Transcripts For CNBC Worldwide Exchange 20130218

Hello. Youre watching todays Worldwide Exchange. Im ross westgate. And im kelly evans. These are your headlines from around the world. The yen resumes its smooth low after it escapes the g20. Shinzo abe admits the bond buying and bank of japans chax are all options. Thats right. And slowing sales in russia lead to a worse than expected Fourth Quarter in russia. Natixis shares up near 20 . Unveiling a simpler structure on a special dividend. And the final week of campaigni campaigning in italy with polls suggesting bersani has the lead. Announcer youre watching Worldwide Exchange, bringing you Business News from around the globe. Okay. First thing to say is we have three hours of the good stuff today. Yes, we do. For all the americans on holiday today, we know you wouldnt want to miss a single second of it the the. We have so much going on. Were going to hear from wayne swan, sir phillip green, were going to hear tr you are out of the fashion week, right sfp. Yeah. I really enjoy getting the perspective from designers because what they say about where theyre seeing strength tr around the world and frankly when you ask them and they say were investing in digital thats as important if not more than whats happening in the retail world. Did you see some great things . There are some Pretty Things there, as well. What was interesting is top shop yesterday, top shop is a high street or for the u. S. A main street brand. But they have this great digital fashion thing going on. Its a gimmicky partnership with google. You see these reports about google getting the lines between fashion and retail and tech are all blurring. They are, indeed. So on todays show, theres a here is another taster. In china, its the first trading day market in the new year of the snake. So will it be new year old problems . Up next from hong kong, well have the latest analysis. Did you just slither . Also, the final week of campaigning in italy ahead of the general elections. We will be live in milan throughout the morning for a roundup of the candidates policies and pit falls. Julia will join us for that. And hear state from the finance ministers. We have a roundup of the g20 meeting in moscow. And London Fashion week is under way and International Expansion seems to be the latest trend. Well hear from top designers who are putting their foot forward on the global runway. First, Standard Poors says it wants more time to gauge shinzo abes rating policies. S p says recent policies could reflat japans economy. But the governments books will continue to be weighed down by heavy debt. Thats even if plans go ahead to raise a sales tax. Theres a one in three chance of a downgrade this fiscal year. This is as the japanese Prime Minister shinzo abe says he will consider changing the banks mandate. He didnt comment on current policy. All this as investors determine who will become the bank of japans next governor. Front runners for the post include former bank of japan Deputy Governor and the head of the Asian Development bank harikahiko tura. We did catch up with taro at a meeting this weekend in moscow. The next boj governor was covered, but the first question, whether mr. Aso thought the g20 communique was an endorsement of japans domestic stimulus plan. Japan has repeatedly tried to explain that japanese policies are taken to overcome deflation and by all means, these are measures to overcome deflation as well as the recession. Thats what is being said in the second paragraph of the communique. Why do you feel, then, certainly from the g7 communique that the off the record briefings continue to be critical of the japanese policy and its implications for the yen. First of all, just before the dissolution of the lower house in japan, as far as the japanese yen rate is concerned, at least, it was 78 yen to the dollar. However, one month after the election, we see that the has gone to 93 or 94 yen. So someone must have suspected that something could have happened. There were some who were suspicious of the situation in japan. The very fact that the yen had to be reassessed. Regardless of the absolute direction of the yen and indeed the underlying stock market in japan, as well, do you think this level of volatility is detablizing for the japanese economy . Regarding the Exchange Rate, the views that should be market determined so it is our policy not to say anything about the Exchange Rate, per se. Turning our eye to the stock market, it is always desirable to see stable stock prices. What we prefer is a slow but steady increase in prices. No one will welcome the going up or going down of stock prices. Thats not desirable for the japanese economy. What are the greatest economic headwinds for japan in reaching its goal of growth and a 2 inflation target . Until this particular determination decision was made, we were just wondering if maybe the people were saying that even if a new government is formed and as far as the economy is concerned, there might not be sudden growth. But this time around, as we watch the japaneses peoples feelings and sentiment, it turned out that sentiment went ahead of what was really happening. The positive prevailed over the japanese sentiment, feelings and mentality. This is why the stock prices had gone up and the Exchange Rate had gone down. Its been a pleasant surprise in our part that mentality played in this way and turned up the economy. What do you think is important that we see in his replacement . Do you have feelings about mr. Muto, mr. Awatta and others that you think would be preferential . As far as the appointment of the governor of the boj is concerned, this is something that our Prime Minister has set aside and theres a rule that after the person the nominated, that person should be confirmed in the didet. So im in month position to say who i prefer at this point. Phillip is joining us from hong kong. Phillip, anybody investors would prefer . Does it matter between the candidates . No, i dont think that theres any particular preference. I think that basically more Foreign Investors are looking at is the actual process for change which the japanese government have been trying to put forward since the elections. And i think that, you know, obviously, from a an International Investor viewpoint, its been very positive what theyve been doing and saying so far. I think, obviously, time will tell whether these moves are going to be really beneficial to the japanese economy. Phillip, did anything just jump out to you with that interview from taro aso just now . No. I think that hes obviously that hes not going to be giving too much on, say, what his preferences are himself. And, yeah, i dont really you know, i mean, hes making sort of fairly guarded comments, anyway. So i wouldnt be too surprised about that. It was interesting to hear him to say that he was pleasantly surprised by the change in sentiment in japan, how much thats contributed to the increase in the nikkei, basically saying, look, its come ahead of any real improvement. That was kind of what he was implying, that theyve been pleasantly surprised by almost how quick people have bought into their plans. Yeah, thats right. And thats basically the nub of it. Because, you know, although the asset of the depreciating yen on the surface should be good for japan because its obviously hurting exporters, but, you know, obviously a lot of economists are not you know, i dont look at japan in detail, but the thing is, a lot of economists have rightly pointed out that inputs to japan are going to cost more. So, therefore, that could actually offset some of the benefits that youre going to see from a depreciating yen. But having said that, the moves themselves that the japanese government wants to go are all positive. So i think that will help sentiment going forward. And on investor access to expanding the market, how does that affect trade on the otc platform . Individuals with over 480,000 who have more than two years of trading experience are now able to trade otc. Still, there was no big boost on chinas first trading day on the year of the snake. Investeders rose at their slowest pace in more than four years. Even fireworksmakers didnt get a big pop. Shares of fireworks fizzed out today. Phillip, given this news, does this fall into the kind of we need to see a slowing as china rebounds this economy camp or does this raise concerns . Though, it doesnt raise concerns. I think it basically falls into the camp, you know, which is that we do need to see a slowing economy. And its probably healthy, you know, for the longer Term Development of the chinese economy. Basically, the expenditure of patents have been quite phrenetic in the past few years. So any slowdown like this to more sustainable levels is better. Youre pretty bullish on chinas stock market right now, yes . Yes. We, in fact, a lot of the originally we were fairly cautiously optimistic on the stock markets this year. A lot of the gain that youve seen, youve probably seen in the first months for the whole year. I think whats going to be driving it in the future is going to be, you know, if we see more inflows into the chinese stock markets, whether they be a share or hong kong listed. That has been increasing, but, you know, the what were hearing is that or seeing is that a lot of it is going into not just shares, but also to etfs. So that thats obviously not going to have a as big a fact on the markets. Did you just say the chinese put in their full year gains in january . No, no, we were fairly cautiously optimistic about the chinese stock markets for this year. And most of the gain that we were looking for has essentially happened in the first month, particularly for the asian market. Hong kong market has increased, as