quarter, we send the document around the world. one of the keys we're highlighting in this the document this quarter is the differentiation happening in emerging markets. over the last 12 months, one of the charts we'll show is the best performing markets in the country was up to the 25. that's a huge spread. now, what's interesting is recently, some of the best performers are the ones that got hammered the hardest. the big current blth deficit countries, countries working on reform, we just talked about india. one of the best performers, interestingly, poland has been a good reformer. so there's differ rination team has been important. if you look historically at different valuations, roughly 75% of the time looking forward a year, that's going to net you a strong double digit return. the problem is, 25% of the time it nets you a really nasty one. if valuations were to move any lower from here, it become almost, at least based on history, a full proof display. that's kind of where i am. if i'm a long-term investor, i'm accumulating emerging markets right now. >> the question is can you hedge that 25% risk that you talked about or not? >> well, are you just saying the percentages i'm putting in take that head on? >> first of all, when you think about what em could be in yoe your overall portfolio, it's not going to be 50% of the portfolio, anyway. so in that sense, it has just because -- >> but one thing you can do is be a little bit more selective. if, for example, there's a country -- one of the ways people are differentiating right now is, for example, commodity importers versus the exporters. the exporters will be in trouble for a while. but you have to bounce that with the harder they fall, maybe the bigger bounce. they say it's always darkest before the dawn. rush yeah has priced in a lot of bad news. and it's start to go become really attractive if russia decides that they're going to play ball with the diplomacy that the west wants to engage in and start to put back a couple more battalions, you could see a pop in that market. but for a long-term investor, i think it's time to start accumulating exposure little by little. >> andrew, thank you so much for joining us. nice to say you, as always. andrew goldburg joining us from jpmorgan asset management. geoff has an exclusive interview with the russian minister of economic development. you don't want to miss that. meanwhile, investors continue to pull money out of the largest fund posting $1.3 billion in outflows of march. investors withdrew more than $411 billion last year, the largest ever annual outflow from any u.s. mutual fund. it was down 0.5% in march, trailing 95% of its peeres and has a return of 1.3% this year, trailing 85% of its rival fund. high speed trading firm virtue financial has reportedly delayed the start of its ipo road show for a week. this amid the negative attention the industry has received from michael lewis' new book, "flash boyd." the agency has several active investigations into possible abuses by high speed traders and other stock market structure issues. the fbi is conducting a wide ranging probe, examining whether high frequency traders are getting material ahead of other investors. >> i think people would agree that there are advantages of speed by what's the impact of the advantages of speed. is it harmful is in the? is it not harmful? but these are all issues we're very much reviewing intensively. >> in his book, lewis contends that high speed traders have rigged the stock market. the debate over the pros and cons got heated tuesday as one of the an tag insists of those books past global markets went back to the ceo of iex, a new exchange that lewis touted is a more even playing field. i think it's really hard to put a -- >> you said it in the book, that's when i knew the market was rilgd and you're trying to pars your words now. you can't say that and -- >> you were quoted that way in the book. >> let's walk through -- >> do you believe it or not? because you said it. >> let me walk you through an example. >> do you believe it or not? >> i believe the markets are rigged. >> okay. there you go. >> and i also think that you're a part of the rigging. if you want to do this, let's do the this. >> i really do. >> good exchange. if you want to catch more of it on cnbc.com. o'brien calls lewis's book a sales pitch for a business model and a 00-page commercial. meanwhile w, deutsche boers is being probed by the u.s. over iran links. the do you have ya boerse is trading lower on the news. and in japan, apple is in talks with a japanese manufacturer that specializes in smartphone displays. makiko has more for us. >> yes, this controls the smartphone that displays quality as well as its response feed. appearing is said to be considering buying their entire stake for about $480 million. it's considering many options, including a handover of its unit. it seems as though the chipmaker unit has dropped a profit and apple currently buys all of its iphone display chips from the country. the quality is becoming a crucial selling point for smartphones and this acquisition would allow apple to incorporate the design of core display components into its overall product development. now, meanwhile, renesas is likely to have stayed in the red marking its ninth consecutive year of losses. following the report, renesas soared nearly 20% today. >> thanks for that, makiko. staying in that region, stores in japan has soon a 6% right thanks to strong demand for the spring products. uniqlo stores profits come from japan. the nikkei closing up 2% today before the release of the sales figures. just a reminder what's on the agenda in asia tomorrow, australia is reporting its retail sales and its trade figures at 8:30 hong kong time. the rba governor is speaking in brisbane. the currency so far this year, we'll get china services pmi out, as well. that might impact the australian dollar and japan's seven and i will post their full year results. the company's is the parent of 7-level and is the world's biggest retailer. that's all tomorrow. meanwhile, still to come today, gold prices sitting at multi week lows. will more of the economy continue to hurt the yellow metal? we'll continue with that in a few moments. few moments. the new french government lineup will be announced at 11:15 cet. stephane is in paris. stephane, who do we think is going to be in and out? >> we probably won't have the -- in half an hour at 11:15 when they were the make a short statement. according to the french media, only the minister's provision will be announced today and we will have to wait until the next week to get the full list of the secretary of states, which are the equivalent of junior minister, the first cap net meeting will tapes tomorrow. it will be a limited meeting because we will have the full tomorrow yet and the new prime minister will appear before the national assembly probably next tuesday. that's a crucial event, ross, because in france, each new prime minister must appear before the national assembly to make a statement to present a political strategy and to seek a vote of confidence from the national -- from the national assembly. it might be a bit tricky because manuel is much more centrist and he's not very popular with the left wing of the socialist party. therefore, he might not get this report from all socialist at the national assembly. the deputies may not vote the confidence to the new prime minister. he has to prevent the socialist party. one thing before, the finance minister will be simply fine. we had a budget minister, a finance minister, a digital minister and that big finance on economy ministry in france. we will probably keep at least two or three persons. and it's among the speculations. the second is that pierre is unlikely to keep his job at the french finance ministry. but, ross, within 25 minutes, we'll have a first read and, obviously, we'll have the name of the next french finance minister, so stay with us because, of course, we'll give you the full list on the comments in less than half appear hour. >> okay, stephane, you have warned us. we will be back with you for that. thank you. nato's commander saying he's working on proposals by april the 15th to reinforce east european allies by air, land and sea. this is after he says the situation with russian forces on the ukrainian border remains incredibly concerning. nato commander says russia all the forces on the ukraine border that would be needed for inincursion into the ukraine and it could encompass ukraine in three to five days. meanwhile, chilean mines appear to be unscath despite the 8.2 magnitude earthquake. it triggered a tsunami and took at least five lives. they had evacuated some workers to be with their families. most mineral rich nations are designed to with stand tremors. meanwhile today, gold prices are nudging higher after two consecutive days of on losses. but the yellow matter is still sitting near seven-week lows. strong data is boosting optimism by economic growth in the world's biggest economy, which means gold is losing its appeal among investors. joining us with his thoughts, jeff. we've been swinging around the 1300 mark for gold. what do you think now? >> well, i think, you know, we've had two factors driving this softness. one, you've had tensions between russia and the west kind of simmer post the crimea incursion. second, we've had the fed sounding pretty hawkish a couple weeks ago. you know, the next catalyst is really what happens on friday with the nonfarm payrolls. that's a strong number. i think that's going to continue the trend where we see gold struggling to perform. >> yeah. and are those -- some, if you get up towards 300,000, which would be quite a number, and obviously negative for gold, as you say. now, there are those who obviously have been saying it for a long time. weep expecting we are going to get a higher inflation. if that comes through at the enof the year, does gold benefit or not? >> well, i don't know if we necessarily see gold benefit from that. our house view is a little more conservative on the outlook for gold. we haven't factored in a big pick up in inflation. but if the opposite were to pan out, potentially that could give it a bit of a boost. >> how does this translate into the gold miners? >> i think gold miners where it's interesting is moving somewhat away from the price. you can't decouple that, but it's looking at what they're doing at the cost levels in terms of trying too tack costs. there's a case we made that gold miners might be lagging the rest as sort of a general mining states by maybe six months or a year in terms of china attack costs and improve margins from within. >> yeah. and it really is all about the cost basis that he's got. and what is happening on that? >> well, i think, you know, you're seeing -- like we've seen across the mining sector, a lot of costs taken out, easy, low hanging fruit. trying to renegotiate contracts asking for 15% or 20% off, those types of things. you're seeing a focus on trying to -- well, you know, high grade or to try and run more efficiently, maybe push back on some not so necessary maintenance, that type of thing, just to kind of ease the cost inflation or, you know, control costs and try and, again, help the margins. >> and just as far as you're -- we have the leading miners here, glencore, angelo american, rio tinto, bhp billiton and lonmin. is what is your leading pick there right now? >> bhp billiton. it's not only because of the diversification and the balance sheet and the probability of a share buyback being announced in august. it's looking at some of the speculation that emerging yesterday about bhp taking a look at its portfolio and potentially looking at more structural options to try and spin off underperforming assets. they've been trying to sell assets, what they consider noncore for some time. they've struggled to find buyers who are willing to pay a decent valuation for these prices. i think maybe the next natural step is looking at some of these exiting through a spin-off. >> jeff, it's good to see you. thank you largely for that. still to come, meanwhile, on today's edition of "worldwide exchange," we're going to go inside nike and find out how the sports giant is trying to, once again, reinvent the golf ball. i think it's still going to be round. apart from that, we'll have to find out. the second hour of southbou"wor exchange," coming up. ange," com. you're watching "worldwide exchange." i'm ross westgate. the headlines from around the globe, april starts with a bang. the s&p hits an all-time high. european stocks capped despite numbers out of spain. france's new prime minister is going to unveil his new brand. a new government in 15 minutes' time just one day after waking up his position. the gm's ceo says sorry, but fails to provide the answers that congress is looking for. mary barra is now set to appear for a second day on capitol hill to answer questions about the automaker's massive recall. >> i cannot tell you why it took so long for a safety defect to be announced for this program. but i can tell you we will find out. and investors continue to pull money out of the world's biggest bond funds. morning star says pimco's total return funds posted outflows of more than $3 billion last month. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. and a very good morning to you. if you just joined us in north america, welcome to the start of your global trading day. the dow yesterday was up 0.5%. right now, we are called higher by around about 24.5 points. the s&p up at a fresh record high. first time we've been up three sessions in a row for a while. and the nasdaq higher by around 9 points, as want one up 11.6% during tuesday's session. as far as the ftse cnbc global 300 is concerned, we are fairley flat. this morning, we've been a little bit more mixed in european trade. right now, the ftse is just up 8 points. the xetra dax is up 0.25%. the cac 40 is fairley flat. the ftse mib is down 0.75%. no major data to look at except from in the uk. just below the 63 level. as far as bond markets are concerned, we're seeing longer data yields on treasury rise a little bit. the ten-year above 2.76%. nearly up to 2.7%. strong sales during the session yesterday. ism manufacturing activity, 53.7 in march. there was some in the employment gauge. today, we look at the u.s. durable goods and the adp report, as well. elsewhere, yields are a little higher across the space in europe, as well. and on the currency markets, very much focused on the yen has hit ten-week lows against the dollar. we hit 103.93. currently trading at 103.78. increase in appetite. the euro/dollar, just below 1.39. 1.37 was the one-month low that we hit on friday. and the aussie/dollar, not far away from its four-month high easy. we had been up at 93.10 boosted by the tapers of chinese stimulus. how is all of this playing into what happens in asia today? sri is the the man with his finger on the pulse in singapore. sri. >> ross, let me just pick up on japan. we have the tankan survey. what that told us is that inflation still needs to get high higher before it gets to that 2% target that the boj aspires to. for more work to get the right type of inflation to get the economy going in the broader economy. now one mentioned the japanese yen. yes, at a ten-week low against the u.s. dollar. so that helped produce the broader market and the forces settling at 1% higher. but worth pointing out, it was higher during the session. so a little bit of give back towards the settlement. the stock was in focus today up by 19% at one point. that's because there was a report that apple is in talks to buy a stake in its chip design unit. so some stock specific factors helping the nikkei, as well. over on the greater china markets, fairley subdued. in positive territory for the shanghai comp and the hang seng. its really the property counters that led both of these markets higher, especially on the hang seng. the subindex for the property sector was at its highest point sips mid-december. that was largely on a report in the state media suggesting that the home ownership restrictions may be relaxed in some cities. so the property developers having a reasonably good day. broadly, the tone is quite cautious. there's still a lot of risk event in the system that we need to get out of this week and digested by the markets. the ecb where you are is one of them, ross, of course and then the big mother of them all, of course, is the nonfarm payrolls at the end of the week. so these markets treading aushusually just ahead of those two key themes. back to you now. >> yes. we will over the globe. sri, thanks for that. have a good evening in singapore. now, sri a while as, it was said that the nato commander has been working on a package of investors to reinforce east european allies for air, land and sea after saying russia has all the forces it needs to make an incursion into the ukraine over the bid of three to five days. russia has responded to that comment by accusing nato of using language that echos the cold war and says neither it nor nato gains from nightso's cooperation or suspension of cooperation. meanwhile, don't forget to tune in tomorrow. geoff has an exclusive interview with the russian minister, as well. sri mentioned the data coming up in the week in the united states. today, we get the employment report out at 8:15 eastern. forecasts call for 300,000 in private sector payrolls. at 10:00, we get february factory orders expected to rise 1.2%. the atlanta fed president dennis lockhart speaks about the economy this afternoon. as for earnings, look for results from monsanto before today's opening bell. right. now, of course, the adp number is usually seen as a gauge for friday's labor department jobs number. stronger data out of the u.s. could send short-term rates higher. our next guest suggests this would be positive for european equities. joining us, peter oppenheimer from goldman sachs. when you look historically at what happens when we get a flattening yield curve, what does history tell us? >> to some degree we can look at history to give us some kind of a guide. when you get a flattening yield curve -- you had long rates yesterday. >> and we're expecting a bit more of a further rise in the short-term for the yield, particularly in the u.s. as economic activity begins to pick up again. particularly, that seemed positive for equity markets. remember, these are the first rises for rates in a low level. they normally come at a time when growth is accelerating. and equity markets respond quite well to that. >> 1994, is that an aberration? because it was shock? >> yes. >> we had this move higher in rates. >> 1994 stands out as being quite an exception in this regard. you had a very unexpected rise in interest rates. it had a very negative impact on bond markets both in the u.s. and globally. and equity markets were not prepared for it. it was coming before you got a strong rise in growth. and you had a negative shot pretty much across the world in asset classes. >> and there's nothing here, the fed has gone out of the way to not do anything that's shocking to anybody. i think that's fairley clear. you say here that what is a more important drive for concerns is valuation. but the stocks have performed very well and valuations have gone up. >> yes. two things here. you've seen a sharp rise in valuations in europe in particular because you have yet to see strong profit growth. that is not surprising. the initial the recoveries in equity markets from very deep bear market lows is nearly always driven by multiple expansion. the question is when does profit growth really take over as the driver. normally, that starts to happen as you get these initial rises in short-term money market rates. and it is, indeed, our expectation that profits will grow reasonably this year. >> a rise in short-term ratio is seen as an inflation should help drive profits is the -- >> right. >> indeed. you know, the offset would be that the all of that recovery is already in the market and, as you say, valuations have gone up. but we don't think they have yet stretched enough, given the margin and revenue growth expectations that we have to really prevent markets from continuing to rise at a reasonable level. in addition what makes it different from previous cycles is that, of course, rates are still incredibly low and the opportunities in other asset classes are still fairley limited. >> peter, good to have you on board. we'll come back to you in a little bit. some of the other stories the we're following today, the gm's ceo mary barra will be back n on capitol hill looking into the retailer's recalls. barra says she didn't know why gm waited more than a decade to recall cars it knew had defective cars. she did promise to change the automaker's culture, putting a new emphasis on safety. >> it has taken way too long and we will learn from this and we will make changes and we will hold people accountable. the best thing n world would be as soon as we find a problem we fix it and it doesn't exist in the marketplace and doesn't affect our customers and doesn't create tragedies. >> and barra is bringing in an outsider to help look into the matter. ken feinberg. gm stock today is down another 1%, down around 5% over the last month. now, high speed trading firm virtue financial has reportedly delayed the start of its ipo for at least a week because of the negative attention the industry has received from michael lucas's new book, "flash point." the agency has several active investigations into possible abuses by high speed traders and other stock market structure issue. the fbi is conducting a wide ranging probe examining whether high frequency traders are getting material information ahead of other investors. >> i think people are aware of the advantages of speed. is it harmful, is it not harmful? who does it harm? but these are all issues which are very much we're reviewing intensively. >> high speed traders have wreaked the stock market. the debates over the pros and cons got pretty heated. one of the an tag insists went at it with brad carpiema, a new exchange that lewis touts is a more even playing field. >> i think it's really hard to put a word on it. >> you said it in the book, that's when i knew the markets were rigged. i think it's disgusting that you're trying to pars your words now. >> you can't say that -- >> you are quoted that way in the book, but -- >> let's walk through it again -- >> do you believe it or not? because you said it. >> let me walk you through an example of -- >> do you believe it or not? >> i believe the markets are rigged. >> okay. there you go. >> and i also think you're a part of the rigging. if you want to do this, let's do this. >> i really do. >> pretty good exchange. worth recapping on cnbc.com. o'brien calls lewis' book a sales pitch for a business model and a 300-page commercial. the discussion is going to ramble on, i think. now, we've got more flashes coming out considering the ukraine. the eu and the u.s. are considering joint efforts to address the ukraine energy security situation. this is issued by the u.s. news in brussels, headed by captain achuthash ashton and john kerry. still to come, we'll get the latest from paris as the details come through. ♪ [ male announcer ] this man has an accomplished research and analytical group at his disposal. ♪ but even more impressive is how he puts it to work for his clients. ♪ morning. morning. thanks for meeting so early. oh, it's not a big deal at all. come on in. [ male announcer ] it's how edward jones makes sense of investing. ♪ a recap of the headlines, the gm of gm mae barra is on capitol hill. the french government gets set to announce its new lineup following disastrous local elections. and last month saw more than $3 billion withdrawn from pimco's total return fund. more to come on those stories. meanwhile, european lawmakers are under increasing pressure to relax austerity. jules is in athens and joins us for more. jules. >> thank you so much, ross. you can see the ministers all leaving behind me. but the real buzz here is whether or not france and, of course, italy, perhaps, too, are going to be asking brussels for more leeway as far as their deficit is concerned. francois hollande, the french president, has been making moves towards that suggesting. i also spoke to the italian finance reform minister asking him if he's been given the green light to move on those targets if they need it. listen in. >> we don't need it. we're going to be keeping with the targets and with the commitment. due to the new budget law in italy, which is stricter, believe it or not, that what the european commission requires of us. >> actually, the italian budget law now means their conditions far more stringend than the european commission. the question is with all the reforms that they're trying to do, will they manage to stick to it? ross, from an emptying out of the ministers meeting here in athens, i'm going to go and enjoy the day. back to you. >> it must be lunchtime. enjoy. thanks, jules. good to see you. still to come on the show, emerging markets are bouncing back, but can the rally be sustained? we'll have a perspective on that. they are weighted to the upside, not by much. not by much. all right. the new french government is currently being announced. french foreign minister lauren fabian remains in his toast. those names are all being read out as you can see from these pictures. we'll get more on that and reaction from stephane on the implications. what we really need to know is going who is going to be the economics minister. the futures, meanwhile, indicate ool pop higher today after the dow was up 74, the s&p up 13 points, the nasdaq up 1.6. right now, the s&p is called higher by nearly 3 points 37 the dow is called higher by around 29 points and the nasdaq called higher around at the moment by 10. meanwhile, fateo is using language that echos the cold war. that's the russian response to the organization's decision to suspend corporation with moscow in protests at the annexation of crimea. nato earlier said there was no sign that russian forces stationed on the eastern ukraine border were returning. and claims moscow still has all the forces needed for an incursion into ukraine. capital outflows at the same time from russia could hit $1100 billion this year. the world's bank is warning that russia's economy might contract by 1.8%. ukraine crisis has led to a sell-off in the the micex down nearly 9%. emerging markets fairley off just off 0.2%. after what was a volatile start to the year, stocks and emerging markets have been staging a turn around. seem ma mody has been looking at which em stocks have contributed to this recent rebound and highlights what market experts are saying about these markets in the new quarter. >> a big turn around for the emerging market index is currently having its best nine-day winning streak since september of 2013. so what's behind the move? well, experts say the market has begun to assume that the worst of the geopolitical risk is over. plus, investors are resetting their growth expectations for china and other emerging markets. the big question is will emerging markets continue to outperform? well, a mixed opinion on the street while ubs sees the emerging market index gaining 10% by year-end. when it comes to emerging markets, it's hard to find a compelling story. in fact, they find the growth story in the u.s. and europe more exciting. now to the four bric markets, brazil, russia, india and china, btig's dan greenhouse says he favors india. continuedan sensex, in fact, just hit a record high while the country still faces high inflati inflation. its current account deficit is narrowing. plus, this is an election year for the country and market participants are growing confident that opposition leader mody will win and become india's next prime minister. india's election results will be announced on or around may 16th. experts say it will be a d decisive moment for the country. back to you. >> meanwhile, the new french government reshuffles is being announced. we knew know that arnold ecamon has been named the new finance minister. he was previously the minister of industrial renewant. laurent fabius is the foreign minister, so are they going to have any impact at all on the french economy? stephane joins us with his analysis. stephane. >> so there's one thing, ross, we've got less ministers than what we used to have in france. 15 ministers, the least of the ministers have been announced this morning. we will have to wait for the next week to ask the secretary of state position, which is the equivalent for junior minister. the key question for us, of course, what the name of the person who is going to replace the former french finance minister is not in the new team and has been replaced by two people, actually. michelle sappa, the finance minister and the minister for the public account, some sort of budget minister. michelle suppan worked for -- he failed to reduce the unemployment rate by the end of the year like francois hollande wanted to do. he's a close friend to francois hollande and probably he will have to take care or to look very carefully at what arnaund, the former minister for the product team recovery that was the official title he had. and he was the nonminister for the economy recovery and the digital was announced a few minutes ago. you might have here that the former ex-wife of francois hollande, the former socialist for the presidential election in 2007 said she joins the team as she is the new ecology minister for france. no changes in terms of diplomacy is the head of the french diplomacy and what is also important, the interior minister that's important for france, the former budget minister is now the interior minister. so top story, of course, for us, new finance and economy ministers is now the of the team. >> stephane, thank you for that. and we'll leave you with a look at how futures are trading right now. we are called higher this morning, dow up by around 27 points, s&p futures currently about 2.5 points above fair value. value. ld save you fifteen percent or more on car insurance. everybody knows that. well, did you know pinocchio was a bad motivational speaker? i look around this room and i see nothing but untapped potential. you have potential. you have...oh boy. geico. fifteen minutes could save you fifteen percent or more on car insurance. welcome to "worldwide exchange." the french government has announced a new lineup. april start to the bang, the s&p hits an all-time high. european stocks have been capped despite strong jobs numbers out of spain. the gm ceo said sorry. failing to provide answers congress was looking for, mary bar ra is appearing a second time on capitol hill. >> i cannot tell you why it took so long for a safety defect to be announced for this program. but i can tell you we will find out. and investors continue to pull money out of the world's biggest bond fund. morning star says pimco's return fund posted outflows of more than $3 billion last month. a very good morning to you. if you've just joined us in north america, u.s. equities after the gains yesterday are called higher today according to the futures. today up 74 points, 0.5%. the s&p at the moment, after being up, what, 0.7% yesterday, currently called higher by around 2.5 points. and the nasdaq at the moment is called higher by 10.5 points avenue being up 1.6%. of course, we had the first three-day move to the the s&p for a few weeks. the ftse cnbc global 300 at the moment is fairley flat. the ftse 1100 yesterday was up 0.8%. and today we have some slim gains for european stocks. right now, up 12 points on the ftse. the xetra dax is up about 0.3%. the cac 40 is fairley flat and the ftse mib down around 0.4%. another big day today, of course, with data coming out, including durable goods and the adp. here is a recap of the some of the thoughts we've had on the channel today. >> optimism around strategic investment. that's the important thing as the industry transitions to the digital business era, we're starting to see a lot in that. we've talked about the forces before, mobility, cloud, social information, but these things are still driving. >> investors got spooked by what happened in emerging markets. we saw a lot of money come out of emerging markets. where is it going to go? it's going to go back into the u.s. and europe. frankly, that's where the opportunities are. less risk. there's potential upside. if we see stronger economic growth, we should see earnings start to accelerate and stock prices push higher. in the bigger scheme of things, i have to say that i'm not exactly -- for the russian economy, anyway. not necessarily because of the events, but surely russia is always a commodity supplement. and still with me on set, peter oppenheimer from goldman sachs. one of the thoughts there was look, people got scared of emerging markets. they got scared and went into european equities. you were talking about how earlier a rise in bond yield is going to be okay for european equities. if you have to choose between europe and the u.s., though, right now on valuation and outperformance, where would you go? >> i think on a rel of basis, europe still sets up pretty well. the valuation is lower, although the differential is not as big as it was six or nine months ago. but there's still a relative valuation gap. we're looking at around 14% in europe as you get top line growth alongside the recovery. in the u.s., only around 8%. so the relative gap still faces europe. >> despite the total growth in the u.s. is going to be a lot stronger. and what about emerging markets right now in relation? you clearly now every emerging market is different. today, a year or two, you could just buy emerging markets. they're very different. >> that's true. i think that there are some very different drivers. there's the economy's big deficits, external funding deficits which are gaul gradual seeing improvements in their final positions, but these have further to go. then you've got the chinese economy, which is a creditor. that way you've seen tightening of credit conditions and the hope is that policy will ease a bit. i think the prospects there, the better. then you've got the geopolitical risks in emerging markets. >> peter, good to see you today. thank you so much for joining us, peter oppenheimer from goldman sachs. now, for the first time in history, the s&p 500 will have 501 components. google's much anticipated share split will offer shareholders a one-time special dividend aimed at halving the price of the stock. shareholders will get two shares for every one that they've owned previously. class a shares will trade under googl and retain their voting rights. the other, class c, will be listed under goog and have no voting rights. this means the influence over thing of the firm will hardly be affected. they will retain the same control as their class b shares, which are not traded publicly and the new share issues are worth voting wise. while they the do this, google shares have -- there we go. currently up 1.8% in yesterday's session. over the last five years, of course, up 226%. joining us with his thoughts, yusef from cantor fitzgerald. youssef, it's interesting because we've been talking about this with facebook in the sense that we wondered whether the founders interested in becoming divergent with the shareholders. could we start to leverage similar accusations towards google as they -- as larry page says i've been retained their control and shareholders get less of it? >> well, i think that's a fair assumption. remember, they already owned a fair amount of class b shares and had super voting rights. ten votes for every share. so it's not as if this is really going to dramatically change the -- that assumption. these guys will continue to exert complete control over the boy and over everything that's strategic to the firm. you know, at the same time, i think you had a number of people since the stock moved about $500 maybe several years ago, several shareholders were asking for a stock split. so this is one way for them to offer a stop stop split. making the shares a little more affordable, but at the same time, really, make sure that any shares given out over the foreseeable future don't dilute any of the class b shares. >> yeah. when you're buying google today, at some price, what exactly are you buying? compared to -- compared to the rest of the sector that you might be in. >> well, fundamentally, you're still buying the king of search, a business that's still a growth market, in our view, still growing mid teens. you're buying one of the top display advertising -- players in the space. you really only have facebook, yahoo! and google in that category. and that's a big, big market where we're seeing a fair amount of add dollars moving and eventually some tv ad dollars will move there. and you also buy in a large gap name that's still in hyper growth, still generating 50% margins, trade in somewhere around 20 times peo 12 times cash flow, which we think is very attractive. >> you talk about product listing ads could be a real boom to google and might make them a bigger starting point to shoppers and they could take shares from amazon and ebay. explain why that might be the case. >> absolutely. i think plas are product list listeding ads are one of the best ways that google is playing into retail space. think of them as an ad format that are very intuitive. you go on google, you do a search and immediately you get not only just a blue link as they used to have, but you get a picture of the product, the price of the product, the different vendors. so it's comparison shopping right there in one screen. google was the first to launch this a couple of years ago. we think from talking to a number of agencies in retail and conversions, that the conversion rates on this new format is very strong. we think that the cpcs or cost per click to google are much higher, which tells you advertisers love them. interestingly enough, earlier this week or late last week, we saw microsoft doing the exact same thing, so they launched something called pa, product ads. so we think this is really going to revolutionize the way retailers advertise online and, clearly, we think google is going to developly get the lion's share of that market. >> yusef, good to see you today. thanks for joining us. also in the secretarier, amazon is holding a media event today. and in other news, gm's ceo mary barra will be back on capitol hill today in front ooh a senate panel looking into the automaker's massive recall of faulty switches. barra says she didn't know why gm waited more than the a decade to recall cars who had defective parts. she promised to change the automaker's culture, putting a new emphasis on safety. >> it's taken way too long and we will learn from this and we will make changes and we will hold people accountable. the best thing in the world would be as soon as we find a problem we fix it and it doesn't exist in the marketplace and doesn't affect our customers and doesn't create tragedies. >> gm is bringing in an outsider to help sort out the company's response to customers affected by the recall, which has been linked to 13 deaths. ken feinberg oversaw compensation funds for 9/11 vict victims, the bp gulf oil spill and the boston marathon bombing. now, investors continue to pull money out of the world's biggest bond funds. pimpco set a return fund of $3.1 billion in march. investors withdrew more than 41 billion in the fund last year, the biggest ever outflow from any u.s. mutual fund. still to come, how the debate on high speed training and whether the market is ready to jump to a new level right on the floor of the new york strong exchange and on cnbc. ♪ [ male announcer ] when fixed income experts... ♪ ...work with equity experts... ♪ ...who work with regional experts... ♪ ...who work with portfolio management experts, that's when expertise happens. mfs. because there is no expertise without collaboration. headlines this morning, gm's mary barra prepares tore another day of questioning on capitol hill over faulty auto parts. the french government announces its new lineup following disastrous local elections. and last month, more than $3 billion was withdrawn from pimco's total return fund. and the chatter over the pros and cons of the risks and rewards of high speed trading is getting even louder just days after the release of their new book which questions the industry's practices. kayla tousche joins us from cnbc hq with a little bit more. i'm quite enjoying this conversation, kayla. i hope we get more of it. it's certainly gotten colorful over the last few days. virtue financial has reportedly delayed the start of its ipo by at least a week. the company had been expected to start the markets process this friday. investors said you're not going to get a positive reception if you do this now. that delay comes from the attention the industry received after the new book flash boys. s.e.c. chair mary jo white told lawmakers the fbi has several agencies under way. earlier this week, the fbi confirmed it had