Formula is going to hurt its Third Quarter revenue. Plus, apple has reportedly sold two suppliers. Its cutting orders for the new model of its iphone and upping orders on its high end 5s. Hello and welcome to this wednesday on Worldwide Exchange. Plenty to talk through on todays show with the clock running down on debt ceiling. Well hear from one guest who says markets are still unfaced by the risk of default. Clearly if you take a look at the price action, john kenalli joins us. Never mind the debt ceiling threat, one of the biggest ipos join us. Japans softbank had a boost after securing a majority stake in the finish gamemaker supersoft. Could this be a sign of more m a in the pipeline . And here in london, we get the latest unEmployment Data 23430 minutes. Has the rate dropped closer to the knockout for forward guide yaps . If thats not enough, the London Stock Exchange is playing host to russian Business Leaders. Thats a first on cnbc at 10 40. But first, as you might expect, u. S. Senate leaders are preparing for a last ditch effort to reach a deal to avoid a senate default. Harry reid and Mitch Mcconnell have essentially finalized their plan. The Senate Reconvenes at noon and both men will brief their respective caucuses. House republicans fought for their two separate bills. The conservative Group Heritage action opposed the plan because at the didnt do enough to roll back obama care. Now its suggested that under the Senate Proposal, the government will be funded through january 15th, debt ceiling extended until february 7th and a committee would have until december 13th to welcome a new round of spending cuts. While this is all going on, fitch has put the credit watch on negative warning. Its citing the political brinkmanship. The u. S. Treasury Department Spokesman says fitchs announcement reflects the urgency for congress to act. China and japan, the biggest debt holders of u. S. Debt, state news agency shinwah says its time for a deamericanized world. Joining us for the first part of the program today, fred normal from hsbc. Fred, what has this episode done for lets say we cobble this deal together. We might be back here in the new year, but what has this deal done to longterm damage for u. S. Investors on debt or not . Longterm damage is the way to look at debt. In the shortterm, there is no alternative. The Asian Central bank is sitting on debt mountains of reserves. What do you do with that in the shortterm . Thats the real problem. But i think in the longterm, clearly in reserve managers, investments in asia are looking at getting away from the u. S. Dollar. And it could potentially, for example, set the tape current liberalization and china to set the Chinese Renminbi as a possible alternative. Its a two, three, fouryear process. Yesterday, you can now invest into Mainland China from london as of yesterday. Is there all part of the same strategy . Its all part of the same process. But the stalemate in washington is essential ly dealing with tht process. The japanese yen is an alternative. The euro is a little bit, but you have issues in the periphery. One thing that surprises, me, though, in all of this, why has gold not rallied more . Why not . I think because potentially you see a secular selling of retail money out of etfs, for example, that is weighing on gold. But i think that reserve managers will have to look more closely at gold over the next two or three years. Gold rise, because when we launch qe, everybody thought it was some kind of hedge against the impact of qe and they realized qe didnt kraelz the inflation they thought. And if youre going to start tapering, yields go up and you get paid nothing for holding gold. I think that the. We had the gold rally and now were moving closer to global deflationary worries than inflationary worries. For example, across asia, you see core goods inflation continue to slow despite fairly strong Economic Growth. But at the same time, if you cant buy gold, isnt treasury an alternative . I dont know. You dont get paid money and i know youre not getting very much on the treasury bills at the moment or jjbs, but you get absolutely zip on cold. Its still better than the underlying default. Nobody will default on gold holdings. So at some point we discover the benefits of having a risk free asset. How much dislocation have we got because of the dislocation of assets in the u. S. Market . Im fought going to sell, im not going to buy, im going to do very little. I think theres a lot of cash forwarding, actually. Across asia, we see the dollar demand going up, we see people putting money aside into cash where theres very little investment right now. In fx, for example, is marketing gear in london talking to investors. Theres very little positioning, for example, in fx markets because people are just awaiting the oak in d. C. So what is likely to be the outcome in asia if we cobble together this deal . How much relief do you think there will be or not . I think there will be a snapback risk on were going to see some strength in the currencies. Potentially were going to see strengthening in risk assets. But fundamentally, because were just pushing off the fiscal deal, were not resolving anything, a shortterm rally. Yeah, exactly and the underlying assumption has always been that we would get the deal so theyve priced in that. Lets bring you up to speed with where we are on asset prices. Were about an hour and eight minutes into the trading day here in europe. We are around about 7 to 2 decliners outpacing advancers at the moment. Down 22 at the moment on the ftse. The xetra dax is pretty flat, cac 40 down about 0. 6 . The ftse mib up around 0. 