well, but not for the same expense. So they could slow down a little bit or just sideways for some time. And still make the gains that we were expecting, anyway. Well, that may sound great for your i guess that may be a good reflection of your views, but maybe not the best reflection of what investors would hope to see for the rest of the year. Thats right. Last word, what is your yearend target, then . Well, originally we were putting Something Like 2,400 for the shanghai composite. And, you know, i think well probably pass that quite easily if so long as we have good changes and good announcements coming from the Party Congress in march and we get over the 2012 reporting season, which is expected to be fairly disappointing, yeah. Phillip, thanks very much. The former european commissioner struggles to gain ground in its first ever political campaign. Julia is in milan. Shes going to be there in the countdown to these elections next week. Jules, good to see you. What are the latest polls suggesting and how close is it going to be to getting control or having no control in the senate . Well, thats the key point, ross. But going back to the last polls that we saw on february the 9th, mario monte was in fourth place behind berlusconi, behind the likely winner bersani and the comedian becky grillo. Calling for the televised debate, he has little too lose and perhaps more to lose is mr. Bersani. Hes clinging on to around a 5 point percentage lead behind mr. Berlusconi. And obviously he doesnt want to face questions about his economic policy, how hes going to fund the repeal of reforms that hes talking about and some promises that hes made about policy going forward. Now, on the subject of berlusconi, i asked the economic adviser of the Democratic Party, the party most likely to win in the lower house here just what a return of berlusconi would meet mean to italy. This is what he had to say. Theres no hope for improving the situation. And not all of these, but most of them will not believe his promise again. I have to be honest, ive been trying to talk to people here about their thoughts on burl scone neep the its tough to get them to go on the record and even even more tough off the record to get people to be positive about him. But along with his coalition of the Northern League he is garnering around 0 oers of the vote in the last poll we got. The other thing to point out is around a third of people at the moment are undecided on how theyre going to vote. Its not something weve seen before. So for all these leaders now, there is everything to play for. Likelihood of getting berlusconi to talk to monte, nil. He said no. Likely of getting becky grilo to talk to monte, nil. Youve got around a 45 of the vote not willing to face mario monti about the future on of this country. Julia, youre there in milan. What are you hearing on the ground . Well, of course, it is a question. Theres five key residence. What regions. Yes, mr. Bersani and the Democratic Party could win the lower house election, but the question is, are they going to get enough for the senate . Thats why we have to start looking at a potential coalition with mario monti. Ive been talking to people affiliated with these parties over the last few days, and i have to say my sense of this situation is youre pulling together extreme parties from the two sides with a centrist party and a leftist party with the Democratic Party. So the difficulty in forming a stable coalition, i have to say. Britain has found a way to pull it off. Well see if maybe italy can follow suit. There in a beautiful shot from milan, thank you very much. Well see you in the next hour. Nicu easily won the runoff vote in cypress. Anastasiades won about 45 of the vote compared to stavros malias. The frontrunner has problems with a swiss negotiation bailout deal for cypress which some have suggested could be reached by the end of march. Keep your eyes on that. Meanwhile, were just over an hour and 17 minutes into trade here in europe. Meanwhile, decliners hit around 5 to 4 on the Dow Jones Stoxx 600. It follows mixed end of the week last week on the u. S. Markets. Were not going to get any trade from them today, of course, because of president s day. So volumes are likely to be fairly steady and low here for european equities. Its worth pointing out the s p theyre having seven straight weeks of gains in the first seven weeks of the year. The last time that happened was 1967. And funny, just how long ago that was. The xetra dax was up 9 points. Ibex is down about 1 . The cac 40 down about 0. 3 . Natixis is up 20 after laying out Restructuring Plans. There we go. Up 18 poin at the moment. And telephenomen phenomenopheno spain down 11. 9 . Its amazing to think of the eurozone. Weve seen around 150 billion raised in various auctions across the year. Spanish yields have outperformed against italy. 10year gilt, 2. 2 . Sterling continues to weaken. Well keep our eyes on that. Euro dollar, 1. 3334. And the real focus has been on the yen. 93. 96 dollar yen at the moment. Still shy of that 33month high of 93. 47 euro yen. Thats all post, of course, the g20. No direct criticism of japan. Lets check in on whats happening in asia on this first trading day of the week. Li sixuan is with us out of singapore. Hi, ross. Asian markets finished on a mixed note with japan yet again dealing in the spotlight. The nikkei jumps 2 here to end a fouryear high. This weakens further with japan avoiding criticism of the g20. Prime minister shinzo abe says buying foreign bonds could see options. And the market focus is also on his nominee for the next bank of japan chief. The Banking Sector led the gains with mitsubishi jumping almost 5 . Sharp shares reversed early weakness to end higher by nearly 3 despite a downgrade from s p. Automakers rallied on a weaker currency. In china, is t shanghai composite lost 0. 5 as it rapped up the first trading day of the year of snake. Liquormakers took the brunt of the selling. Retail sales in china during the week long Lunar New Year holiday rose at the slowest pace in four years as stateowned firms cut down spending on food and drink after a ban on boozy banquets. A new wave of smog engulfed beijing on sunday. Meanwhile, Hong Kong Markets saw profit taking with resources and Property Developers leading the losses. Elsewhere, south koreas kospi finished about flat. Australias esf 200 hit a fresh 4 1 2 year high boosted by domestic upbeat earnings. Action now trading higher by a modest 0. 1 . Back to you, ross. Sixuan, thank you for that. M a is back, baby. That seems to be the message after last weeks extraordinary deal flow. Just what will investors see activity this year . Well discuss after the break. [ male announcer ] citibanks app for ipad makes it easy for anne to manage her finances when shes on the go. Even when shes not going anywhere. Citibank for ipad. Easier banking. Standard at citibank. Okay. [ male announcer ] with citibanks popmoney, dan can easily send money by email right from his citibank account. Nice job ben. [ male announcer ] next up, the gutters. Citibank popmoney. Easier banking. Standard at citibank. Welcome back to the program. Mergers and acquisitions have dominated headlines in the past week. Mega deals like Berkshire Hathways takeover of hines, American Airlines long awaited merger with usair, its got beale fueled hope that deal making is back. And taking a closer look at metals and is mining, lee is with us. Before we look at metales and mining, there are some broader take aways from this report, as well. Do you agree with the overall sentiment that this year is going to be a much better year for m a . Lets hope so. Last year was a particularly bad year, lowest deal volume and value since lehmans 2009. We really hope this year will pick up. Our report talks about completed deals, so it didnt include the Xstrata Glencore deal. It will give a nice boost to 2013 if and when that ever happens. I think everyone is expecting it to happen, but its certainly dragging on, yes. Is that emblem attic, the involvement of the chinese here . I think for the mining and metals sector, absolutely, the chinese are the biggest users. So they need to be involved from a competition perspective, but more and more from a deal perspective. And do you expect that to be one of the trends this year that we see . Yes, absolutely. We saw an increase of chinese and other stateowned entities acquiring 2012 and we expect that to be an increasing trend along with more diverse private investors into the sector. How about with mixing the funding, we are going to see deal flow. Whats the funding for it . The funding will increasingly be from the private sector. The corporate, the diversifies, the angelos, the rios, they will do deals, but they are capital constrained. They will recycle capital. But increasingly, the valuations are looking attractive to the private sector, not least because there arent returns elsewhere right now. So we expect to see more capital flowing into the sector. Absolutely. I think the last deal was very much dominated by consolidation amongst the majors. And that plays really now is changed. The majors are capital constrained and it will he will be private investors and new emerging diversified next generation coming through, doing the deals. How do you play it as an investor . As an investor, i think you need exposure to the private funds, as well. Purely on the investment side it will be difficult because you have to pick winners. Find undervalued assets, turn them around and make a return on the shortterm. You bet on the private guys that are happening along with the other guys, as well. I think they have a much easier route to market because they dont have the same shareholder issues being risk averse. Lee, good to see you. Lee downham from ernst young. Now, finding out what other sectors are the best to watch, greatest analysis on cnbc. Com. Thats right. Still to come on the show, carlsberg. Now, this company wont be toasting 2012 as the danish brewer, one of the weaker stocks on the stoxx 600 today. Diluted, not diluted. What did i say . The headlines from around the globe, the yen resumes its slide lower, the nikkei up after japan escapes g20 criticism. The finance minister defends his countrys plan in a cnbc interview. And carlsberg reveals prices in russia. And natixis shares rallied as much as 20 after the french lender unveils a simpler structu structure. And a final week of campaigning gets under way in italy with polls suggesting bersani has a narrow lead. European stocks dont get the benefit of the u. S. Trading day and as a result pretty flat. The ftse 100 down, xetra dax up a little bit. The cac 40 down 0. 