been conducting a wide ranging probe, getting whether high speed firms are getting information ahead of other investors. i think people would agree that there are advantages of speed, but what's the impact of the advantages of speed? is it harmful? who does it harm if it harms? but these are all issue that's we're very much reviewing intens intensively. >> in his book, lewis has confirmed high speed traders have rigged the stock markets. it gets heated tuesday between cnbc's power lunch. when added it was bass global markets o'brien. giving investors a more even playing field. >> i think it's really hard. >> you said it in the book. that's when i knew the markets are rigged. it's disgusting that you're trying to pars your words now. >> if you can't -- >> you are quoted that way in the book. >> let's walk through an example. >> do you believe it or not? because you said it. >> let me walk you through an example of -- >> it's a yes-or-no question. do you believe it or not? >> i believe the markets are rigged. >> okay. there you go. >> and i also think that you're a part of the rigging. if you want to do this, let's do this. >> i really do. >> with that, the gloves were off and it turned into a no holds barred wrestling match pope brian and lewis. o'brien says lewis is scaring investors. he also challenged costiamus to repeat his claims from the books. >> in my exchange as a sign of corruption and it's his backing of his exchange is a sign of virtue. >> there's a difference. >> it's the same thing. >> the backing of me is bad and the backing of you is good. what is the difference? >> the investors in our exchange don't trade on our exchange. that's part of the problem, right? i say the sky is blue, bill says the sky is red, right? this company -- >> but this building is owned by traders for 22 years. . >> you can watch the whole match on cnbc.com. but while it was going on, traders were stopping what they were doing. you could hear cheers and boos from the floors. a lot of traders are interested in the way this comes out because it could affect the way a lot of people on the floor of the exchange do business. >> great discussion. even if you did see it, it's well worth watching again on krnsz.com. i have a feeling it's going to keep running, don't you? yes, i do. this book is just coming out. there are a lot of claims made in the book that might be an issue with some people who actually work in the market. is there a rigged stock market? is there an advantage for certain traders over to others? certainly lewis lays out one story, but people will be drawing their own opinions from it. >> the book has got fantastic publicity. i think we can say that. kayla, thanks for that. have a good day. >> now, slightly different, it's estimated that enough golf balls are produced each year to circle the earth. sports manufacturer nike is now looking to keep the edge over rivals with a new ball that claims to add length to your shot while reducing the risk of a hook or a slice. can it be? >> they call this the oven because it's where nikkei golf engineers cook up new golf ball innovations. the goal here? one new golf ball prototype per day. this the stand alone r&b facility is located down from nike's headquarters. these are made in oregon resin golf balls. they're going to eventually end up on store shelves. right now they're going through their final coating. if the thickness of that is off by a fraction of the thickness of your head, you can see the trajectory of that golf ball change by yards. the key so this is the core. resin is lighter than the traditional rubber. they're getting this product from chemicalmaker dupont. it's supposed to deliver more energy with impact. that's obviously a good thing for pro golfers like tiger woods who is moving over to this ball later this year, but it's good for your average everyday golfer who maybe has an average swing. according to the usga, each year, enough golf balls are produced to circle the entire earth. the golf ball industry's biggest company is actually titelist. just a few more numbers from you. overall, nike golf pulled in $791 million last year. that's that represented a 9% increase over on 2012. not bad, but the overall golf industry, $10 billion per year. so hopefully the oven will heat up more market share for nike. back to you. the s&p called higher by 2.5, the dow by 27. but we get the adp employment report before the open. chris runky is managing director at bank of tokyo mitsubishi ufj. good to see you. how will we trade through this number, do you think? >> well, we're looking for a pretty strong number. you know, payroll jobs were pretty weak in december. i think it was 48,000. it came back a little more in january. up about 129,000. last month, 175. the goal we're trying to get to is to 200. but adp last month was only about 130 something. this month the street is looking for quite a big number. i hope we don't get disappointed. but there's reason to believe that jobs are going to pick up and get back, if anything, maybe a little bit more than 200,000 in the month of march. >> we should be quite interesting. very briefly, as we get much more than 200,000, will we get much more of a response from the fed under their guidance? >> well, they're kind of locked and loaded here. they say they're not on auto pilot. we think they are. they're cutting in these drip $10 billion steps for qe currently at 55. >> we have to go. thank you so much for your time. i'm sorry about that. "squawk box" up next. . good morning and welcome to "squawk box." gm's ceo mary barra visited congress and they call the automaker's response unacceptable. the s&p hits a record high. next up, the adp employment report. and fired up over flash boys. the debate over high frequency trading gets kicked up a notch. it is tuesday, april 2nd, 2014. autism awareness day. we're all in blue and "squawk box" begins right now. good wednesday morning to you. welcome to "squawk box" here on cnbc. joe is over here. i said it just mentioned -- it's wednesday, nonetheless, i'm andrew ross sorkin along with joe kernen this morning. becky, sadly, out again today. she's a little bit sick, but she's going to hopefully be back, we hope, tomorrow. joe was saying it is autism speaks awareness day. that's what all these pins and ties are about. but straight to our top story this morning, gm's ceo mary barra facing a congressional panel we're going to get to aman jabbers in just a moment. it was interesting to watch just what she had to say yesterday. i'm not sure she -- >> you were able to see the advantage of having a new ceo
could be delayed due to a critical issue. technology problems they say. connectivity problems. today we're expecting another wild one. pretty flat. let's check in on the british pound. that is trading high. $1.68.18. why? once again, we're showing strength in the u.k. economy. 6.6% unemployment. the lowest in five years. wage increases, though, that is few and far between. that is lower, of course slower than inflation. and grocery prices are going up. nevertheless, this could push mash carney to have to act -- mark carney to have to act. there are concerns about the higher housing prices in the u.k.. a look at a two-day basis just to see the rise that we had on the british pound. current interest trading particularly higher. let's have a look at european stocks. i want to see if we have indeed opened. there are concerns that we might be delayed. this appears to be yesterday's trading at the moment. we'll have a look at particular stocks. we want to get to home retail. up 1.2% this morning. why? it owns home base as well. both showing better than expected sales growth. margins might be decrease. they are seeing sales ramping up. the weather is better. home retail currently up 1.2%. in a skort yum that just won a project to help build a road in scot land. 745 million pound project. ou'll see that trade rise. ulberry up off 4.3%. they have no c.e.o. they have no creative director. this is a company lost in direction. > we have the global head of equity strategy at citigroup. welcome to "on the move." global indices, stock indices can't break through these. can't hold on to all of these all-time highs or multi-year highs. they touch them and then fall a little bit and then touch them again. what's going on? >> there is a big break around. volatility is cheap because -- to yield, they -- by doing that, they have flourished the market with a lot of -- there is a lot of protection around, which means every time we go up there is selling and go down there is buying. >> what is going to break us through -- >> we need a new bid or new -- market. new flows to move away interest that. albeit also a buying environment. earnings could be a catalyst in july. if we have a confirmation that earnings are improving, that would be big. >> do you think the volume will be lower anyway? >> the world cup is not going help from this point of view. >> are you one of those investors who looks at the world cup and sees it as an investing opportunity? goldman sachs, u.b.s. have released these fascinating reports which predict who is is going to be the winner and whether or not it impacts the country's stock market if they do win or host country. do you spend much time thinking about that kind of stuff? >> we have done some leg work as construction gets underway. who benefits from it. some of the sponsors will benefit for sure. in brazil, they have been a strong -- already. >> since march. it is in a bull market. >> it is guaranteed a bull market. we'll see if it continues. >> who is going to win, by the way? >> you won't get that out of me. >> england. england . england won't win. what are the risks, this lack of volatility when volatility starts to pick up. what are the risks out there? >> earnings i think are the one thing we do need. if you look at equities as an asset class, we were historical trends. we were at the loped of ranges. now very normalized. we're not cheap anymore. we're not expensive but we're kind of in between. for us to continue to be higher, we need earnings. >> the earnings in europe? >> last year we had about 5% growth this this year we expect about 10%. we didn't get much of that. this is why it is so important that could renew the volume in the market. >> there is going to be a correction. we were going to speak earlier. hopefully we'll get him on another time. forecasting a correction in the u.s. markets. are you one of those that say it has been so long since we have seen a decline of 10% in the u.s. stock market that one is due. it is just going to be a matter of time. >> that would not be a basic scenario. if you look at what low volatility brings you. it brings you more low volatile tifment from this point of view, we don't feel the position is extreme. the market is is not overbought. they are -- in the market. as long as the earnings are ok, to go back to this -- >> just about earnings. anything else? >> it is momentum. it is showing that we can win and we can maintain -- that we have seen. big risk. geopolitical risks things which are unforseen. >> russia has died down a little bit, hasn't it? >> as a global impact, yes. the market has seemed to absorb it extremely well. russia as a country and the impact it may have on international flows into the country and funding the country that could -- >> buy into the russian assets? all emerging markets have since the -- the wobble in the beginning of the year. it is incredible, the rebound we have seen since the earlier year wobble. >> the extreme positioning and the bearish rns we have seen did cre this bounce. everything started floating better. going forward, we expect more -- russia will not be one of our best picks. we think china which is very cheap are a lot more interesting. to be very casme. >> we'll come back to this. thanks. global head of equity trading strategy at citigroup. here is what else is coming up on "on the move" today. chancellor osborne takes a hard line on libor. we'll look at whether the world cup brings a windfall to the host country. >> i'm mark barton in london. this is "on the move" streaming online, on your phone and on the mazon fire tv. further industrial action, operating profit will fall by with the exrared previous target. ccording to aer ling us. shares down 2.01% because of that profit warning. now we got some breaking news on france's biggest bank in the last 13 minutes. one of b.n.p. paribas' co-c.e.o.s is stepping down. the u.s. had been pressuring the bank to dismiss george chodro nmp. we have details. is this linked to the alleged sanction violations or not? >> well, you have to believe it is. because his name is being deemed, tried to be pushed out in many press reports. i mean you can't disdowntown fact that regulators are under a lot of pressure to hold individuals responsible and not just go after nameless corporate eptitys. allow them to pay their fine and walk away no one's reputation soiled. regulators are taken a lot of criticism with that. >> this gentleman himself hasn't been accused of any wrongdoing. >> correct. although they don't want to let banks walk away without someone in the high level executive suite's head rolling so to speak. that is new tone that regulators are taking. it is a result of the criticisms they have taken for not making high level executives leave their post. >> could we see more high level executives depart b.n.p. paribas? >> well, there has been a lot of press reports that the banking -- top banking regulator in new york is pushing for other departures. this is the most senior departure that he has pushed for. >> is the french pressure on the u.s. working? of course we had obama meet with hol land just a week or so ago. the bank of france governor is putting pressure on the u.s. over this fine which could amount to $10 billion. we don't know yet. what is happening on that front? >> i don't know that it is working to the effect that obama is saying prosecutors are separate from the u.s. brooverpblg government t you have to take him at his word on that. are very good at leaking reports to the media. they feel like they are getting pressure from people they don't want pressure to come from. >> jesse westbrook joining us today. still with us, the global head of equity trading strategy at citigroup. where are the financials? >> we like them. we think they are this a sweet spot. they are going to get help from european q.e. . that is going to help the assets nd that is good for the banks. u.s. yields are coming back higher because of the pickup in the economy. the sweet spot where the assets should do better, they should make more money because of the yield curve on the u.s. side. >> we debate the eck cassy of what the e.c.b. rolled out after a week of -- what is your view on what the e.c.b. has done and what will it actually achi? >> i think they started the clock ticking. there was a lot talking but very little action. the market was kind of waiting to see when something was going to start. we did -- to a large extent. targeted liquidity. an announcement expected in september. left the door open to do large scale asset purchases. it is not as if -- comparing to q.e. 1, 2, 3 in the u.s., the situation is different. the economy is doing better. >> q.e. , is it possible to the tune of -- what the u.s. achieved achieved, which is 25% of g.d.p.? >> not -- i'm not -- again, i think draghi has been incremental in his approach. we will do what we have to do. there is no need for -- a trillion. kind of the what the market is expecting or hoping for. we will probably get another $200 billion. that takes you closer. >> it underpins the bond market and the stock market. >> it underpins the stock market. in essence what draghi did was to raise the e.c.b. to something that was a lot closer to the money. it is good for equity and risk assets. >> back to you in a few seconds time. g.e. big story today. planning another round of lobbying in paris on its $17 billion offer flash flood alston energy assets. siemens has been waiting in the wings. it may have a new partner in mitsubishi to bolster its bid. let's head over to hans nichols in berlin. just break this down for us. >> mitsubishi and hitachi on one side joining with siemens. we get a good sense of just what siemens wants from alston. that is their gas tur bind the services a-- turbine and the services aspect of it. they would get the grid side and the steam fire plant, mostly coal. they are lobbying the government. there are meets all week. they have two top officials in paris and their argument is basically three-fold. jobs, jobs, jobs. that has always been their argument. they say they will add 1,000 jobs. they do have i 17 billion behind the figure. behind bid. they say their bid is stronger. it will lead to a healthier company. mr. holland certain meeting with his ministers today. mark? >> hans, dow husband siemens fit into all of this? >> well, so here is the interesting thing about what bids and what parts of the energy aspects and energy bids that they want. they are saying that the -- by partnering with mitsubishi, the grid side of it will be done from the japan sneeze size. so siemens would avoid any regulatory hurdles where they have 50% already of the high voltage transmission line. they get out of a regulatory mess but create another one. the idea of a european conglomerate. the idea that this would be a european company that is eroded a little bit when you have two powerful partners in mitsubishi and hitachi. i'm not saying it is fatal to the bid but it does change it. >> thanks. hans nichols live in berlin. 3 looking at our function. looks at all the underlying and mergers and acquisitions activity. in europe, the value deal that has been announced this year is half a trillion. 585.7 billion. that is doubling on the same period last year. can it continue? people talking about the $1 trillion quarter. >> yes, it can can. we have seen a lot of the m&a. backlog interest the previous years. it may look a little bit extreme. it is just that it had been a lot slower for many years. one number we looked at is what our deal is percentage of total market cap. we're on pace to be at 1.6% for the year. t is not exuberant just yet. i guess it is the expression of the fact that corporates have a healthy -- have been sitting on cash. as risk appetite comes back, they are home run m more willing to use the cash. it is going to continue going but part of it will be allocated to m&a. >> we talked about financials. let's get to your other themes . miners and other areas. do you like the look now or not? >> to speak about europe and as we think of q.e. . q.e. will be good for risk assets. will be good for the periphery and domestic recovery. anything linked to that in the context of europe should do better. earnings again, it is a big driver where we think performance is going to come from. which gives you value with earnings momentum will be a sweet spot in the market. >> more highs? we're at near record highs for the s&p and then the dow jones. do you think we will push through? >> most likely we will push through. i think our equity strategist research just -- the targets for the end of 2015 which gives you still 20% upside. the only difference between this year and last year is it is going to be slower. hat is good and healthy. something which is going higher is good. it is letting investors coming in. keeping in mind that a lot of investors have not -- the volumes are low. hedge funds have degrossed. not a lot people are making money from this. >> good to chat with you. thanks a lot. thank you sir for joining us today. ing up, we're going to weigh investor -- coming up, weighing the risk appetite. details next. ♪ >> welcome back to move. i'm mark barton in london. sony's television revenue jumped the most since 2012 as demand surged for the world cup. sony said last month, its struggling tv unit could make its first profit in more than a decade, even if it misses sales forecast by 16%. aer lingus sees its operating profit 10% to 20% below last year. they say industrial action and strikes next week caused significant damage to trading. yesterday lufftansa shares fell. 2014 has been the busiest year for i.p.o.'s since 2006. the latest thing to list in london is b&m retail. shares are rallying. joining us for more on this ruth is our news reporter davis. how is the reception? how is it going? >> it is going very well. the shares up 5%. >> it is something. >> it is great for them. if you look at -- they just managed to stay above off a price and you see companies like describe having to price at the bottom of the range. b&m for sale of -- and the private equity they are selling. this is a good story. >> a lot companies have come to market, haven't they in the last year or so? >> absolutely. absolutely. and investors are -- for soist choice. which means they are not taking the time or putting money into every stock that comes their way. it is a great example of this. they had to price at the bottom of the range. the private equity owners didn't sell any stake. look at b&m today. about 1 billion pounds is what they are selling. for them it is a great story. they bought a significant stake in 2012. they are exiting now at evaluations which seem attractive. >> talking about exiting. this is the return to the stock market for mr. terry leahy isn't it? >> it absolutely is. i was just looking at how it was trade today. it is down this year. he must be pretty happy that he is with a story like b&m, their sales seem to be going great. they are not as well known not on every street corner as tesco but the i.p.o. shouldn't hurt for that. >> the art of leaving your job is var skillful art. to many, he left at the pacific northwest time as tesco's fortunes declined. it is a pop, isn't it? we don't like to use words like that. >> this year, yes. absolutely. when you see -- the -- of the world that had these great evaluations and are trading down. >> more on the world cup next. stay with us. ♪ >> welcome back to move. i'm mark barton at bloomberg's european headquarters in london. let's see how things are shaping up so far. here is a picture on the markets, as you can see the ftse down about .10. gains for the stoxx 600 creeping up towards those six-year highs once again. more advanced in germany. the dax up about .1% as well. caroline hyde is here at the touch screen with three stocks to watch. am indeed. i will even give you six if the character decides to open. a slight delay to stocks trading n amsterdam and paris. a technical glitch slowing those trades down. b&m retail. e u.k. retailer comes on the -- new kid on the block to the stock exchange. trading higher, up by 5% at the mole. home retail is falling today in the united kingdom. they sell picnic tables. the likes of pipes and garden furniture. doing very well as the center starts to be on a roll. profitable not doing so well. margins are falling for both of those key stores, that home retail operates. down almost 1%. unilever trading up 1.3%. a bit of a hint of m&a in the u.k. press today. the maker of home products is potentially being looked at by private equities to some four pounds per share. it could be being eyed up for 40 pounds a share. could it go any higher? mark, back to you. france still not trading. >> thanks, caroline. these are the top headlines today. a breakway, way from al qaeda is the ing calfturing birthplace of saddam hussein. the i.m.f. is sounding the alarm about the globaling market. the group said policy makers must take more steps to sprept another property crash. the i.m.f. 's latest report shows housing prices are well above their historical average in many places. we have breaking news on france's biggest bank in the last hour. c.o.o. is.p. paribas' stepping down. george coursel. it maces a possible fine of $10 billion. let's head our attention to biggest sporting event on the planet. the 2014 world cup kicks off in brazil today. the host country faces significant challenges. om gibson reports. back in 2007, when brazil was awarded the 2014 cup, the country was enjoying a period of rapid economic growth, but getting ready for the finals hasn't been easy. the task of building and remodeling 12 stadiums wasn't as daunting as it has now become. only three of the 12 have been completed on time the arena that hosts the opening games still has work to do until the bitter end. brazilian public protested demanding hospitals and schools over football stadiums. it cost 33% more than previous world cup in south africa. there are major concerns for the afety of the world's fans. in 2013, brazil was the nation with the most debt caused by football violence -- deaths caused by football violence and every year there are 20 times more murders in brazil than there are in the u.k. and five times more than in the u.s. they will monitor crowds while robots will be deployed by the brazilian police. despite much of the negativity, brazil is odds on to lift the trophy. goldman sachs is so confident, the investment bank suggests buying brazilian stocks. such is the boost expected to lolekity markets. >> staying on the world cup, a win on the field may be a win on the markets. that is according to goldman chs' international chief strategist, peter oppenheimer. >> there seems to be some kind of sentencement boost that you get. doesn't last that long. probably around 3-4 weeks. virtually every time going back over the last three or four decades, the country that has won has had a rally relative to the rst of the world market. >> joined by the chief exist at u.b.s. ryan is here as well. you have been doing this since 2006. you correctly predicted that italy would win that year. so congratulations to you for that. many didn't. ou also write that -- you were also right that spain won it four years ago. how does your model differ from other banks? >> the fact of explaining how a country will win the world cup are usually the same. it is the objective strength of the team. past performances which really matters and whether the team is a host country or not. if it is on a latin american continent or europe. >> this world cup, brazil, you agree with goldman that brazil is going to win. goldman says that is why you you should buy brazil effectively. they say on a one-month horizon in dollar terms, the stock market of the victor, the winning team in the cup outperforms other stock markets on average by 3.5%. you think they are going to win but you don't think it is a buy. xplain hole in the -- in goldman sachs' logic? >> i'm a bit more humble. i don't say i don't expect brazil to win. i just say they have the highest odds to win. they have twice as much odds as argentina which is the second favorite and then comes spain and germany, which is three times lower. that sarksde it is a short-term view to think that the stock markets will outperform. what we have experienced in the last couple of months was basically that we have an election which will happen later the ear, and so far, incumbent president was going to be elected. now with everything which has front of the world cup, her odds have declined slightly. this was in fact beneficial for the markets. if we go to this logic, we come to the conclusion if brazil would not win the world cup then the chance of her to get reelected would be heavily compromised and this in turn could be positive for the markets. >> if brazil wins the world cup, look at your model. it is going to have to win the hard way, isn't it? you're predicting brazil final. it will have to play argentina, germany, italy and holland. all the way to win the final. that is a pretty tricky route. you're also throwing out some curveballs by saying it has a few nemesises out there. hasn't its? >> yeah, exactly. it is not a walk in the park for brazil to win the world cup. but then, you also should notice that in some cases, france, for example, beat germany in the quarterfinal, something which could happen, brazil would meet france in the sem final and france has beaten brazil in the last three world cups that they have met together. also another nemesis, uruguay. everyone in brazil remembers they beat brazil and won the world cup in brazil. this is something that could also happen. that brazil could meet uruguay already in final eight. >> going back to your argument that brazilian stocks would do better if brazil doesn't win. i guess friday was an example of that. you were pointing out stocks were up about 3%. biggest gainer among major stock markets. precisely because a poll came out showing eroding support for the president in her bid to be re-elected. even in that poll, she got 34% of the vote. the other contenders put tot got 35%. so she still wins. i don't get the argument about how, you know, we see more market reform. n the back of brazil losing. >> clearly what will happen is that the mood will be very grim because a lot of people in brazil will say did we spend all of this money for this? i think then her odds are compromised. the two major contenders are more reform oriented than she is herself. this is why we think ultimately if brazil would not win the world cup, it could have a positive effect in the long run for the brazilian stock market. >> very upset to see your model predicting that uruguay and italy would progress in our group, in the english group. i am of course english. the model shows the percentages of uruguay and italy and england progressing. they are quite similar, aren't they? it would not be a surprise if england progressed, right? >> not at all. one has to say, england has always come with really high hopes on the world cup. until last world cup, england and spain were the two teams underperforming basically what people were hoping they would do. quite the contrary to other teams, italy and germany usually coming not this time for germany but usually coming with a very lousy team on the world cup and going up to the final four at least. >> a quick question here. i got ivory coast. not actually expecting to make any money on that bet. if a country like ivory coast wins, what does that mean for the stock market there? presumably they are going to do pretty well on the back of that. right? >> i think this would really lift the mood for some countries to win the world cup. we know in the past, we have seen some effects. usually they don't last very long. we have seen clearly, to boost the economy, the consumer sentiment for some of those countries. clearly it has an impact, at least in the short run. to win? going what is your own view? your personal view? >> i would obviously go for switzerland because this is my home country. >> but the chances are not very high, are they? >> they are better than ivory coast. >> they are a little bit better than ivory coast but they are in a very tight group. they have france the their group. if they manage to go in the next round, they will either face argentina, which i think this will be the end or they might face a country which is a little bit less difficult. they could go to the quarterfinals but beyond that, it would be a surprise. >> thanks. the english manager did once ake switzerland to the world good luck switzerland. thanks. the chief economist and mr. ivory coast. >> the smart money is still on ivory coast. >> right. after the break, we're going to keep it on the world cup and take a look at some of brazil's wealthiest. brazilionaires. ♪ >> the largest construction company in latin america and one behind many of the world cup stadiums. they are among the biggest contributors and have come under fire for the $665 million in subsidized state loans to build the arenas. for a closer look, i'm joined by bloomberg's brazilonaires editor. who is at the center of this fortune controversy? >> basically two billionaires who have very, very close tice to one another and the government itself. roberto is 92 years old. the patriarch of the largest construction company and a protege of him back in the 1970's who owns o.a.s., also a very large construction company. >> how did they make their fortunes? >> perez inherited a very indebted company from his father after world war ii and built it if there. these guys were handed contracts to build road, infrastructure, train tracks and that sort of thing. a much newer story. basically talked himself into a job and really became his protege through it all. these are the ninth and 109 richest people in brazil. oderbrecht is a family business. >> what do the people want them to do then? >> their basic complaint is the government said 2007-2009, when they earned the rights for the world cup, they were not expected to spend any government money. they put almost $3 billion into building the stadiums. people are saying our housing costs are going up. you need to fund education and health care. the country is in trouble. why are we spending all of this money to enrich these already rich people? that is the big protest. they want some of this money funneled back into social programs. >> i'm asking everyone. you to answer the question. who is going to win? >> hi heart tells me go with the u.s. that is not going to happen. i'm going to go with italy. >> they are in england's group. i wouldn't mind if england and italy went through. now world cup isn't the only big sporting event today. the u.s. open begins as well. ahead of the tournament, i sat down with one of the greatest golfers to ever live. gary player. i asked him about what separates a good player from a superstar. >> the swing is not the thing. >> what is the thing? mind is the thing. there are only about 12 supersisters that have ever lived. in the entire history, what is it that makes you a superstar? everybody has an opinion. on genetics. i have studied genetics. anytime the terror bred racehorse program. you cannot describe it. it is the thing called it. everybody likes to think that it is just something that you are loaned that works under pressure. you have to have something that works under pressure. good nerves. you can go through the whole thing. courage, patience, dedication, application, fitness. t is never -- you are loaned it. nothing is on a permanent basis. >> is that talents over people often say, there is some cricketters. people used to say there is gooch and gower. gooch got more runs in the end. >> natural talent. >> gooch got there with hard work. gower, the natural talent people admire more. >> i think winston churchhill said the height that great men reached and kept was never -- by sudden flight. while your opponent was sleeping, he was toiling in the night. that's what did. i had to outwork everybody else. i pulled vijay singh's leg the other night at the masters. you hit a lot of balls. not as many as i have. if you live as long as i have, you'll hit as many. you have to get to this age. >> the legend that is gary player. he won the u.s. open almost 50 years ago. 1965. we won it to complete the grand slam. one of only five men to have achieved that feat. "the pulse" is coming up at the top of the hour. olivia is with us. what have we got in store? >> i'm sorry i feel a bit sorry for you. we are going wall-to-wall on your favorite topic. we are talking about the world cup of course. the tournament kicking off today. the country has spent $11 billion getting ready for it. is all that money actually worth it? we are going to be putting that question to a senior latin american from i.m.s. plus we are going to be talking tech. google just launched in berlin. tech hub for europe. and then halo comes on. they will be launching executive car service. what does this mean for the competition landscape? uber says they will be offering black cab services. all of that coming up on "the pulse". >> as we head to break, we're going to leave you with a picture of this stock on the movie. iliad. recovering from yeesd losses. up nearly 5%. stay with us. ♪ >> george osborne has a message for currency riggers. they are planning to extend the w to criminalize libor rigging. let's bring in caroline hyde. this is the big speech tonight? >> it is. every year he speaks toing industry. today it is watch out if you're a manipulator. if you manipulate foreign exchange. if you're a trader in commodities and potentially manipulated the gold price or fixed income. no longer will jail terms be just for those who created libor and underpins some $300 trillion worth of contracts, student loans, whether they be mortgages. $6 have been dished out to nine different banks. george osborne wants to get bigger and more wholehearted. if you manipulated foreign lihange or gold, you too able. this is not just the bankers. this is to the people at home. >> when you mention libor to most people, they go what? >> exactly. he tries to put it in common language. he said look. markets here set the interest rates for people's mortgages. this affects your mortgage cost. your everyday outgoing exchange rates for exports and our holidays. he brings it back to your own holiday and commodity prices for the good that you buy. say there is wheat in your bread that you buy at the store. this is what he is trying to get. get people onboard showing that he is tough on the financial markets. >> he is carving his own path as well, isn't he? trying to differentiate the u.k. from the e.u.. >> this is another general election ploy. we have penal vote here of course, a referendum we are being promised on whether the u.k. stays in or out over the e.u.. we are going to make regulation here ourselves. u.k. is going into loan. it is not going adopt e.u. market manipulation or abuse. we're going to have our own stronger regulation. u.k. specific. they say it is -- flexibility. >> who is going to win the world cup, by the way? >> i have drawn portugal. >> thanks, caroline. stay with bloomberg television. olivia sterns is back with "the pulse". she will kick it off with the economic impact of the world cup in brazil. stay with us. ♪ . . >> calling it quits. np's top executives will step down. the u.s. seeks $10 billion from the bank for sanctioned violations. osborne cracks down. fix currency rates will face a jail. the world cup kicks off in brazil today but after delays and demonstrations is the nation ready? good morning, and welcome to "the pulse" live from
