Transcripts For CNBC Worldwide Exchange 20140130 : vimarsana

CNBC Worldwide Exchange January 30, 2014

Bouncing back from profit warnings saying it will cut spending and step up asset sales this year. Spains economic continues to pick up the pace. Good news in germany where the jobless numbers fall faster than expected. And hanging up on hand sets, google gets out of the business of making smartphones, selling its money, using the motorola unit to lenovo for nearly 3 billion. Announcer youre watching worldwide exchange, bringing you Business News from around the globe. A very good morning to you. We concluded the feds last meeting. Ben bernanke as expected was a 10 billion taper once again. And not a huge amount of deception from the fomc. Equities following asia and the u. S. Lower, the dow down 189 points. Down to lows we havent seen since november 7th. The s p down to december 9th lows. Its a huge number of individual stocks to look at. How does that translate into the indices . The ftse 100 was down some 28 points. Its down another 28 points today. Xetra dax off 0. 4 . The cac 40 off 0. 5 and the ftse mib off 0. 25 . We had the hsbc number out which dipped down into contraction territory. That came out with a new day today. Nikkei off 2. 5 today. The shanghai composite down 0. 8 , the hang seng off 0. 5 . Asx 200 off 0. 8 . Were back below the twoho month low, 100. 56. Yesterday we were up to around 2778 before we heard from the fed. Bund yields are lower. Very, very touchy we are today. I like that. Sterling back down to 1. 65. Aussie dollar not far away from the 3 1 2 year lows at the moment. And euro dollar, still on this 1. 36 mark. Weve had spanish gdp out today. The recovery, picking up steam. The first gtp reading for the Fourth Quarter shows the spanish economy expanded by 0. 3 compared to the previous three months. Stephane is in madrid. He has more for us. Stephane, how does this compare with what we were looking for . Well, thats exactly in line with what the finance minister told Parliament Three weeks ago. But its stronger than what most economies were expecting. The finance minister is actually confident for the month to come. He believes that the gdp will expand by 1 this year, which would be higher than the official target of 0. 7 . Thats good news. Even if there are still a lot of negative indicators. In spain, the first one, retail sales has been released yesterday. It was down 1 in december. That was the biggest decline since last summer. Plus, of course, the Unemployment Rate still improved to a record level 26 . Although its been stabilized over the last three quarters. It remains at a very high level with the youth Unemployment Rate at the 56 . The black economy is a big concern in spain. Its now estimated thats 24 of the spanish Economic Activity. The black economy, which is a main problem when it comes to tax incomes for the Spanish Government and, of course, the consequences of the realistic crisis. Acourting to the latest data, more than 550,000 people still owe and have to repay their bank more than the value of their houses are flat. So there is still a lot of economic pressure on these people. But the overall feeling is that the situation is improving gradually. Stephane, thanks very much indeed for that. Well get more reaction to that number in just few moments time. January season adjusted jobless falling again from the december figure, minus 28,000. It was minus 19,000 in december. The december adjusted jobless rate, 6. 8 pefrs, unchanged from the december level. Tun adjusted jobless rate, 7. 3 . Thats actually a tick up from the unadjusted level of 6. 7 in december, as well. And lets bring in bertha ahead of macro credit research. Burton, nice to see you. Good morning. How would you characterize the well, weve got a recovery in spain. We havent yet got one in italy. How would you characterize things . Spain like ireland is reaping the benefits of reforms. The first tacks to get a recovery are to get transparency for investment. Not only in financial assets. Spain has done the bad bank. It has cleaned up its banks and weve got now 35 year on year increase in demand for spanish real estate from foreign investors. Weve got carrefour today announcing they will hire more than 5,000 employees in spain after ford increased their factory investments in spain. So not only was transparency on the Banking System as increasing demand for financial assets, by reforms on the labor markets have increased demand for real assets, for real investment. All youre doing is lagging. It was the coalition government, which is fragile. Although after the kicking out of berlusconi, its free there. The key there is maybe with that you can have a stoppinger coalition, maybe a strong majority. Then you can have more reforms. But its a much longer process, so spain is going to outperform. Weve seen a huge amount of outpours. Weve seen a huge amount of convergence trade already. The lowest cost ever on a twoyear note. Five year irish trading below that of the uk and the u. S. Weve come a very long way. We seem to have priced in an awful lot of recovery already, havent we . I agree. Like last year and the year before we were long on europe, on european bonds, on periphery. We talked about a meltup in the last months of 2013. And now were just after this meltup, were asking ourselves, you know, if the market is a bubble or not. I think theres in a bubble, people do irrational things. Companies do financial engineering, banks lend to everyone, consumers borrow and buy things they cannot afford. And i think were not there yet in europe. I think we are in a crowded trade, for sure. There are some areas that are a bit vulnerable like the new cocoa bondses, for example, or corporate hybrid bonds, very complex structures. But generally speaking, i think theres a bit more upside in periphery. Globally, we see outflows out of emerging markets. This real location is still ongoing. But yeah, we have less sugar in the market. Its a bit like a diet coke. You dont have a lot of sugar, you dont have a lot of calories. How much more do you think spreads can tighten . Well, i think, you know, were