3 and the ibex down 0. 9 the . Lets hee so he how the bond space is reacting this weekend. 5. 3 on the bond yield in spain and 4. 4 in italy. I think theres a huge story here with whats happening with gilt and sterling and with britain more broadly. 2. 22 last week. As far as the currency markets are concerned, you youll see the pound you wont see the pound, anyway. Dollar yen is where were focused. 93. 37 is where the paper hit last week. Euro yen, not far away, either. From 1. 2771, which is the 34month but it goes to when we have to update the board, tells you to take some that were more dramatic last year and add a couple of new ones for the months ahead . Yeah. The swiss came out and said were going to keep it. For now, exactly. Except, of course, when you do that, it will be right back in the news. David cameron is likely to face questions over a 750 million helicopter contract when he kicks off a threeday visit to india today. The choppers made by meclanica are the center of a bribery scandal. Other corporate trade issues could include tescos bid to enter indias Retail Market and tax issues faced by voda phone and shell. Moodys says indias Credit Outlook is looking increasingly vulnerable. Indias trade deficit wieeddened to 20 billion in january. The wide deficit would weaken the rooep rupee, push up import prices and fuel stablism. And inflation slowed do its lowest level in more than thee years in january. Our Interest Rates for the cut in 2013. The governor of the reserve bank of india told cnbc at the ghe thinks theres room for monetary easing over the next few months. I think it is special on the government to consolidate fiscally, that its special on the central bank to bring about an environment of price stability ask put the government on the central bank. Understand that you need Fiscal Consolidation, you need price stability for longterm sustainable growth. There is, of course, difference of view in the shortterm, a difference of perception depending on where youre sitting. But i dont think you should see that as a major division. International quart nation or at least a shared understanding on the implications of individual country policies, especially systemically important countries, domestic policies, lower impact on emerging economies. And i believe that advanced economies, systemically important economies must be sensitive to the lower impact of their policies. Also speaking on the sidelines of the g20, Australias Deputy Prime Minister dismissed talk of a currency war, but did admit that a stopping aussie dollar is a concern and key to australias economy. We saw a huge crash in Commodity Prices in the second half of last year and that relied heavily on our revenues. And part and parcel of all of that was doubts about the future of chinese growth. But if the chinese economy is growing 7. 5 or 8 , thats still very strong growth. Its good news not just for australia, not just for the region, but for the global economy. The chinese economy is Something Like 40 larger than it was at the end of the 2007 when it was growing at 10. So with an economy growing at 8 or just below 8, its still making a significant contribution to global growth. Have we got a better balance now in terms of austerity versus growth in terms of a coordinated g20 agenda . Look, i was pleased to hear the discussion about the Economic Outlook and what we need to do to strengthen gloeg global growth. We need a range of policies, but particularly fiscal policy and monetary policy. Working together to support growth in jobs. We had a discussion about that. We had a discussion about Exchange Rates and we need the marketbased Exchange Rates. We had a long discussion about the appropriate balance depending on domestic conditions about the range of countries between fiscal policy and monetary policy. And i believe in our mediums today, there was a lot of agreement about the fundamentals of all the dead. First and foremost, we have to take into account near term conditions. In terms of fiscal policy, i think there is broad agreement on the structural reform to lift our growth potential. We had a long discussion about the need to finance infrastructure, the importance of that to growth in the developing world. I think we had a pretty good jan about all of those things and is i think a general agreement that to grow, we have to Grow Together and that means a lot more cooperation. Now, the worlds fourth biggest Brewer Carlsberg has reported bigger than expected Fourth Quarter profits. The number reflects sales from russia. For more, dirk vanlan did he r joins us now from jeffrey peps carlsberg shares are down almost 5. 5 , seven weeks on the stoxx 6 of 00 so a pretty big disappointment for investorses here. Yeah. You saw operating profit was about 4 bro what we had for the forty quarter. Most of that was europe. I think more importantly was the markets focusing on a rather disappointing outlook for 2013 and the consensus estimates were around 10. 8 currently. Sdh whats going on in russia where its sales stalled a bit . Russia has been an ongoing issue for them and they actually have a slightly better year last year. Theyve managed to regain market share. But why profits have been down is theyve seen a lot higher input costs and in the back end of last year and, you know, i think that factor means that theyre not as favorable in 2013 as people were expecting. And so i think thats where some of the disappointment stands. What are those key input costs and what do they point to for 2015 . Theyre looking to be up in the low Single Digits and most of that is although youre get something softness in volume, that is offexecutive by higher packaging. Is that industry going to be across the industry, those factors . Yes, it is. If you look at shares of heineken today, they are fractionally lower. Is it time for the company to shore up its cost structure . No. I think the streets have gotten slightly ahead of themselves in terms of what theyre expecting. I think theyre expect ago big bounce back in russia and clearly theres higher input pressure there. Northern europe is proving to be a bigger impact, as well, than people were expecting. I think thats expectations getting ahead of themselves. It doesnt bode well for those. You would think that beer would certainly by a pretty good barometer of where demand strength is currently. It doesnt reflect well, i think, for retail spend. No. I think there will be. Tough markets this year. France had a tough impact in january. As we know, western europe is a structurally declining beer market and so the challenge for brewers is to find way toes increase the price. Thats a challenge for them. Does that mean consolidation is ahead . We know with food and is drink theres been a bunch of deals in this space. One of the biggest food deals with acquisition of heinz, theres been consolidation in asia with the drinks industry. What about the carlsberg . I think because the focus has always been on m a in asia, frankly, i think western europe isnt a very attract traive beer market. I think were unlikely to see deals in m a. I dont see that changing. The focus will be emerging markets. When we drink up those comparisons, all the stocks have done okay, carlsberg, sab and does that remain the case . We are cautious on heineken. I think the group is transformed into more of an emerging play. With jeffries, we think there are issues in europe that are going to make 2013 a tough year. If carlsberg has to ramp up quickly to offset markets, would you as an investor penalize them for doing so or would that be rewarded . Theyve done very clever deals there and they continue to consolidate their market. Frankly, i think that would be welcomed. Well leave it there. Carlsberg down now about 6 still. And down 7 at one point today. Just a reminder of whats on the agenda in asia tomorrow, their first group of earnings due out tomorrow from the likes of arian, amatill and aseano. The rba will release minutes from its latest policy meeting. Finally in manila, the countrys first new listing of the year. And thailand coming off that super strong close at the end ovd year. 18 , people. Google it. Its interesting differentiation across the region. Were going to take a short break, but when we come back, you need to boost your digital message. Well bring you the full interview next on Worldwide Exchange. To grow, we have to boost our social media visibility. More likes. More tweets. So, beginning today, my son brock and his whole team will be our new senior social media strategists. Any questions . Since we make radiator valves wouldnt it be better if we just let fedex help us to expand to new markets . Hmm gotta admit thats better than a few likes. I dont have the door code. Whos that . He won a contest online to be ceo for the day. How am i supposed to run a business here without an office . [ male