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. you're watching "worldwide exchange." bringing you business news from around the globe. a warm welcome again to today's edition of "worldwide exchange." let's 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 doesn't only gets beats streaming service and its market leading high-end head phones but high profile talent. beats co-founder 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 it's 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 they've 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. they're seeing they're 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 it's 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 that's probably the major reason they're 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 they're requiring as well and the people is also a reason for the deal. >> what about more broadly, the number of m&a deals we're seeing as a sign or at least underpinning the equity markets right now? what's your take? >> i think it is underpinning the equity markets. i don't think it's 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 didn't. i think now that businesses are getting more confident, maybe chief executives are thinking that the global economy won't grow quite as quickly as they're used to. they have to look to buy revenue. they're having to make acquisitions. they also realize the low interest rates may not stay there forever. they want to take advantage of that while they're still there. i think it's a combination of things. the deals we are seeing are very large. and i think that you'll probably see more of them over the next few months. >> what we've seen has been primarily dominating the tech sector and pharma sector. where specifically would you be focusing right now? >> i think we've 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 apple's purchase of beats and why some experts think it's all about new models in music on our website. don't 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. that's europe but what about asia? let's 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 we'll see meaningful increases in real wages. that's really going to be the key factor that's 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 we're 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 what's going on in the u.s. bond market. we saw the ten-year hit its lowest level since 2013. now trading at 2.43. the 30-year trading at 3.29 this morning, too. 12-month lows for the 30-year. a lot of questions being asked not just about the messages being sent but what's going on as far as the front end of the relative to the back end. we'll be talking about that a lot more during the show. let's get back to paul cedric. you've given me lots of reasons about why we're seeing this bull market being so unloved by investors. >> yes. >> what changes that? >> that's 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 what's 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 it's earnings. you've 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. it's 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 what's that telling people and the fact that equity markets are rerated so much in the past year where earnings haven't really gone with it. he makes very good points. at the moment, most equity markets are of reasonable value. they don't 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 -- >> you're saying the pessimism is because people aren't yet seeing earnings underpinning the rally we're getting right now? >> i think that's part of it. i always think there's a psychological thing as well. i mean, the 2008-'09 is relatively visible in people's 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 we're seeing as far as professional investors are concerned and individual investors? as far as the professional investors are concerned they're relatively bullish. if you look at investor surveys, like the aaii as you point out, two-thirds of those polled in this market think we'll be at the same level or lower in six month's time. >> i think that's right. but it's 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 lynch's fun manager, for example, shows the average pension fund manager has 5% of his portfolio in cash. relative to history, that's 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 you're bound to do, you have the fundamentals underpinning you. >> let's 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 long-term basis we're 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 we'll ride out this period and maybe on the plus side, we wouldn't 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 today's show, we'll head out to paris where france's biggest job related social network will attempt to lure investors with an ipo. but is the hunger for tech strong over in paris? we'll be finding out. meanwhile, egypt's former military chief wins the presidential election with an astonishing 96% of the vote. with the opposition screaming foul play, just how reliable are those results? and a board that's 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 season's hottest convertible... ohhh....and say goodbye to samantha. [ male announcer ] geico. 15 minutes could save you 15% or more. you're watching "worldwide exchange." we're seeing the first bite of japan's 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 you're 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 i'm a bettingen and i'm betting that's 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 you're 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 don't think we're anything near close to having the problems, even if we have another quarter of bad numbers, frankly, in japan. there's nowhere near the situation there was in '97. the reality is we're far less worried. >> as far as investors are concerned, perhaps far more important is the government's 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 it's 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 we're focused on when we're 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 we're 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? >> it's a great question. when we've looked at this, we think that the news wasn't bad enough to warrant boj or government response. we think that the government sees this really, let's say the last five or six months in its entirety as confirmation that abeonomics is working. we're 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 can't 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, you'd see bank of japan action. we're firmly convinced of that. we don't think they'll see that action. that's a sign it's worked, abeonomics is working despite news to the contrary or commentary to the contrary. we're on track towards 2% inflation. that's the goal. >> i think it's interesting that we're talking about the possibility of the boj adding more stimulus. i hear there's informal debate right now in tokyo about just how they exit. they don't 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, we've been very successful at this. we probably don't 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. they're not going to do anything until it's 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 that's 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 they're in the sweet spot. they can sit pretty and see how the numbers go. >> well, exactly. japan's been, obviously, it's been talked about a lot. it's had a very difficult time over the last 20, 25 years. and this abeonomics as people talk about, there's 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? >> they've 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. >> you're staying with us. let's move on to our other top stories. u.s. whistle-blower 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 wouldn't be in a situation where whistle blowers were necessary. i think it's important to remember that people don't set their lives on fire. they don't say good-bye to their families, actually pack up without saying good-bye to their families. they don't 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 don't think there's ever been any question that i'd like to go home. i mean, from day one, i said i'm doing this to serve my country. now, whether amnesty or clemency ever becomes a possibility is not for me to say. that's 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. it's 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. >> doesn't 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 it's 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 whistle-blower was taking dangerous actions. >> he's hurt his country. he's 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 don't go to russia. they don't seek asylum in cuba. they don't 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. he's 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 presidential polls. will the vote end the country's controversial turmoil. as different people, we are able to express ourselves and where we are able to accomplish our ambitions. you're watching "worldwide exchange," bringing you business news from around the globe. an apple a day doesn't keep the doctor away. the u.s. tech giant finally puts a $3 billion bid on the table for rap star dr. dre's 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. >> we're 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 that's a good thing. >> people we pay the most are about as early as good as a monkey with a dart board. >> the uk's 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. we're also waiting for data from them this morning on house prices. joining us now is simon rubinson. paul sedgwick is still with us. simon, we're obviously focusing on the housing market. take us through the numbers. >> essentially with london, what we're finding is the buyer appetite seems to be losing some of its momentum. it's still strong and at a relatively high level compared to where it was. actually what we're finding now, there's a few constraints kicking in. wherever it's linked to affordability, we know how far prices have moved up. whether it's linked to the introduction of the proposal following the mortgage market, the recommendations. wherever it's 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 isn't 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 we're 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, we're 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 year-on-year price gain very low single digits. >> we had the bank of england's funding for the first quarter, 2 billion pounds, that's data from the bank of england. tote outstanding funding at 43.3 billion. doesn't look like there's 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 don't 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. i'm not sure those three borrowers are a lot of the borrowers for overseas money. i know it's 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 there's focus on the use of macro prudential policy doesn't have impact when you're talking about cash braving the markets. >> simon rubinsohn, thank you for joining us. on a programming note, following the dominance of an - anti-establishment and anti-eu parties, nigel farage will be speaking with michelle caruso-cabrera 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 market-leading high-end head phones but high profile talent. beats co-founders jimmy iovin says ceo tim cook told him he wanted to buy beats at a meeting two months ago. speaking at the co-technology conference, apple's 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 it's 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 isn't 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 e-mail, the edge says some of youtube's 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 e-mail 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 irish-year-oiriseyirish 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 presidential 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. you're 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. here's what he had to say. >> to tell you the truth, you know, what i have is i have an extraordinary sense of pride. let's look, for example, at some of the western markets. that are reasonably stable or flat erb. let's 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, you'll 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 hasn't made a decision on that front yet. it has a year to do so. also telecom egypt overseeing much of the country's 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 it's 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, egypt's 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 tonight's show. make sure you tune in to access middle east, 23:00 cet. we'll be talking about the firm's 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 thailand's 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. japan's 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. that's all from the nikkei business report. back to you, julia. >> thanks so much for that. let's 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, we'll 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 year-long cycle of interest rate hikes. stay tuned as we ask if that's 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 you're 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 co-author 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, let's 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. that's why the markets are so efficient. on every side of the transaction you've 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, there's something on the other side of the trade that's 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 chairman's 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. it's the only tech ipo, isn't it, since 2006? take us through the details. any idea of size yet? >> yes. it's going to be the largest one indeed since 2006. it's vdo, a french professional network which has announced its ipo. it started a process with ipo, won't 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 didn't say how much cash it's planning to raise from the ipo. it will re-invest 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. that's 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. >> don't tell human resources then. >> i won't. good at keeping secrets. thanks, stephan. brazil's 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. you'd expect them to signal a pause here. actually, they left the door open. inflation, still a real problem, isn't 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 it's a sensible move. we've seen 375 basis points of hike since early last year, a huge amount. that's 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 bank's 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 you'll 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 they'll 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. it's 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, that's 2.3%. that's 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. it's hard to see where a pickup is going to come from. >> there's a lot of focus on the world cup. we'll 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, we've looked at this before and said the impact is probably going to be fairly small. we're probably talking about something of the order of a few tenths of a percentage point of gdp, certainly no more. of course you'll see higher tourist revenues, an increase in consumer spending. a feel-good factor. businesses will scale back activity, partially shutting down as the tournament gets going. the historical evidence doesn't suggest these major sporting events have a lasting impact on the economy. there's no evidence to suggest when we look back through the decades of olympics, world cups, those sorts of things, we're 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. what's the probability that we have a huge surprise in this election or even if we don't get a surprise, does the fact she's going to win by a lesser margin change policy after the election? that's what we need, isn't it? >> i think maybe to a limited extent, clearly he's on track to be re-elected. she's 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 that's squeezed by half since the early stages of the campaign. is she under threat? probably not. she'll get in again. i think when -- if and when dylan gets back in, there will be more pragmatism, they'll have to reign in fiscal spending. >> a lot of work to do. >> yes. >> michael henderson from maplecroft. after the break, we'll be talking gdp, was it just the weather in the first quarter? stay tuned. we'll be discussing, next. welcome to "worldwide exchange," i'm julia chatterley. these are your headlines from around the world. an apple a day doesn't keep the doctor away. the u.s. tech giant finally puts a $3 billion bid on the table for rap star dr. dre's 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. you're 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. let's 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 week's 4% gains so far. let's complete the circle now and check in on asia. sri of course is in singapore. sri, what's 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 that's going to continue. the japanese authorities don't think that it will. they believe that the consumer is in fairly good shape. i think we're a big part of this equation is whether we're going to see further meaningful increases in real wages. that should have a trickle-down 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. it's 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. that's 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 what's going on in the u.s. bond markets right now. we saw the u.s. ten-year down at 2.44. it's right now trading around 2.43, just under that now. the 30-year also trading at 3.29 right now, near 12-month 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 what's going on at the shorter en6 the curve to the longer end of the curve. i'll 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. >> i'm not shocked by it. if you think about the weather situation we've had in the united states, everyone stayed home. i know i didn't want to go out, it was so cold. to have activity down is really not surprising. there's a lot of evidence it kind of got moved forward. i'm looking athat the numbers would go stronger as we go forward in the year for sure. >> we're 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 what's 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 it's 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. they're skittish and there's 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 what's going to happen. but i think the equity markets are moving up rationally. we're 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 what's happening in the equity markets is rational. i think we're a way aways from the grand rotation everyone has been talking about. there's still a lot of scared money on the side that's 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 you're 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 that's the case, who's buying? >> well, you have a lot of institutions out there. you're 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 it's 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. you're seeing that. i think that's a very rational move. i think that investors right now are trying to play that balance between i can't get any yield but i'm afraid that if the market's making new highs, i've seen this play before and i don't want to get crushed again. you had a rough type of thing. you're 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. we're 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 we're probably not going to see interest moves for at least another year or so. but that implies they're going to move in about a year or so. doing deals now and deploying cash, that's healthy for all equities. i remain kind of bullish. i still think we'll have a positive year, probably upper single digits. i think we'll have a positive year in the equities in the united states. >> the story of unloved markets, bullishness but being unloved. it's interesting. great to talk to you. president of mercadian asset management. we also get weekly jobless claims today at 8:30 a.m. eastern. it's forecast to drop by 6,000 to a total of 320,000. then at 10:00 a.m. eastern, april pending home sales, they're expected to rise 2%. we've also got kansas city fed president e president esther george and look for earnings from abercrombie & fitch and lions gate, the music studio. we've just been talking about the brazilian economy and inflation. but also the eyes of the world are on brazil as we're 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? >> it's 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 feel-good 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 take-back beyond that one to three-month period, does it underperform if it's outperformed in that period? >> typically it does. it depends a great deal on what's 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. that's really dependent on what's happening fundamentally. >> have there been exceptions to the rule? i know brazil in 2012 when they were having a currency crisis, deep recession, it didn't 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 feel-good factor that's 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 post-tournament slum in confidence. again, it doesn't last very long, about a month. typically, the runners underperform the world market by 1%, 1.5%. >> speaking of runner-up, i was thinking about england. >> england's chances are not that good. looking at the probability we have that's looking at the overall chances of different teams competing puts england's chances of getting into the final at only about 5%. its chances of winning about 1.5%. >> 1.5% for england? i'm mortified. are you a chelsea fan? >> i am a chelsea -- i'm a chelsea fan now that i've 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 there's a good chance, there's 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 month's u.s. open at pinehurst. he's continuing his rehab after undergoing a back operation. it's the second major in a row that he's 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 child's pose. sfx: bing. who's got two hooves and just got a claim status update from geico? this guy, that's who. sfx: bing. and i just got a...oh no, that's mom. sorry. claim status updates. just a tap away on the geico app. i'm spending too much time hiring and not enough time in my kitchen. 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[ 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. you're 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. let's take a closer look at today's 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 high-end head phone but also high-profile talent. beats co-founder 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 it's 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. it's all about the music. apple isn't 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 e-mail, the edge says some of u2's 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 e-mail, worldwide@cnbc.com, by twitter, @cnbcwex or direct to me @jchatterleycnbc. > the numbers aren't good for google. the company is 70% male and 61% white. nearly three-quarters of google's leadership is also white apparently. companies in silicone valley have been reluctant to share diversification information. there's 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 so-called 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 alibaba's corporate governance structure. they will keep an iron grip on the company post-ipo 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 gm's ignition switch recall into one single class-action. 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 don't 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. we've just had auction results from italy. they've sold 7.5 billion euros worth of five and ten-year 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 what's 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. whistle-blower 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 wouldn't be in a situation where whistle-blowers were necessary. i think it's important to remember that people don't set their lives on fire. they don't say good-bye to their families, actually pack up without saying good-bye to their families. they don't 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 week's 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? >> that's what many people have been talking about here. it's been interesting. snowden's interview has been played up here in china. there's a lot of people who are saying he's 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 government-to-government 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, there's 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 hasn't 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 shouldn't 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 we'll just move on. we'll leave you with a look at how the u.s. futures are trading ahead of the open on wall street. i'll get my false teeth back in. see you after the break. welcome to "worldwide exchange," i'm julia chatterley and these are your headlines from around the world. an apple a day doesn't keep the doctor away. the u.s. tech giant finally puts a $3 billion bid on the table for dr. dre's 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. you're watching "worldwide exchange," bringing you business news from around the globe. >> if you're 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 30-year 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. that's 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 we're seeing in the equity markets right now. >> it's amazing. there's been a lot of debate about what is driving this rally. the bottom line is, i think it's 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 better-than-expected data. that's 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 what's 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, it's difficult to prove definitively but i think u.s. treasury data suggests that belgium's 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 acouldn't 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, that's basically headquartered in belgium. >> who? >> you know -- >> i want to say china. >> i think there's a pretty good chance it could be china. though again we can't prove it definitively. i think china is the only country that's large enough, that can account for the magnitude of the numbers we're 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 that's 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? >> there's some sense there was a time that u.s. -- this year, china will overtake the u.s. in becoming the world's 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 we've seen this year. >> david, stay right there. we'll continue this conversation. for now, let's bring you up to speed on some of today's top stories. after weeks of speculation, it's 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 apple's tim cook and eddy cue as well as beats co-founder, 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. it's also about the talent you're 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, let's 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. that's a space that's growing fast. it jumped about 20% in q1 year over year. also of course you're getting beats music, that's 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, he's excited about this transaction. he told me he's 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 so-called 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 alibaba's corporate governance structure. they will keep an iron grip on the company post-ipo 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 t-mobile. 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 don't know how bad their internet service is. >> beijing has a terrible air but people in beijing don't know this, every morning, it's 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. we'll bring you all the latest, next. mine was earned in korea in 1953. afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's 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. you're 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 gm's 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 gm's ignition switch recall into a single class-action. 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 isn't expected to be addressed until july, though. plaintiffs lawyers want the judge to determine where a potential class-action 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 didn't 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 closed-end 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 that's 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 co-author 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, let's 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. that's why the markets are so efficient. on every side of the transaction you've 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 who's just as confident and optimistic that selling you whatever you're buying is going to be a great choice as well. today's 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. let's give you a look at what's on today's agenda in the united states. we have weekly jobless claims at 8:30 a.m. eastern, they're forecast to drop by 6,000 to a total of 320,000. at 10:00 a.m. then, it's april pending home sales. they're 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 moody's, 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 we'll 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. we'll 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%. that's 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, that's 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, what's 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 who's buying treasuries. you said china. talk to me about the impact of that chinese buying relative to tapering right now. what's 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. what's transpiring is the chinese increased buying has more than offset reduction in fed purchases. effectively there's 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? >> what's 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 there's probably reason to think capitulation has yet to play out in course. i think we're already overshooting territory and investors should be looking for lower yields to look to establish new shorts. >> what's 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 don't 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. there's a built-in 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 japan-like. we don't have deflation but we'll 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, we've known that was coming for the last year. it can explain what's 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 they're aging also means that the work force will be shrinking which means actually they're 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. david's not talking. fantastic to have you on the show. john and david, thank you. that's just about it for today's show. i hope you enjoyed it. contact us, tweet u us @jchatterleycnbc. "squawk box" coming right up. good morning. a revision to gdp tops today's mark eight jen da. 2.42 on the ten-year. 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. we'll have more of that interview. "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm 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. it's official, apple is buying beats for $3 billion. analysts say apple is try to catch up in the fast-growing business of music streaming. we'll have more on this story from jon fortt at the code conference in just a few minutes. we've been waiting on this one. the video from dr. dre himself already out there.
you will, for the markets. ten-year note yield, as we often do at this time, below 2.6. i like to compare, france 1.71. italy 2.749. oil prices of course have become a key. wti and brent, you can see it, down on wti. brent is higher. by a nice 48 cents. let's get to our road map this morning. starts with m&a. shares of covidien up around 30%, irish drugmaker agreed to be acquired by what was or will no longer be u.s.-based medtronic. price tag $43 billion. markets under pressure and as you saw oil is remaining volatile as violence and tensions in iraq continue to escalate. we're going to go live on the ground and get the latest from the region. target confirming it experienced problems with computerized checkout systems but breathe easy, the issues not security related. let's start off with m&a. we've got plenty of. the biggest of the deals is involve two medical devicemakers, medtronic agreeing to acquire ireland-based covidien for $43 billion. values covidien 93.20 a share. there was no word of this out there. so you have an unadjusted stock price of whatever it was friday. the newly combined company will base itself in ireland, of course, it is yet another tax inversion following names that i've been talking about for quite some time, namely, a lot of the m&a coming. this is one of many today. and inversions continue. in this case, as in so many, jim, tax inversions, changing their tax jurisdiction, done as importantly, if not more so in this case, for the ability to repatriate the cash that's a crewing over seas and will back to the u.s. without suffering significant tax penalties or any in that way. talking about investing, reinvesting here as much as, what $10 billion over 10 years in r&d at medtronic. but it's a tax inversion, make no mistake. yes, there's a lot of strategic parts of this deal that seem be embraced by the market, they're having a conference call talking about that. but it's still about taxes. >> well, david, i'm not sure if you're familiar with 20 lower hatch street in dublin, but that turns out to be where covidien is located. see, i thought it was located in mansfield, massachusetts, had the ceo on "mad money" it seemed like a massachusetts company. but i think that it turns out that it's on lower hatch street. >> active street. >> yeah. >> yeah. not far from there you'll find any number of other our major -- pharmaceutical companies. >> with with the cleveland indians, the cavaliers and the browns, eaton located at phitz william place. it's another company in dublin. they had their annual meet agent four seasons hotel. i stayed there while visiting the guinness factory. these are new things to me. there's a medical device tax from obama, healthcare. looks like being on 20 lower hatch treat street you may not have to pay that. >> is that true? >> what people are buzzing about. if we were to go, i've got several fabulous places we could visit, we could visit trinitying look at the book of kels. we could do a lot. >> i would love to go to ireland with you. >> many major american companies. >> and stop in on many of the managements, because i know they'll all be there. >> they have to be. they have annual meeting there's. >> about the only time they're there. >> i wish it were facetious, but mansfield is where covidien is located. but it's actually located on 20 lower hatch street. >> listen, you -- we can discuss this to we're blue in the face in terms whether companies should be allowed to do this. of course they are. >> right. >> their responsibility is to their employees, and their shareholders and customers. >> right. >> they're not necessarily responsible to be patriotic citizens of the united states. >> no. >> and have to pay taxes. if they can find a tax regime, because ours is not competitive as the rest of the world, why wouldn't they? that will continue to happen until we change rule or come up with comprehensive tax reform that makes it, us, more competitive, particularly as it relates to profits earned outside the u.s. >> the irs has a set of rules that you study -- i did a lot of corporate tax work in school and then after. the irs actually encourages you to do everything you can legally to v avoid tax, not evade tax. but you have every right to avoid tax. these companies are doing exactly what the irs says. listen, minimize tax, you should absolutely do it. so that's what they're doing. it's funny, because i had liked covidien, they bought -- they've got great devices that have -- >> u.s. surgical, of course everybody once a part of tyco, added a lot to it. then that tyco bermuda base went from bermuda to i'm, in terms of jurisdiction and covidien. >> when you look at breakup of tyco, tyco, had a division called amp, a division in pennsylvania. i thought amp was located in pennsylvania. that's wrong. it's switzerland. a town that apparently we bombed by mistake in world war ii. but i don't know, you see, i'm not sure exactly -- maybe that was a safe zone. i, again, this is an amazing thing. if you're in washington and watching the show, you'd be saying, what? we've got to stop this immediately. the irs is saying it's fine. but in the end, this was not -- somewhat driven by the idea that covidien has a terrific hospital business, you get a hold of hospitals. >> under aca, this is going to been more important, have a broader array and suite of products, so the devicemaker with all of the things that covidien makes, surgical supplies and like. >> that's why striker has to buy. you've explained this, as long as new companies, acquiring company, 20%. >> of the overall. that will be the case. covidien shareholders loan 23%. >> johnson & johnson can they do something? >> 30%. >> they may be too big to buy smith and nephew, if you structure a deal, you can get around tax avoidance, perfectly legal. this is happening and it's going to cost the treasury a huge amount of money versus repatriation. i've got a list of fine companies that i thought were american companies. but for instance, david, chicago bridge and iron, they don't make bridges, they don't make iron, they're not located in chicago. the old punch line was they were in houston. no they're in the hague. how great for floor, floor's watching and saying we ought to go buy cbi, they just missed the quart. a famous city that has 36,000 people, minneapolis, minnesota-based pent air. >> and the list goes on and on. jim, it will continue to grow because the idea of the window closing is motivating more companies to try to do it and it's a competitive advantage for competitors if they have it and others don't. >> right. >> i want to get -- talking about oil. here's stock futures falling, oil prices up a bit, you saw brent up, of course, escalating violence in iraq the key reason. cnbc's chief international correspondent, michelle caruso-cabrera in northern iraq and brings us the latest this morning. michelle? >> david, yeah, just about 100 miles west of here, another city, tally far taken by sunni insurgent rebels. another town that has fallen even as the iraqi government starts to fight back. the other headline is that the u.s. and iran in vienna, supposed to be on opposite sides of the table when it comes to nuclear talks, now going to be discussing what should be done relative to the sunni insurgents because they both consider the sunnis and what's happening here a problem and the rebels are their common enemy. strange combination of bedfellows occurring because of the situation in iraq. a lot of people are asking whether or not we are facing the impending destruction of iraq, as we know it. the disintegration, so to speak. i want to show you i kurdish newspaper, running this map which shows exactly that. they have broken up iraq into three different pieces. not coincidentally they have shown kurdistan to be bigger than what it is now. they've added two or three provinces from what i can tell. a lot of belief there's so much frustration with baghdad, that could be what happens as a result. other story out today, the insurgents, isis, islamic from syria and iraq, turns out, according to the guardian of the united kingdom, they are extremely wealthy, worth $1.5 billion. the guardian quotes, intelligence sources which say they have found early last week more than 100 zip drives from an insurgent's home which shows financial status. so not only did they steal half a billion from the central bank of mosul last week, but apparently they've also been selling oil from syria. sometimes back to the syrian government because the syrian government doesn't control that part of syria anymore. they've been selling oil at a discount, but certainly it's been bringing in a lot of money. a very, very wealthy terrorist organization is what the central iraqi government is up against along with united states as well. back to you. >> thank you. >> david. >> what's the approach here? michelle caruso-cabrera, reporting from northern iraq. >> here's the next thing. you're going to start hearing that schlumberger, baker-hughes, weatherford, another company that is located in texas, tends to be located overseas, you're going to hear number cuts, i believe, because of iraq. bp, royal dutch, exxon, spent a lot of money in iraq, i expect a number of cuts in that company. if insurgents continue, what will happen is people from the workers will leave the infrastructure, it will be too dangerous, these are be targeted. be aware those companies could get hit, though they're booming in other parts of the world. schlumberger, baker hughes, weather ford, bp, exxon, question marks now that they invest sod much in iraq. >> the last key economic report from the opening bell. james woolsey with his take on the crisis in iraq. a lot more "squawk on the street." we're just gets started at post 9. i bought a car, over and tells you, and you're like. a good deal or not. that's what led up to us looking at truecar.com. and with truecar.com, there's no buyer's remorse. save time, save money, and never overpay. visit truecar.com ♪ "first day of my life" by bright eyes ♪ you're not just looking for a house. you're looking for a place for your life to happen. they challenge us. they take us to worlds full of heroes and titans. for respawn, building the best interactive entertainment begins with the cloud. this is "titanfall." the first multiplayer game for xbox one built and run on microsoft azure. letting gamers around the world interact in ways they never thought possible. this cloud turns data into excitement. this is the microsoft cloud. welcome back to "squawk b " box." may industrial hitting wires up .6 on industrial production. that is much better than the better revised, down .3 originally released as down .6. utilization rates moved up to 79.1 from 78.9. we continue to see rather strong moves on the utilization side. of course, that's may data. june empire came in over 19, that was a four-year best. and if you looked at the always two months in arrears april tick data, it was a little negative when you had short-term securities. but when you looked at entire picture, it did improve to some extent. david faber, back to you. >> thank you, rick santelli. it's a merger monday, no doubt. maybe a merger tuesday or wednesday. we're going to get more deals. >> let's try to get to all of them. >> we spent a good deal of time talking about tax inversions. an issue far beyond that of merger and acquisitions relating to medtronic and covidien but they done want to make it that story, they're talking about strategy. time warner telecom, bought by level 3. ten bucks a share in cash, about worth $40.86 a share. there you can see, time warner telecom shares moving up, as is the stock of the inquirer. not a big move. >> no. >> more typical than not of what we've seen in the market when it comes to announcement of deals talking about net present value, 2.2 billion. 