4 , as well. Sector breakdown looks like this. Yesterday, there were no sectors next to territories to begin with. Telecoms are a little firmer. Best performers yesterday were down despite that uptick in car registrations although its a fairy weak january. Lets just show you apple, first of all, trading in frankfurt. In is where it goes, down about 1 . The cheaper version of its iphone. It has raised orders apparently for the 5s, the high end. Lvmh down 6 today posting a Third Quarter sales in its fashion and leather business. And danone, down 3. 5 . Its cutting its 2013 targets after baby formula sales failed to repound in asia following a food scare. Stephane is in paris. Ross, do you buy leather or fashion goods . Do i buy leather or fashion goods . Do you . What about leather fashion . Well, you might not be the only one because, actually, the performance of that sector of lvmh was extremely weak in the Third Quarter. And thats a problem because its the main activity of the brand, according to a luxury analyst. Revenue from that division dropped around 4 in the Third Quarter. Its Louis Vuitton brand, such a repositioning of the brand would lead to shortterm losses in sales. The management of lvmh has predicted that the transformation would take president obama a year and a half. But in terms of other businesses, the retailing division was really good in the quarter, up 13 . Its driven by the very Strong Performance of stores, wine and Spirits Division doing well, up nearly 3 thanks to strong shopping sales, especially in asia and north america. But as i was saying, the man division is low. Danone recalled some baby Food Products in asia and that had a Significant Impact of that division in the Third Quarter. Sales decline by nearly 9 , which is below the average forecast of a 3 contraction. As a result, danone missed the Sales Forecast for the First Quarter and lowered its guidance for the full year. And practice most importantly, the company is secretarying a significant drop in operating margin. The new target, the cfo tried to step in and cool down the market saying danone should do well for the second half of the year. But as for now, the stock is 3. 5 lower. Ross. Lets show you where we stand with bond yields at the moment, particularly u. S. Treasury yields. 2. 72 , the yield is where we stand at the moment. Down to 2. 59 when the fed came out with that no tapering decision. 2. 81 on the gilt. Data coming out in about 18 minutes or so. As far as the currency markets are concerned, there was Much Movement on a 24hour basis yesterday and there still is in dollar yen. 98. 33, almost exactly the same print at this time yet. Euro dollar, 1. 3540, now 1. 3529, so barely budged. The aussie dollar still around the 95 mark. Not huge moves over 24 hours. What about the Asian Session today . Sixuan is with us out of singapore, as ever. Hi, sixuan. Thank you, ross. The nikkei 225 finished higher by 0. 2 . China markets under pressure today with real estate stocks leading the losses on fears of fresh property curves and the shanghai composite ended down by almost 2 . Elsewhere, hong kong and taiwan both lost about 0. 4 in south korea. The kospi ended lower by 0. 3 . Despite the foreign buyer frenzy for the session. Being the longest buying streak in kospis history. As for some individual movers, over in hong kong, lots of movement for the free tv license. Pccw and fantastic tv, they both obtained initial tables and shares of icable more than doubled today. Pccw gained almost 5 . On the other hand, Congress Long tv was rejected and the company will lay off more than 300 employees. So how important that tv license is, ross. Sixuan, thanks very much indeed for that. Now, were only two games to super sales name, is softbank taking a gamble on the Gaming Company . Well talk about that still to come. Plus, with the debt ceiling just a little bit more real today, well take the chance to look back at what some of the key players had to say about the prospe prospect. Here is a reminder of the morning made by the imf christine legarde. If there is that degree of disruption, that lack of certainty, the lack of trust in the u. S. Signature, it would mean massive disruption the world over and we would be at risk of tipping yet again into recession. Third quarter profits fill slightly, there are signs demand is rising in some regions acourting to intel. The firm aerps forth quarter outlook is short of analyst estimates. Its delaying its new chips until the Third Quarter of next year due to technical setbacks. Intel stock in frankfurt down nearly 2 . Yahoo s Third Quarter profit fell 13 , excludeing the big gains in the sales of alibaba. The ceo says changes aimed at new devices will take time. Yahoo is trying a deal to cut the number of shares it must sell in connection with alibabas ibo. Stock up 0. 5 in frankfurt. Twitter says it will list shares on the new york stock exchange. The nyse says this is a decisive win, but it shows twitter is no closer to being profitable. Twitter lots tripling the 65 billion. Softbank buying a stake in supercell for 1. 5 billion. 20 of the investment will come from softbanks own mobile banking unit in online entertainment. The deal values themakers of clashes of clans, thats 3 billion, and comes three months after softbank closed its acquisition of sprint. Shares of softbank are concerned. Softbank up 2. 