announcer ] fast, reliable deliveries worldwide. Fedex. British finance minister George Osborne says he denied the communique was underwomening and he wouldnt be drawn into the discussion with the words follow through. I think youre being a bit unfair. Its a big thing when the world economies come together and talk about the iss concerned them. What if we werent getting together to talk about global growth, what we can doing did on to make sure all of our issues define popularity . We are talking about the issues that are dominating the newspaper headlines in the market. A previous g20 meeting has been very much an issue at the center on austerity. Do you think were now moving to more of a growth agenda rather than the emphasis on austerity . I think what youre seeing at the moment, for example, with currencies is a determination for us to come together around common language, which makes it very clear that we are not going to be using currencies to achieve competitive devaluations and i expect youll see in the communique today very strong language, which is similar actually to the license you saw from the g7 a few days ago. Now, i think thats a positive thing. I think its a very clear signal from the largest economies in the world that theyre not going to engage in the kinds of things that have caused problems for the World Economy in the past when there werent g20 meetings. Mr. Draghi of the ecb was telling reporters that we shouldnt waste our time talking about currency wars. And yet you say to me, mr. Osbourn, there will away Firm Commitment to avoid these in the communique. Who is perpetrating the crime at the moment . Its not clear that theres been any more volatility at the moment than youve seen in other periods. But it isnt direct no, there has been a lot of speculation in the Financial Media about currency and i think its useful when the finance ministers come together and make it clear we have a common approach to this and the common approach is were not going to use currencies as a tool of economic warfare. Do you think any of your partners are . I think the language reflects the intentions of all the governments around the table. So its not a problem at the moment, its just something that might be a problem and if anyone was thinking about using competitive valuation for their currency, this is a warning for them. Its not a warning. Its a common statement from the largest economies in the world. This is not going to be the tool to use. I think that does reassure markets. I think it reassures citizens, as well, that countries are going to address their fundamental Economic Issues and not try and find shortcuts to the way out. The ecd says weve been too optimistic previously on our growth assumptions. Is that a met for for the uk . And, hence, have we had too much austerity and not enough emphasis on growth . What i think youve seen with the uk and the rest is a recognition that the eurozone sovereign debt crisis had a big impact on confidence now. We feel that the tail risks of the financial crisis tail risks that exited last year have hugely abated and this meeting takes place in a much calmer environment. And in order to deal with that situation last year, lots of countries, including the uk, allowed automatic stabilizers to operate. We pushed out our debt target, travrm, in the uk. So we demonstrated the flexibility. But it was within a context of credible Fiscal Consolidation plans, credible plans to deal with our deficits. And, again, i think youll see language about that reinforcing that in the communique today. There are a lot of concerns about the british austerity plan, the ifs says were going to have to borrow up to 64 billion pounds by the time of the next election. Does that mean the plan is just not working . Theres no doubt weve had more difficult Economic Times than anyone hopes a couple of years ago. Weve had the eurozone crisis, uncertainty in the u. S. And i think in the uk as with other countries, weve had the longer term effects, the lingering effects of the banking crash. And if you look at the uks gdp numbers, there was a lot of talk a couple of weeks ago when we posted a negative Fourth Quarter that, you know, that was something that was somehow extraordinary. Now you can see with all the other countries of the western world posting negative quarters, many of them, toile actually its not that extraordinary. We live in a tough neighborhood and this is a tough, economic situation. Is it true that the comments i read that youre frustrated with mr. King and the expansionary policies of the bank of glbd . Are you hoping for more when mr. Carney becomes the governor of the bank of england . Im not seeing those reports you referred to and i work closely with mervyn king respecting his independence. But actually, funding the lending, for example, the banks scheme to help with Credit Conditions is a joint scheme with the treasury. So we work pretty well together and i dont have these frustrations that you report. You and your french and german counterparts have been talking about strategy toes clamp down on Corporation Tax avoidance. Wouldnt it be just simpler to cut the uk tax code which on last count with ten times the size of costal world pace . Tolstoy is a better read. But what i would say is the International Tax rules were developed about a hundred years ago after the First World War and they have not kept pace with the changes in the World Economy and the changes to the Way International companies do their business and the changes to the way we all go about economic activity. For example, on the internet. So we want to update those tax rules. That cant be done in one country. Talk about the uk tax code, its not possible for the uk to draet address the structure of the International Economy simply to return tax code. And, of course, what we want to do is make sure International Companies still see britain as a home and a place that but thats your major appropriate, for s es to thrive. Well, we do and today we see a survey saying that the uk has gone to the top of the league table of the most competitive places to do business. But that is not an excuse for not paying tax and using the wrinkles of the International Tax code to avoid paying tax. And by working with the oecd, by working with other countries like germany and australia and the u. S. And so on, we can get International Agreement without pricing ourselves individually on out of the world market. I had a chance to speak to steve in moscow. Being part of the euro seems to have little for most britains. A new poll conduct the determined only one in three uk citizens would vote to stay in the european union. One in three. Do you think this is just the same kind of thing where people initially asked about it go im not so sure about this thing and as it draws closer that britain might actually leave, they get skittish . Im not sure if thats the basis. I know what that poll is saying, but i think theres a lot of confusion between the euro and the eu sometimes. I know that people think of the eurozone and the eu as sort of the same thing. The whole message from the conservative government has been a little confused. Its interesting and well play this a little later, but but they want to stay in the eu if they can negotiate new terms. You punish about theres a split in there because there will be one wing of the party that is essentially we want to stay and he are negotiate. The question comes is if they cant get everything they want, do they then say we tried, but we still better stay . A whole other wing of the party says, if we try and we dont get what we want, then we had better leave. And its interesting. We asked earlier tr week about whether it would be bad for business if britain left the eu. Actually, he seemed to say yes. In every the less, i think he serves in some capacity with the government, as well. He hesitated a little bit and says, well, yes, well play that tape. And how many other people actually but there is an audit going on in the government on the impact of the eu in terms of rules and regulationes and thats going to be very important. We need some empirical evidence. Exactly. British designer and middleton sister favorite alice kemperly is said to open two new stores in dubai. She says the next place for competition is the web. I caught up with her and asked her about good Old Fashioned brick and Mortar Stores this days. A lot of people traveling to london come in and they like to spend money. Obviously, if i need something, i go online. But i think that its very, very important to have that showcased. So yes, i think a lot of stores do. Thats why theyre there. Do you sense the change in the business as to how much you have to focus and have a digital strategy, at all . Absolutely. I think its important. If people dont maximize visibility on everything, they have basically to blast out your brands message and also were relaunching our website in march. So thats going to be really, really exciting. Wa about stores . Where are the next ones . The next open store in qatar, there will be a store in new york next. So yeah, its very exciting. But the next process is the web, rebuilding it and relaunching it. Where are most of your clients coming from these days . It depends on whether its from the web or whether its retail or with where do you notice the web clients are coming from . Web clients are actually a lot of new yorkers and a lot of english and middle east. But surprising amount of london is new yorkers, which shows how much more it can feed with the new website the. And you heard her say it there, the next focus is the web. And yesterday this top shop show of the tape, getting a lot of attention. Its a way for the fashion chain to partner with google, do some innovative