240 million of total run rate synergies, so that's what gets people excited. >> right. level 3 had been left for dead company. jim crow built the company, got overvalued. >> on the verge of bankruptcy. >> fiber -- we know there are other companies. >> it was 360. >> so many. the company fell on hard times but never lost its edge as being a company a backbone for the internet. and it had been considered a backup for content delivery systems. the companies made a comeback. brilliant move by lvl3, they've expanded their ability, maybe able to go to netflix and say we can handle a lot of your traffic because we're fiber. a great investment level 3. >> they're only paying 12.8 times 2014 ebida versus what tyson paid for hillshire. totally different businesses, i make that point to show how incredibly high that multiple was. they say it's 9.5, if you estimate run rate synergies. so we take that out, we're only paying 9.5 years. >> level 3 has to be bought. it's become a core holding for people who want to be able to play the increasing need to be able to have video on your -- video on your pc. >> right. >> terrific. >> good day for core x management, significant owners of both. >> i didn't know that. >> which one do you want to talk about. >> williams department aek ses mid stream neithers. telling you that they had the absolute best. chesapeake, by the way, spin-off. mike came on "mad money" and said weird the fastest growing pipeline company. williams is buying rest of access mid stream partners. williams will go up because you can accelerate the earnings of williams and access mid stream. an amazing stock. >> really has. >> had a chart for that, the company's the best performer, i've been recommending it consistently, the fastest growing mlp. now mike has completed the mission of trying to bring out a lot of value. the ceo the best in the pipeline business. congratulations. this is a great deal. >> 6 billion in character will qu qu williams owns 100% of the partner. >> fabulous. >> a big deal. we know how cheap debt is. companies are using it, not to take it on balance sheet and increase leverage, to buy back stock, but buy other asset wlz it be medtronic, level 3 or in this case williams. >> the sanodisk deal is interesting. they bought fio, it was at 32 in 2012. they had an emc killer. turns out it wasn't killing anybody. a popular with our viewers, a popular situation, futsion-io, the stock was at nine, now an 11.25 deal. i think they've given up. you know, those who played in this game thought fusion-io was the next emc, it turned out to be the next nothing. sandisk is on fire. they've done a lot of things right and it's another very good deal by sandisk. >> does m&a -- do all the deals have the power to turn this market, or still going to be more about geopolitical fears. >> if 3.6 million gets cut down to 2.6 million and chaos worldwide spreads we'll be looking at earnings versus that. here's a funny one, take a look at the absolute -- the intersection of all of this. whetherford's business 33, comes from iraq. at the same time weatherford, it's a texas-based company located at 2000 st. james place in houston. no, it's in geneva. so weatherford on the weakness, it will be weak, might be scooped up pay company that wanted to be located in geneva. that's one to watch. >> there you go. >> if that gets a takeover bid. >> united all of the themes. >> global tension and a swiss address might produce $28 bid for weatherford. >> more from jim, including mad dash for month as we count down thwarts the opening bell. a look at futures. more "squawk on the street." in a world that's changing faster than ever, we believe outshining the competition tomorrow quires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the 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we get the full fiscal year, the march quarter, we've been working off the last filing year-end as year-end 2013. there seems to be growth numbers giving investors pause which is hurting yahoo! >> 23%, you have been very smart, always talking about the taxes and how much value is going to come out. now, i think when you look at alibaba slowing, first it might have impact on jd, because alibaba was the lipitor, but this cuts to how much mass marissa mayer done? people say, yahoo! is a shell except for alibaba. this is a measurement and if it goes lower, of what myers accomplished. i always hoped that yahoo! would get the alibaba money and then go by a series of companies making it more relevant. if there isn't as much money, yahoo! may be less relevant. >> alibaba, don't be confused, it was sequential growth rate off the last quarter, singles day, that was expected to put in perspective. full year fiscal revenue growth 52%. net income groat 305%. revenue growth did decelerate from q4 to q1 of the year, the actual year. but you know, that's because they suck a lot of the marketing spent into that period of the year. so it isn't as much there for the march quarter. jerry yang will be on. 47% of gmp, revenues up 691%. >> maybe those people who felt alibaba was going to be worth $250 billion -- they've been the leader in trying to figure out how much -- say alibaba comes in 200 billion, you'd still buy yahoo! on weakness. >> so many other names this morning. right back with the opening bell on "squawk on the street." ♪ ♪ ♪ [ male announcer ] if you can't stand the heat, get off the test track. get the mercedes-benz you've been burning for at the summer event, going on now at your authorized mercedes-benz dealer. hurry, before this opportunity cools off. ♪ it can help your business save money. false. the truth is when you compare our fastest internet to the fastest dsl from the phone company, comcast business gives you more for your money. why pay more for less? call today 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[ indistinct talking ] [ male announcer ] right there in their trading platform. ♪ so the magic shell went back to being a...shell. get live squawks right in your trading platform with thinkorswim from td ameritrade. watching cnbcs "squawk on the street," live from the financial capital of the world. opening bell set to ring in 30 seconds. geopolitical tensions continue to be the reigning concern for many investing. but, man, do we have a lot of positives, too. >> west texas intermediate, u.s.-based up 20 cents. brent up 15 cents than would signal we're overdoing it. obviously the news reads horrible but remember, the massacres, but if you want to focus on earnings per share, this is right now in sync with what's happening. not so bad. >> there you very it, the opening bell for monday. taking a look at s&p real time exchange back at hq, composes itself, perhaps a bit more red than green on the board there for the big board here, progressive celebrates its fifth trading anniversary. and over at the nasdaq, compresco partners. celebrates the anniversary of its listing for the third year or the third year of its listing, celebrated. >> a couple other things that are on the move that are actually fundamental that i think we should point out. one of my absolute favorites, isis pharma has -- you'll see that stock climbing, new anti-diabetes formulation. it's phase ii but after what happened with merck buying a company that had phase ii work, no longer hesitate to talk about phase ii. >> many missed that when it came to the company that we're talking about from last week. let's get breaking news right now on the imf and the economy. steve liesman back at headquarters. >> david, thanks very much. imf with its outlook on the united states lowering u.s. forecast 2014, to 2%. down 0.8 percentage points because of the weak first half. saying the second half should strengthen and maintaining its 3% forecast for 2015. interesting development here, imf, for the first time, endorsing raising u.s. minimum wage saying it's low by historical and international standards and it would raise incomes for millions of working poor. a dicey political issue here. on outlook for u.s. monetary policy, particularly uncertain, whether the risk of quote significant swings in market flows and prices in the months ahead depending on the outlook for interest rates and inflation. imf saying market spreads and low volatility do not reflect monetary policy uncertainty, calling for greater fed communication, including press conferences after every meeting. low rates raised financial stability concern for the imf. longer rage, full employment in the united states by 2017, inflation area pressures needed and the fed policy rate could remain at zero, longer than what the market believes mid-2015. wading into an interesting political issue here because republicans seem to not support raising the minimum wage and they have their problems with the imf. this could exacerbate that concern. david? >> interesting to see them wading into our domestic political debates. steve liesman back at hq, thank you. let's go to tech for a bit. we haven't talked that much about technology names this morning. start off with amazon, introducing a phone soon, big meeting in seattle, bezos will be there introducing what is widely expected based on many reports amazon phone. you can order whatever you want or it will order it for you while you think of it, monitor your brain waves, know what you want. i only guessed a bit. >> one of the things that was, throughout the copy about the amazon, how much competition there is in the cell phone business. >> right. >> whether this will hurt apple or hurt google. >> all of the profits split by two companies because rest is incredibly low margin. look at the lack of success that google has had with motorola, for example, which it bought in jettison, keeping the intellectual property. nokia, microsoft, what are they thinking, at the same time those argue well they have to be closer and closer to their customer, can't allow themselves to get disintermediated by various platforms available on your mobile device that do what they do and lead you to somewhere else. >> the cameras. >> i don't know. >> it's causing google to go down, i think. i was with someone who is close to google over the weekend, google's working closely with google maps and controversial company uber, turns out that the driverless car is an attempt to be able to take over the taxi industry, six years away. >> more than that. >> well, they're going -- two years driving around campus. i mention this google has lots of irons in the fire, amazon has lots of irons in the fire. >> they do. >> it's the nature of the beast they're happy to go at each other without thinking whether there is a market, this is kindle versus ipad. apple obviously with beats also. then we have to get used to the company, the idea that these companies are just going at it every single front because they just have to protect their turf. >> they do. they feel as though they have to innovate the culture that bezos instilled at amazon, not worried about near-term reported profit but was making investments they believe will sustain and help the business to grow significantly. one company we did mention that has done well with the phone, apple, i think, its name. >> yes. >> it's actually up, which is bucking the trend overall in technology with many of the names that we typically, not a great deal, but down nonetheless. apple, man, it's breaking out. >> done quite well. >> yeah. >> done quite well. very quiet. the split obviously had -- did more to attract people than detract people. there's a lot of people talking about how third quarter could be very good quarter for their cell phone. i don't like -- >> read the tin cup piece in the "new york times" over the weekend? >> yes. >> tim cook piece. >> the only reason i focussed on it, the company, but it's tim cook's company. i think that's the right way to look at it. it took a little while. footsteps here are so big. i mean, this is just one of the most amazing transitions. i think it's very much on track, a winner in a lot of the innovations are quiet and subtle but adding to numbers which we know is what matters. >> talking winners. wells fargo certainly among that among the banking group, shares up 13.5%. some making note of i think "the journal" will soon become the largest bank of all time in terms of market cap. pushing 300 billion, not quite, 271, let call it billion dollar market val up down today. you can see 37 cents. >> that's because what happened there is this is a domestic bank at a time the international bank, the rage, is no longer so hot. it a company that had far fewer fights with the justice department and that also has helped them. their domestic model, john stump, has done more than anyone in the business. they said, look, we can own 30% of the mortgage market in the country, cross sell lots of customers. why do we need to do this international business? so you know, you hear them losing on fixed income currency and trading. that's helped them immensely. >> ge, our former parent company, shares of which are down 41 cents, perhaps or definitely appear facing competition for its deal from the combination of mitsubishi and siemens. the french government doesn't own a share, it's essentially running the auction. >> yeah. >> always like the finance minister's the one that comments on it. >> i think the company that drops the bid goes highest. the idea that the french government is running the auction, what that says you have to employ more people in france. i think that before you do that you'd like to fire everyone in france, but that's obviously out of the question. >> the definitive agreement, the largest shareholder, of course, 29% shareholder's on their side. but they've got win the french government over. they have to continue to work on than hoping for a counterbid, the friend. they got it. >> instead of raising numbers, ge, unless we see new things you can do well with the hiring, you are cutting numbers. you can't go against these other european companies hls you want to be diluted. not good for shareholders. when you have a bid like pilgrims and tyson, notice how much tyson went down when they finally won. >> especially because, right the other guy stayed at 55 and tyson went to 63. >> for a total also ran -- >> it's amazing how often we've come back to hillshire. they were terminated agreement with pinnacle. either got to agree to take $163 million in a breakup fee now or argue it can hold the vote which may come in a couple of months, basically blackstone which controls pinnacle may be trying to get more here to go away immediately because they have the right to drag this out for a while. we'll see. >> pinnacle checked out. it's difficult to see what will pinnacle do to -- pinnacle, by the way, bird's eye, duncan heinz, it's a slow grower boosting the dividend, doing the right thing but not meant to be at these prices without a deal. i think it's a fine company, at the same time, it's just another slow growing company. >> right. you mentioned yahoo! in the "mad dash." it is by far one of worst performers, down over 5.5%. this is on the new filing from alibaba, remember, of course? yahoo's! significant owner will be a significant seller in the initial public offering to the tune of about 10%, we don't know it may come down. primary shares being sole by alibaba as well. expecting them to hit the road end of july for an offering taking place early august. if they can do it around the 8th of august, lucky numbers, 8, 8, for alibaba. the latest filing includes march quarter and that march quarter does show deceleration in revenue growth for the overall business. when you speak to people who know alibaba well, that's what you expect given how big our fourth quarter is. it it always draws marketing spending away from the next quarter and that is the case. over all revenues for the fiscal year which ends with march quarter, don't mean to be confuturing, 52%. not bad top line growth with those margins. >> a lot of people raising their -- what they thought growth forecast, behind the scenes for alibaba based on how j.d., which had come public in the teens, at 27. if jd worked this well, i think alibaba's going to work better. this is kind of a take your breath away moment, if you had been buying yahoo! up while jd's rise -- there's a lot of algorithmic craziness so that's a lock step. the speculators have said yahoo! maybe doesn't have as much money. i continue to like yahoo! for reasons that have to do with longer-term structural but people are critical of that meyer regime saying it hasn't shown results yet. >> bob pisani on the floor. he okay. actually, bob, before we get to you, we're going to hq. scott cohn has breaking news. >> david, the last ditch appeal to wipe out his insider trading conviction has failed, u.s. supreme court denying rajaratnam's appeal a short time ago. he is serving 11-year prison sentence. this also really vindicates the u.s. attorney and his crackdown on insider trading because the things that rajaratnam challenge the wiretap evidence used to convict him and the idea that the recipient of insider trading information has to know that it was obtained illegally. the supreme court denying without explanation the last-ditch appeal. he'll continue to serve his 11-year prison term. the key aereo case, hampton pearson is at the supreme court, we'll have that if it comes out. >> thank you, let's get to the aforementioned bob pisani on the floor. more of what happens moving. >> good morning. gold and oil to the upside. metals to upside. market's on the weaker end, financials are down, some transports are down once again. other than that everybody's talking about what you mentioned, the alibaba details being filled in. what's most interesting about this, to me, people on the independents that are on there. there's a nine-member board, four independents, and yang is not a surprise. michael evans vice chairman of goldman and he's on the board. a consultant at motorola solutions is on the board. the first chief executive of hong kong, awe powerhouse board on the independent side. david mentioning disappointment on the revenue growth. i don't know, it seems like nitpicking at 3.71 billion on net income, revenue up 4.4 billion. what's amazing, net margins 47%. think about this, talking net margins 47%. that's an absolutely incredible number and the rest of it seem look a lot of nitpicking to me. as david mentioned, yahoo! is down on this. we did get transaction volumes for two of the main businesses, up 32%, the transaction volumes. you can see the reaction there in yahoo!. by the way, speaking of ipos, the market is going to come, the big company that does market data and indices. a real powerhouse in the overall data and indexing business. take a look at movers this morning here. of course we did get that covidien/medtronic deal. covidien acquired by medtronic. $42 billion deal, see covidien up 26%. medtronic up. a biotech company, bluebird, positive result forward gene therapy treatment. on the upside. goodyear tires up 2.5%, positive mention in barrons. the comment from michael heartnet, one of the big strategists at bank of america merrill lynch, the case for summer meltup remains stronger than that for summer meltdown as the high liquidity low growth backdrop forces investor cash levels down. a lot of people wondering whether it's going from here. i would note, the federal reserve meeting this week, it's the first one with stanley fischer as vice chairman. considered a moderate. the opinion is we're going to stay on the liberal side, or the dovish side. back to you. >> thank you, bob pisani. valeant, jim, continuing to go at it. taking an interesting turn. gotten nastier. a press released by allergan at 7:00 a.m., continuing to take up the theme of coming at valeant stock price, questioning it, quoting people, many of whom we've heard from in the past, whether it's hampton or jim chanos. at end of the press release they've done something i've rarely seen, took e-mails they did not get permission to reprint but took e-mails from rob kindler, a guest this morning on cnbc's "squawk box," you may have seen him many times on the air, vice chairman. to allergan ceo which he's pitching for the business, right? what goes on on wall street. bankers are trying to get on one side or the other because big fees will accrue to you if you can have advice on ear side. also want to put it in the leak tables, it important to print a big deal. but these rarely have i seen e-mails used against them. why? kindler got hired by valeant last week to help them in their continued pursuit of allergan. so they put these e-mails out and say, my takeaway, in one, he said not being aggressive enough in going after the vrx business model and currency. another e-mail, not from kindler, but to allergan cfo jeff edwards from another banker at mt., port of what kindler is suggesting to allow him to use his significant relationships with media and analysts to provide a clear and detailed ar ticklation of why valeant is a house of cards. this happens all the time in a sense a banker trying to get hired morgan stanley, their analyst across the divide, but analyst does have an overweight on. that could be tricky for them to start questioning if they were -- if they had been hired by allergan, question valeant on their investment side of things. they have a overweight rating. but it's ugly. >> valeant's getting killed here. >> the business of wall street and seeing some of it up front, you know, you don't want to see, and, b, are they going to burn down the village to save it? >> valeant has become a stock you can't own. it goes down all the time. you know, david, a man well respected, a lot of comment whether is r&d has generated returns. it's kind of easy to see, r&d is the highest there and the growth is the highest there. >> that man, michael pearson question the r&d spending by pharma. in this case, perhaps an outlier at allergan and r&d spending productive. you can parse this different ways. sure, most companies buy other companies to acquire their drugs but at the same time that r&d budget helds develop them. merck's not going to get credit if it comes to market to treat hep c. shouldn't that be seen as an r&d spend? >> i have regarded it as the greatest ophthalmological franchise other than what reagar regeneron has with macular degeneration. they've figured out uses of botox, does that not take r&d or do they stick people all over the place and it turns out something works? no, it's r&d. >> valeant has to figure out a way to turn around the stock price. rick santelli in chicago. rick? >> good morning, david. well we are looking at treasury yields fairly close unchanged. depending what part of the curve you're looking at. go to the longer end, down a basis point, open the chart up to may 1st. you can clearly see, the fed meeting that's coming up, or the one in the rear view mirror 2.60 level very significant. let's look at the relationships between securities and overseas. look at what's going on on the yield curve, 5 versus 10s, today's new plflat under 90 fla. tens to bunds, 125 basis points. this is a 15-year, yes, 1-5, on the differential between the two rates. take one of those legs, the bund, and compare to the guild. carney and the uk central bank look to be raiding rates on a more aggressive time line than the u.s. look at their security against bunds, it's now 140 basis points of difference, that's a 17-year wide. why do i bring it up? that might reprice what's going on in europe and the developtive value to the ten-year gets affected. all three significant. look at foreign exchange side. euro versus the dollar, this chart goes back year-to-date. not a lot of action going on here. but the 1.35 is support, back to you. >> thank you, rick santelli. up next, stop trading with jim, "squawk on the street" will be right back. 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[ train whistle blows ] ♪ my mom works at ge. ♪ it's time for cramer and stop trading. >> no one's picking up on this and it's surprising to me. really for many years weave been saying, why are all consumer products companies saying in venezuela? little piece in the ft today, venezuela looking to simplify foreign exchange system. that would be what these guys have wanted let's go over it. colgate, 5% of sales venezuela. avon 5% of sales, don't like avon because of other issues. kimberly-clark, 2% of sales. enterprising analyst would raise numbers 2016, that to would be done by 2015, it's significant for numbers because we are all tired of hearing number cut venezuela. >> strangest thing in these earnings press releases on the huge multinationals where you run into venezuela currency a reason for some sort of adjustment. >> this looks like the beginning of the end of chavez two-tiered to u.s. companies foreign exchange system. you'll be hearing about this over the next few days. first, obviously in this, which is great, you're first in a lot of stuff, but shows trying to break ground here. colgate, proctor, kimberly-clark and clorox. i think you want to own those stocks. >> coming up tonight? >> we're doing a little world cup situation. what companies we think around the world are going to do well. i'm tempted to rip it up and talk about the wonderful eaton company in ireland but we're not going to do that. by the way, congratulations to williams company, wnb shareholders the winners buying access midstream. stock up 15%. >> the story of the morning, eye eyes on iraq, merger and acquisition activity. williams one of the best performerser th performers, that stock up 18%. >> yeah. >> i think we talked about it earlier. >> i got up at 4:00 to go over the deals and up until the minute we started i was overwhelmed and i'm still trying to get my arms around the deal. the level 3 deal so important. this is all -- that's a netflix drive deal. we didn't follow up on yelp. by the way, micron upgraded, old tech doing well. remarkable time if it were not for iraq, we'll be going to all-time highs within a few weeks. >> medtronic deal for covidien, one -- rich peterson at capital iq, the largest foreign acquisition at all time. throwing a little bit of debt there but right there. medtronic shares, also responding positively. not like williams but the theme of the acquirer stock going up on obviously the potential accretion and the tax inversion. >> right. >> looking forward to "mad money "s if you're doing more on the home addresses, if you will, of so many companies that have all operations in in the states. >> st. jude, it's not at all consistent with what they're doing. he has an office in dublin. it's a building. how nice. he did more than have a mail drop. st. jude, if they want to get around that tax that was put in by obamacare, this is the way to do it. i know when st. jude came on the show, they were upset about they were the ones hit by the tax. they didn't have the lobbying muscle in washington. too many companies located in the same area, not enough senators. i think st. jude has to do a deal. >> jim, see you tomorrow. >> we're on it. >> thanks, bud. we've got home building sentiment coming up after this. we're moving our company to new york state. the numbers are impressive. over 400,000 new private sector jobs... making new york state number two in the nation in new private sector job creation... with 10 regional development strategies to fit your business needs. and now it's even better because they've introduced startup new york... with the state creating dozens of tax-free zones where businesses pay no taxes for ten years. become the next business to discover the new new york. 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[buzzer] dangnabbit. geico. fifteen minutes could save you...well, you know. welcome back to "squawk on the street." breaking news on housing. home builder sentiment jumps four points in june to 49 on the monthly index from the national association of home builders. this, after barely moving since february. 50 is the line between positive and negative territory. the builders, however, cite strong headwinds including weak consumer confidence, limited availability of labor and tight supplies. single family housing starts running about half of the historical rate given demand. of the three index components, all posted gains but the largest in current sales which jumped six points to 54, crossing into the positive range. component gauging sales expectations in the next six months rose three points to 59 and buyer traffic increased three points to 36. weakest component of the index. regionally, three-month moving average, home builder sentiment strongest in the south and west weakest in the northeast. midwest the only region to see a drop in building confidence. more of course online. sarah? >> thanks very much, diana. to iraq, tensions rising as sunni militants capture another city today. cnbc's chief international correspondent michelle caruso-cabrera is live for us in northern iraq with the latest. michelle? >> reporter: sar ah, here in kurdistan, where i am in the northeast region of iraq, the situation is much calmer due to the fact they have a stronger army and a stronger government than the central government of baghdad. a big building boom going on here because this is a part of the iraq where they can drill for oil. while the vast majority of oil production is in the south, there's oil production slowly but surely coming online here. as a result, you can see new construction all over erbil, the capital of kurd distance. in a huge battle with baghdad. they want to pump their own oil and sell their own oil. baghdad says they don't have the right to. cur distance doesn't care. they have been ramping up production, more than 200,000 barrels per day. their goals are pretty grand. hope to be pumping 500,000 barrels per day by the end of the year, a million barrels by the end of next year, 2 million barrels by the end of 2019. iraq wouldn't help them export their oil. the pipeline that runs to turkey was in official iraqi territory, so what did kurd distance do, built their own pipeline, capacity of 300,000 barrel per day. before they were trucking oil to turkey. now they've been able to reduce the cost of shipping from $20 per barrel to only $10 per barrel. now a lot of the major oil companies have gotten licenses here, though they could face repercussions from baghdad. they also have operations in the south. but exxon mobil, total of france, explorations in kurdistan. two companies, the ceo of genel, tony hayward, the ceo of bp during the gulf of mexico oil spill. headquartered in norway. they, too, hope to be and are using the pipeline. the issue they face is once oil gets to turkey, once they load it up on tankers, because disputes with baghdad they've not been able to sell two full tankers floating in the ocean now with more than 2 million barrels of oil. that just happened within the last three weeks, even before we saw this big insurgency start up. i spoke with the head of external -- the minister of external relations here in kurdistan. the fight with baghdad, they don't care what baghdad thinks. >> they want to control the economy, the energy, the security, why should we be part of a country when there's not -- when that country doesn't treat you equally? >> reporter: there have been suggestions for arbitration. baghdad would get 83% of the revenue that comes from kurdistan selling oil, kurdistan would get 17%, the current structure under the constitution. baghdad wants to stay in control of oil production and exports as well. the question is, the situation now so dire on the ground, with a strong military in kurdistan is it possible that the kurd government says to baghdad, we'll help you out but you have to make a deal when it comes to oil. >> they may find it's priority number one when the white house gets involved. thank you very much. let's bring in the former director of the cia, jim woolsey, chairman of woolsey partners and chairman of defensive democraties. the picture from where michelle is dire. it's raised concerns from all sides. as we have the luxury of you on the program, i'd like to ask one of the burning questions that really still hangs in the air for many people, why for all of its resources do the pentagon and cia not see this coming? why has isis been able to blindside both the iraqi government and the white house? >> well, some have seen it coming. some of the military intelligence people have been saying for many months that something like this was going to get started. but it's a natural consequence of i think the weakness that the united states has shown, the u.s. government, in syria especially. but also in withdrawing every last troop in 2011 from iraq. we didn't even do that in south korea. so the united states has look somewhere between hesitant and incompetent over the course of the last four, five years. and it's beginning to show. nobody worries about us anymore. nobody is perturbed the united states might not be on their side. terrorist r. doing what they want to do engage in 17th century-long fight of sunnis against shias. >> would you agree with mitt romney, i guess from what you're saying, what he said yesterday the united states should have kept some forces in there, a, to teach maliki what democracy means orren clugs means in practice, and more importantly, better intelligence on the ground. and is the adjunct to that argument it is not possible to view with all of the resources that the pentagon and the cia has, not possible to get an accurate picture from outside the country or from flying drones over? >> we need to have some people not necessarily military troops over there keeping track of what's going on and perhaps helping with thing like drone strikes and the rest. but i think that it's very late. we are in a situation that has largely been contrived by president obama in order to make sure he can say the united states is completely out of the middle east. in doing so, he's created a situation in both iraq and syria, i think, that is extremely dangerous and where we have very, very little leverage. >> i'm asking you, with your technical knowledge, a very important question because even now it would appear that the president may have some air strike against the militia forces. that is on the table. at the same time we have war ships, one large aircraft carrier in the gulf, two other next to it. so my question again to you is, if you're outside the country, can you accurately determine where those forces are in order to launch air strikes that do their job and not inflame the situation? >> it depends whether talking about using airpower in an urban area or outside an urban area. talking about using it out in the countryside, that's where the united states has a huge advantage and our accurate systems can do an effective job. in cities it's much more difficult, much more difficult to avoid civilian casualties. i'm not sure that even as good as our air force and navy, marines are with air power, i'm not sure that it's an answer for dealing with terrorists operating in the cities, taking peel out and massacring them and the rest. >> should the united states team up with iran or at least sit down with iran to discuss this, to fight the common enemy here? >> well, iran is a huge problem, and part on the way of developing a nuclear weapon and negotiations we're engaged in with them are not going to slow them down, if at all. we're likely to give up on some of our sanction. remember occasionally you are to work with people you don't want to work with in order to defeat the hitler and japanese and we had to be a partner of josef stalin's and a lot of people didn't want to but we needed him. i hope we don't need the iranians because i think they are craftier than s stchlt alin was. >> jim woolsey. >> a big deal of the morning, medtronic agreeing to acquire ireland-based covidien about $43 billion in cash and stock the consideration. medtronic shares up bit. covidien shares up a lot. meg? >> david, that's right. seeing both companies rising today. people seem to like the deal. 93.22 medtronic is paying for covidien 29% premium to covidien's friday closing share price. medtronic will be able to reincorporate in ireland, take advantage of 12.5% corporate tax rate there companies were stressing on a conference call this is not all about the taxes. they're saying the strategy to combine gives them products that don't overlap too much, really expands their capacity in emerging markets, ceo of covidien saying in a call today this deal's one plus one equal five, saying that is how good the deal is for both sides. now of course this continues a trend of consolidation we've seen in medical device companies. as the affordable care act has added a lot of pricing pressures on hospitals, the customers of the companies, they are starting to combine to get better negotiating leverage with customer. analysts saying they're expecting to see more deals in medical devices. this comes after we saw zimmer buy biomed. so there's a consolidation that's begun. smith and nephew rumored as a takeover target. analysts expect that to come back into the play. david? >> thanks very much. yeah, of course inversions continue of pace. >> a point you were making offair, with the tax inversions it's not about the tax rate you're going to pay. it's the ability to move cash internationally cash-free, that's the bigger issue. >> that's what medtronic is citing. of course citing a low tax rate here in the u.s. of 18% saying it not necessarily the tax arbitrage with the irish incorporation that will bring them a lower tax rate but a key in all of the deals the ability to freely move cash generating overseas back to the u.s. without having to pay taxes is a key consideration, one of the reasons we're seeing so many inversions. when one starts it forces a competitor in the same industry to consider the same thing otherwise they have an advantage in different areas it will be more difficult to compete. >> health care m&a is at a record. >> large part because of the inversions. >> talk more about. bring in cnbc contributor here, barbara ryan, managing direct of fti consulting. a lot of talk about tax inversions and overseas cash, barbara. the company says it will be good for the united states. medtronic, that is. will it? >> well i think you know we've seen as you've all discussed a lot of these deals taking place broadly in health care for the reasons that you've all mentioned. the need to be more competitive, obviously all of the companies are global and generating a lot of cash outside the united states. and there would be sort of a punishing penalty to bring that back into the united states and then as david mentioned, this obviously feeds on itself because then you have to do these types of deals just to maintain your competitiveness and cost to capital. i think that if you look at a lot of these transactions, let's say take paerrigo and alan, it has -- it does allow them a significant runway to turbo charge their growth outside the united states. and in so doing, as a company operating in the united states, they're going to be much more successful and generating more tax revenue. so it's not that these companies are going to leave their footprints in the u.s. but certainly as meg mentioned as well, in this particular deal, there is the opportunity to expand into emerging markets. >> yeah. they also talk up the technology and innovation that they're going to spend here in the united states. talk about from your world if this gets regulatory approval, what kind of scope and scale this combined company would have in medical devices. >> you know, i'm not the world's expert on medical devices and maybe meg has a better thought listening to the call in terms of what the r&d would be, but i would expect that this is an opportunity for the company to reinvest in newinnovate. they talked about something that would drive consistent and sustainable high-single digit revenue growth. >> yeah. it also, as we've been talking about, follows a series of consolidations in medical devices and hospitals and hospital services driven by health care law, taxes, you name it. who's next? who's left out there for mergers and acquisitions? >> i think meg mentioned a bunch of them but we're likely to see companies like mylan and perrigo to be inquisitive. a big transaction with valeant and allergan. i think the specialty pharmaed by has one that's consolidated and i don't think that pfizer/astrazeneca is likely that the last chapter has been written on that one either. >> to be continued. thanks for joining us on the deal. barbara ryan, a managing director at fti consulting. david, you're focused on where the next deal's going to come from. >> interesting listening to barbara. i did want to point out, medtronic shares turned down. there is some question whether the accretion is going to be quite as much and as quick as perhaps had been hoped when it was read in the press release as opposed to discussed on the conference call. and i also wanted to note, our other big deal if ecan bring it it up, level 3, lvlt, that has turned sharply lower, not sure why at this point. one of the things typical in this robust environment for mergers and acquisitions the stock of acquiring company has gone up. that has dramatically moved lower at level 3, one of the bigger deal, the acquisition of time warner telecom, wanted to note both. >> questions about the deals. up next, more on the technical issues at target that shut down some checkout line over the weekend. and adisle supreme court decisions could be issued today, among them the big decision on arrow, streaming local television online. it a biggie. we'll bring it if and when it happens. peace of mind is important when you're running a successful business. so we provide it services you can rely on. with centurylink as your trusted it partner, you'll experience reliable uptime for the network and services you depend on. multi-layered security solutions keep your information safe, and secure. and responsive dedicated support meets your needs, and eases your mind. centurylink. your link to what's next. . looks like stock marks are starting the week on a high note. it's early. let send it over to dominic chu. >> elevated prices. check out bluebird bio, the developer of gene therapies that aim to repair genetic defects. treatment for a rare blood disorder, allow patients to go several months with -- between receiving blood transfusions, stock off its highs but up 39% in today's trade. back over to you guys. >> up next on the program, the chief global equity strategist of goldman will join us live for an exclusive interview. where you should be putting your money around the world particularly outside the country. helps you be ready anytime the moment is right. cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a free 30-tablet trial. ask your doctor about cialis for daily use when folks think about wthey think salmon and energy. but the energy bp produces up here creates something else as well: jobs all over america. engineering and innovation jobs. advanced safety systems & technology. shipping and manufacturing. across the united states, bp supports more than a quarter million jobs. when we set up operation in one part of the country, people in other parts go to work. that's not a coincidence. it's one more part of our commitment to america. 