2 today. Amir, good to see you today. What does this deal mean for softbank . Well, they have been diversifying. I dont see any synergy between the online bank quality. But i think relative to the big purchase of sprint, this you can regard as relatively low risk Purchase Price of softbank. I think softbank has its role cut out for it given the tremendous task of integrating the spectrums from clear wire and building out the lt network in the u. S. , which is a gargantuan task. Are you clear about the strategy . Obviously, they failed the Vivendi Universal music and then that bid for sprint and now theyre buying the gamesmaker. What is the strategy . I dont think there is one, to be honest with you. I dont see a clear cut strategy where all these purchases will mesh together to build this ecosystem that might rival Something Like apple, maybe. But i dont really see i think what they tend to do is tends to dabble in different parts of the market, very successfully, i might add. But i dont see the a big strategy behind these relatively big premiums that its paying for for these acquisitions. I really dont see a big, big picture push behind it. Youve had a short on the stock, but youve taken that off. Yeah. Theres a lot of individual interest in there. A deal like today got a lot of people excited about gungho, as you saw. Its now trading around 1 trillion yen in market cap. Thats based on one game. At least in this case in super cell. You could argue that theres two games involved. If you look at it relative to game valuations, nintendo is trading at two to three times cells versus supercell at three times, i think the valuation is paid for even though its in vary high growth segment of mobile gaming. He think the valuations are ridiculous. Do you think week going to get more consolidation in the seconder . I think the issue with mobile game sg you have thousands and thousands of games being kind of released for free in hope that they will get online sorry, ingame ads and ingame content sales going. Obviously, theres so many number of games now available, its difficult to monetize that with in game contents sales. This is a really, really big hit which isnt the case for super cell, the two titles have been. Its a very, very tough market. Its an unknown quantity given that its still at its embryonic stage. Its growing at a certainly low base. We dont know what the big outcome is going to be. We can see some of the players in the gaming world, maybe not so much softbank be our Game Developers trying to get into that market by buying game lost or glue, some of the listed ones and unlisted ones coming to the market next year. Thanks for joining us. Still to come on the show, the bank of england expects it will take until 2014 before british unemployment dips to 7. 6 , but our next guest says it could reach that level today. Find out whos right. Well look at the jobs report straight after the break. Before that, as dday begins stateside, well take a look back at some of the main sectors in the debt drama. If we run out of cash to pay our bills, there is no option that permits us to pay all of our bills on time which means a failure of congress to act would for the first time put us in a place where were defaulting on our obligations as a gcht. Government. And the headlines from around the globe, were on the brink. U. S. Senate is still trying to come up with a bill to avoid a potential default. Investors are europe are also cautious. Despite an uptick in european car registrations for september. Two french stocks also on the down side, lvmh hit by multiple downgrades after an unexpected slowdown in sales. Danones baby recall on formula is going to hurt revenue. Apple said its cutting orders for the cheaper model of its iphone, at the same time upping orders on its iphone 5s. If youre just joining us, the ftsdz if it is 100 is down 0. 4 , xetra dax down 0. 1 , cac 40 down 0. 7 . Bond yields, tenyear bund, 1. 91 . 2. 72 treasuries. Dollar yen as we were, with 598. 30 handle. Euro dollar, 1. 35 handle. Sterling dollar, just above 1. 60. It is indeed to the pound as we will now turn our attention to the layest data out of employment. Allen clark is with us. 30 seconds to go. What are you expecting . We see another tick down in the Unemployment Rate from 7. 7 to 7. 6 . If it doesnt happen today, it will happen next month. Its been a good start for forward guidance. And the key reason we look at unemployment is its now become a key knockout ratio for their forward guidance. It is. But we need to keep it in context. If we get to 7 in rather late 2015 versus 2016, its still very early. Were in a weak spot right now. We have the data out and lets bring that to you. The claimant camp, thats people claiming unemployment, september jobless claims, down 41,700, 4 of the workforce. That fall is the biggest since june 1997. The claimant jobless rate, the lowest since january 2009. We were looking for a fall of 25,000. The unemployment three months to august unemployment down 18,000. The rate, 7. 7 . It was forecast, as allen just said, to 7. 6 . The average earnings equals the lowest on record. The uks threemonth august average earning just up 0. 8 . There you go. Big fall in claimant count. We have a fall in the ilo. But no drop in the Unemployment Rate, allen. I get employment probably didnt pick up as much as it should have done. Given that the claimant count comes out one month ahead of the imo and its been falling for the last well, more than 30k for the ilo. It didnt happen today, it will happen next month. Its a big drop in the claimant count today. Its firing on al cylinders. We are in the sweet spot. Gdp growth in the region at 1 quarter on quarter. Its very reasonable. Its interesting, of course, we did see unemployment staying higher than at 2. 7 earlier this week. But average earnings, very weak. There is no theres still no wage growth to concern us. Its a bizarre thing. Theres nothing else quite like it. Youve got real disposable Income Growth. The Housing Market is on fire. People go out and spend money that they dont really have. Thats the real thing. Earnings below 1 . Inflation is 0. 5 or more above it. We shouldnt be growing too well. But thats one of the bizarre things about this economy. Where is the growth coming from at the moment, then . Are being loading down on savings or loading up on credit again . I think thats on borrowed time. The help to buy scheme has boosted, a bit of spending this year, but ppi payout, cash that people have this year, they wont have forever. I think theyll cool off into next year. Banks have put money i