stuff and how much stuff is on this side as opposed to bricks and mortar. Theres a lot going on with marketing. A lot of people have been driven to use diop line and shop online and thats an enormous moment, all brands wherever you are. Right. And it can be useful for companies because if you look at the top shop examples, they know 25 of their online sales are going to california. They open a store in l. A. And its doing amazing. Speaking of which, still to come on the program, sir phillip green says top shop has a long way to go in the u. S. Where its Flagship Store is a hit already among fashionist yas. The question is whether they can deliver on its american ambitions. He says if they see prospects of expanding well across america, hes very positive on america there. Its not all coming up roses for the u. S. Thats why he had to go out and raise money recently. Also, still to come on the show, central bank keep the Printing Presses running. Our next guess this morning says the equity rally in japan may not be real. Francisco will join us after the break to talk about that. Thats right. And whether high yield is going to bubble. Well ask about the potential for the u. S. Dollar being dramatically weaker from here. Id love to ask him about sterling, as well, to continue to think this is a theme. Yeah. Its interesting. Well see if gilt yields continue to go up, the pound keeps weakening. And martin wheel, over the weekend, said sterling may need to weaken to help the current account deficit. At the same time, though, citigroup saying they see it weaken in the u. S. Relative to the u. S. Again, for a country that has its own printing press, you have to wonder if its not more about inflation concerns. It is well and truly alive in britain with regard to its curren currency. Plenty more to come on Worldwide Exchange. See you in a few minutes. The yen resumes its slide lower. The nikkei is up. The finance minister defending his stimulus plan in a cnbc exclusive. Uk finance minister George Osborne denies a warning to japan and says leader less follow through with their pledge. We have a common approach to this and the common approach is were not going to use currencies as a tool of economic warfare. And investors say the latest restructuring, natixis is up after the french lender unveils a simpler structure and the special dividend. And the latest polls suggest bersanis party has a narrow lead in itly. Jay youre watching Worldwide Exchange, bringing you Business News from around the globe. Markets are relatively quiet, save for japan. Get to that in a second. The cnbc ftse global 300 down about 0. 1 overnight. Own though the nikkei was up about 0. 2 . Take a look at whats been happening in european markets. We should add china has reopened after its Lunar New Year. Here across europe, its a fairly mixed, cautious picture. The ftse is 00 down 0. 2 . Xetra dax barely lower at 7589. The cac 40 giving up 0. 5 this morning. Na particularsy is up sharply. The rest of the stocks not necessarily seeing much of a lift. Again, the levels that were looking at are still the trading range weve seen for the last several months. Yeah. And italian yields are a lot more cautious ahead of this election. Some individual stocks in focus, as well. Natixis shares are up around 20 at one stage today. Carlsberg is softer, down nearly 6. 5 after reporting Fourth Quarter results that missed forecasts and in spain, tell phenomenon ka shares down 2. 25 today because of taking a charge because of vpzs recent currency devaluation. Gilt yields, lower tt, just under 2. 11 is . Sterling dollar has been down to 1. 5462. There we go. 1. 5468. Pretty much near the 6 1 2 month low that we hit on friday. And were talking about as martins comments. Not far away from that month high of 94. 75. Sixuan rejoings us with the asian recap. Thank you, ross. Its a good start to the week for japanese equity investors. The nikkei jumped 2. 4 to a new year high. Prime minister shinzo abe says buying foreign bonds and revising boj law could see options. The market focus is on his nominee for the next bank of japan governor. The Banking Sector led the gains with Mitsubishi Ufj jumping 5 . Sharp shares end higher by almost 3 despite a downgrade of s p. Automakers rallied on the weak erp currency. But a lackluster showing from china is mainland markets which return to trade after a week long new year break. Financials were the major drag on the markets. Liquormakers too can the brunt of the selling today. We know retail sales in china during the week long holiday broke at the slowest pace in four years because firms cut down on spending food and drink after a ban on booze yg banquets. But stocks rallied today on hopes of more Government Support after a new wave of smog sh rouded beijing on sunday. The Hong Kong Market lived in step with the mainland bourses with resources and Property Developers leading the losses. Elsewhere, south koreas kospi finished flat and another strong finish for australia as positive earnings news pushed the asx 200 to its highest close in more than 4 1 2 years. Indias sensex ending higher by about 0. 1 . Back to you. Sixuan, thanks very much for that. A lot of green on that board behind her. We caught up with the finance minister taro aso at this weekends meeting in moscow. The boj was covered, but the first question, whether he thought the g20 communique was an endorsement of japans stimulus plan pes japan has repeatededly explain japanese policies have overtaken deflation. These are measures to overcome deflation as well as a recession. Thats whats been said in the second paragraph of the communique. Why do you feel then, certainly from the g7 communique that the off the record meetings appear to be critical of the japanese policy and its implications for the yen. First of all, just before the dissolution of the lower house in japan, as far as the japanese yen rate is concerned, at least, it was 78 yen to the dollar. However, one month after the election, we see that the yens fally has gone to 93 or 94 yen. So someone must have suspected that something could have happened. There were some who were suspicious of the situation in japan. The very fact that the yen had to be reassessed. Regardless of the absolute direction of the yen and indeed the underlying stock market in japan, as well, do you think this level of volatility is stabilizing for the japanese economy . Regarding the Exchange Rate, the views that it should be market determined, so it is our policy not to say anything about the Exchange Rate, per se. In the stock market, it is always desirable to see stable stock prices. What we prefer is a slow but steady increase in stock prices. No one will welcome the going up or going down or stock prices. Thats not desirable for the japanese economy. What are the greatest economic headwinds for japan in reaching its goal of growth and 2 inflation targets . Until this particular determination decision was made, we were just wondering if maybe the people would think that even if a new government is formed and as far as the economy concerned, there might not be sudden growth. But this time around, as we watch the japanese peoples feelings of sentiment, it turns out sentiment was ahead of what was happening. This is why the stock prices had gone up and the Exchange Rate had gone down. Its been a pleasant surprise on our part that mentality played in this way and pushed up the economy. What do you think is important that we see in mr. Shirakawas replacement . Do you feel feelings about others that you think would be preferential . As far as the appointment of the governor of the boj is concerned, this is something that our government will decide and after the person the nominated, that person should be confirmed. Im in month position to say who i prefer or anything of that point. Theres been a sharp and sustained movement in the boj. How much further can it go . There is the potential for this year for them to bring down 103 billion yuan and its bigger because its 1. 3 trillion dollars equivalent. So youre saying the size of what japan is doing, even though japan is a third of its size . Absolutely. So it could be impactful. And this time around, they want to get it right. They come from 20 years of policymakers in a way. Theres a lot of frustration. So the electorate in the japanese economy is kind of frustrated to see there was no recovery in the economy visavis the United States that managed to have a bigger rebound. Even though weve seen already a 20 plus percent move in the nikkei, are you saying it can keep going . Do you still get exposure . Are you long here . Absolutely. Also because they cannot be seen as being too aggressive in the market. But we cannot rule out the point of seeing the nikkei rising much faster from these levels. Does that mean the yen are you going to do a long nikkei short yen . Is that in a way, thats does that work . In a way, yes. Its going to be more upset than proportionally devaluations of the japanese yen. In theory, it could well be that the nikkei goes from 11,000 to 20,000 within the next couple of years. Although at the same time, the japanese yen devalues it from the current system. Down the next couple of years. But if the yen goes to 4100 to the dollar, that is not a real rally, purely a nominal rally. Would you hedge that or go short the yen . No. We would be hedging it out. What you need to do is make sure the currency isnt eating up your gains completely. Ill loouz loosive gains against investor returns. What is an investor to do . You say this cant last, its all nominal. But you cant really fight the trend, either. Exactly. We are in bubble markets. Last year, we played the bubble markets through the high yielder. This year, we think its going to be a lot to do with equities and the best way to fight it is probably to ride it until it lasts, but hedge yourself. If i played a sterling denominated etf on japan, i dont know if there is such a thing, actually, but would that take out my currency risks . For example, like longer japanese positioning into other currencies, like a dollar or euros, euros would be even better in this case. And, you know, you need to play with a correlation between different asset classes. As of december and november, for example, the correlation between the equity markets and the effects market was not as strong as it is currently. Do you see that breaking down, anyway . A lot of people are talking later in the year about the you know, the dollar and growth. Is growth going to play a bigger emphasis in the currency market, therefore, break the correlations weve seen over the last few years the risk on risk off correlation . I think actually, no, its going to increase potentially from here. Because, you know, over the past five years, the Central Banks have increased their Balance Sheet from three and to six. So its been and expansion. From now object with this year, for example, the u. S. And japan together will bring down an additional 2. 