at 2 , potentially we could go up beside her. High yield spreads are around 3 . We could go 50 basis points tighter into yearend, for sure. And the market can always surprise you and do better than you think. But, you know, at some point you have to stop being greedy. So were very, very careful on scaling down our exposure throughout the year if we get to an irrational level. I just got some statements coming out of the ecb, which id like to get your views on. Credit standards on Business Loans tighten in the Fourth Quarter, but less than they tightened in the Third Quarter of 2013. Corporate loans standard fell 2 from 5 in the third. Banks expecting loan tightening to nil in the First Quarter of 2014. How tight, still, is credit in the eurozone in your opinion . And actually, what do you make of the of banks credit as an investment . This is very interesting. What is happening in europe is that the banks are deleveraging really fast in a disorderly way in the last few years. This deleveraging is now becoming more stable. Basically, banks b are deleveraging at a lower pace and this has been happening over the last few months of last year when the ecb announced the qr and the stress tests and investors starting to put money into bank capital. So banks were able to raise equity instead of cutting assets and cutting loans. But we still have some deleveraging. In december, across the eurozone, banks cut around 30 billion of loans to nonfinancial companies. So we still have a bit of deleveraging going on. So far, since last two years, we lost 350 billion of loans to nonfinancial companies, which is bigger than the size of the european high yield market. So what we need to do is for other so other investors that are not banks to come and do lending. For example, insurance companies, we had several initiatives recently or secretzations, which is something that was talked about. Banks aring goal to need another year to restart lending aggressively like we were doing before and to recapitalize. And in the end, we need Smaller Banks in europe. Banks are still three times the size of gdp, which is the highest in the world. So you need other nonbanking investors to come in. There are other opportunities in bank assets this year. Thanks for that. Thank you. Now, also coming up in todays show, the biggest banks, talking about banks, the biggest banks in all the eurozone, santander missed expectations on profit in the quarter. Coming up, well get more from stephane in madrid and find out what went wrong. Also, in japan, its a tale of different forchs. Well hear why nomuras profits have risen more than 5 but its rival is issue ago profit warning. And its the chinese new year. The horse is aiven seen as one of the more auspicious animals. Well see whether markets will trot, gamble or gallop this year. Google announces its plans to get out of the mobile hand set business, a rather expensive mistake. Pretty big day for earnings here in europe. Lets skik off with roche, the stock up 1. 2 , but it missed expectations been ericsson will get a boost this year. Givaudan up nearly 6 . Riding high, the swiss perfumemaker receiving a bigger than expected hike. It now aims to grab extra market share this year. And santander, down 1. 6 in madrid, missing forecasts. It did double earnings. It was boosted by the stronger comments of the bank with the exception of brazil where the net profit dropped 8 last year. In spain, which remains an important market although its only 7 , the net profit declines by 45 in 2013 and thats one of the reasons why the earnings were below expectations. Net lending income, which is the difference between what the bank charges for loans and how much you pay was below expectations for the last year. And nearly up to 26 building euros. Thats a 13 decline in one year and that explains why the stock is trading lower. The bad loan ratio, also important, 5. 64 at the end of last year. There are two press conferences. The first one at the dividend sales, the ratio. You know the Spanish Central Bank is putting it pressure on the banks to limit the payout ratio. This is much lower than what santander used to pay to reach shareholders. The second is the emerging countries. Its the risk for Spanish Banks and they could face a drain on emerging currencies and on that matter, the chairman of santander didnt make any statement to the press this morning. Over to you. Stephane, thanks for that. Thats santander. Back to the uk, three other Companies Worth looking at, bskyb posted better than expected profits. Speaking first to us, b the cfo spoke to us and said the outlook for the company was still pretty positive. Theres a huge amount of hedge room in the market to go after. You may be a case in point. After 25 years of trying to sell you a box and a dish, many more customers continue to want that as you see in todays market. But theres a number of people in addition to that who might want the sports pass for the day or the weekend to come in and rent from time to time. Thats the market of 13 million households in the uk that we at sky havent been able to access before, but going forward, we as well as other competitors will go after that market. Bskyb stock as you can see, up 3. 25 . Royal shuch shell up nearly 2 after a drop in Fourth Quarters earnings compared to last year. It did impress in trying to cut costs. This is after the Company Issued a profit warning earlier this month, of course. Did i ageo, down 5 today. Half of your sales jumping 1. 