Welcome to Worldwide Exchange. Im kelly evans. Yes, hello, everybody. Im Louisa Bojesen. These are your headlines from around the world. President obama calls congressional leaders to the white house today in what could be the last chance to come talk before the u. S. Falls off the fiscal cliff next week. Investors are bracing for the final eurozone bond sale of the year. Italy will sell up to 6 billion later today. And the yen has been sent lower and stocks to their highest level in 21 months. This is the final Worldwide Exchange from london of the year. Louisa is here for it. I cant believe it. Its my last working day of the year, as well. Is it . Yes. Unfortunately well still be talking about the same thing were talking about now. Although i feel well be talking more debt ceiling, as well. And speaking of which, president obama is trying a last ditch effort to restart budget talks days before the u. S. Goes over the fiscal cliff. Speaker john boehner has called the house back into session sunday evening. House majority leader eric cantor is telling his members to be prepared to work through january 2nd. Both sides are still far apart on taxes and spending cuts. Harry reid says prospect deals by monday are unlikely. Minority leader Mitch Mcconnell says theres still time for an agreement. Republicans arent likely to sign a blank check just because we find ourselves at the edge of the cliff. That wouldnt be fair to the american people. Now, a new reuters poll Shows Americans blame republicans more than democrats or president obama for the fiscal crisis. And when asked who they held more response, 27 said the gop, 6 pointed to the dems and 30 said all of the above. For more on this, were joined by Christian Schultz from barronberg bank. Welcome. So were going over the fiscal cliff. Well, the consumer confidenc already be over the cliff in terms of confidence already. That might already be the first impact of the crisis of not of the crisis, but yes of the fiscal cliff. It seems we have this moment where this animal goes over the cliff, all limbs are still rotating around and were staring into the abyss and eventually were going to fold. I love that mental image. But it was the expectations component of that confidence data yesterday that was responsible for the headline decline. Whats interesting is the current component continues to increase. When you look at the drop in gas prices, the job market held up okay, it should have been a pretty good Holiday Season. Confidence taking a bit of a hit. Maybe you can finger the fiscal cliff here. Absolutely. The Housing Market is improving. That is actually something that should really support the economy going into next year. So the potential growth rate, if we were not talking about fiscal cliff or any adjustment at all would probably be quite high, higher than weve seen over the last years. Could be in the rake of 3 . Plus, that confidence impact that these negotiations are likely to have, and that means that the u. S. Economy is still going to grow at relatively mediocre rate of probably 2 next year. Thats our view. Timothy geithner here in the past couple of days talking about the debt ceiling and what could be done to try to move that forward in a stable manner if you would. Theres no way around it, right . Do you think thats taken kind of a bargaining chip away from the fiscal cliff negotiations . There seems to be some politics behind this announcement right now as we hit the ceiling. As you make the calculations, it seemed to me as if they were only going to hit the ceiling in february or march next year anyway. The fact that he comes out and says actually were shutting the ceiling now and i have to make all these adjustments so we hit only in february seems to me that there is a bit of politics going on already and trying to increase the pressure on the republicans to agree at the year end. I wonder how much is priced into the markets. Despite the fact that were going partially over the cliff or doing the coyote roadrunner thing in the air, im just not sure that we are necessarily going to see a huge move. Among other things, it seems the market is tired of the political wrangling. Indeed. I think what is priced in is that this is priced in at a slope. Its something thats going accumulate over the year and is going to hit the gdp if it really hits over the course of the whole year, not all in january. Its not going to be a cliff but rather a slope. But this confidence, they are not so sure thats priced in. And youre staying with us for the rest of the hour. If all of this hasnt sent you over the edge yet, stay the cliff quiz on our website. Have you taken the quiz yet . I looked at it. I did not do very well. There were some pop things in there that i didnt get. See if you can do better. It wouldnt take much. Greeces National Bank euro bank alfa and perez says they need the money following disclosures by the lenders last week. Greece is concerned that the 50 billion euros set aside for Bank Recapitalization will be enough to cover the shortfall. And the italian treasury is holding its last debt sale of the year. Traders are expecting to see solid demand for the paper after rome placed nearly 12 billion euros of shorted dated paper just yesterday. Still, they warn investors could become more discerning in the new year especially as the italian electric tore ral race on thursday. Italy expects to raise around 10 billion euros next year. Less supply. We know theres still plenty of investor demand and no sign necessarily of reignited concern about the longer term health of these you could call them peripheral economies. No. Things have really improved. Its all still down to the ecbs pledge to support these countries if they fulfill the conditions. Especially in the case of italy. The country is fulfilling conditions of the ecb if it ever got into needed. It made the fiscal adjustment that was needed. If the country exits recession which we expect to happen next year and the growth at a potential growth rate of say 1 mers, 1. 