5 trillion dollars. It is out of the japanese economy. That is foreseen that theyre not among staff any more. So thats how much they believe in it and how much theyre concerned about the global economy. So the level of currency debasement, which theyre undergoing right now is unprecedent and from now on it will bite, really. And you can expect it to see relative equity markets going up and set by currency devaluation. The ecb central bank Balance Sheet will increase. The american one increases by 1 trillion dollars. And that is amazing. On inflation, whether you i know. We could keep this going for three more houz hours. But well have to get you back next time to do that. Yeah. Still to come, italian election could be coming to a small screen near you. Mario monti is calling for a televised debate among contenors. Stay tuned to see who is topping the billing so far. Well be live in milan right after this break. Great, everybody made it. We all work remotely so this is a big deal, our first full Team Gathering i wanted to call on a few people. Ashley, ashley marshall. Here. Since were often all on the move, ashley suggested we use fedex office to hold packages for us. Great job. [ applause ] thank you. And on a protocol note, id like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh im sorry guys. Ah sometimes the caps lock gets stuck on my keyboard. Hey do you wanna get a drink later . [ male announcer ] hold packages at any fedex office location. Today is gonna be an gimportant day for us. You ready . We wanna be our brothers keeper. Whats number two we wanna do . Bring it up to 90 decatherms. How bout ya, joe . Lets go ahead and bring it online. Attention on site, attention on site. Now starting unit nine. Some of the worlds cleanest gas turbines are now powering some of americas biggest cities. Siemens. Answers. Italys mario montanaty is calling on the candidates to appear in a televised debate as hes struggling to gain ground in his first ever campaign. Jules is in milan. Anybody nibbling at his debate idea, jules . Well, what weve seen is that hes in fourth place behind berlusconi, behind the comedian becky grillo and wind the man thats most likely to win right now, mr. Bersani of the Democratic Party. But i think the important thing to point out here is theres still a third of voters out there that havent made a decision, in part because of the scandals weve had in the last few months making it difficult for people to decide. For mario montis point of view, it cant hurt. Berlusconi came out immediately and said hes not willing to face mario monti. He doesnt want questions on his economic policy. But one of the things that gets banded around here is if hes more interesting in addressing his legal issues. You know, my accepts from that is that actually, despite whats going on in the markets, the relative calm appearance right now, its going to be pretty difficult for them to pull together a coalition because they come from both sides of the political spectrum. And beyond that, even if they get a coalition, are they going to be able to implement these reforms . I spoke to the economic adviser of the Democratic Party, mr. Bersanis party, and i asked him whether that calm in the market is due to the possibility of the Economic Reforms in italy or whether its to do with draghi and the omt. Here is what he had to say. Mario draghi could be so assertive in july because in italy, the political situation has changed. We with our support because italy is still a democracy. So what monti achieved was because of someone in parliament supported him. And this improvement, this political improvement in italy was key for draghi. He makes an interesting point. Fast forward to today and we have the threat or the performance of an omt program. The question is, is that going on be enough to counteract any instability we get if we get a surprise at this weeks election . Thats an open question. I also just wonder going back to berlusconi how likely it is that we see him coming back this weekend and whether the popes resignation has done anything to underkwut his momentum. Its quite interesting, isnt it . If you look at the polls again, weve had this plaque out in february the 9th. His coalition remember, hes in the coalition with the Northern League were garnering around 30 of the vote. So just five Percentage Points. Hes seen a dramatic increase of around 15 Percentage Points since christmas. Some of his momentum over to last week or so, the shadow has been cast by the pope and his decision to resign. So in terms of the Media Coverage here for berlusconi, it certainly drops off. If hes not going to come out and have any kind of debate with monti, its tough to see how his league can be fought. Absolutely. And in the meantime, of course, his trials are being postponed until after the elections, maybe hoping for some diplomatic immunity there. Julia, thanks very much for that. Great to see you on the program this morning. Still to come on the show, model res walking the walk, designers are talking the talk at the London Fashion week. Yes. I dont know why i got this assignment, ross. You should have been the one to see it. Stay tuned. Find out why british labels have their eyes set on the global runway. [ male announcer ] how could switchgrass in argentina, change engineering in dubai, aluminum production in south africa, and the Aerospace Industry in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Welcome back to Worldwide Exchange. London fashion week is under way. And not just here in the studio, either. Thats right. And top shop, aim to go allow customers to feel like they were at one of this weekends much sought after fashion shows. I caught up with the owner and asked him about the brands global expansion. They just opened a store in los angeles. In america now, thats four. So big country. So base odd what would he have got here, weve got lots to do. So, you know, we would like to open certainly another ten stores in the next 2 1 2 years in america. So we met every big real estate operator while we were there, every big developer. So were working. What do you think about america, about the strength of the Retail Market right now . I mean, you know, certain people are doing well. Listen, i think in every market, if youve got a great brand, youve got great product, people shop. Shopping hasnt ended. I think whats happening is the market is getting squeezed. Whether their operators dont have the right merchandise or im not in the sector team. So i think you have to bring something in the public you want to buy. Hopefully weve got something slightly different, slightly unique. Were not there. Weve got one story in california with 40 Million People. Weve got time to get saturated. So i think having a blank can s canvas, maybe well be able to invoke bricks and onlines together. If we want to be in that business, thats how you do it. But the las vegas reaction was much stronger than we thought. Can you give us more detail on that . Not yet. We were about 50 above our plan. And how are you going to maintain profit margins, basically . Well, we have to be better at it. You know, newness, i think the speed of the market now is more important than ever. Luckily, were a business thats been in that space. So our speed to market has always been very powerful and it continues to be that way. I think thats probably our age, being produced very quickly. What impact has private equity had on the Retail Market . Well, i think in the last few years, there havent really been in the deals. But i think historically, you know, i think private equity and businesses have done a reasonably good job with it. Now, you know, you read in the paper sort of m a is back in fashion. Well see. Any m a in your plans . Who knows. What about dreams . What about it . Are you going to buy it . I have no idea. Are you considering it . We look at lots of things. If britain leaves the eu, would that be bad for business . I cant just answer you in auto i think probably it would be a bad idea, but i think its not just a simple answer like that. We have to understand its much more complex. Thats what we were talking about. Still, i think probably it would be a bad idea. And its a difficult issue. Ten more stores in the u. S. Can they escape the debt, this graveyard for retailers . Our next guest, allegra, thanks for joining us. The one company, of course, that has epitomized this has been burberry. Profit warning last year well, not profit warning. They came out and warned china wasnt as good agency they like. Have we rebuilt