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[ male announcer ] see if your business qualifies. take a look at health care sector. it's one of the best performing sectors in the s&p 500 right now. dom chu. >> health care stocks are moving higher, and it's all about the merger and acquisition type activity we've seen. covidien the leading gainer in the s&p 500 after agreeing to be bought by medtronic at 42.9 billion in cash and stock. that comes to $93.22 a share. followed by four other medical devicemakers. boston scientific, styker, st. jude medical and intuitive surgical. investors are looking for some other plays or consolidation in the medical device industry. you're seeing a lot of the action today in health care. >> clearly, tensions are high in iraq as equities feel the pressure around the world. and there's the imf this morning, in case you've not heard, lowering growth forecast for this country to 2% this year. saying there are risks of significant swings in market flows and prices in the months ahead. who better to address that, peter oppenheimer, chief global equity strategist of goldman sachs traveling from london. >> good morning. >> why are the equity markets resilient to what is happening in iraq? >> i think that directly the economic impact of what happens going on there is relatively modest and the oil supplies don't look to be majorly disruptive and the threat looks relatively low. roll tivolt tilt has been falli some time. and i think growth forecasts are really in a narrow range. and that combination with very supportive policy, a lot of forward guidance is keeping volatility low and people focused on relatively moderate risks have economic shock. >> does that lead to the imf point of bubbles. >> it's too level i to talk about bubbles. >> are the valuations sound or exaggerated because of the slow melt-up. >> i think that the valuations in aggregate are still okay. clearly in equity space, it absolute terms valuations have moved up a long way. in most part of the world they're below with averages. but they're higher here in the u.s. with a backdrop it's accommodative policy support. and zero interest rates in most places in real terms. i think it's too early to be talking about a bubble. >> what do you think about gold right now which has received a bid on the geopolitical tensions? do you recommend clients have gold in their portfolios or exposure potentially through gold stocks to hedge against these ex-only nift shocks. >> the prospect of gold are tied to real interest rates and v volatility. the prospects outside the shore-term focus on political tensions are particularly good. so i think that ultimately gold prices are likely to continue to trend downwards. >> pack to equities, what you do, where should we go? where will you get the most upside this year or the next year? do you follow the central banks? is japan a better bet than europe? there. >> i think japan and europe, both together, look the most attract everybody regions globally. >> more than the u.s.? >> more than the u.s. japan the strongest profit growth and after a period of weaken, economically and in the market, you're likely to see a further rise in earnings revisions and more policy support as welcoming through in the second half of the year. valuations are attractive. >> how much cheaper are european stocks than american stocks right now? >> well if you look at it in simple metrics, p/e, for example most of the broad european markets around 14 times, 14. 5, 1 1.5 p/e in the u.s., that's not unusual. the key point is difference in earning cycle. u.s. profits at an all-time high, margins at an all-time high. more sick cali depressed than europe. >> if you google european etfs you can immediately see the instruments in which to play this. i see the i-shares italy index up 15%, spanish index up 12. where should people go as you break it down? >> specifically, these peripheral markets have enjoyed a huge boost, firstly from a sharp narrowing of sovereign spreads from high levels a year ago. and of course, you've seen modest recovery from the recessions in the countries. >> sure. >> from these levels i think it's going to broaden out. the overall european indices up more than the s&p year-to-date. we think from a country perspective, germany, looks more attractive, it's very cheap on a multiple basis, more geared into an economic recovery. >> janet yellen has another major decision and conference this week. do you expect any surprise from the federal reserve, commentary on overseas, geopolitical risks and growth? >> i think the outlook that they talk about will probably remain broadly unchanged. i think they'll continue to be relatively dovish in terms of outlook but not looking for any any major surprises. you're seeing generally that kind of outlook reinforced by central banks across the world, and a similar thing in the euro area. >> dots will get higher where they thing interest rates might go and that could spook people. could be a de facto tightening, what people will be talking about and questioning her and the new forecast. >> that's right. the broader tenant of what people will be saying there's plenty of slack in the economy, outlook is big, inflation risks are relatively low. the market has broad forward slightly expectation of when interest rates will start to rise. the peak lel of interest rates likely to be lower than previous cycles and that's the crucial thing. >> so circle back to europe, suggesting people bought german equities you felt the euro would fall. the euro's perched around 1.35 close to the february low. everybody's watching this level to see if there is a major break. do you have to have a major break on the euro to buy german equities or would you go in anyway? >> no, i don't think it's dependent purely on that factor. it would be helpful if the euro came down. remember, the ecb's package we heard a week ago is broad based, not focused purely on the euro but credit easing across europe and that will be helpful. it's also important to recognize germany a global index, it's a big beneficiary of a pick up in global growth, particularly dm-led growth operationally levered into a potential recovery. from the evaluations it's quite an attractive way to gain access of that improving economic outlook. >> enjoy your trip here. peter oppenheimer from goldman sachs. >> as tensions in iraq rise, we'll be joined by ed roits, chairman of the house foreign affairs committee. hear what he has to say about the possibility of drones and working with iran as options to solve the worsening conflict in iraq. i spent my entire childhood seeing the world in reverse, and i loved every minute of it. but then you grow up and there's no going back. but it's okay, it's just a new kind of adventure. and really, who wants to look backwards when you can look forward? that's why i always choose the fastest intern.r slow. the fastest printer. the fastest lunch. turkey club. the fastest pencil sharpener. the fastest elevator. the fastest speed dial. the fastest office plant. so why wouldn't i choose the fastest wifi? i would. switch to comcast business internet and get the fastest wifi included. comcast business. built for business. knew welcome back to "squawk on the street." christine lagarde getting done with a press conference. want to bring you some of what she said. imf making waves with the report on the u.s. calling for a rise in the minimum wage and warning of marketed risks from low fed fund raider rates and too much certainty over fed policy. lagarde was just asked whether the recent rate hike by england means the united states has to follow suit. the market assessment is generally that once tapering will have been completed to the point where they will no longer be purchases, then tightening might, in short order, take place. we are not that certain about the short order. >> so suggesting that maybe rates can remain at zero beyond mid-2015. lagarde giving more details about the imf's call for raising the minimum wage in the u.s. talking about significant numbers, you know, when you have 50 million people living below poverty level, many who are working people, not people just not doing anything, that's why we are recommending it it. now, as to give you a number, is it 10.10? this is something that needs to decided by legislator tos, clearly. >> in the report, the so-called article iv consultation with the united states, which is done annually, the imf wonders significant swings in marks due too much certainty in monetary policy. market preds reflect too much uncertainty. now looking for 2% in 2014, down 0.8 percentage points. 2015 looking at 3%. again, pushing ahead that higher than expected growth. >> i find it interesting, that report is out two day before janet yellen has to make this decision and the federal reserve is out with its decision on interest rates. weighing in heavily on monetary policy, yes, imf weighs if on all economic policies but it's interesting, in light of the ecb comments and how draghi followed through. >> i think that's accurate especially because the uk is going one way, ecb seem to be go further down the road of pushing down rates. united states in the middle now and layer in japan. lagarde was not asked to put all four major essential banks into some context but you do right there, and it's the united states in a difficult place and this report coming two days before the u.s. fed about to decide. >> a lack of coordination. steve liesman, good to see you. the latest in iraq. islamic militants capturing a northern iraqi town striking another blow to the shiite-led government. militants claimed to have carried out a mass execution of iraqi soldiers. here on set to share his insights how the u.s. should be responding, congressman ed royce, republican from california, and chairman of the foreign affairs committee. thanks for joining us. >> good morning. >> drones, you would like to see targeted drone attacks in iraq? >> this has been a request now that the iraqi government has been making because you have these columns of -- this al qaeda offshoot, you know, waving the black flag of al qaeda, moving across town by town, picking up more and more wealth. they hit the central bank, took $450 million when they took mosul. this makes it the richest terrorist organization in the world. clearly if we had responded to "and given the air power through drone strikes, this would have helped check this advance on the ground. >> drone strikes, what about boots on the ground? >> i don't think anyone wants to see boots on the ground. but that's not what's required here. what is lacking on the part of the iraqi forces is air support and that can be given by drone strikes or tomahawks, frankly it's been four months now since they were encamped in western iraq and since they began their long march, city by city. so this is what's baffling, why don't we hit them. >> the president has said, he's reviewing all options presumably including this one. >> right. >> what is the likelihood na the u.s. takes this action with air strike. >> i've talked to the vice president, national security adviser for some weeks now, this has been in abeyance we don't are a lot of time here. as the situation becomes more dire on the ground, it also brings in iran into the equation. >> right. >> so it would behoove us to move -- to have moved quickly, and we should move now in order to give that air support. >> promising the nation surgical strikes which you've done through history and they've proved not to be that surgical. we've heard from the former director of the cia jim woolsey a half hour ago, he was explaining how technically it's difficult, depending where forces are, to strike without massive damage. are you prepared to enflien fli massive collateral damage? >> think about it, when you've got an army encamped as they were or columns on the road, it is possible to hit those columns. >> but now moving through towns, you said it yourself. >> yes, now that we've waited four months it become more difficult. but the fact is that if we wanted to stiffen the backbone of the iraqi forces, they're a more secular force, they behave like other armies do when they face al qaeda. they tend to run away. they need some kind of air support. the easiest way to do it is with drones. there's other options, tomahawks and so forth as i've said. at the end of the day, the longer you wait, the more equipment they get, the more money they loot, the larger the force. >> on the ground, what would we be leaving? the current government, it's hugely separatist. >> right. >> it is going to be a trap, it has been before. >> you've got to keep your eye on the main problem, the main problem's al qaeda. the main problem's, a guy who said when he was let out of prison to american forces, he said, i'll seal you guys in the future in new york. you know, this is a fellow who has now massacred maybe 1700 people, you've got daytime crucifix going on, mass atrocities. >> radical islam, it's in north africa, too look what's going on in kenya today or whether it's -- i mean, so many countries were fighting the battle on a lot of fronts it would seem. in the case of iraq, we would be doing it with a government we don't really support that has not been inclusive in any way and created this problem that it's facing on its own. >> you've got to admit, the longer we wait in terms of taking decisive action, the more assets they get under their control, the mar casualties they inflict and ignite the sectarian violence. if we moved decisively quickly, we could have provide the support. >> i understand what the gop has to do it has to show obama is asleep at the wheel because that's powerful than benghazi. at the same time -- >> i don't agree with you. >> let's disagree. the point i was going to make, there may be no appetite in this country for further conflict or being drawn in any way, the blood and treasure is over, there's no more to give away now. >> simon, seriously, talking about an al qaeda affiliate here. you can't wait until this individual establishes a kalla fate. he's going to cart get the u.s., jordan and other countries in the region. it makes no sense not to use drones to knock this guy back. >>s this country going have to be permanent state of on/off war? does it go on forever? >> i will tell you that as lon as al qaeda is out there, somebody had better be minding the business of keeping them in check because if you don't, you end up with another 9/11. that is the reality of the situation we face. >> thanks for the warning. good to see you, congressman here in new york. congressman ed royce joining us at post nine. >> dom chu, up six point on the dow for a market flash. >> dream works, the stock's moving lower as its latest an mission flick "how to train your dragon part 2" didn't knock the socks offen investors. some estimates higher in terms of the weekend take. stock up 25% over the last month in perhaps anticipation but now investors taking money off the table. back over to you guys. >> thank you. next on the program, starbucks offering workers free college tuition. we'll take you live to an event in new york as ceo howard shut talks about the new online initiative. plus, target under fire again for another glitch. this time it with its cash registers. more on that when "squawk on the street" comes back. chocolate is very individual. white chocolate lovers don't like dark chocolate. milk chocolate lovers don't necessarily like dark or white. before we couldn't really allow the consumer to customize their preferred chocolate. we needed the scalable cloud solution allowing them to see all 800 products and select what they are looking for. now there is endless opportunity to indulge. 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[ male announcer ] ...won't last forever. see your authorized dealer for an incredible offer on the exhilarating c250 sport sedan. but hurry, offers end soon. share your summer moments in your mercedes-benz with us. they're the days to take care of business.. when possibilities become reality. with centurylink as your trusted partner, our visionary cloud infrastructure and global broadband network free you to focus on what matters. with custom communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. every day of the week. centurylink® your link to what's next. . well, target is under fire again, this time for a glitch at cash registers in some of its stores that caused long lines and angry customers. courtney reagan live outside a target in new jersey. it wasn't hackers this time. >> reporter: it wasn't hackers but target again sufferingage outage, credit and debit card transaction point of sale processing. the outage has been rectified but that doesn't mean that customers weren't frustrated and lines weren't long while the issue was ongoing. this is a video from several target locations in california, showing you what it was like during the outage. target doesn't have any details at this time on the total number of stores that were impacted or the cause other than to say it was not security-related. target says teams worked with guests on a store by store base basis to provide supports and isolated to in store and not online. but, shoppers took to social media to express their frustration. this picture from twitter user taylor gowen, long lines, keep shopping with you and your commuters keep crashing, failing. target checkout lines just shutdown. super thrilling experience right now. and sugar mames says i left the target line, put my items back, drove to walmart, bought the same items and saved time. target said, earlier this evening we experienced a glitch that impacted speed of checkout at some u.s. stores. we've been able to restore our checkout process. we sincerely appaologize to anye inconvenienceded by the issue they tested the system here in new jersey, everything appear to be working normally. this location, however, always closed on sunday. so it's unclear whether it would have been one of the stores impacted by outage. >> they can't catch a break. thank you. looking now at a webcast of howard schultz ceo of starbucks making an announcement about the company's new college tuition initiative. that's not howard shut schultz, i su spec the head of the arizona state university. jane? >> hi, yes, that is -- schultz should be taking the stage shortly, supporting our partners' ambitions the best investment star bucks can make. looking back at webcast, where you are, near in new york city, the deal starbucks offering highlights high cost of and increasing popularity of online degrees. starbucks has had a smaller reimbursement program that gave back $1,000 a year. this one could cost significantly more as asu estimates 15,000 to 20,000 starbucks employees could be reimbursed in the new program, strictly online and double asu's current online student body of 11,000. look at the graphic. upper classmen, juniors and seniors who work 20 hours a week will get full reimbursement for course work towards a bachelor' degree. not a class here and a class there. underclassmen get partial financial aid. there will be coaches, counselors and academic advisers to help employees through the system and no commitment to stay at starbucks after graduation. employees can also be working at a starbucks, et cetera. if they try to do this, they have to qualify to get into asu where the average gpa of incoming freshmen is just shy of 3.5 with an s.a.t. score of 1129. "u.s. news & world report" says there are about 1,000 an line degree programs. we like to call this disruptive. asu ranks number nine on that. guys, we had an intern here who did her whole degree at penn state online. never set foot on the campus. we talk about disruptive. this is one of those disruptive things. back to you. >> yeah. and you have to wonder whether other corporations will follow. thank you very much, jane wells, good to see you. still ahead, sandisk buying fusion io today for more than $1 billion. the president and ceo of sandisk will be joining "squawk alley" live. you won't want to miss that. we're back after a quick break. 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shake-up. a bug may have allowed access to hackers to videos of hollywood celebrities. >> you're watching "worldwide exchange". bringing you business news from around the globe. >> hi, everybody, welcome. good morning. you're watching "worldwide exchange." are you aquake? >> i am. i'm very awake. day one was very enjoyable and i hope day two will be the same. >> it's going to be. it definitely will be the same. in fact, you've been doing more than just working here in the studio. >> i have been out and done a few interviews. >> 835 million pounds is what the premier league has spent. >> indeed, which represents 30% inflation last time. we'll be talking about that inflation and the inflation in television. 30% more than elsewhere in the economy. >> so while we're talking about inflation, 0.3% in the eurozone, 30% inflation in football, it's fan taft ig. we'll weave that in. we've got a good show coming up. now, our main story, crisis talks between ukraine and moscow are continuing. >> the talks come at a crucial point in the crisis after ukraine abandons their defense in the latest of a series of military reversals. ukraine's defense minister announced the country's options to liberate kiev was over and the focus was now on defending itself against russia. we are joined now by tim harris and christopher branville, managing director of trusted sources. welcome to you both. christopher, i'll start with you. the time for diplomacy, is that over now in the ukraine/russia crisis? >> well, frankly speaking, it's right back. yesterday's talks in the political leadership of the rebel movement and the kiev government represented no less than by the former president of ukraine are the third such talks since the last week of june. seems like an age ago. after that, the ukrainian president, poroshenko, canceled the cease-fire looking for a military solution. now russia has beefed up the insurgency, as inflicted on the -- we're back to talks. the malaysian airliner, death, destruction, bitterness, more sanctions, economic war. they're talking, but it's difficult to be optimistic. >> we were just talking about what's taking place in ukraine. just to mention that we've got some live pictures coming in from moscow where the russian foreign minister lavrov is due to speak at any minute with his tunisian counterparts. we're awaiting the russian foreign minister and we'll keep you up to date with what comes out of that one. tim, what are your initial thoughts on the crisis and what situation we're in now and what will happen from here? >> well, whenever this ends, there has to be a lasting solution and that muchtd ultimately lead to negotiations. the key now is that the hot heads aren't too hot. i think we all have a good idea of what's going on. i think the gloves are off here. i think there will be significant pressure building on the russians in due course. there will be political pressure internally. if the sanctions which the eu may or may not ramp up even further rolls through and it's hurting europe, clearly, as much as it's going to hurt russia. if we do end up having an energy impasse, that may be a stage further down the road. but at the moment, it's talk and talk to try and keep this thing -- >> quite popular at home. less so abroad. do you think has he lost kind of the good will, the international good will? >> he got off to a blinding start with the annexation of crimea. that took him to levels of domestic popularity in the country. i wouldn't necessarily say in the cities of russia, but that was where he went. from here, obviously, this is now long going. this is going to be a long, drawn out crisis. i think the issue is clearly russians are involved in this explicitly as well as implicitly, and this can only draw more in that. i think as this does get drawn out and as the russians themselves realize what is occurring, then i think there will be building domestic pressure for him. but there are more immediate issues to address. >> xrift fer, if this is going to work, nato is going to have to bring putin directly to the table. what can they offer put yib to try and get him to come to the table to discuss this? >> the u.s. government and its european allies on one hand and the russian government on the other. your implication that this is a high geopolitical conflict is spot on. form formerly, the negotiations were between the ukraine and this rebel group in the east. however, i don't think that's really going to happen. russia's goal is simply to prop up this insurgency sufficiently to stop it from being crushed. i suggest russia's goal is not to conquer ukraine as a hole. it's to secure its strategic goals in ukraine, above all, ukraine's neutrality. it's nonalignment. >> it pushed the rest of ukraine, the majority, much closer to flato than its ever been. surely in doing that, putin shot himself in the foot and the result is likely to be whatever is left of ukraine will want to join nato in the future. >> that's absolutely a scenario and that maine counterproductive. you're spot on. if crimea was still part of ukraine, you would have 1.3 million voters voting solidly for the russian alignment. even without crimea, if you want to join nato, there might be a simple majority. even know, i think it's unlikely there will be a national consens consensus. it's still a very divided country. if you try to put it in one camp or the other, you will tear it apart and ultimately destroy it. >> chris and tim, stay with us. you'll talk more on these companies in a bit. russian companies that have -- such as gazprom as the u.s. expands its sanctions on moscow. this is the ft report that roznet is suggesting beijing take a stake in its oil fields. the u.s., though, is under growing international pressure to end its ban on crude exports. the eu and others have made the case to open up its reserves overseas. which allows u.s. companies to export, not oil, except under limited circumstances. i want to come back and touch on one of the points that you brought up about putin's mission and keeping the overall neutrality for ukraine. has he gone too far? can he keep neutrality for ukraine or are ukrainians going to look at the situation and say of course we're going to choose europe? >> he can't determine the state of ukraine. he has russian interests and you may have minority interests within the ukraine, but ukraine is a free, democratic state. and they are, in theory wsh in charge of their direction. so sister-in-law pressures will build the boiling part that is ukraine today. and we don't want to go to an extreme solution as chris alludes it could go. i think putin must know have a set of strategic objectives that he will have on outlined. he's not going to resemble the union. >> i think there are energy implications, as well. >> i think the question of u.s. crude exports linked into this in the sense that the -- with geopolitical uncertainties with interruption of 7 million barrels of oil a day is not iran. you could not interdict russian oil without causing a major shock to the economy. countries around the world are starting to think of that. the stakes are high. this is not just some kind of local conflict. great powers are involved. >> christopher, thank you very much for being with us. >> tim, you're staying with us for a while. the e-mail as usual is worldwide@cnbc.com, find us on twitter, as well. we're happy to get you involved here from the top of the hour. let's update you on markets today, mainly green behind me. strength throughout in europe. the stoxx 600 up 33 basis points so far. let's have a look at the individual markets. and it's strength across the board, really. we have got some quite important data releases coming up today. in the uk, we've got construction data at 9:30 and overall in the eurozone we have produced price inflation at 10:00, so that data is coming through. nonetheless, the market is very strong today. you think that partly comes from the weaker manufacturing data that we had yesterday across the eurozone and what investors are thinking that's going mean for the eurozone meeting coming up on thursday. it's very clear that bonds still think, as they have done in recent weeks, that we're going to see further loosening from the ecb on thursday. record lows continue in europe. 90 basis points in germany. 2.4% in italy. and those european yields have dragged down yields globally. uk and the u.s. at similar levels hovering around 2.4%. fx rate, we haven't seen much. we'll be talking to goldman sachs people oppenheimer at 10:00 who has recently reduced his forecast on the euro. today in the yen, a significant move, 40 basis points weakening against the dollar. that has, though, allowed the nikkei to move up to a one-month high. coming up, wilfred gets in on the game because he's taking a closer look at the playing field for tv football. that is the battle between sky and bt leads up. he'll be telling you all he knows about this. >> this is a familiar set for british football fans. the sports gamble paid off? join me after the break to find out. where the reward was that what if tnew car smelledit card and the freedom of the open road? a card that gave you that "i'm 16 and just got my first car" feeling. presenting the buypower card from capital one. redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac - with no limits. so every time you use it, you're not just shopping for goods. you're shopping for something great. learn more at buypowercard.com hi, everybody. welcome back. apple has reportedly fixed a bug in icloud that could have let hackers leak celebrity photos. the login page was found to be vulnerable in which attackers try multiple password toes gain access. most sites lock out users who enter multiple passwords. apple is saying, though, that it takes user privacy very seriously. they have to. >> big issue. >> huge issue. now, september has a reputation as a very bad month for markets. the s&p capital iq says 20 months since 1987, september makes the list four times, 2001, 2008, 2002, 2011. if you go back further to 1945, september has only ended higher 45% of the time. the worst showing of any other month. psychological pressures of the big round numbers on the s&p 500 and the looming end of the fed's asset purchases could reinforce the september stereotype. so should you be selling in september or do you think the rally can carry on through? tell us what uveng, worldwide@cnbc.com or via twitter, @cnbcwex. troubled premier league giant manchester united dominated football activity as the deadline slammed shut on monday. manu spend more than 140 million pounds in total. teams across the league spend a total of $835 million euros. surprising rival sky in the process. having paid 738 million pounds to broadcast 38 live premier games this season, they changed the pay tv by offering matches for free to its broadband subscribers, setting up, the sports channel has cost bt in the region of 42 million pounds. i spoke with the head of bt's consumer division to find out. >> it's been very successful. if we look back a year ago, we wouldn't predict the success we've had. we have 5 million customers. the business is performing very well, as well. >> and what's the main rationale for it? is it purely to drive broadband descriptions? well, the man rationale comes back to the opportunities that we saw. what we saw is in the british marketplace, roughly one in five households describes bskyb sports because the process at that time was so high. you look around the world and around europe, the typical figure is roughly one in two households. so it's a huge market that struck out as being a big opportunity to give sport back to the people and create a bigger marketplace for premium sport. >> so far, you don't charge directly for the sport's conflict. he just spent another 900 million pound on champion league rights. >> yes. >> will you start charging for those games? >> we had said for champion's league and games, there will be a charge. >> would you say you're predominantly a television company or a telecom company? >> i think the notion of those categories being separate is probably a vestage of the past. increasingly, they will c converge. the transmission of high width band data content, these worlds are really converging. >> we're talking now about thinking, as you're saying, about telecoms and television and video altogether. >> yes. >> how important is owning content for a media company in general? >> i think it -- i think it is pretty vital because it comes down to a strong reason for people to stick with you. it's such a competitive market. it's an extremely competitive market for broadband in this company. it's why prices have come down. to have something in the nature of sports content gives customers a great reason to stick with you. >> we're joined now by nick. has the for ray into the sports world paid off? >> yeah, absolutely. if you look at the statistics, off the launch of tv, it's gone from around 50% a quarter to around 70% since thief laurchbled. its losses have fallen from around 130 to 200,000 a quarter to around 50%. but it has inflated the cost of its largest competitor. and it's -- you know, there's really know question it's done what it was supposed to do. >> and as we look at this now, what is the next stage? it's costing 2 billion pounds. there's got to be more to come if this is to be seen as a success in the long-term. >> i don't think so. i think this is a strategy to compete in a telecom business, a telecom strategy. it's really designed to bring customers back to the company, would increase its market share. there is a network effect of having multiple products for customers. this helps the network effect. so, really, i mean, there is a mobile strategy coming, as well, later on, so there is a multiple customer strategy. but i don't think it's something that -- i don't think that bt is going to become a prolific content provider anytime soon. >> i mentioned it today because john pettit said they're going to start charging for the champion's league viewers. they're trying to make money directly out of the content. >> absolutely. but i think it's still a very small part of the company relative to their network access. i think generally speaking, we have a cautious view in large companies. companies do well, the reason for the success for this particular strategy is it's been very focused. ahead of those specificics and objectives, which a broader tv strategy would dilute the thing. >> taking on sky is still a big -- still a big take on. how do you view it, tim? >> well, this is a global market. you can see it's still being talked about, moving certain type of spots around that stage with that content. i think if bt have got their numbers right, this experiment two years into it, clearly, they've gone the numbers. and they can afford to pay what they're paying. these numbers never seem to get smaller. the picture of broadband is not just about soccer. it's a much larger issue. >> these numbers do keep getting bigger. surprise inflation in football both in the transfer market and also in how much forecast. it's astonishing. it's only going to rise in the future. it's paid about 300 million a year for the champion's league. you know, given the relative importance of premier league versus champion's league for uk customers, that really indicates a large inflation. bt kind of falters to pay. it has large cash flow. it's unpaying a relatively small amount of its dividend, a very small cash flow dividend. for me, there's a high probability of inflation, the next premier league auction. >> it's interesting, as well, that yesterday we saw liberty mobile who lungs with igt. do you think they'll try to move more content going forward? >> i think that's realivic. it is content which you need. it's a complete reconstruction over a five-year period. and clearly it's one of the few objects there to be picked off if that is where it should go. i think the market is pricing it accordingly. >> thank you very much for that, tim. tim stays with us. now, while football's busy wheeling and dealing, some of the world's biggest stars are taking part in a charity match. it was organized by pope france. there is no devine intervention, though. the pope's team lost, 6-3. >> you kind of want the pope on your team. >> you think you would. but it didn't work out in this particular case. >> maybe they need to practice more. practice some goals. still to come here on the show, the italian eye wear giant sees changes at the top. that has been speculated. do investors like what they see? we'll get the latest live from milan. you're watching "worldwide exchange." good morning, everybody. welcome back, everyone. russia says it will review its next military strategy as nato is on its borders. >> the euro hitting fresh 12-month lows, sflirting with a 1.31 level against the dollar as investors bet the economic outlook in europe will prompt some form of action from the ecb. and luxottica shares under pressure in milan after a management shake-up. the chairman tells cnbc he's always played an active role in the business. and apple may have fixed the bug that may have allowed hackers to gain access to icloud accounts and leak nude photos of hollywood celebrities. >> hello and welcome back to the show. we're getting breaking news at the moment. uk construction data is out and it's the strongest in seven months. construction output in britain grew at the fastest pace in august boosting job creation and putting a strain on suppliers. we'll have a quick look at what that's done in the currency markets. a slight tick up in sterling. nothing too significant so far, though. >> construction pmi for our guests rising from 64 versus 62.4 in july. the right ers poll, quite a bit stronger. i'm looking at a couple of greece flashes here, wilfred. greece is stating it expects debt relief talks to start in october after the september review. that's coming up in the ecb stress test, as well. so we're looking at those stress tests having to be done and over with before the debt relief talks. they can begin in greece. it's all down to how much of a hand in the pocket of the troika greece wants to have, right? >> absolutely. >> the euro has been trading ahead of a fresh one-month low. many analysts say they expect the central bank to -- in an establishment so counter weak growth. tim is with us. what do you think the ecb will do on thursday and what do you think they should do? >> i think markets will weigh heavily on draghi's words. he's the right man. that is something that has crept up. as you know, from previous cycles, from previous examples of our kens, deflation is not somewhere where you want to go. you will absolutely not want to go there. it may well be that we're beyond words, therefore, actions will maybe have to be seen. do we go to an outright quantitative easing program or does the ecb stop some stage before it gets there. this is where we talk about the purchases of asset backed securities, the possible bank loans, we're talking about a 200 billion euro program