5 , with inflation under control, with Interest Rates back to levels which were normal for italy before the financial crisis, then all these adjustments altogether show that italy can go back on to a Sustainable Growth path and is that with or without berlusconi involved . Because end of february are these elections. Yes. The elections are, of course, more the campaign heading into the elections with all these noises, especially the end ecb noises that we hear from italy. Thats going to cause concern that if italy does need help, how likely are they going to be to get it . In the years from 1993 to 2007 italy brought down its debt to gdp ratio to almost 100 and half of that time berlusconi is Prime Minister. Its not like berlusconi has a record of fiscal spending. No. But i guess also the times were different. The times were different but the Interest Rate was slightly higher than it is now. But the primary surplus of the country ran over that period which was an acceptable 3 on average is already right now reached once again. So all the parameters are in the right place and the only thing the next government needs to do is actually nothing. If it does nothing, if it doesnt reverse the reforms whats interesting is what berlusconi is campaigning on is austerity. Hes running on an ant antiausterity pro eu package. While its untenable, it does have a certain amount of certainly backtracking the fiscal returns for them. Exactly. This property tax, i think thats a cause for concern. If you were to repeal that, the fiscal position on would be unsustainable and he would have to raise taxes elsewhere to make up for that. That would be some messy negotiations with him on a european level. Markets would be very concerned already heading into the elections. The more noise we hear, the higher italian borrowing costs would be and if italian borrowing costs rise, one of the very important parameters which led to this drop in debt to gdp over these 15 years heading into the crisis would not be fulfilled any more and italys position would be unsustainable because of all that noise. It sounds like a catalyst should this fall into place in 2013. That still remain toes be seen. Christian will stay with us. Standing in front of our pan European Markets map and youll note that were seeing more red than green on our screens right now. Just a recap. We came back into the market stateside on wednesday trading lower with some nervousness arising. Even the latest comments about not being able to come to a full solution on the fiscal cliff. Equities falling on wednesday in the u. S. On thursday when we opened here in europe, yesterday we saw a relatively stable markets. We closed out on a flat to slightly higher note for most of our European Markets yesterday. This morning coming into trade, were pretty flat. Weve taken a bit of a dropdown on this drop but were just a couple of points lower. In the Asian Session overnight, we managed to see gains back again. They lost again on the notion of the fiscal cliff not happening. Shanghai composite higher by just over 1 in todays session. Hang seng, and the kospi closing slightly higher across the board. The European Markets mixed, but the ftse 100 still flat to higher. Were all looking towards these fiscal cliff negotiations. At the moment, weve got a couple more days of trade before we get to the end of the new year, as well. Most analysts out there, theyve been saying were going to see a relatively flattish end to the year from where we are now given that weve seen such an increase of equities in the past 12 months. Weve seen stellar outperformance from these European Markets. Also the periphery markets incidentally, too. Bond markets, the fixed income markets, here were seeing buying in germany at the moment and 10year german bund around 3 . A little bit of buying into the gild as well as some of the safe haven trades back on. We have this italian bond auction. The first one is going to be settled in 2013 and the last one in this year, as well. Its thought that it is going to see solid demand given that it hasnt gotten any trouble getting off the ground as of late with those bond auctions, as well. A quick wrap on the forex market. Here youre looking at selling in the euro dollar right now. 1. 3190. Were flirting with the high level of this trading range that weve been stuck in. Dollar yen, its thought when this new japanese government coming into place, theyre simulating the economy and to make sure a weaker yen is in place, as well. Kelly. Louisa, thanks. Were keeping an eye on gold today. Could the precious metal be losing its luster come 2013 . Well find out why kuts has decided to cut exposure to the precious metal for the first time. Hello, everybody. Welcome back. Gold is gaining today. This year, higher by somewhere in the region of 6 plus. So underperforming the broader equity markets, but nevertheless, still a nice gain. Kutz has reduced its exposure to gold for the First Time Since 2009. Joining us is allen higgins, chief Investment Officer for the uk coutts. Good morning. Good morning. So weve had 12 years of exposure to gold. Youre limiting it now. Why . Its starting to lag, but more subtly from a portfolio construction perspective, its lost its negative correlation. For example, quarter 2010, well, euro crisis won when we had equity markets down a lot then gold really surged forward, giving a negative correlation. And so for the Portfolio Manager at coutts, it has been at times a legal high gold exposure surging upwards in times of stress. For those days seem to have gone. Trimming it. That is a fact that theres a real shortage of low risk investments of on german bunch negative. But youre saying its trading like other risk assets at the moment. At times, its correlated with em. So its less attractive from a portfolio construction perspective as compared to what it was. Its fascinating because weve been talking about one theme for 2013 being is it a stock pickers market, are we seeing less differentiation, what youre saying would suggest that gold has