the confidence back there . Absolutely. I think 2012 was relatively subdued for china, across the board for luxury. We saw in some cases flat growth. It kwas quite a shock and quite a setback. But i think some of that represented china traveling more on the impact. We saw europe benefiting from that. What weve seen in calendar 4q is a shift in the tide and asia has come back and improved quite significantly on 3q runways. And thats something thats basic will i across the board from the case. Theres been a different between the hard side of the equation. Theres been very different trends by price point within each of those segments. Whats been the difference between the hard and soft goods . So within the hard goods, the mid segment has outperformed. Thats more of the mid price relative to the high end which has been somewhat impacted by the crackdown of the government on gift giving. Thats a category which runs itself easily to gift giving in that respect. Soft goods, youve seen the contrary. So the high end of more sweet name take advantage of having outperformed. And i think that represents more of a shift away from the max luxury or the logo driven brands. What impact is digital having, is the growth of online shopping, delivery and basically this upending of the traditional shopping having across the space inspect. I think its more of a pr and Communications Tool for these firms. Its another way to reach the customer. Obviously, burberry has been on the cutting edge of that. But theres not so much of a big driver in terms of immerse and luxury. But theyre embracing that rather than in the past the brands have been more reluctant to do so. London fagdz week, is it about sales or is it about getting pictures out there . Thats a great point. Communication, one of the three key pillars for luxury. How you communicate about your brand is everything. Its all about creating this image and all of that serves to enhance pricing power, which is the end objective for all the luxury brands. The burberry show is tonight. Justin cook was important in their digital strategy, but hes now at top shop. How do you like this company isnt it true can you recommend it here for inest vers . Burberry is a hold. Its had some volatility and not to mention last years profit warning. Its a great brand because its one of two british luxury stories out there. And in terms of profitability, it has significant upside potential whereas some of the other players in the industry have reached their peak margins. I think theres a great opportunity for burberry. Its doing a lot right things in terms of executing on that strategy. But at these levels, i think there may be a better opportunity ahead. Ppr and swatch are your picks. What is it with swatch that you like . I like swatch partly because of the valuation. I think its undervalued relative to the competitor as well as the effect on average. I think because of its vertical integration, in fact with regulatory changes in the Swiss Manufacturing industry, its in a great position and, in fact, all the companies that rely on swatch are looking to enhance their own capacities to move away from that reliance. So i think theyre in a good position. They have this competitive advantage. And they all know where their currency is going to be relative to the euro, anyway. Thats true. Allegra, good to see you, Allegra Perry from cantor fitzgerald. And still to come on the program, g20 nations in moscow declare there would be no currently war. We will talk currencies when we come back. Welcome back to Worldwide Exchange. Im kelly evans. And im ross westgate. The nikkei higher after japan escapes direct criticism from the g20. The finance minister defends his finance plan in an exclusive interview with cnbc. British finance minister George Osborne says leaders will follow through with their pledge. We have a common approach to this common approach is were not going to use currencies as a tool of economic warfare. Investors cheered the latest Restructuring Plan in the Banking Sector. Na particulars its rallied as much as 20 . And the final week of campaigning is under way in italy. The latest polls, the Democratic Party has a near row lead. Well, china markets have reopened, but u. S. Markets are closed for president s day. So well look to europe for queues ahead of the italian election this weekend. Trade is lackluster. The ftse 100 is marginally lower. The xetra dax has moved higher, up the 0. 2 . In the cac 40, still weaker by about 0. 25 . The ibex 35 still down 1 . Some concern relative to the periphery with spain underperforming on stocks and seeing a small widening of its tenyear bond sfred. Ross. Let me show you where were standing now. The yep, just over 94 against the dollar. Euro dollar has been at sorry, euro yen, 124. 54. Both sides arent too far away from the 30month peak. 1. 2771 was the euro yen 4month peak. You were talking, francesco, about the devaluement. How does that net out on dollar and the yen . Well, in both cases, i would be expecting a devaluation of both currencies, especially the currencies with the supply. The euro, for example . And like productive assets, you know, like real assets, commodities. So were going to see more money pushing into Commodity Prices . Yes, i would say so in the medium term. And at the moment, i would think that the Federal Reserve is the most concerned into timing, into the shape and intervention. We know that there diminishing returns from the central bank activities. So theyre committed to a big push in 2013. Theyre going to bring out 85 billion a month. How about diminishing returns, why dont they do Something Else sthp. Well, they know this is their chance. 2013, 2015, theyre marginal impact is going to be even lower than it is today. Plus, bernanke is a great admirer of the period, which means inflating asset prices for people to feel richer, wealthier into Consumer Confidence and consumer spending. If no one is getting wage increases and youre pushing up the cost of living, everyone is feeling poorer. Well, im skeptical a the what theyre putting into place. I dont think youll be printing money driver and asset values. I dont think theyre going to be quite successful at doing that. I think the key factor will be growth in 2013. That will be the missing element in the market and that will create a lot of travel. The debt overhang is going to be increased, inflated further. Growth is not going to be there to support it. The real economy is going to be bigger and that is going to be a bigger drag on growth itself. That doesnt sound like the kind of helpful rebalancing we were looking for after the financial crisis. It doesnt bode well for the longer term of the structure of the economy. Absolutely not. Japan is an example over the last 20 years. Their failure to regulate growth. Theyre determined to give it a bigger push over the in many next couple of years. And we are really moving from japanese the scenario in the basis. Where they will try to move that money position. Stay there. Well also get your yields on high yield environments, as well. How else are you supposed to make money today . Here is a recap of what some of the experts have told us on this channel. That trend were continuing over the course of the next month or two and we suddenly get ourselves to a hundred very quickly, that may well be the trigger point which could get them into hotter water. Its very difficult to be precise as to when this will happen. And if youre going to have a 200 or 300 dollar move in the next six months, it will be down rather than up. Dont want to be in low risk assets at the moment as we were experiencing the sentiment swing at the moment. Now, iberia has started a fiveday strike. That could cause problems in spain. Well get plenty more on that when Worldwide Exchange continues. To grow, we have to boost our social media visibility. More likes. More tweets. So, beginning today, my son brock and his whole team will be our new senior social media strategists. Any questions . Since we make radiator valves wouldnt it be better if we just let fedex help us to expand to new markets . Hmm gotta admit thats better than a few likes. I dont have the door code. Whos that . He won a contest online to be ceo for the day. How am i supposed to run a business here without an office . [ male announcer ] fast, reliable deliveries worldwide. Fedex. Welcome back to Worldwide Exchange. Here is a look at todays other top stories. Cypress will have to wait another week for a new president. Anastatsiates is the leader of the Democratic Party and secured about 45 of the vote. His closest rival, Stavros Malas took just under 27 of the tally. Jcb officials have suggested a deal could be reached by the end of march, although investors are largely wording whether thats wishful thinking. Korea. Meanwhile, thousands took to the streets of lisbon and madrid over the weekend to protest austerity measures. In the portuguese capital, around 5,000 people called for the government to step down accusing the Prime Minister of being a liar and a thief. In sane, possible changes to the Regional Health care system profited demonstrations in madrid and other cities including barcelona. Regional governments continued to implement stringent spending cuts. European officials are considering banking regulations. Most eu countries including eu and france support bonus curves holing banks to a one to one bonuses salary ratio. The newspaper says the uk has suggested an alternative proposal that bans cash bonuses exceeding salaries. But still, a pretty Extraordinary Development as it moves forward the. Yeah. Meanwhile, being a part of europe, for most britains, a new poll reveals that only one in three british citizens would vote to stay in the eu. The conservative ruling British Government last night promised to hold a referendum on the matter in 2017. And the troubles amounting to the spanish Flagship Airline iberia is likely to cause widespread chaos and cost the airline millions. The strike begins tonight. 