being announced by the end of this week, up two, not saying that. but you see speculation about what degrees of quantitative easing might be needed to kick start the eu economy and further out and the numbers could be much bigger. i think what we'll see is asset backed purchases just troo tie and get liquidity flowing. yes doesn't think it could be as effective as his targeted -- >> well, fiscal policy is interesting. >> the government is very hard. a new government, same story. guess what? they're talking austerity. so there is not an awful lot of fiscal expansion to talk about the numbers when they look like what they look like. the eu is clearly the laggard. >> wouldn't they want to wait and see what happens with the ltros? we have that hurdle to go over and see what banks choose to do. at the same time, also, what would they be buying? they're not going buy -- the french and the german two-year yield are now below zero. >> the federal reserve has stepped into markets and was not dependent at that time. it is not a question of what the balance sheets -- not the ecb makes money after this. i would say the parallel here is to say we're in a steep dive in the plains. yes, we think we can pull out of it, but are we going to hit the ground in the meantime. and i don't think the ecb wants to start seeing numbers at zero or minus or whatever. we've got net interest rates on deposit. banks have to pay. that's one for the banks to put their money somewhere safe and not get it working. we are where we are. and physical policy in europe is heterogeneous, in my view, and not altogether effective. and different motivations have been seen by different governments. the ecb has to try and apply a homogeneous policy across the whole region. >> good luck. >> indeed. >> tim, that you can very much for being with us, tim harris, ceo of harris capital associates. despite could sizzle out, we'll hear from the chief strategist at goldman sachs on why the bank is staying long u.s. equities. now, president obama is to demonstrate his commitment protecting eastern europe from russia, he will aattend nato meeting where he's expected to put pressure on european leaders. according to reports, the alliance is to establish a rapid reaction fall to countries closer to russia for russian military intervention in krien. meanwhile, the kremlin says it will review its military strategy in response to nato enlargement. now, markets remaining on tender hooks with geopolitics over the crisis in ukraine deepens. it's not just russia, though, that investors are needing to keep an eye on. samantha takes a look at the geopolitical hot spots that has the potential to impact your portfolio. global investors today are facing an unprecedented level in geopolitical risks and any further escalation and conflicts in this region could need to hire global prices. let's start with the ongoing conflict. >> ukraine, anti-government protests turned violent earlier this year. that's resulting in a sequence of events. russian presidents putin annexed in crimea and, of course, the ongoing stand off between russia and the west, let's move on to middle east and north african region where we are a series of multiple flash points. now starting off with the conflict between syria and iraq will cause tensions between syria and israel and palestine. it will spill over into other parts of the region, even north africa. finding the region close to home where territorial deputies in the south china see have been on the rise, most recently the placement of a chinese oil rig in contested waters. adding to that, the souring in nations between tokyo and beijing over another set of disputed islands, plus the potential ongoing threat of north korea and the increase between cross border conflicts between india and pakistan. back to you in london. >> for more on what the rising geopolitical tensions mean around the world, head to our website. cnbc.com and follow up on twitter, @cnbcwex. luxottica shares have been trading lower a day after saying their ceo will be stepping down. cnbc spoke to deveccio and asked whether he would be more involved in the future. >> it's not like i wasn't involve in the operation of the company before. it's not like i abal bandon the business. i left him in charge, but i was by his side. we will continue to move forward as we have been doing so. we did it for ten years with garro and now we'll do it for another ten years. claudia has more on this story from milan. claudia, good to see you. i was just talking to somebody about luxottica today and you were saying it's no secret there has been a rift between the two characters for a time. it's also no secret it's because of gurrera we have seen a lot of positive for the group. so now what? and how are shareholders reacting? >> absolutely. guerra is responsibility for the recent google glass deal they are working on, as well, as well as getting backs the license that they had with armani. he is responsible for some significant operations, some significant strategic choices the company has made and had a lot of freedom. he's doubled revenues for the group and now has revenues at 7.3 billion a year. has a very good reputation as a ceo and italian company that has become a global leader in the sector. so the idea that the market is penalizing the stocks here this morning, not too much, is because there is some concern around this decision to make the structure more complex, so to speak. the cfo will take on the co-ceo position with a market ceo but is not in the position he's coming from outside the company. and then de vecchio will have sort of more of a hands on approach in the next month during this change for the company to this new type of management. so the market says citigroup, for example, skeptical of this new structure. also, this analyst saying that gu erreo was a very safe pair of hands for luxottica, but he does agree that de veccio should have a more hands on approach in the next month. there is a lot of complexity for this business. they have doubled their revenues in the last ten years. the idea that this market has become very complicated and want to work hard on the emerging markets could mean maybe this more complex structure could be beneficial. so for now, we'll see what will happen in the next days and weeks. we'll get news out about the new co-ceo. back to you in london. >> claudia, thank you very much for that. we appreciate it. the nikkei enjoyed a nice bump up as they show regular pay and bonuses are on the rise. the nikkei has the story live from tokyo. >> hi there. average monthly pay rose marking the largest increase in 17 years. it shows some companies are gradually raising raises giving some relieve as prime minister abe hopes to proceed with more tax hikes in october next year. real wages, which are are a just had to reflect changes in consumer prices dropped 0.4% on the year. and it shows that wages are not keep up with inflation after the consumption tax hike in april. in the meantime, prime minister abe is working on his cabinet reshuffle. shoziki is said to be considered into health and ministry cab nut. investors saw this as a move that would push the pension fund to increase its stakes in domestic stocks. abe will announce his new cabinet tomorrow. back to you guys. >> thank you very much for that. we'll speak very soon again. the indian prime minister has completed day two of his visit to japan. he's saying the aim is to boost business ties with the company to a new level. so far, he's accepted investments competing 3 trillion yep. lasta, the changes that are in front of us, what is it going to mean politically and what is it going to mean for the markets? >> it's very clear what it means for the markets. the markets have risen by 33% year-to-date. it was around february 3rd that the first polls indicated a modi victory, in fact, land slide victory. since then, the markets are gained 23%. we are at all-time highs. from the date he actually came to power, that is a gain of about 15%. no two ways about the market's confidence or the industry's confidence that modi will be able to resolve all issues. a cnbc poll indicated -- of ceos indicated that 90% thought the problems were already above average. but if you took individual performances, then the market was much more set. on reform, he's gone very poorly. on foern investment and attracting foreigners, he has scored almost 6 on 10. so very high numbers. his hits are seen as indecisiveness, especially in the structure, clearances at the state level. one of his biggest achievements is putting all the clearances on a digital grid so industry knows where the clearances stand on various issues. he has been more fair to the states, according to a lot ooh politicians. and he has abolished a planning commission which used to be appointed. that has been abolished so states won't feel their power has been intruded on. basically, he's got a very high ranking both from ceos and governments. >> thank you very much. some breaking news is hitting our wires, protesters are breaking into the iraqi parliament and vandalizing the building. that's according to witnesses by reuters. in coming long, police have arrested 19 people following pro democracy protests in the country. it's sparked by beijing's decision to -- activists are planning a series of protests against the ruling, including strikes and a sit in in the city's financial district. still to come here on the show, wilfred is called up from the bench to take a closer look at the battle for tv football rights. >> called up from the bench. i'm not sure i like that. >> we'll be back with more on football from wilfred. >> football if you're a customer, the bt sports gamble pay off. i come to their broadcast studios in east london to find out. ly, everybody. welcome back. apple has reportedly fixed a bug that could have allowed hackers into icloud accounts. the bug has been cited in a leak. >> jennifer lawrence is one of the biggest names in hollywood. but overnight, the young oscar winner took center stage for a different reason after dozens of nude and risk kay photos of the actress appeared on an anonymous image sharing cite. singers ariana grande and kate upton, rihanna. it's a scenario like a comedy shown in which a video goes viral after getting cloes lost in the cloud. >> it went up in the cloud. >> and you can't get it down from the cloud? >> nobody understands the cloud. >> what is most alarming, how an identified hacker claims he got the pictures, through the icloud. hundreds of millions of people. >> we caught up with former federal cyber crime prosecutor mark rash at a security computer conference today in sweden. >> by storing it on the cloud, it becomes a one-stop shop for hackers. hackers only have to break in one place to get everybody's data. if celebrities are vulnerable, it means everybody is vulnerable on the cloud. earlier today, the fbi said it is aware of the issue and is looking into it while apple said we take privacy serious ly. celebrities condemned the leak as violations of privacy. some celebrities say the photos of her are fake, while actress mary elizabeth tweeted, to those of you looking at photos i took with my husband years ago in the privacy of our home, hope you feel great about yourself. another reminder that privacy is one click away from public scrutiny. nbc news, los angeles. now, uk small business is responsible for creating four out of every five new jobs, so more than half of all commercial innovations in the country. according to a new study, the report suggests that they have turned a corner from the economic difficult seen in recent years. the ceo is now with us. that was a more positive result than perhaps some people would have expected, but this is a survey of uk, u.s., divergent results across the different countries. >> there are divergent results, but everywhere is better been the proportion increase has been in economies which have been doing well. so the uk, the u.s., germany. the biggest improvers actually spain where optimism went from the high 20s to the low 40s, a real improvement showing the austerity that they've had in spain is paying off in terms of the -- of the country. >> one of the other interesting things, smaller firms down the scale are the ones struggling most to get funding. that's a very important aspect of the eurozone at the moment. is there anything that can be done to help them? >> i think everywhere. clearly, that has helped for the smaller firms. it's always people with less than ten employees who struggle. it is universal. i think the other issue with funding is the divergence between countries and the uk, 65% of people say they struggle to get access to funding. but in spain, it's 83. so actually, it's bad, but we are relatively better off in the uk than -- >> you say it's getting better. i was struck by the point that one in three small business owners are considering exiting their business in the last three years. >> i was surprised by that. of all the things in the survey, that surprised me the most. it goes to show that many people -- and the other thing is, half are going to retire. and maybe that is a need for consulting a knowledge-based economy which is more a service orientation rather than an inveng. >> and we talk about small businesses, but it's good to be small, but not that small. size doesn't matter when it comes to developing products. >> more than ten people, more than 20 are most positive. and those with more than five. it's the distance, actually. >> we just ahead to the apple story, the hacking story. it came across in your survey, as well, the fear that cyber attack is rising amongst businesses. do you think small and medium businesses don't spend enough? is it too low down on their priority risk? >> specifically on cyber. 70% say they have cyber security, they have fire walls. but that's saying 30% don't. that's a big chunk of businesses which are leaving themselves open to a cyber attack. the apple story shows cyber attacks are risk on. it may be a low probability, but when it happens, it can have quite a big impact. there's a lot to talk about. people are trying to understand how it works. but yes, you expect that to be a real demand across europe and the united states. >> you said that the survey was completed in the six weeks up to summer. how quickly do trends change? i mean, we're looking at something that's been very active on geopolitics, at least, right? and also within a couple of weeks, we might have rate hikes, we may not. do trends change quickly in your experience? >> for a small business, it's local demand. it's a rapid economic deterioration locally. >> interestingly, the firms that have started during the recession, generation of recession are much more focused on the export market than more established firms, may be reflecting the fact that local isn't good enough. you have to tap into growth in asia in order to do that as the growth. again, that means that, you know, euro businesses are more global than they are from the beginning rather than working together at the time. >> as a ceo of a major insurer in the uk, when are you expecting rates to go up and how will that impact your business more broadly? >> the markets rates remain competitive, i.e. -- and we expect that to be the case in the next year or two. we are very affected by events and 2013 and 2014 have been very quiet years. in contrast to 2011 when we had earthquakes and tsunamis and floods around the world. thus far, it's been pretty quiet. >> thank you very much for being with us. the foreign minister in italy is saying the new russian sanctions package will be finalized wednesday and a decision on that will be made on friday. we know that the meetings are taking place as we speak. a press conference is taking place as we speak. >> and russia's lavrov has said that there is a, quote, party of war in kiev which is supported by washington and european nations. so he's really spoken ahead of the nato meeting. these are live pictures coming from moscow here at the moment. lavrov saying there is a party of war in kiev that's supported by u.s. and europe. still to come here on "worldwide exchange," though, it's a question on everyone's mind. will the summer rally sizzle out in september or is there more room to run? find out why goldman sachs is staying long the s&p 500. hello, everybody. welcome. you are watching "worldwide exchange" for the second hour. the euro is hitting fresh 12-month lows on expectations of ecb action. the kremlin says it will review its military strategy in response to nato enlarge. on its border. conceive he warns its una de facto war with moscow. >> apple reportedly fixes the bug that may have allowed hackers to gain accounts to icloud accounts and leak nude photos of hollywood celebrities. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. if you're just joining us, thank you very much for joining us. we didn't have any trade in the u.s. yesterday on monday. and august finished as the strongest august in 14 years. yet we're expecting more -- in the u.s. and that's expected to open up about 10 points for the s&p, nasdaq up 4 or 5 points and the dow up about 30, 38 points. let's have a look at what's happening in europe, as well. europe is quite interesting. it opened mix at the start of trade and has strengthened throughout the day somewhat surprising. ftse mib in italy up 1.25%. very strong. france, 40 basis points and germany around 90 basis points. the uk, the lagger ftse 100 up about 30 basis points. >> i feel like we need to reintroduce you, though. i know you don't want me to, but basically a lot of viewers joining at this time from the states. it was labor day, so a lot of people you weren't watching because you were out at the beach or what have you. this is wilfred frost. we're happy to have you with us. you've been out looking at the business of football and things like that. >> and the money inflation that we're seeing in the football market which is very different from the fundamental market and we'll touch on that later. >> we'll be looking in on the package that you did on these rights. >> indeed. >> so anyway, let's talk more about the markets. i know you don't like me to intrars you, but -- >> i love it. >> take a look at what's taking place in the currency markets. euro/dollar, 1.31 right now, sitting tight at this level. we saw the euro at a one-year low from yesterday's session on the expectations that the ecb could come in and take action on thursday. the dollar at its highest level against the yen since january. very low volumes. it has to be said coming into the day's session due to the labor day holiday. the bond markets, again, very interesting moves in the bond markets with continued buying across the ten-year paper as you're seeing -- or as you've seen, recently not today, as we've seen selling with the yields pushing up, the yield now on the ten-year bund above that 0.9 level we've been hovering around 0.88%, 0.86%. the german and the french who-year yields now being below zero. the speculation that the ecb, they could step in, we could see some type of action from the ecb, there is work to do some type of a full bond buying program, it would essentially mean they would be following in the foot steps of the fed and the bank of japan, too. just to mention, we've got a whole punch of meetings taking place in the banks this week. the ecb, the bank, the rba leaving rates on hold as expected earlier in this session. bank of japan meeting this week. and the bank of canada. to round it up, you've got the manufacturing index and consumer spending for the month of july, as well thank you very much, louisa. lots of data still to come this week. the european equity market is up. the russian minister lavrov has announced a western bank party of war. lavrov said ukraine is pushing for nato membership in order to disrupt peace efforts. meanwhile, ukrainian troops have abandon their defense on monday in the latest of a series of military reversals. the defense minister announced the country's attempt to liberate the east was over and the focus was now defending ukraine from russia. the u.s. president is expected to put pressure on european leaders to spend more on defense. according to reports, the alliance is set to establish a record reaction force positioned in countries close to russia. the russian military in ukraine. meanwhile, the kremlin says it will review its military strategy in response to nato enlargement. it's interesting that lavrov has been so avert, accusing ukraine of wanting to join nato. frankly, putin and russia's involvement is of course going push ukraine more towards europe and nato. >> they haven't made a secret of their desire to join nato, but it's going to take years to reach that. they have to control their own territory in order to join nato. that's one of the issues. it's also interesting to see whether nato wants to get involved in this. they don't have to. we've got a lot taking place in the middle east. i know on the sidelines, they've said they're involved in iraq and trying to figure out strategy, as well. do they want ukraine, as well? >> i agree. but the pro russian ukrainian leader, he was only elected on 800,000 majority. if you take crimea out of the ee wag equation, that shows a less russian ukraine. it's not. russia has pushed ukraine away. >> it would have been interesting to see in hindsight if had europe prened ukraine way back with -- not a binary option of you're either with us or with russia, but some type of option where there's ties to russia, and at the same time you can move towards us somehow. it would have been interesting to see what would have happened, in hindsight. >> in either way, nato has to get putin back to the table. there's no way diplomacy can work if it's just with the rebels. at the moment, there's nothing to work with. >> that's the key point. as one of our earlier guests was saying, you solve things through diplomacy. >> we hope. just moving on from ukraine and russia and just to mention what's taking place with regard to the tropical storm dollie, the nhc saying tropical storm dollie is moving towards mexico. they're saying they're looking at slight strengthening in the next 24 hours until it's anticipated that dollie will be making landfall and they're saying a turn towards the west-northwest is expected by this afternoon. so potential landfall to come. let's taking a look at some of the other stories to come. apple has reportly fixed a bug that could have allowed hackers to gain access to icloud acts leaking nude pictures of celebrities. the bug occurred in apple's find my phone software. it was found to be vulnerable to hackers. most sites -- apple lacked such production. apple says it takes user privacy very seriously. >> apple is reportedly in deals with visa, master phone to turn the iphone into a wallet. reports say users could make mobile payments with the touch of a finger. apple, visa, mastercard, analysts looking at how they're trading in frankfurt. positive mostly, but after the latest security breach, i'm not sure i want all my bank details on my phone, as well, do you? >> no, but i'm old fashioned, as well. i'm having a hard time switching everything to one gadget. i like the calendar where i write things. >> i think that's your age. >> how about you? how safe do you feel having things on your iphone? let us know. find us on e-mail, worldwide@cnbc.com. find us on twitter, @louisabojesen on twitter is where you can find us, as well. >> let's get a look at what's on today's agenda in the united states. the august manufacturing index is without calling for a reading of 56.8 down fractionally from july. at 10:00, we get july construction spending expected to rise 1.2%. and september has a reputation as a very bad month for the markets. it all depends on your starting point, doesn't it? >> indeed. there's a lot of years that have been weak -- strong but then weak. >> but s&p capital iq, they say of the worst 20 months since '87, september is making the list four times, 2001, 2002, 2008, and 2011, as well. if you go back to 1945, september ended higher only 45% of the time, the worst showing of any month out there. traders are saying the psychological pressures and the looming end of the fed's asset purchases could reinforce the september hikes, as well. you're also coming off very low levels of volume, right? >> absolutely. the next week is manufacturing. people come back, they will be weighing up, are valuations high or is what we've seen moving up? >> and we're in complete disconnect. that's at least how it feels with regard to what equities markets are telling us and what bond markets are telling us. we're in complete disconnect and we're in complete disconnection with what equity markets are doing versus the economic data, as well. >> for me, it's two risks. one is a short-term valuation play. if you saw september pullbacks, that could give one more confidence. but the other one, which i think is more of a -- problem is that we've seen what markets did on the face of tapering last may. and i think the rates going up is a totally different equation. we just don't know how, a, the economy will do and, b, how the economy has done. it's a very big difference between pushing rates up and tightening. so i think it will be fascinating to see as they fundamental economies strengthen and the quality gets closer, what -- >> aren't we testing that with verbal intervention with various fed officials? they continue from yellen. but to me, it seems like markets will be ready at least for the first rate hike. >> as you said, a split vote is an important indicator of when that might come. but also, you know, when rates start going up, it can change sentiment quickly. >> i often say, where is the next crisis going to come from? it's very sad, isn't it? crucial. >> you think how is the future going to look and what is the next big item and user in financial markets. if it's not coming from housing or banking, where will it come from? what's brewing as we're busy concentrating? >> absolutely. and we're keen to hear what you think on that. should you be selling in september or do you think that the rally will keep going? what do you think the raiding month ahead has? worldwide@cnbc.com or @cnbcwex. still to come here on the show, luxottica is unveiling changes at the top. do investors like what they see? very good. >> over here, we'll introduce the chairman after the break. meanwhile, though, we'll take a look at how the futures are trading ahead of the open on wall street. we'll see you in a minute. hello, everybody. welcome back. where do we go from here? a management shake-up giving the eye wear giant luxottica a new year. but inest havers see change in a different shade. and apple fixed a bug in icloud that could have allowed hackers access to nude celebrities. >> and luxottica shares are trading lower a day after the italian eye wear giant the ceo will step down. italian papers speculated a rift between the chairman and delvecchio were behind the move. cnbc spoke to delvecchio and asked whether he would become more involved in the operation. >> it's not like i was not involved before. i left him in charge when i was by his side. we'll continue as we have been doing so. we hope to achieve our usual growth of minimum 7% a year and we'll continue this way. we did it for ten years and now we'll do it for another ten years. still to come on the show, actually, back in the day when you were heading back to school, did you go shopping once a year? >> i did. but it was driven by my mother. i don't know that i had much choice in the matter. >> probably. but today, it's different. while it may be on for students, the back to school shopping season is finished. we'll find out which retailers will be cashing in and how the kids are spending today. that's up next. xkç the euro is trading at a fresh one-year low. and ahead of the ecb policy decision on thursday. that's a very important number. many analysts expect the central bank to announce outright purchases of asset backed securities in an attempt to counter weak growth and falling inflation. goldman sachs cut its euro/dollar outlook this week to 1.20 over the next 12 months saying there was plenty of room for mario draghi to talk the currency lower. >> and peter oppenheimer has cut their target. he's with goldman sachs. why? >> i think the dynamics have shifted for the euro. clearly, the ecb are looking for other means to accommodate monetary policy. talking the euro down is within part of that. but there is an increasing departure taking place between the monetary dynamics in the u.s. and in the eurozone and indeed in the growth dynamic. so i think that from a period where the euro was very strong because it was internally financed, you had high domestic phasing for the current account surplus, you're seeing a bigger drive move force. >> is this more a euro/weakness argument or a dollar/strength argument? >> i think bit of both. in particular, we are looking at generalized euro weakness and probably quite attractive. by the end of 2017, we think the euro will get the parity against the dollar. equally, i think there's good arguments for saying generally we'll enter a period of more sustained strength over the next months and years. >> and if we have a look at what draghi has achieved so far, of course, he's got a lot of things going without actually doing that much. do you think this thursday he will have to do anything really force.ful, any outright quantitative easing? >> no. i think it's likely to be more incremental again, perhaps more detail on asset backed security programs. but that's a game changer, it's been talked about and highlighted. it's not likely to actually start before the bank asset quality reviews. so we might hear a little bit more details about that, but outright qe of government securities, for example, i think is still not likely to be on the agenda. >> peter, your chief global equity strategist. i have one question. are markets going to continue higher? >> in equities, i think they are. i think we have a back drop of gradually improving global economic conditions. europe is stag nating, but that's not really a big change. the u.s. is improving now after a period of weakness in the first half. and you're seeing that broadening out in other parts of the world, as well. yet that is combined with a back drop of very accommodative monetary conditions, very low inflation. on a relative basis, equities stall off some value. >> and you're overweight banks, even heading into the ecb's stress test, the asset quality review. >> yes. i think the asset quality review will provide more clarity than investors wants for the banks and that will be helpful. european banks have gone a long way to improve and bolster their balance sheets and we are starting to see a positive provisioning cycle which would be helpful. but important, also, to appear where the ecb would be taking over the framework for the banks and that, i think, will be very important in increasing the vulnerable of capital across europe which will be helpful, as well. >> peter, you're saying with us. we need to talk about some of the trends happening at the moment because summer break officially ends for the final batch of students and the back to school season will keep on going. 48% of teenagers polled by this magazine, they will they'll continue to make purchases into the fall, they'll have their new ipad cover, jeans, etcetera, ready for the first day. jason is the vice president at teen vogue. we can smile a bit and say this is the back to school season, it doesn't mean a lot. it is very important, though, for retailers. no? >> it's a big season. it's a $75 billion season. it's second ohm to the holiday season in the states. retailers have their eye on the season. it sets them up nice for the holiday. we're expecting some nice comps compared to last august. we're expecting to see anywhere from 4% to 5% growth over last august which experienced 3% to 4% growth. >> i noted that 80% of the teens are using a smartphone to shop. that's a shift and a half. >> louisa, this has changed everything forever. the smartphone, as an accessory to the shopping experience has made this generation have more influence than any generation prior. 97% of our readers share images on social media sites of their back to school purchases .that's the crux of this cycle of influence that happens with this reader. >> and you say instagram is the number one social media platform where girls seek inspiration for back to school hopping. how well are companies using social media to drive sales? >> first and foremost, you're there. it means using social media sites to drive people into the bricks and mortar experience, to connect them back to the e-commerce and now mobile commerce experiences and connect with consumers 24/7 everywhere they expect you to be. >> jason, thank you very much. now, coming up here on the show, investors are banking on another lifeline from ecb president mario draghi. our next guest is saying it's too early to go overweight europe. find out why, after the break. in the meantime, let's take a look at how the futures are trading ahead of the open on wall street. the implied open pointing higher. the ats is more than a validation of your achievements. it's a powerful reflection of your drive to succeed. so, forget the gold watch; grab the brass ring... you don't need anyone to tell you that success is yours, because you're busy... ...seizing it... ...drafting it... ...tuning it... making it. the new 2015 cadillac ats. dad,thank you mom for said this oftprotecting my future.you. thank you for being my hero and my dad. military families are uniquely thankful for many things, the legacy of usaa auto insurance could be one of them. if you're a current or former military member or their family, get an auto insurance quote and see why 92% of our members plan to stay for life. welcome to "worldwide exchange." i'm wilfred frost. >> welcome back. i'm louisa bojesen. these are your headlines from around the world. >> u.s. investors try to slug off september sales as the euro hits a fresh 12-month low on expectations of ecb action. so the kremlin is saying it will review its military strategy in response to nato enlargement on its boarders, as kiev is warning it's in a de facto war with moscow. luxottica has a management shake-up. the chairman of the group told cnbc he's always played an active role in the business. and apple has fixed a bug that may have allowed hackers to gain access to accounts and leak photos of nude hollywood celebrities. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. if you're just tuning in, thank you for joining us on the show. let's have a look at how markets are expected to open. the nasdaq expected to open up 11 points, the dow expected to open up about 37 points. we'll be looking forward to the u.s. market open very shortly with a couple of our guests. moving on, european markets have been strong today. they opened fairley mixed and strengthened throughout the day. france, about 50 basis points, um germany pretty strong, as well. 90 basis points. this despite quite a lot of data coming out over the next few days, not least of course the ecb meeting on thursday. lou, back to you. as we've been talking about, september has a reputation as a very bad month for the market. the s&p capital iq says of the worst 20 months since '87, september makes the list four times since 2001, 2002, '08, 2011. we could go back to 1945. september has ended higher only 45% of the time, the worst showing of any month. traders say the psychological pressures on the round numbers of the s&p 500 and the looming purchases could reinforce the stereotype. joining us annoy, peter oppenheimer and dan. dan, i just read out some numbers on the month of september. it all depends on your entry point and a lot of things to see what's happening on what month lt. how are you viewing september coming out of the summer? >> well, i think in general if we look at how the rest of the year looks, it's still a pretty good environment. on the economic front, pretty stable there. nothing too surprising coming from the central bank or from the fed. valuations importantly still look fine. even though we're at new highs for a lot of the indices. the multiples still look good. we think it's still a relatively benign environment for u.s. equities. biggest risk is what might happen in europe the. >> dan, would you be buying europe? >> we're a little cautious in europe on one hand. valuations are looking attractive to the u.s., but there's still uncertainty. while it's too early to say that's been resolved and we can confidently go back into the region. >> peter, we've got u.s. value ages currently forwarded around 16 times pe. what sort of level of earnings do we need to see to justify that? >> well, i think that earnings growth is going to be positive, but is slowing. we're around 6% or so probably justifies that multiple. and the difficulty is knowing what really is different from the multiple in a world where you've got close to zero interest rates. some would argue a lot higher than we're seeing today. i would agree that valuations are not excessive in the u.s. one thing i think makes europe perhaps slightly more interesting despite the uncertainties of the current situation in russia and ukraine is that valuations are a lot lower. of course there are differences between the two markets in terms of the structure sectors and so on. but even accounting for that, i think you have higher risk into the current market and a better potential from here. >> even with economic data, it's still quite soggy in europe. we've been heading the wrong way over the last couple of months. >> the important thing here i think is where the outcome is relative to expect ages. in the summer sell-off in europe, i think markets went a long way to price a higher risk of a new recession and deflation. we don't think that's going to happen. it's not positive outgrowth, either. i think you don't need much growth to fish the markets higher in europe, particularly when a lot of european companies will benefit from the stronger growth in the u.s. is and elsewhere. >> dan, you're slightly more bearish on europe and that you're saying that german yields on the other hand reflect a potential for a japan-style lost decade across europe. >> well, exactly. and if we think about how the equity markets might respond, certainly economic growth we know is pretty flat, including with the recession. but what we really haven't seen yet in terms of equity markets is a turn around in earnings growth expectation. you have to balance what you see are attractive valuition aes for europe and the u.s. and that's what we haven't seen yet. you haven't seen the restructuring taking place at the corporate level. on the economic front, it does matter how willing the companies are able to reform. with his that activity in spain, clearly france, we know the implication of all that is going to be difficult. for a lot of unalternativety, that is not enough to make us eager. >> so what's your u.s. trade, dan? >> generally speaking, we think the markets are overall attractive, but not jumping up and down about it. valuations are not cheap. relative to europe, the u.s. looks good. we think some of the other regions look more attractive. if you take into account risk premiums, emerging markets much cheaper than developed markets right now. they have been outperforming. still potential in gentlemanen pa, kind of going back and forth on whether or not things are going to turn around. valuations give you a belief over the longer term? >> dan, until next time, thank you very much, dan morris. so early where you are, as well. thank you for getting up with us, global strategist at tia craft asset management. >> peter, staying on track, you said you expect a stronger dollar move. what does that suggest for emerging markets equities? >> with the, i think the outlook is a little bit mixed in emerging markets. it's attempt to go look at them as sort of a unified asset class. they haven't been performing really that way for some time. i think on the one hand, you have some emerging markets, see quite big improvements in their underlying deficits and fundamentals. on the other hand, if we move into a period of higher u.s. interest rates, which pushes up the u.s. dollar, i think that could create some challenges for emerging markets, put downward pressure on some of the exchange rates and also some tensions for equities markets where the economies have more fragile economic balances. so i think it's a little bit of a mixed picture. we wouldn't be clearly taking a positive step on em relative to dm. i think some of the markets, particularly in north asia, india which has done rather well do look quite attractive. but more for specific reasons because they are emerging market assets. >> peter, thank you so much for joining us. we wish you a safe flight to switzerland. >> thank you. we've been asking, should you be selling in september or do you think the rally can carry through? tell us what you think the trading month ahead of us has in store. find us on