8 in the latter half of last year. In another first on cnbc interview, the ceo said the company was weathering the emerging market storm. Western europe is turning the corner. It declined 1 , which im happy to say is a lot better than where weve been the last few years. The emerging markets are a mixed bag. Weve weathered the emerging markets. We know its not a straight line. He took over from paul walsh last year. Joining us for more, jessica ground, uk Equities Fund manager at schroeders. Nice to see you. Theyre saying were weathering the storm. Clearly, investors think now. I think for diageo, the trend was a slowdown and i think that disappointed. They had brought down expectations on the top line growth they were targeting. And people have been paying a premium for did i ageos market exposure. China and nigeria were disappointing. So its fantastic that north america and western europe were better. Big staple cash drainage of companies who got a premiums because they were also youre getting more than half your income now from emerging markets and that has come back to bite a little bit, i suppose. I think it has. I think, you know, as weve seen, the other big news about the taper coming down by 10 billion and people are now really focusing on not just the slowdown, but also what the removal of liquidity means for emerging markets. And cop assumers, you know, its just been more difficult across the board there. So i think this is going to away theme for that process for a while. Talk about bskyb. Bskyb better than expected first half. Strong sales of hd services on demand movies. Revenues doing very well. The costs are going up, as well, arent they . I think the real quick is you are having this battle for contends. Weve seen bt come in for the talks rights. Who knows, even cnbc might be bidding. Well, you never know. You never know. But i think in this digital tablet era, content is king and i think you cant overlook that youre going to see concentration. I think whats encouraging, though, is that sky is finding new ways to monetize that and reaching out to new types of customers we saw in the previous segment. So, actually, churn is quite encouraging, not too high. And they are actually signing up new subscribers. So as long as you keep doing that, you can keep paying for the content. I suppose theyre paying more for that. And its all about the next auction. Its all about the next auction. And bt have got deeper pockets. But they need to prove that they can monetize this, that people will pay them for the champions league, which theyve just bought. So i think its a big area of uncertainty. And actually they might call a truce and decide to hold each others content. Just on to shell, we had that profit warning earlier in the month. Ditching a program in alaska. It was part of a strategy after that drop in profit. Do you think he can put this back on track . I think i think it is possible. I think a lot of the oil stocks as well as the mining stocks, shareholders are starting to say, actually, cut back your cap ex, show us the returns. We want to see more discipline. Youve embarked on this. It hasnt helped with the cash flow. So there is a lot more pressure. Were talking about capx almost 15 billion. So cutting 110 billion from that i think will be enough. And such a big profit warning, 2. 9 million dollars. The profit, it was 5. 6 in 2012. And shell is not the only one. We saw bg preannouncing. There has been a lot of disappointment in this area of the market. I think thats why investors are cracking the whip. So good to see you. Thank you so much for coming, uk Equity Fund Manager at schroeders. Well take a short break. Later, well take a closer look at shell as well as other oil majors expected to report stateside. Exxon is coming up in around an hour. Some of the other stories were watching today, it may be the new start of the lunar year, but china is not off to the best of starts. Factory activities deteriorated for the first time in six months. Hsbcs final numbers for january has come in at 49. 5 compared to decembers 350. 5. Anybody below 50 is a contraction and its pretty much bang on what the contract numbers told us last week. The central bank deciding again to taper its monthly purchases by 10 billion to 65 billion. In its statement, the fed looked past some recent weak Economic Data, including the jobs report and instead noted Economic Activity has picked up in recent quarters. In corporate news, lenovos spending free continues. Its a lot less than the more than 12 billion google initially paid for the unit just two years ago. So as google backs out of its deal, were asking what is your more expensive mistake. If you want to join the conversation here on worldwide exchange, get in touch with us. Worldwide cnbc. Com, tweet cnbcwex or direct to me rosswestgate. The most expensive mistake youve made, was it the champagne and chocolates you bought for your producer at christmas . Could be. Still to come on the show, ra mere ras quarterly profits nearly doubled. Well have your Japanese Bank roundup right after this. I love chalk and erasers. But change is coming. All my students have the brand new surface. It has the new windows and comes with office, has a real keyboard, so they can do real work. They can use Bing Smartsearch to find anything in the world. Or last nights assignment. And the battery lasts and lasts, so after school they can skype, play games, and my favorite. Do homework. Change is looking pretty good after all. Change is looking pretty good after all. Olets say you pay your tguy around 2 percent to manage your money. Thats not much, you think except its 2 percent every year. Does that make a difference . Search cost of Financial Advisors ouch over time it really adds up. Then go to e trade and find out how much our advice costs. Spoiler alert. Its low. Really . Yes, really. E trade offers Investment Advice and guidance from dedicated professional financial consultants. Its guidance on your terms not ours thats how our system works. E trade. Less for us, more for you. Headlines from around the globe, another day in the red following asia. Chinese manufacturing numbers continue to slip. Earnings numbers not helping out. Diageo, roche, all disappointing. Spains recovery continues to improve. The economic is expanding again in the Fourth Quarter. Good news in germany, too. As jobless numbers fall faster than expected. And hanging up on hand sets, google gets out of the business of making smartphones after two years of getting in. Its selling its moneylosing motorola unit to lenovo for around 3 billion. All right. The ftse 100 down 0. 6 xetra dax off 0. 5 . As well as the cac 40. The ftse mib is off 0. 2 . Hitting the lowest level since november the 7th. The s p down a

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