70,000 passengers are likely to be affected, piling further pressure on the nations already struggling tourist industry. Iberia report a loss of 25 2 Million Euros during the first nine months of 2012. Francesca is still with us. We want to get your thoughts on a km of themes here. I know weve been talking about the eu, weve did you discussed how you see the euro special being a headwind. But we have sort of a general strategy and then a couple of possibilities that you like to hedge for. That is one of our scenarios, one out of six in which we try to simplify the states of the world. The dollar devaluation is one which weve been looking at for quite some time now. We think at some point there might be the possibility of seeing the dollar devaluing strongly for a number of different reasons. First of all, its because its the intentions of the u. S. To try to achieve that as a way to, you know, incentive the buying of the treasuries and their exports. Also, we believe at some point, there is far too much reserves across the world which are invests into american dollars. They currently own 11 trillion worth of assets. What does the devaluation encourage people to buy treasuries . Surely its the other way around. That has been happening in the last ten years. Two years ago, they were 2 trillion and now theyre 11 trillion. A lot of it has been coming from markets. And so at the moment, 60 of it is being invested into american dollars and its reeleding an average of 40 basis points. Some 4 five years ago. So its kind of useless yielding money. At the time, the dollar will be perceived to be going down, we believe that might turn into 49 because a lot of people will be joining the trend and sell the dollars. What is the what is the other reserve that they go to . The euro, do they pile in . Japan has said they will buy ecm bonds. To make sure that they will devalue against the euro. Its kind of a favor which is not really a favor. What about gold . They can buy gold. China, russia, theyre buying as much as they can find. But here, china has been downplaying treasuries for more than a year. They used to be at 1. 4 trillion, now theyre at 1. 1. This trend has been going for quite some time. What im thinking is that the momentum, you can get momentum in the trend because of the largest technicals. And on the fixed income side, how much more, you know, still looking for yield, how much more is it going to push prices . Looking for yield . High yield, yeah. Well, high yield, i think theyve got to where they can be. I mean, there might be an additional tightening, but last year we invested into yield for moscow, the portfolio. This year we move out of a yield into equity because we think equity is more defensive play. Whereas high yielder, there are signs into the bubble. One is the most important one of that 30 of the devaluation. Income investors cant switch into equities. Theyll keep going to where the yield is. Or theyll move into cash. Etf have already been seeing some outlook for high yielder. We will see more and more going through time. You know, at the moment, there are Certain Companies that will be down 6. 5 times. Treat that at 4 to 5 yield. It just doesnt have that, doesnt make much sense. Plus, there was a turkey local bonds described by 51 times. 51 times oversubscribed, yeah, i think i know what youre saying when we Start Talking about a high yield bubble in these situations. Francesco fasanara, thank you so much for stopping by this morning. Thats your latest party was 51 is times oversubscribed. Wasnt it . Obviously. Still to come, the g20 meeting in moscow, policy was agreed on. Whats the outlook for 2013 . Well find out with the spanish and german finance minister told cnbc. [ whirring ] [ creaking ] [ male announcer ] trophies and awards lift you up. But they can also hold you back. Unless you ask, whats next . [ zapping ] [ clang ] this is the next level of performance. The next level of innovation. The next rx. The f sport. This is the pursuit of perfection. The f sport. All stations come over to mithis is for real this time. Step seven point two one two. Verify and lock. Command is locked. Five seconds. Three, two, one. Standing by for capture. 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Cannonbox [splash ] the french finance minister this morning says he doesnt see paris losing credibility if there are exceptional circumstances that push back the deficit target. He says once theyve had the Eu Commission forecast since february the 22nd whether more budget savings will be needed. Now, this comes as a number of policymakers have been talking about the state of the eurozone over the weekends. They include ecb board member euro gasmussen. He says the ecb is in better shape than six months ago and competitiveness, not currently devaluation was the key to boosting growth. Steve caught up with the french finance minister at the g20, as well, and he, too, told him the eurozone was in better shape and explained his stance on currency manipulation. There is no contra decision. I always said that i was against the currency war and refuse any kind of pressure on Central Banks and especially on the ecb. But still, there were some equilibriums which exited because, first, the eurozone is in better shape. So people want to invest in europe. But second, also because elsewhere, were seeing strategies and this is why i called for it. This is the approach that has now been adopted by the g7. It is going to be adopted, too, by the g20. Of course the currency rates are staepd established by the markets, but we must avoid aggressive deval ewe agsz and the currency rate must reflect the fundamentals of our economy. We will move to the fundamentals and all the economies can work in good shape and also in Good Relationship between them. So were talking about a crime that doesnt seem to have a perpetrator. Who is carrying out aggressive strategies which devalue their own currencies overtly . Im not in a trial. Listen, you said that there are some carrying out aggressive strategies. Im not a judge and the important thing is that the g7 currencies which reflect on all the currencies of the world, all of them together were capable to define a corporate bond. So now, i think we are going to get out of it the. The eurozone is in a bad state as shown by the gdp figures. We continue to suffer because of the strength of the euro compared with these devaluations, dont we . I dont think the main problem is this level of currency. It has been addressed by the g7 statement and is addressed by the g20. The problem is, how can we manage to go on with Fiscal Consolidation strategies on the midterm, but also being capable of defending our growth in the full term . It is a question maybe of space, of risen and equilibrium, meaning that i think we cannot act the same when a country is in excess and when a country is in deficit. Does that mean the germans need to spend more money . It means that and i think the message will be addressed by the g20. When a country is in a strong situation, it can strengthen its own internal demand. You dont want to name country thats need to no. Im not in the name and shame or the name ask blame because we are here at the g20 in a corporate approach. As you know, france and germany have a very strong relationship. And when i speak about cooperation, its first of all our cooperation which is the basis of the european construction. One more question if i may, sir. It appears that previous g20 meetings have got their coordination, but they have coordination based on two aggressive sta activity igs where the conference was on deficit reduction and deficit management. It shows europe has been aggressive on austerity and needs to think about a more Aggressive Growth strategy. Clearly, the last two seconders of growth are bad for germ thee, are bad for france and this is where we have to reflect on how we can move on, continue with Fiscal Consolidation which is necessary, a very serious attitude towards deficit and this is the attitude that we adopt in france. But also keeping in mind that we are responsible in front of our people and that europe cannot be for the long run a zone of high unemployment and low growth. We have to have this debate. We had it here in the g20. I think it was a comprehensive approach and well have it in the eurozone, too, in the months to come. But its not a matter of renouncing to what its maybe a matter of balance. Now, the g20 attendees agreed on the need to crack down on Corporate Tax avoidance. The final communique did say members were determined to develop measures to stop Firms Shifting profits from the home country to pay tax elsewhere. Should not be able to cap the phase and theres a tool to unfairly use their taxing. And the head of the International Monetary fund, christine legarde, has strongly dismissed concerns over the currency war. Speak to go cnbc at a press conference, she said imf has worried a lot about currency worries, not necessarily currency wars. Stay tuned to the show. Well tell you more about what legarde said in moscow. On our website, sneak ahead and get the full details. Can the world cope with 120 oil . Well talk about that when we come back. [ kitt ] you know whats impressive . A talking car. But ill tell you what impresses me. A talking train. This ge locomotive can tell you exactly where it is, what its carrying, while using less fuel. Delivering whatever the world needs, when it needs it. After all, whats the point of talking if you dont have something important to say