become one of these assets that isnt in its own world, that has started to trade with everything else. From an ideal perspective, what were looking for. Its easy to buy equities or high yield. Were looking something to hedge that. And for a while, gold fulfilled that role. But now its increasingly hard. To be fair, its hard to find any negativity. So what takes its place . Pretty hard, to be honest. Government bonds still have a role. Government bonds with credit on top if you like. So we were one of the first private banks to buy ultra long Corporate Bonds normally held by Pension Funds reflecting the fact that you have above average risk premiums and potential risk correlation. So thats attractive. An area thats really suffered, ctas. Ctas . Ctas really suffered. What are ctas . Commodity trading advisers is what theyre short of. Its a style of Hedge Fund Management and it did very well in 08 and 01 or 2. Theyve struggled for a couple of years. But still importantly they still have a negative correlation. Im just wondering what happens with the cliff impact on gold. You know, if we find the cliff solution, if we find a mediocre solution, if we find no solution, are we going to see a huge swing in the price of gold . Well, gold has a safe haven role. It has had a safe haven role just like other assets that you mentioned that could be hemgs against equity movements such as these safe haven bonds such as german ones, u. S. Ones, maybe japanese ones. If the u. S. Goes over the cliff, if confidence starts to rock around, if we have Financial Market turbulences, demand for safe havens should go up. We already see these small movements with very well volumes where theres a little bit of money flowing back into safe havens now. I would expect gold to have some role in this, as well. Whats interesting is given that and given all the reasons why people have historically liked gold, you would have expected it to be a strong asset class in the second half of the year, maybe with some of these uncertainties around. But that wasnt the case. It really underperformed and that has caught so much attention because it suggests people, you know, what really are the drivers here . Yeah, quite. So safe haven less so, but still what youre seeing is em Central Banks continue to add and essentially if you like catching up with some of the nations. Iraq add to gold as well as the many other em Central Banks. We still own gold, so were still looking for it to rally. But just the case for holding substantial amounts in gold is somewhat less. But i mean, just looking at that, some of your musings and some of the general musings out there, this seems to be a notion that if we see some of the fiscal cliff agreement reached we could see a gold play and if we dont see a fiscal cliff agreement reached, gold could see a buy. When you look at this income theme, which we think is still very important and for next year a secondary income theme, growing dividends, second commercial property, it has a lot of competition to do. We still own it. Weve trimmed it. Its still a bit of a mixed message of gold. Yeah. I think another role of gold is as an inflation hedge. And there i think the outlook is pretty negative, actually. Because inflation is going to pick up and make gold a good investment. Inflation, given all these weak economies in the world does not look likely to pick up. And that should reduce demand for gold. Even the fiscal cliff, if the outcome of the fiscal cliff is a bit more austerity in the u. S. , that should drive down inflation. Weve seen a portfolio structure adding gold in that 12year period. If you start to remove some of these buyers from the market such as a coutts, will the buying from Central Banks be enough to support the loss of that investor class . If you guys arent the only ones looking at this saying its time to pear back positions, its not suggesting a good outlook for next year. Were keeping some positions in gold. So your portfolio exposure, what was it at now . We were at the order of 8 , now were at 5 or 6 . Bear in mind this is at a 20 volatility easily. So its a relatively big contribution to our clients risk profile. Well leave it there. Thanks so much. Thank you. Well, wpp may be the largest advertising and consult iing company in the world, but ceos Martin Sorrell says he has some regrets about what he didnt enter in 2012. It toughened up as we started the year. Having done 4 fft fist quarter, we were feeling optimistic and we said it would be better than 4 at the end of the year. From then on, it started to go down. We had 3 growth like for like excludeing acquisitions. Interestingly, we got into quarteritis which is companies seemed to be looking at quarters instead of calendar years. There was a finite limit to what companies could do in terms of reducing costs and they would have to focus more on the top line. That proved to be very true because a number of companies missed the top line forecast. So in october, however, we saw a bit of a recovery from q3. And our flash figures were 2 and we did 2. 5 in october. We have not told the market what we did in november, but it was better than october. And so weve ended up, you know, towards the end of november after november up by 3 , a little bit more than 3 , actually. And december we have to wait and see. Are you going to try to diversify further outside of europe . Well, you know, if i do have any regrets, and i have a few over the years, im willing to admit publicly. It would be that we didnt have enough in our operations, that we didnt have enough in asia and latin america, africa and the middle east and europe. Some some of our clients have got 40 , 45 , 50 and they benefit as a result. The other part of it is i wish we had not just onethird of our operations in digital here on cnbc and that we had, lets say, 40 , 45 there, too. The pattern youll see in 2013 is meets ya, application to our business and we specifically are going to get people to work more and more together in order to deliver more effective and efficient adv