e-mail, worldwide@cnbc.com. find us on twitter,@cnbc.com. no, that was e-mail. sorry. twitter, @cnbcwex. directly to us, might be easier, @lieu wise sabojesen or -- >>@wilfredfrost. eric cantore just left his post in congress two weeks ago, but he's got a new gig on wall street. the former u.s. house majority leader is joining a wall street bank. he'll be advising corporate and investor clients on takeovers and other deals. cantor lost his seat in congress when he was defeated in virginia republican primary back in june. and it's a dark day in atlantic city, new jersey, as the we believe casino closes its doors. on sunday, the show boat casino closes down. in a fitting moment, one of the last songs over the show boat's last speaker was queens another one bites the dust. with the atlantic club shutting in january, atlantic city is now down to eight casinos. nearly 8,000 workers are losing their jobs. the city has been facing increased competition in other states. i was at a casino, for work, and it was literally one of those moments where you're standing by a slot machine and somebody said can i use this machine? and every other machine around me was available. i said okay, fine, so i move. they put in whatever you put in, a dollar or whatever, and literally so much money fell out. >> unbelievable. have you been to vegas and atlantic city? >> i've been to vegas twice. it's interesting. i'm -- yeah. >> i've been three times. i hope we can line up an interview with one of the ceos so i can go out there again. >> just play the machine. don't let anybody play your machine. that is all i have to say. the trial to determine whether detroit's bankruptcy plan will be approved kicks off today at 11:00 a.m. eastern time. this comes a little more than a year after the motor city filed for the biggest bankruptcy in u.s. history. detroit hopes to cut $12 billion in debt to a more manageable $5 billion. the trial is expected to last until at least mid october. coming up, more on the fallout of the famous phones being hacked. reports saying apple's icloud software had a major flaw that could have allowed hackers to gain access to several celebrity phones and photos. more details, next. welcome back. it's back to business. a management shake-up for luxottica. a new look. will investors see the change in a different shade? apple clears the cloud on a bug that allowed hackers to access nude photos of celebrities. >> hi, everybody. welcome back to "worldwide exchange." as mentioned, storm clouds have been forming around apple over the last couple of days as hacker may have used a bug in the company's icloud software to gain access to some very private photos on some very famous people's phones. jack jackie deangelis has more from cnbc headquarters. this is serious both for the people involved and for apple as a company, as well. tell us what happened. >> that's right. good morning to you, louisa. right now, reportedly apple is fixing the bug that may have allowed hackers to access the icloud accounts of several selecties that you mention dollars, including jennifer lawrence and kate upton and posting nude photos of them on a webb site. the weakness occurred in apple's find my phone software. the bug was exposed on the cochairing site. the photos were leaked on sunday. the sign my phone login page was found to have been vulnerable in attacks or when hackers created a tool to test thousands of passwords against a user's account until they find the right one. end gadget says apple lacked this protect. the source of the hack is uncle unclear. britain's -- quoting appear anonymous hacker saying he was a collector, not a hacker. some say their posted photos are fake, others don't. a spokesperson for lawrence said she's contacted authorities to investigation the hacking. upton's lawyer calls this an outrageous invasion of her privacy. all eyes on apple when it comes to issues like this and everybody watching for that iphone 6 next week, too. guys. back to you. >> thank you very much for that. it's especially a story that i think we're probably not going to hear the last of. >> we've been talking about in this week. cyber security is a big risk to market. now, we're 2,000 days into this bull market run, but can the stampede continue? we'll preview the trading day, next. welcome back. let's have an update on european markets. very much in the green. that wasn't the case opening at the day. that was mixed. they have strengthened throughout the day. that's despite quite a lot of data releases that we've got coming up over the next few days. the most significant, the ecb meeting on thursday. the markets suggesting the ecb will likely be easing given that we've got italy up 1.2%, france up 0.5%. germany up nearly 1% and the ftse 100 lagging them. we haven't had much movement today in the euro. it's only off 10 basis points, but it is hovering around 12-month lows. the other main areas today, i was going to mention the yen, but the yen has weakened significantly today, and that has allowed the nikkei to hit a two-week high, i believe. on to u.s. futures, as we said at the top of the break, very, very strong markets in august. the strongest for the s&p in 14 years. yet the momentum looks like it's going to continue. so how do you make money in markets like these? here is what some of the experts have been telling us this morning. >> prices can go lower short-term. i don't think prices can go to, let's say, $70 a barrel for a prolonged period. because i think the cost pressures in the industry are too great. >> look at the strength and the yen together of the two. i think both are sitting right now because i think there's a bit of a data drop relative to expectations. i think the swiss franc will creep higher. it has done pretty well in the last month or so. and i think that turn around is in the data. it's a very interesting market. there will be reforms. the new government is very committed to have structure change in the country, to tackle the big economic problems. but at the same time, as you said, the market has been very strong after the value of one year. and after the elections, the last six weeks or so, markets have moved a bit sideways compared to the overall emerging market index. well, we're just giving you a look at what's on today's agenda in the united states. the august ism manufacturing index is out at 10:00 a.m. eastern time, with forecasts calling for a reading of 56.8, down just a tad from july. at 10:00, we get the july construction spending through. ben lichtenstein is president at tradersaudio.com and he joins us. ben, i'm loving the glasses, absolutely loving them. very, very cool. super fly. ben, talk to us about how you should be trading the markets at the moment and what your expectations are heading into september. >> well, i think at this point for the most part, you really have to be focused on long sided opportunities. this market continues to be on a tear to the upside. the only real concern amid all of this bid activity and higher highs and higher lows is just the rough low. it's continued unwillingness to participate for the most part all year. it's been diversion, unwilling to see the new higher highs on the year that we've been seeing in the s&ps, nasdaq and the dow. but really, the focus, i think, is also on the dollar as we see real good strength in the dollar getting up into these new year highs. continued strength there, but for the most part, i think as we enter into september, really, nothing has changed. we've rolled out of the summer months, if you will, and that psychological doldrum type period is behind us hopefully. but, again, as long as we continue to see higher highs and higher lows, i think volatility will remain relatively low. we saw the vision go out around 12 last month. i don't think any of the real fundamental contributing factors that have contributed to sustain this rally the upside has really changed. i think for the most part, we continue to see status quo, if you will. >> ben, ukraine and russia here in europe, are u.s. investors concerned about that conflict in geopolitics in general? >> there is some, but for the most part, it's kind of been shrugged off. for the most part, we've been able to avoid some sort of a high energy sell-off or anything sustainable to the downside in reaction. again, if you look at the fear index, if you look at the volatility index, you're looking at 12. i don't really see that as a major factor right now. you know, it seems like we're one news headline away from some major sell-off, but each one of those sell-offs has been bought. and so, again, they end up turning out to we excellent buying opportunities as the market polls back. but yes, there is concern. for the most part, i think that as long as it remains at the level of concern, if you will, that we've been seeing over the last month or six weeks or eight weeks or whatever it's been now, i don't think, again, i don't think that it's going to be the one contributing factor that's going to derail this market, if you will. >> ben, what do we do in the meantime? if we're one headline away from some type of correction, what do we buy from before? >> well, i think that you continue to play the market in the way that you have. i think that you look for the market retreating and pulling back below areas of value, that the market has established on the way up. i think until that starts to happen, again, i think that this market continues to be on a tear, if you will. unprecedented move to the upside. but this market has established areas of value on the way up. we talk about these. these are the footprints, if you will, the paths that the market has taken. and until the market starts to pullback and, you know, retrade some of those areas of values with significance, with sustainability, and energy and conviction to the downside, again, i think you continue to play this market from the long sided position. i think you look for failed break outs to the down side. i think you look for high energy breakouts to the upside and look for sustainability. unfortunately, it's tough to pick targets, if you will, as we breach unchartered territory. i don't think that's a reason to sell the market. >> ben, we've got to go. got your message. again, loving the glasses. i've got a pair like that at home. i do. i've got a couple pairs like that. i'm blind as a bat without any glasses or contact lenses. ben, thank you very much. good to see you again, ben lichtenstein president of tradersaudio.com. we've been asking, should you be selling in september? do you think the rally can carry through? jeff tweeted in to say september is a dividend month. it takes a little bit of time to heal after that. >> it's been a lovely two days, thank you for the warm introduction to "worldwide exchange." >> thank you for gracing us with your presence. you're continuing on, i'm dashing off to berlin now. i'll see you down the line from berlin. >> thank you very much, louisa. i'm be bath tomorrow with carolin roth. good-bye. >> bye for now. in my kitchen.enough te [ female announcer ] need to hire fast? go to ziprecruiter.com and post your job to over 30 of the web's 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. good morning. welcome to "squawk box." a new month for wall street and a fresh batch of economic data, including friday's big employment report. president obama heading to europe today as nato forms a 4,000 troop force to react to russia's involvement in ukraine. and hey, you, get off of my cloud. the fbi and apple investigating a massive leak of nude celebrity photos. uh-oh. including oscar winner jennifer lawrence and super model kate upton. it's tuesday, september 2nd, 2014. "squawk box" begins right now. ♪ good morning, everybody. welcome to "squawk box" here on cnbc. it is time to get back to work and back to school. we are happy to be here with you. i'm becky quick along with joe kernen and andrew ross sorkin. there is a big deal in hoops that's happening. kevin durant is sticking with the swoosh. he will stay with nike in what could be a $300 million endorsement deal for the next three years. under armour getting stuffed on that. let's get to andrew. we have breaking news on dollar general and family dollar. >> thank you, becky. we do have news this morning. dollar general is planning to raise its all cash bid for family dollar to $80 a share. here is what's happening as far as we
its lowest level since july 2012. russian prime minister dimitry medvedev says sanctions against russia have damaged international relations. speaking exclusively to cnbc, he says moscow has not closed door to anyone, but a reset with the u.s. is not possible right now. >> no, of course not. it's absolutely impossible, let's be clear. we did not come up with these sanctions, let's be clear. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> shares in shire are plunging at the bottom of the ftse after abvie said it would reconsider its takeover. you can see it's down 26%. shire has urged the u.s. giant to proceed with the deal saying the group could face a 1.6 billion if it walks away. the news is looking at overtakover targets circled by firms looking to take advantage of stable tax arrangements in the uk. as tra and smith both down 4%. catherine, a very big move for shire off the back of this. >> absolutely. despite shire insisting that this deal isn't done yet, the market seems to think that it's no longer with us. 30%, levels not seen since before news of this deal first emerged back in the summer. so it looks as though as far as the market is concerned, anyway, this deal is dead in the water. if you look at the abbvie statement from today, what it's telling us, they're being forced to consider this deal as a result of the u.s. treasury deal. this is a change in tone from a couple of weeks ago when the chief executive was reiterating that the deal was so important for abbvie. they're going to go back, the board is going to meet again early next week. shire is losing some of its top in the share price today. it's going to get $1.6 billion for essentially not doing that. that is going to look and the very fact that this is built into the deal suggests shire were nervous even back in the summer that this deal could fall through. we're seen bigger and bigger news. >> what does this news tell us about the broader pharmaceutical sector, because we've seen a surge in m&a as a lot of these drug firms are looking to grow their revenue as many of these names are dealing with patent expiration. >> we still don't know whether the senate is going to pass these laws. i think there's a lot of caution here with a lot of these firms. having been overly cautious, of course, you have to bear in mind the angle to the u.s. government has been very, very against these kind of deals. we heard the president himself talking about them and suggesting that almost immoral to be taken your profits off away from the country whose business was originally grown where the revenues are. >> catherine, thank you very much for that update. moving on, csr shares are higher after qualcomm agreed to buy them ahead of the deadline for csr to accept another offering from microchip. csr up 31%. intel's first quarter profit rode 12%. the company shipping more than 100 million for the quarter in the first time as pc sales improve as efforts to put more profits into tablet sess bearing frooud fruit. revenue could grow 10%. >> there is no guarantees in business, but i think we're benefiting from a couple of things they're. we've got great technology coming into the pc segment. we're seeing growth at the high end, lower prices bringing back the share from tablets. we're starting to participate in a wider range of devices. our data center business is benefiting from computing and connecting to the internet. >> intel providing a bit of relief to all the bulls out there. the semi conductor index down 13% over the past three months is now trading in correction territory. >> that's an interesting thing in those results was the main part of that uptick for sales. they're on track for their 40 million chip sales, the tablet sales for the year. but still making massive losses in that segment. >> other chipmakers find ways to continue to that business. >> given the news around chips and the movement that we are seeing in the philadelphia semi conductor index, do you think now is a good buying opportunity? we're seeing names in the semi conductor index trade into double digits. e-mail us, cnbc.com or sweet us, @cnbcwex. flat to relatively down is what i was going to say. but as you can see on the interday charm, in the last five or ten 34i7bs, the stoxx 600 has moved sharply lower. it's down 0.8%. we've had a flat open in europe and moved more significantly down in the last five or ten minutes. let's look at which individual markets is leading that sell-off. the ftse most significantly down 1.3%. some of those tax inversion targets at the bottom as we suggested moments ago. germany is off 0.6%. it lowered its gdp forecast yesterday and inflation numbers came out this morning in line flat for the month. france is down 0.6%. italy down roughly 1%. now, let's get to some more individual stocks. a big day for shuffles in europe, a new ceo of balance four. qinetiq off 9%. bg group has posed hell ga lune to take the head position. let's look at bonds. an interesting move in the three-year, low for the first time since may 2013. that negative sentiment compressed yields across the board over the last week or so. the u.s. ten-year at 2.2%. just ten days ago, we had the 2.2%. incredibly low yield. and the uk, 2.11%. it was at the start of october, around 2.4%. within europe, the uk is seen relatively as a safe haven. the u.s. dollar gave up a bit of its recent gains. yesterday and today, the u.s. dollar rebounding yet again. u.s. dollar/yen, 07.23. sri jegarajah is standing by in asia for us. good morning to you, wilfred. it was surprising that we saw that zew a day earlier and we saw a downgrade to german's economy. yet the markets over here managed to slug off those european growth concerns and put it down to buying at the lows and some bargain hunting. that is why we have a fairley pro risk day today, all in all, is for the asian markets. we have some inflation numbers, very subdued. that speaks to continued stress in the chinese economy, continue very subdued domestic demand, overcapacity in the industrial product side, as well. yet the markets managed to shrug that off, too. perhaps they are dealing with the idea of further stimulus. we've seen some composure. the nikkei has managed to climb back above that 15k handle. seema, back to you now. >> sri, thank you so much. coming up on "worldwide exchange," i think i might have got carried away. here why u2 frontman bono has issued an apology to his fans. no such apology from irishman michael noonan as the fading out of the double tax loophole. drivers will enjoy the price cut at the pump, but will you splash out more this holiday season? we will want to hear from you. that's coming up next. a single ember that escapes from a wildfire can travel more than a mile. that single ember can ignite and destroy your home or even your community you can't control where that ember will land only what happens when it does get fire adapted now at fireadapted.org russia secured their trade relations with china with -- with cnbc. medvedev said it was not politically motivated. geoff is in moscow with more. >> yeah, you could take that at face value if you like or you can dig a little deeper, wilfred. and it's clear that russia itself increasingly isolated as a result of the several rounds of sanctions we've seen so far. not only politically, but of course, economically. that sums up damage here to the economy in the latest round of sanctions, which have limited access to the capital markets have been particularly painful and will become increasingly painful if they remain in place with so many russian companies needing to service their foreign currency denominated debt. so this is a reason why now the russians are trying to fast track some of these deals with the chinese and, as you say, nearly 40 deals inked over the last few days here. so how is this being portrayed locally? well, some of the russian newspapers have actually talked about this being an arranged marriage, maybe something that neither partner wanted to rush into, but has happened as a result of the sanctions regime. let's just listen to what the prime minister told me about the motivation for these deals. >> translator: in short, these are not political considerations. it is our choice. what is it based on? russia is both a european and an asian country. which is why we trade with europe and are willing to continue to do so. our trade with the european union reached about $420 billion last year. and we also trade with asia, where china is our largest partner. so once again, these are not political deals, but an informed choice. at the same time, we need to take note of everything that happens around russia. if some of our projects with europe, america and others are put on ice -- and i'm not talking about the reasons behind this -- we logically move those projects to other destinations. >> do you see the action that you're taking here alongside china as a way of trying to reduce the dollar's significance globally and to try to marginalize america's power economically in the world? >> translator: we have nothing against the dollar. and i don't think china has anything against it, either. but we believe a modern currency system should be better balanced so when one of the currencies is sagging, this should be compensated by other global reserve currencies. in this sense, i'm only talking about my impressions which have not changed since 2008. i believe that we need six or seven reserve currencies to create the required level of financial stability and they should include the dollar, the euro, the pound, and possibly in the near future the yuan. we also considered the ruble, but this is a goal more a more distant future. we believe this would be a more financial structure. the dollar is the main reserve currency. it's a fact, no one can deny it. more over, as you know, we have substantial gold and firm currency reserves which we keep in securities. and the bulk of these securities are dominated in dollars simply because the market of dollar denominated securities is the largest in the world. i'm not sure this is a good thing. not because we don't like the dollar, but because it makes uses very dependent on the u.s. economy. the u.s. economy has started growing again, which is good, but we don't have confidence that it won't enter another recession, which would be bad for everyone. this is the kind of dependance that we should avoid in the global economic system as i see it. and i believe that many rapidly growing economies share this view, such as the economies often identified by the abbreviation bric, namely brazil, russia, india, china and sosouth africa. but not only them, i think this will benefit the global economy. >> and just as an amendment to this story, wilfred, many germany used to be russia's main trading partner. now china has taken that place. and i think as long as this sanction regime remain necessary place, the russians are increasingly forced to follow this pivot east policy, as they call it here. we'll only see european partners fall back and perhaps the russians and others who are prepared to step in and take their place increase the level of trade they do with this economy. back to you. >> geoff, thanks very much and a great interview there with the russian pm. we'll be playing more of that throughout the show. german inflations remain stable in september. the figure keeps up pressure on the ecb to add further stimulus to boost the ur ro row zone recovery. it comes amid an increasingly gloomy outlook. >> and let's recap some of the most recent data we've been getting out of germany. industrial production came in lower. so did factory orders. german exports fell 5.8%. some analysts pegging instability in russia and sanctions imposed by europe on russia. the most recent read was that zew which slumped into negative territory. will this change angela merkel's strategy going forward? wilfred, that will be a question going forward. >> that is, of course, a big question. let's put it to our guests now. also with us, paul heinz. danielle, let me put it to you first, do you think this worsening damage will allow them to change their policy looking forward? >> well, i think the data overall is a surprise to the downside. even though as a whole, recessions, just a sluggish gold which may feel like a quasi stagnation. it seems the main policymaker's comment being more on eventually support more investment. but whether this means actual public spending rather than just putting in place policies to support investors more generally, such as more public partnerships as an example. another possibility is to play with the competition. the budget could make it more, of course, friendly. so far, we haven't seen actually policy, but if the dollar continues to surprise to the downside, there may be some shift, though not very big in overall economic policies. >> thank you. germany not only, of course, in the focus because of their own economic data, but also across the eurozone, being blamed for that weakness. are they right to continue with the terms and continue with the austerity rhetoric? >> austerity is correct. when it comes to tax hikes is dead wrong. for tax rates, cut expenditures is tough. >> and that should be done across the eurozone? >> i think so, yes. >> and it's back down to the individual governments or is germany -- it's down to the individual government because you don't have a federal government. >> absolutely. but i think a lot of them are refraining from that because of german politicians stopping them from breaking the stability and growth pattern. >> well, that pact has been broken for many years. and what europe needs is lower tax rates to stimulate growth, to stimulate work effort and they need less topic expenditures to kick people back. >> and i guess the question is what is the likelihood of that actually taking place? >> i think the likelihood is increasing with this rather depressing numbers. though i would add you shouldn't look too much into the most recent month on month data. i don't think that we have a technical recession going on in germany now, but there is very sluggish growth. and some other numbers, like container imports, retail sales have not not that bad in germany and in europe in general, in the eurozone in general lately. so it's not all bad. but the problem now is that with interest rates at rock bottom, okay, what can be done? >> olivie, a new recession. so mario draghi, he has said it himself. people are praying, please, don't qe, what can qe do? >> what is there left to be done? is this now out of the hands of mr. draghi and into the hands of the individual government? >> the argument here is similar to the one we're discussing on fiscal policy. to the extent that the data, not just the hard number, but the surprise to the downside. this would re-ignite the debate of whether the ecb has done enough. >> there is another one in december. it will expand their balance sheets and in a sense will put in place policy, but it's not for sovereign debt, not for public sector but for private sector ones. the pressure to do more will come back. but in reality, i think when you think about public sector qe, the market itself is doing that. >> bond yields are at a record low of the eurozone, so there isn't much for yields to pull further. >> and given the weaker than expected data coming out of the eurozone, the euro continues to weaken against the u.s. dollar. how much farther can it go from here? >> we have bearish, medium term on the euro. the forex makes strategy weaker within the next 12 months or so from where we are today. but it's beneficial for the euro area economy in many ways. that would boost exports to some degree. you also have some inflation into the region and finally, it helps overall rebalancing by making more expensive and exports cheaper. so in the countries that still are adjusting their current account, that will contribute to that adjustment. this is the main effect of the policies that we have seen so far. >> daniel, thank you very much, from morgan stanley. also thank you to tor hein. still to come on the show, rio tinto's iron ore output hits a record high, but will volatility rock the mining giant going forward? more on the first quarter update, coming next. slier considering a $55 billion takeover of a pharma firm. >> but a deal is on the horizon for qualcomm. the u.s. chipmaker offers $2.5 billion to london rival csr, sending its shares soaring. extending losses with wti hovering at $80 a barrel, the move starting a sell-off. prime minister medvedev says sanctions against russia have damaged international relations. he says moscow has not closed doors to anyone but a reset to the u.s. is not possible right now. and we're going to have a look at sterling as we await the uk jobless number. the data is just out. the unemployment rate has fallen to 6% for september. in august, it was 6.2%. it was forecast to be 6.1%. it has come in at 6%. so slightly better than expectations. sterling popping up on the back of that, it's at 1.5935. up 20 basis points for the day. this comes as inflation slowed in the uk to 1.2%. retail prices fell more than expected. does this raise the question of whether the bank of england will raise rates sooner than expected? let's poll that question to our uk business editor, helia. >> what's happened today is another shift in the right direction. but it ironically makes things even more difficult. 6%, that's really close to the number we averaged out before the financial crisis is. unemployment in the uk was around 5.7%. remember that the uk and the u.s. have quite similar patterns in terms of employment in the recession we had mass unemployment up to 8% here, up to 10%. then you came down. we are now close to precrisis levels. so we're now topping 6%. remember, the mark carney forward guidance originally was about going below 7% unemployment. the problem is, inflation. as you said. and wage inflation has been very weak. we've got that problem in the states, as well. >> coming with the wage inflation number, in fact, average everyonings has come in at plus 0.9% in august. it was forecast at plus 0.8%. it's not a huge ramt, but it is better than expected given that we had core cpi yesterday weaker than expected. >> yeah. earlier in the year we closed the gap. we had wage inflation finally, finally meeting the crest of what you pay for your fuel, what you pay for your toe mateos in the grocery shop. and that's the point is that in the uk, what do you want? you give a little, you get a little. and what the government would tell you is that their plan has been working because essentially it's more important to have people in employment on very suppressed wages than to have unemployment. the problem for the bank of england, of course, is how do you justify keeping interest rates at this emergency level low when you have this very, very high employment rate and getting close to the kind of full employment rate that we saw before the precrisis. so you've got that conflicting data. so that's the difficulty. low inflation so no inflationary pressure in terms of cpi, but you have falling unemployment. and you've got great grades, as well. >> lowest unemployment rate since 2008. that came in higher than expected. you have to wonder if that does change the situation in terms of whether the bank of england will raise rates, something that we'll be watching very closely. we are seeing sterling strengthen against the u.s. dollar, a very different situation yesterday when that slowing inflation number resulted in the sterling selling off. >> inflation was a shocker yesterday. it has to be said. it was quite a big data point that came in unexpected. >> absolutely. helia, thank you very much for joining us. let's move on from cable and have a look at european markets which are in the red today. they opened basically flat, and they did weaken about an hour into trade. the ftse 100 is the laggard. down 1.1%. that's because some of the tax inversion deals have been falling shy of 333% so far today. germany is down 0.5%. france down a similar amount and italy down almost 0.75%. let's have a look at the stoxx 50, as well, for a broader indication of what's happening in europe. it's off 0.64%, continuing its downward trend for the month. >> now, intel beat its numbers. >> intel is the best performing stock in the dow this year, but could the chip giant continue to please investors? intel reported shares of 56 cents on revenue that jumped to 54.6 billion. so ip on the bottom and the top. looking ahead, intel said to expect q4 revenue of 14.7 billion. accepting estimates. here is what the company's cfo said about the results. >> we had our first quarter ever of more than 100 million units of microprocessor shipped. and record ever revenue. and we were operating profit by 30%. so we saw a pretty strong quarter, a little better than we expected. >> drilling down into the business line, intel said its pc cline group saw revenue just to 9.2 billion. that is better than what analysts forecast. that has been the story for this year. pc sales bert than expected. the question is how long that continues. its data have saw revenue jump to 3.7 billion. in line with what the street predicted. intel making a big push into mobile. the company offering subsidies into companies that use technology. josh lipton, cnbc, silicone valley. rio tinto has reported a 12% jump in iron ore output saying it was on track to meet 2014 targets despite volatility in iron ore price webs chief executive sam walsh said the company will continue to generate strong cash flow and return for investors. the company declined to comment on a recent takeover approach that is rejected from rival glennco exstrada. let's bring in john meyer and talk about rio tinto's better than expected numbers in terms of iron ore production. does this change sentiment around this stock which has been volatile as of late, a lot of that having to do with speculation over a deal with glencore? >> i think it improves sentiment. it's building on good numbers and i think they beat quite a lot of forecasts there. so you've got two things at play. rio tinto commanding an ever greater share of the market. they are largely offsetting the price. that's pretty good for them. >> do you think that potential takeover for glencore signals that they at least believe iron ore prices have bottomed? >> i'm not sure it's about that. i think the iron ore business is clearly where the bulk of the business comes from. but glencore is very good at making numbers out of the commodities. surely they would like to do more and i'm sure they would be good at it. but rio has run that business very well. for glencore, it's about making more out of parts of rio tinto. i think that also will come back again. >> it's an odd one with glencore. i still think it's the old mold of seeing a trader. but if they buy a big miner, do they cease to become a trader? >> i think we can look at glencore as two businesses. they are primarily a trader. they run that side of things really well and that's where they add value. but they're pretty good on the mining side, too. they empower the local executives, they enable these guys to push ahead with expansions. they're good with allocating capital. good discipline in there and i think the model has proven itself very well. >> john, what about valuation? it's currently trading at nine times forward earnings. is that a reason alone to own the stock? >> yes, it is. that's a low valuation. i think it reflects where we are within cycle. but the u.s. is going very well now. and i think we've got more stimulus packages to come. maybe some soft stimulus in china and definitely more liquidity to come out of the eurozone. >> definitely a very active space. thank you for your time, john meyer. moscow has proposed building a gas pine line between russia and japan. the move could strengthen ties between the two nations as russia faces a setback from western economic sanctions. we have the story live from tokyo. >> according to diplomatic sources, the plan is to connect the two. electricity output is currently transferred to japan in liquified form. a gas pipeline would be 30% to 40% cheaper. this comes after russia continues to face crippling sanctions from the g-7 countries. >> japanese government officials acknowledge that by using the pipeline. russia is trying to win over japan and drive a wedge within the g-7 line. that could lead to a relaxing of the sanctions. if the plan goes forward, it would be the first pipeline that could span directly to foreign countries. there are speculations that the issue may be discussed on the meetings scheduled between the two nations next month. however, it is a delicate issue for japan since it will be difficult to pursue the plan without approval from its ally, the u.s. this relationship with russias has worsened with the uk crisis. that's all from the nikkei. back to you. >> thank you very much. still cocome, we bring you more of that exclusive interview with dimitry medvedev. geoff asked the russian prime minister some tough questions, including whether russia's ultimate aim is to bring back the ussr. we leave you with his answer. >> translator: do we want to restore the soviet union? it is impossible to restore what is gone, obviously. i was born in the soviet union at about the same time as you, although we lived under different systems. we still listened to the same music, as we found out. but the world has changed since then and the soviet union no longer exists. we have the russian federation, based on a constitutional adopted by our people. this constitution proclaims the same set of values, such as are accepted by the absolute majority of human kind, notably, the supremacy of human rights, democracy, the protection of private property, market based development and so on and so forth. i won't list them all because they are universal values. so nobody wants to go back. there is no returning to the past. >> the estonians can feel safe that you're not coming after their russians? >> regrettably for some countries, including small ones, this is simply a way of consolidating elite. we all remember how it works. the russians are coming so we mute unite and under this banner hold parliamentary elections. your customers, our financing. your aspirations, our analytics. your goals, our technology. introducing synchrony financial, bringing new meaning to the word partnership. banking. loyalty. analytics. synchrony financial. enagage with us. welcome back. last month, apple had two files that got downloaded to play lists. here is what bono had to say. >> i had this beautiful idea. got carried away with ourselves. artists are prone to that kind of thing. a drop of megalomania, touch of begin rossty, a dash of self-promotion and deep fear that these songs that we poured our lives into the last few years might be heard. there's a lot of noise out there. >> a dash of self-promotion, very much tongue and cheek. i think on this particular example, fair play because i'm sure apple approached them, offered them a huge amount of money and that's up to apple how they deliver it to their customers, not youtube. on this one example, i'll stick with bono. >> i'll stick with bono. in other news, heightened global fears continue to weigh on crude prices. 41 out of 43 stocks in the s&p energy sector are now down over 10% since oil hit highs of the year in june, so a big move in the energy space. meanwhile, u.s. retail sales in september due later, expected to show the first monthly decline in spending since january. could we see an uptick next month as customers feel the effect of cheaper energy prices, especially when it comes to price cuts at the pump? we want to hear from you. let us know how you're spending the cash you're saving at the pump. perhaps oil prices are making no difference at all to you. if you want to join the conversation, get in touch with us. worldwide@cnbc.com or @cnbcwex. >> this come ahead of the holiday shopping season, so a critical time. it will be interesting to see if consumers take that lower gas price and use some of that money they're saving on other goods. >> particularly high in europe, but stickily in the u.s. it's been much lower. irish finance minister michael noonan has announced his budget for 2015 amid increasing pressure from u.s. regulators. this as u.s. firm abbvie says it will reconsider a deal for shire due to the tax clampdown. let's talk about that irish budget. from the headline, it looks quite positive, the first year in quite a few that there was no serious austerity measures. but i noticed that you thought it was a, quote, kick in the teeth for irish entrepreneurs. >> yes, there was a social charge increased taxes on the highest producers in ireland. the irish economy, and had this is a tax situation you described slightly earlier, the irish economy is currently geared towards attracting foreign investment. obviously that's very, very important to us. remaining independent and being able to exercise tax competition is crucial. however, domestic tax policy is loaded in a way that punishes domestic entrepreneurship, the start upculture, sme and the self-employed. they are the biggest producers that they had in our domestic economy and the budget yesterday unfortunately didn't do anything for them and, in fact, these are the people that have been paying the bills and that have really, i think, been taking a big part of the brunt of the so-called austerity measures. i would have expected them to get a break yesterday. they didn't and that was a missed opportunity. >> and how will the crackdown impact ireland's economy? they've been helping able to employment as well as business spending. >> these investors are hugely important to our economy. tax competition is essential for irish growth to be able to continue. and for the success story of ireland which has, you know, hit a bump along the road, but for the success story of ireland in the past 30 years to continue. the fact that our tax competitiveness is constantly under attack is something of grave concern. we were given guarantees in the second lisbon referendum that the eu would not interfere in our tax affairs, yet yesterday we had an eu commissioner congratulates himself and giving himself a pat on the back for the pressure the eu ex eithers. it's breaking their proposals around the lisbon treaty in ireland, celebrating the fact that this pressure has brought some result. i'll say this, there is going to be a pattern type arrangement put in place, we will remain competitive and those foreign investors who are looking at ireland as a destination i'm quite sure will find uniformity from every political strand in ireland, that we will defend our tax competitiveness and ireland will remain a solid plate for them to invest. >> the u.s. secretary of state john kerry says the u.s. and russia have agreed to share some intelligence regarding the fight against islamic state militants following a meeting with his russian counterpart, survei lavrov in paris. but speak to go cnbc, dimitry medvedev says international relations have been damaged as a result of the sanctions. he will be traveling to brisbane for the g-20 meeting hosted by australia. geoff joins us now from moscow with the latest. geoff. >> yeah. there are a lot of people unhappy with the russians, let's be quite frank about this. we've had two rounds of sanctions imposed. this g-20 story is just the latest ip carnation of what has been a long running issue this year, not only the incursions in ukraine, but the tragic downing of mh-17. vladimir putin is set to go to the g-20 meeting in november, but there are those in australia who would rather not see him there, given a number of australians died in that tragedy. tony abbott used this phrase. he said r he said he would give vladimir putin a shirt fronting, which would a number of people outside of australia what this actually meant. it seems it is a term for a tackle in australian rules football. i had the opportunity, of course, to talk to the prime minister so i asked the prime minister what his response was to this quite undiplomatic language from tony abbott. let's listen. >> president putin will be going to the g-20 meeting. the prime minister of australia, who has used this peculiar term which we're all trying to understand. he says he is going to shirt front the president, apparently, which is a reference to a kind of tackle they do in australian rules football. i wonder if he's aware of the president's prowess on the judo mat. >> this is a question for the australian prime minister. i don't have the honor of being equated with him, but i knew, too, of his predecessors and had good relationships with them. if he likes to use sports terms, let him go ahead. mr. putin is quite adept at sports and they could have forceful debates. that said, serious politicians should choose their words carefully. >> now, this is getting quite a lot of play in australia as you would imagine. when tony abbott first made the comments, there were those domestically who wondered why he was using this terminology. well, they've heard it now in moscow and they're not impressed. having said that, this is a serious issue. clearly we want to see some progress into the investigation of what caused the downing of mh-17 and if mr. putin's trip to the g-20 meeting can help us do that, then i guess he should go. wilfred, back to you. >> thanks very much, geoff. for more of geoff's exclusive interview with the russian prime minister including more on those comments on his australian counterpart ahead of the g-20 summit, head to cnbc.com. and we want to update you on the story, of course, on ebola. a second health care worker at texas health presbyterian hospital in the u.s. who provided care for that first ebola patient has been diagnosed with the disease, has tested positive for ebola. we'll deep you up to date on the condition and the state of that health care worker throughout the show. now back to the ceo of networks. before we talk about europe and ireland, let's talk about russia after that interview from geoff. is the biggest fallout here not sanctions, not oil industry, but just the pr, what people think of russia in the global economy? >> i think it's more than that. congratulations to cnbc and to geoff for getting that interview. it was very revealing, i think. you know, the fact that you have this pr exercise that -- where we hear about, you know, the respect to human rights and the integrity of the states and that the estonians have nothing to worry about neglects the fact that russia invaded ukraine. it violated the boarders of a sovereign state. there are ample evidence of russian artillery actively operating in ukraine to shoot down of the malaysian airlines airli airliner. it's a real shame. europe needs russia. i suspect we're going to have some dpifkt challenges and that we will see sanctions being faced off against this coming winter and i think gas will be used as a tool in that exercise. it's happened, we need rush a ya. i agree with him that issues like isis will the most -- issues that need to be dealt with right now. >> you were saying you used to be an investors 234 russia. what needs to happen for you to get interested back in russia? >> hopefully russia will change. hopef hopefully it will start respecting tin tegty of ukraine's boarders. hopefully a solution can be found for the ukrainian situation. then we can get back on track. we want to quickly apologize to our asian viewers who missed the end of geoff's interview with the russian prime minister. also want to say thank you very much to declan for joining us. let's have a quick look at european markets, what they're doing before we go to break. we're in the red across the board today. the ftse 100 is the laggard, down about 1.3%. germany is down about 0.9%. italy and france down both 1%. let's have a look at the u.s. market ahead of trades. u.s. futures point to go a negative open for the s&p and the dow joins down 4 points and 12 points respectively. the nasdaq expected to open fractionally up. >> wilfred, you were just talking about the markets. could the sell-off mean very good buying opportunities? we'll discuss with an expert. plus, crude oil prices trading at a four-year low. does that offer an opportunity? we'll discuss that, as well. welcome toe "worldwide exchange." i'm seema mody. >> and i'm wilfred frost. >> the u.s. clamped down on tax inversion hit takeover targets in london. shares in shire plummet after abbvie says it's reconsidering its $55 billion bid. but a deal is on the horizon for qualcomm. a rebound in pc sales boosts intel. you're watching "worldwide exchange," bringing you business news from around the globe. and another big day for the markets, wilfred. we're seeing ierpan stocks trade lower right now, but we dot that better than expected jobs number out of the uk. >> interesting contrast yesterday, inflation weaker than expected. employment slightly better. but i think it's all really at the margin. as you say, i think the biggest things on the minds of mark carney and other central bank governs is this tight economy. >> and we have crude oil trading at a two-year low. that's weighing on investors sentiment. >> and i wonder whether oil prices are pulling down lots of the big cap stocks, the energy stocks. will it give a boost down the line to retailers when consumers have a bit of a breather? >> absolutely. let's take a look at u.s. premarket trade. to the down side, indicating a lower open, the s&p 500 down about 3. the dow jones down about 18 points. nasdaq, the tech heavy index showing a little bit of green in premarket trade. still, we're going to keep an eye on the u.s. futures abdomen we have seen volatility over the past couple of weeks in the u.s. markets. now on to the ftse cnbc global 300, this is a good index of stocks around the world. right now, trading lower by around 15 points. down about 0.25% at the session lows. we'll keep an eye on that index. diving into the individual european markets, we were talking about the uk unemployment coming in at the lowest level since 2008 at 6%. that not really helping equities. trading down by around 85 points. coming ahead of this, we did get slowing inflation data yesterday, something investors are keeping their high on. germany, we've been highlighting the weaker than expected data that has been coming out of germany. industrial production, factory other side, that zew report and after that trade data. france, seeing red here, about 44 points. italy, another triple digit decline for italy, down about 200 points. so things not looking good in europe. data will be eyed as we go through this week, wilfred. >> absolutely. a significant amount of red here. of course, stirred from weak global sentiment. i want to focus here on the u.s. 30 year which has fallen below 3% for the first time in auto while. significant yield compression both over the short and the long end over the last week or so. the ten-year, 2.91%. germany, 0.811%. can it break the 0.8% barrier? it's been hovering below 1% for a while, but it hasn't ticked below 0.8%. and the uk, relative trade within europe is a recommendively safer haven compared to continental europe. it was 2.4% at the beginning of october. it's 2.1%. let's check on forex. the u.s. dollar did, in fact, weaken a bit last week. it has started to strengthen again so far in the last two trading sessions. euro/dollar is at 1.2646 against the yen. u.s. doctoral yen is at 107.17. cable is at 1.590. sri is standing by in asia with the latest. >> wilfred, the markets over here are doing a pretty good job after shrugging off growth concerns coming out of europe, coming out of your neck of the woods and is down to the fact that many investors have been buying some of the beaten down cycles cyclesals. that was in markets. in china, we saw inflation prints at the consumer level and the worst number in almost four years. that underscores yet again sharply the threat of deflation, the fact that domestic demand still remains very, very subdued. but if the proverbial good news is bad news, if you look at the market reaction here, investors do believe that low inflation is going to give the policies the room to maneuver and the scope to bring on board more stimulus, consolidate growth without raising price pressures. so that is how the market took it and that's why the shanghai composite and the hang seng are up. the nikkei snapping a five-day losing streak and retaking the 15k handle once again. that is how we look. is this rally going to continue as we see more in the markets? we'll leave ow that note. and we want to get you an update on the ebola story. a second health care worker in the u.s. that provided care from that first ebola patient that came from liberia has been tested positive for the disease. the health care worker reported a fever tuesday and was immediately isolated on that day. we'll continue to keep you up to date on the state and condition of that health care worker. peter oppenheimer from goldman sachs, peter, we saw yet that germany cut its growth outlook for the year and for next year. when we get the q3 prints, will they fall into technical recession? >> well, it looks likely that there will be a negative print. and germany in particular has been very weak in the third quarter, slightly to continue into the fourth quarter. having said that, we think the pace of recovery through next year is likely to be pretty similar to the expectations before this period of weakness. so we do think it will be slightly temporary. growth is going to be weak in germany, as elsewhere in europe, but probably not as weak as current prints. >> and off the back of that, though, it sounds like relatively bold, at least in the short-term. but you have to be overweight on european equities, both the three month and 12-month. >> a lot of this comes down to valuation. the prospects for growth is not good. it's probably not as good as people were expecting late last year, but probably not as bad as the markets are currently priced in. the valuations are back to fight low levels. you've got a high risk premium priced in, very high dividend yields and we think dividends are now relatively safe. so in local currency returns, we've got reasonably high returns. but in dollar terms, because we think the dollar is going to continue to rise, europe comes out as being relatively unattractive. >> you know, you also wrote that weak earnings out of europe will be counter balanced by further easing from the central bank. is that -- someone takes issue with that and the says there's a very low chance of the central bank unveiling quantitative easing. >> yeah. we don't think that quantitative easing is on the cards anytime soon. we would look at a 30% probability over that over the next 12 months. but you are seeing financial conditions coming down partly because of the weak euro and, of course, we've got the tltros and other programs still to come through. so i think monetary policy is relatively easing. there's a political logjam and very little prospect of the structural reforms that the markets have been hoping to see. >> to the u.s. markets, a lot of volatility over the past couple of weeks. how does an investor make money in this new area of volatility? >> we had low volatility for a long time. i think that has a lot to the with the growth concerns you're seeing at the moment. revenues were falling, growth was very weak, equity markets corrected and then they appeared to very low volatility with stable rising prices for a number of months. i think at the moment, global growth is weak, not going to be all that good, but probably not as bad as the market is pricing. if you look at global gdp growth for this year, most forecasts are forecasts around 3%. that's what it was last year and the year before. global growth is weak, not terrible. interest rates are likely to stay low. >> and volatility, of course, in the equity markets must create nice pockets of value on a sector basis. if we look at the u.s., we've been asking our viewers this morning will weaker oil prices benefit the consumer, which sectors do you think you should be overweight? >> i think the weaker oil prices are an important cut across the board. consumption is continuing to come down. equity in most markets is generating a reasonable yield and can grow their dividends look extremely attractive. that is another theme that i think is interesting, really, across all the major markets. >> as always, thank you very much. peter oppenheimer, chief global equity strategist at goldman sachs. and as we've been telling you all this morning, heightened global growth fears continue to weigh on crude prices, dealing a blow to u.s. energy listed stocks. 41 out of the 43 stocks are now down over 10% since oil hit a high above $107 on june 20th. >> meanwhile, we're expected to see the first decline in spend since january in the u.s. could we see this change especially due to the price cuts at the pump? we want to hear from you on this. let us know if you're spending your cash now that you're saving it at the pump. or perhaps weaker gas prices have no impact at all. worldwide@cnbc.com, or @cnbcwex. seema, for us in london, using public transport, it doesn't really make a difference. >> it doesn't. do you have a car? >> i do have a car. it doesn't get used much. >> the tube is so efficient. you guys call it petrol here? >> petrol. >> all right. we call it gas. >> there's differences, i'm learning. >> intel's third quarter profits beat estimates as revenues rose nearly 8%. the company shipped nearly 800 million chips in the quarter for the first time. intel is upbeat about the fourth quarter predicting it could grow 10%. >> we're benefiting from a couple of things here. we have great technology coming into the pc segment. we're seeing growth at the high end and we're seeing lower priced systems bringing back some share from tablets. .we're starting to participate in a wider range of devices. and then our data center business is benefiting from the growth of all these clients computing and connecting to the internet. >> and share hoild holders liked what they heard. intel rising about 2% in after hours trade. keep in mind the s&p semi conductor index has been trading in correction territory. int intel, somewhat of a bright spot in trade. qualcomm agreed to buy london chipmaker for $2.5 billion. the u.s. giant secured the deal to accept another rival. microchip. today, csr up significantly, 30% in london trade and qualcomm off fractionally in frankfurt. earlier, our colleagues on "squawk box" europe spoke to the ceo of csr first and asked why the company accepted qualcomm's offer. >> qualcomm is one of the largest semi conductor companies in the semi conductor industry. ace mentioned earlier, they are very strong leaders in mobile phones and tablets. with their modems, with their application processes and a whole range of products around it. the revenue last year was close to $25 billion. culturally, if you look at qualcomm, they're an engineering company, driven by innovation. it's all about developing new products. you look at csr, very similar can you tell culture. we're pushing the boundary and all about creating new products. i would say culturally and extra technique imagely a strong fit, as well. coming up, geoff joins us with more of his exclusive interview with russian prime minister medvedev. find out what he really thinks about president obama straight after the break. i love having a free checked bag. with my united mileageplus explorer card. i have saved $75 in checked bag fees. priority boarding is really important to us. you can just get on the plane and relax. i love to travel, no foreign transaction fees means real savings. we can go to any country and spend money the way we would in the us. when i spend money on this card i can see brazil in my future. i use the explorer card to earn miles in order to go visit my family which means a lot to me. ♪ welcome back. u.s. energy stocks slip as crude hits a two-year low. shares in uk pharma are sent sharply lower. and a second health care worker in the u.s. tests positive for the ebola virus. >> as mentioned, a second health care worker has tested positive for ebola in texas. the worker was among those caring for thomas duncan, the liberian man who died in a dallas hospital last week. the unidentity worker reported a fever tuesday and was immediately isolated, officials say. meanwhile, the nurse would became infected while looking after duncan says she's doing fine in isolation and is being well cared for at the hospital. russia is, quote, not closing any doors. but a reset in relations with the united states is not possible while international sanctions remain in place. that is the view of the russian prime minister medvedev who has spoken exclusively with geoff in moscow. medvedev said the russian people do not want anything from president obama. geoff joins us now live from moscow. >> yeah, good morning or i should say good afternoon, wilfred. what's interesting is we have this meeting in paris where john kerry and foreign minutester lavrov were able to make progress on some areas, not least intelligence sharing when it comes to the middle east. but there is anger here in moscow over the way russia feels it's been treated by president obama. and at the heart of this issue, not only the sanctions, but president obama's recent appearance in the u.n. where he ran through a list of global threa threats. he started with ebola number one, put russia number two and isis number three. they really weren't very happy about that here. so when i spoke to the prime minister of russia, i asked him, firstly, was there any opportunity for a reset in relations with sanctions in place? let's listen to what he said. >> no, of course not. it's absolutely impossible. let's be clear. we did not come up with these sanctions. our international partners did. as we say in russia, let got be their judge. we will overcome these sanctions. i have no doubt that after a while these sanctions will dissipate. there will be no more sanctions, but we can't deny the fact that they have damaged our relations. i understand the concern our partners may have regarding the international situation and the developments in europe and ukraine. although clearly ukraine is closer to us than anything else because we are almost one people. but when the foundations of international relations, which we have worked sore hard for are being sacrificed to impose all sorts of restrictions just to show how cool we are, just to show that somebody can punish someone, well, in my opinion, it's absolutely destructive. and i would even go as far as saying a stupid position. it's sad to hear sprb say in an address to the u.n. that the threats facing humanity are the ebola virus, the russian federation and only then the islamic state. i don't want to dig phi it with a response. it's sad. it's like some kind of mental aberration. it's imperative to leave all of that behind and get back to normality. perhaps go back to square one and only then talk about our future relations. >> we are not closing any doors. to do so, we must bring the situation back to normal. >> so the punch line, we are not closing any doors at this stage, but quite frankly, given the feelings towards the president in the united states at this point, difficult to see how any of those doors are going to open in the short-term when it comes to trying to improve relations between moscow and washington. back to you. in our news, bank of america picks up the baton for u.s. financial earnings. we hear from one ran list who says now might be the time for lenders to clean up its real estate woes. that's coming up next. we just had news that uk challenger bank aldemore has abandon its ipo due to the recent deterioration of global equity markets. >> this is really interesting. given the recent market volatility, will that result in other companies delaying their ipo listings? i spoke to aaron levy, the ceo of box, the cloud storage firm. i asked him if he's been following the recent volatility and he said it's something we're paying attention to. >> jimmy chu lowering their price rake earlier in the week. wti crude trading at a two-your low. we also want to take a look at the u.s. premarket trade, slightly lower on the day with the nasdaq bucking the trend. you can see the commodity boards, brent crude trading down by around 1% at $84 a barrel. nymex crude at $80 a barrel. retail sales in september due later today. able to show the first monthly decline since january. could we see an uptick next month? especially when it comes to filling up your tank. we've been asking our viewers whether you plan to spend the extra cash you're saving at the pump. john tweeted in and said money saved at the pump is peanuts compared to investment losses from the market sell-off. i'm not sure that is true for every consumer. but anyway, we do want to hear from you on this. please get in touch, worldwide@cnbc.com. or via twitter @cnbcwex. let's have a look at u.s. futures before the market open. what are we expecting there? >> we are indicating a lower open the last time we checked with the nasdaq bucking the trend up just about 2 points in premarket trade. dow jones about eight points and premarket in s&p 500 indicating a lower open which by the way still trading below its 200-day moving average. still to come on the show, intel not only beats the street, but hosts its high ever. we'll get you the full story after this break. welcome to "worldwide exchange." i'm seema mody. >> and i'm wilfred frost. the u.s. champion on tax inversion hits takeover targets in london. shares in shire plummet after abbvie says it's reconsidering its $55 billion bid. intel posting better tan expected earnings. and a second health care worker in texas tested positive for the ebola virus. if you're just tuning in, thanks for joining us on "worldwide exchange." the dow ended in the red after rising as much as 140 points earlier in the session. the vix trading above 20. we also saw a big movement in the dow transports index, which after getting into correction territory did rally up about 2%. small and midcap stocks remain in correction territory. let's dive into the individual european markets to see where we're seeing the action today. the ftse 100 very much in focus, down about 70 points after the uk reported its lowest unemployment rate since 2008. remember, yet we got data on inflation, falling inflation across the uk. that in focus, as well. germany, given the weak data out of germany roently, industrial production factory orders, trade data, as well as inflation. we're looking at germany right now, trade down by around 66 points or about 0.7%. france down about 30 points and italy another triple digit decline, down 124 points for the italian market. now, if we look at the euro stoxx 50, right now we have moved lower, down about 23 points or 0.8%. keep in mind, though, down about 6.5% over the past three months. new concerned about europe and its economic recovery, definitely a focal point for investors. how do you make money in these markets? here is what some of our experts have been telling us this morning. >> on india, i know we're still relatively bullish. this is an economy that is growing at well below trend rate. so if you take a bit of a long-term view, india still has a lot of value left. >> there are trading opportunities. over the long-term, i think you would have to look at who has basically the highest potential returns, highest potential for cash coming back to shareholders and, you know, that's probably, you know, a balance between looking at the bhp and rio and just changing your ratings over time. >> we are bearish, medium term on the euro. more or less appreciation from where we are in the next 12 months. >> we have earnings come through. do you think we'll get enough positive coming through that the u.s. market with slug off these woes coming from europe? >> that's the question of the day, if better-than-expected earnings coming off the u.s. will offset the worries which the price of oil is a concern for investors. we did get a disappointing report for jpmorgan. our focus now shifts to ebay and some of the intel stocks. somewhat of a bright spot after the semi conductor index has been trading down, trading in correction territory. even speaking of intel, intel's third quarter profits rose 12% as revenues rose nearly 8%. the company pc sales improve an effort to put more processors and tablets is bearing fruit. intel is upbeat about the fourth quarter, predicting revenue to grow 10%. >> there's no guarantees in business. but we have great technology coming into the system. we're starting to participate in a wider range of devices. our data center is benefiting from all this growth of connected to the internet 37. >> the company beat street expectations. let's briven in brook simpson, brett, thanks for joining us. better than expected reports on intel. a lot of that being driven by the pc division. how much can pcs help intel's profitability going forward? >> that's a great question. we've seen in the last 12 months an elevated corporate refresh in pcs. i think since microsoft demands ending support for windows xp, we've seen cios tell us that they have looked at refreshing their pcs over the last month. that refresh cycle has brought about a recovery. and will the consumer start to rebalance? we've seen mixed results in consumer this year. >> and perhaps it is temporary. let's talk about smartphones and they're on course for 40 million a year. that department is still making big losses. but these are chip giants. how come it's taken so long to become profitable and the biggest growth driver in the industry? >> i think this is a big question for intel and, you know, it's made big investments this year. 1.5% of sales has been allocated for -- revenues for that business. so essentially we think $750 million of incentives has been spent to drive this 40 million tablet number. i think the key question is without that incentive, what kind of volatile can we expect? we won't see a break even point or profits for some time in mobile. i think it's going to be -- to see how they turn around. when you look@mobile, dominated by samsung, by intel, samsung and apple. apple has their own chip. the chinese have very strong using media. so how intel breaks into those ecosystems will be key. >> the first move advantage really hurting them there. also in the news, csr shares up on the breach. the u.s. giant secured the deal. the price previously was said to be too low. and qualcomm is coming in t end. >> yeah. i think going forward we're going to see accessories play a bigger part. people are being smartphones, but now it's things like beats head sets, and having the accessories will be important. the other area, i think, where you're going to see a lot of changes in the car so you talk about connected car putting cellular in the car is going to be important. it takes five years for a chipmaker to get qualified in some of these carmakers. qualcomm doesn't have a channel. i think csr having an established presence in automotive will give them a real boost. brett, just taking a step back, how do you make sense of the recent volatility in the semi conductor index, down about 13% just over the past four weeks. >> that is a great question. i think the concerns we hear from investors around gdp cuts, there's a role, i think the strong dollar is unnerving some people. you've seen in headline markets like automotive, forbes come out and cause some concerns for the outlook for automotive, semi conductor. microchip also was concerning for a lot of players, a lot of investors, too. so i think there are signals that maybe we're in an elevated period for growth and because of gdp sensitive, and the stocks have done well this year. i think investors want to, you happen, make profits and reduce their holdings. >> brett simpson, analyst, thanks for your time. let's take a look at the other top stories. as mentioned, a second health care worker has tested positive for ebola in texas. that according to the state health department. one health care worker in isolation says she's doing fine and is being well cared for at the hospital. russia is, quote, not closing any doors but a reset in relations with the united states is not possible while international sanctions remain in place. that is the view of russian prime minister medvedev who has spoken exclusively to geoff in moscow. geoff is in moscow with the latest. >> let's give you some back story on this, wilfred. the chinese have been in town here and we've seen deals signed in the tens of billions of dollars. this is the chinese coming in, taking advantage of the sanctions regime as it exists and perhaps displacing both european and u.s. businesses that might have been in the running for some of those contracts. so there are unintended consequences here. it's a regime that the russian government is increasingly frustrated by, because it is having an impact on the economy and they feel it's unjust and they feel obama, president obama has been the architect. let me just play you a little clip here of what the prime minister had to say to me on the sanctions and a reset with the united states. >> when the foundations of international relations, which we had worked so hard for, are being sacrificed to impose all sorts of restrictions just to show how cool we are, just to show that somebody can put someone, in my opinion, it's absolutely destructive. i would even go as far as saying a stupid position. >> yeah. and the language becomes more choice in other parts of the interview. there wag r was an appearance at the back end of last month where president obama talked about the major threats facing the world. number one, ebola. number two, russia. number three, isis. the russians are still feeling pretty sore about the fact that the russian prime minister put them in that position. so the message here from a man who has largely been seen as a liberal, and more soft will i spoken on these matters than the president here, the message is a tough one to washington at this stage. no reset without removal. coming up on the show, has a fall in the price of oil, will that send equities lower? we're going to discuss coming up next on "worldwide exchange." if you're wondering what sector has been hit harder, look no farther than the energy sector. 90% of stocks in the energy sector are down more than 10% since june. the s&p energy sector down 1%. in yesterday's session, down about 10.34% over the past month. what's the reason? oil prices falling to a multi year locumed with weaker demand in china. take a look at chesapeake energy, down 40% since june 20th. that's when oil hit recent highs. and new field exploration down about 39%. transocean down about 36%. so some big moves in the energy space, wilfred. >> absolutely. as that high iea report said yet, it's what is of a perfect storm for oil prices as excess demand and supply able to shrug off geopolitical concerns. could we see an uptick next month? will retail get a much needed lift from the biggest spending power? we want to hear from you on this. let us know if you're spending the cash, saving at the pump or perhaps weak oil prices are making no difference at all. slade tweeted in to say prices never really go down at the pump. prices are up 835% since 2008. there we go. if you want to join the conversation here on was, worldwide@cnbc.com or @cnbcwex. moving on, it's been through weeks since the u.s. treasury department announced new rules to track crackdown on u.s. tap tax inversion deals. the impact is being felt as one big merger could fall apart. morgan brennan is at cnbc hq with more. >> abbvie is now reconsidering its $54 billion takeover of uk rival slier. that's putting it on track to be the biggest deal. the company says its board will meeting next week. under the deal, abbvie would move its headquarters. if the move falls apart, abbvie would have to pay about $1. 6/billion. in a statement, it's said the impact of the treasuries to the the impact of the financial benefits of the transaction. the two sides have been racing to complete the deal by the end of the year as scrutiny of tax inversions has picked up. some huge names could be hit. john paulson or paulson & company own aes nearly 5% shareholder of shire. if the deal is canceled, it will be the largest casualty from the government's crackdown. earlier this month, sterling announced plans of a takeover of the, shares, of the environment. shire is down just under 25%. back to you. >> morgan, thank you very much. as we head to break, these are your top headlines. as we were telling you, u.s. energy stocks fell off as the price of crude oil hits a two-year allow. as we reconsider the bid for shire, sending shares of the uk pharma sharply lower. and a second health care worker in the u.s. tests positive for the ebola virus. synchrony financial partners with over two hundred thousand businesses, from fashion retailers to healthcare providers, from jewelers to sporting good stores, to help their customers get what they want and need. banking. loyalty. analytics. synchrony financial. engage with us. the if it is flths 1100 down 1%. shire is down 30%. germany is down 0.5% as is italy. continuing to be weighed down by general concerns over renewed growth. renewed concerns about a slowdown in the eurozone, wilfred, having an effect on u.s. markets over the past couple of weeks. right now, though, futures trading to the upside, implying a higher open. the dow up about 18 points in premarket trade. nasdaq up about 10 points and s&p 500 up about 1. interesting to see that movement in premarket trade. we were at one point expecting a lower open. also in focus, of course, commodities, wti crude, trading at a two-year low on renewed global growth concerns. now down about 24% just this year. that's one of the reasons we're seeing the energy sector underperform. now, let's give you a rundown of what to watch this trading day. september retail sales are out at 8:30 a.m. eastern, forecast to drop by 0.1%. but rise 0.3% when you exclude autos. we get the latest fed based book reports. bank of america, blackrock, pnc financial will report results before the opening bell. earnings definitely taking center stage. now according to dow jones forecast, bank of america is due to report the loss of 9 cents a share down from a profit of 20 cents in the same period last year. revenue is seen declining to $21.3 billion. marty joins us now. three big banks reporting yesterday. what did you learn from them and what does that mean you're expecting from bank of america today? >> we are seeing some progress, albeit very slow on the revenue side. we saw some efficiencies underlying, still being built. so management relative to the little bit of revenue growth we have has been productive. then we're seeing asset quality costs are going to stay and remain at historically low levels for the foreseeable future. so while not robust growth, we are seeing some major i can't knowal gains. and then we saw citigroup come in with some strategic action that we feel like are very productive. expenses took a bite out of jpmorgan profits. how much do you think legal settlements could dampen their earnings? well, there is the big settlement that they've already announced, which is what makes them expected to report a loss this quarter. we think they can earn in their general 30, 35 cents a quarter that they've been doing. and when we're looking at these settlements, they're not as worried or anxious about the capital of future of franchise risk. so they're cleaning up and moving forward. so they're the kind of things we have to segment out and separate from the core earnings. but right now, they're not really given nearly as much pressure to these stocks as they did maybe a year or two ago. >> thank you, martsy mosby, director of bank and equity strategies at finding sparks. before we go, a reminder that the blackrock ceo larry fink will be on "squawk box" to discuss his company's results. that's today at 6:30 a.m. eastern.time. let's have a look at the u.s. futures before we go. we're expect ago slightly positive open today in trade. those numbers are coming for you now. european markets in the red so far. the stoxx 600 is down today in trade. it's down about 0.6%. nonetheless, u.s. futures expected -- >> but remember, we started higher in the u.s. and ended lower. so still remain toes be seen. >> and that's all we've got time for today on "worldwide exchange." i'll wilfred frost. >> i'm seema mody. "squawk box" is next. good morning and welcome to "squawk box." making news, a second health care worker in dallas who provided care for patient zero, ebola victim thomas eric duncan, now testing positive for the deadly disease. the oil squeeze, how the facili fallout in the slide of crude is rippling through the markets. the slide, oil, any idea whatever happens. and inside intel, provtsd as the chip giant grow and the stock moves higher, it is wednesday, october 15th. right in the middle between april 15th. i think it's six months since the democrats favorite day as 2014, "squawk box" begins right now. good morning and welcome to "squawk box" here on cnbc. joe kernen doing the math on when tax day is going to be and where we are. joe kernen is here. i'm here. becky quick, she will be here. she's going to join us in about a half an hour. she has the newsmaker of the morning. she will be interviewing blackro blackrock's chairman and ceo larry fink. he's going to be discussing his company's latest results. plus, give us his take on the markets, the fed, the economy and geopolitics and much, much more. if there's one guy out there these days that you want to hear from auto on a day like today, it is mr. fink. >> in the meantime were going to get to markets. not a great way to wake up this morning. a second health care worker now in texas has tested positive for