Dollar. We have been producing 100 in italy and we have been struggling in the past two years. So with a strong euro germany and the u. S. Warn moscow of further sanctions after nato releases images suggesting the Russian Military is supporting separatists in Eastern Ukraine. And one hour to go until we get the highly watched eurozone inflation data that could provide clues on the ecbs next policy move. We are falling again ahead of the release. Announcer youre watching worldwide exchange, bringing you Business News from around the globe. Good morning, everyone. The headline this morning coming out of tesco. Tesco trading sharply lower today. Down by 6. 6 . It was down by as much as 9 before after the Company Issued yet another profit warning. The third time in three years the struggling grocer has slashed its interim dividend by 75 and announced that incoming deal, dave lewis will take up his post next monday. That is one month earlier than expected and thats obviously weighing on some of the our uk retailerses, including rival sainsbury. Morrison off by 3. 4 and ocado seeing some decline of 2. 4 . Helia, tell me exactly why were seeing this partnership tuesday fall in shares today . What is the shock announcement . It is a shock announcement. And that wall of red youre looking at is red because this is the biggest share slide move with tess coy in 3 1 2 years. Why is that . Another profits warning. This is quite a serious profits warning. If we look at the numbers, theyre saying theyre expecting the first half bigger. Now 1. 1 million. Thats about three or four billion less than it was last year. For the full year, theyre now expecting 2. 3 billion, 2. 4 billion, 2013, the full year with 3. 3 billion. This is a massive falldown for tesco. After a really torrid time, remember their chief executive has only just Phillip Clark resigned after shareholders essentially pushed him out and you see the urgency of was going on in britains biggest super market. Their new chief executive, david lewis, from unilever is coming a month early and when youre talking about that dividend, thats going to be another disappointment to shareholders. And if you look at that wall again, that wall of red, youre seeing this is not just a problem for tesco, this is a problem for britain grocery markets. One of my former colleagues at the telegraph this morning said this is a retail revolution. And hes right. Essentially, the entire battleground for how consumers shop in the uk, thats changing. Why is it changing . Because were offered more choice and because of two things very specifically and that is the german discounters, the likes of alvie, the likes of little who are just slapping up market share. If you look at the recent numbers from cantar, the reason all of the super markets are down is because tesco recently market share slipped. Last year it was about 30 . This year its down at 28 . Falling 4 in the last reading. Morrison, down, sainsbury, flat. Look at albie, 29 market growth. Little, 18 market growth. How do you battle with a thing like that . So are you saying tesco is fighting a losing battle or are you saying not even the ceo can manage the turn around . I think if the ceo manages the turn around, it will be a market in bloom. I noticed steve was this morning talking about valuation and the fact that its cheap. But the problem for grocery markets in the uk is the model of how consumers shop. That race for space that we saw ten years ago where tesco was in every single pace code in the uk, that was not important any more. People either want value and theyre willing to go to places like alvie and little, or they want something very local to them, convenient stores, or they want the high end. So its going to be a very tough ride for tesco. Helia, thank you so much for that. Were going to be talking more about that at 9 30 cst. Lets move on in terms of corporate news. Shares in fiat driving higher after the italian automaker said he does not expect to block its merger with u. S. Based chrysler. The 500 million euro cap on such exit is not likely to be breached, indicating it will go ahead as planned in the month of october. Italian luxury group as posted a better than expected rise in first half profits by improvement in its key china market. They sounded confident on the firms current improving currency position. From asset core is the sanctioning of the dollar. We have been a company which produces 100 in italy, we have been struggling in the past two years so with a strong euro. So the improvement and the more favorable exchange, it will definitely benefit. We do not expect our segment to be impacted. I think on the United States, probably the best bout for this year but also for next year. Emerging markets have made emerging markets like latin america, africa, they are still very volatile. Lets stay with italy because we just got italian july jobless data out. It rose to 12. 6 . That was higher than initially forecast while looking for an execution around 12. 3 . This is what the Previous Data showed us. July started coming in above forecasts, italy losing 35,000 jobs, losing 7. 1,000 jobs on the year and the youth unemployment figure, the rate actually fell. It did fall, but its still at a very lofty level at 42. 9 in the month of july. So the trend is certainly not getting any better with regard to the italian and the french jobless markets. Thats where we saw a record high earlier on this week. And more key data due out today with eurozone inflation hitting the wires at 1100 cet. Analysts expect the first prices rode by 0. 1 nearing august nearing a fiveyear low. In space, the headline rate fell further into deflationary territory at minus 0. 5 . Not a Great Success story. Speaking out at dinner for journalists, he also expressed concern about inflation across the area. No one intends to push a country that is in an economic downturn even deeper into the abit. We are higher by around 0. 3 pergs. You wouldnt necessarily expect that. But maybe this is a little bit of a bounce back from yesterdays losses. And for the week, were still higher by around 0. 75 for the ftse, almost 2 for the cac and the dax. Around 3 this week overall. Probably very much on expectations that were going to get more qe or a ramp up in qe and monetary easing from the ecb. Of course, cpi numbers. The xetra dax, off by 0. 4 . The ftse mib, a little bit of outperformance today, up by around 1 . Lets have a look at the bond markets where, once again, were seeing record lows for the tenyear bund yields. Still below that 0. 9 level. Once again, were seeing a flight to safety happening here and this is very much visible in the treasury yield. 2. 33 . This is a 14month low. Once again, were seeing end of the month lows, this could exacerbate some of the moves were seeing here. In the currency markets, the euro is falling against the u. S. Dollar once again. 1. 3168. Were expecting 0. 3 . 2 japanese yen is pretty much immune to the weaker than expected data points we got out of japan earlier on today. Were going to talk more more about that earlier on in the show. I also want to show you, the Exchange Rate target of 11720 that the s p set out about three years ago. Once gn, this highlights the risk aversion that is in the markets. Fresh images have been released which shows russian nato forces in ukraine. Moscow is trying to create a land corridor. Nato says well over 1,000 russian soldiers are supporting separatist rebels. U. S. President barack obama has ruled out military action in ukraine, but warned moscow got its basis, further sanctions. The fact that russia has taken these actions in violation of the sovereignty and integrity of the ukrainians has resulted, i believe, in a weakening of russia. Not a strengthening of russia. That may not be apparent immediately, but i think it will become increasingly parent. What its also done is isolated russia from its trading partners, International Business, and those i think are going to be very difficult to recover from. Before we continue with the story, the latest flash, eurozone money market rains turn negative for the fist time. No real surprise given the geopolitical risk and the risk aversion that were seeing out there. Claudia, what can we expect from that meeting . The meeting, which is going to cover various areas because many are the geopolitical issues. Whats going to dominate is ukraine. What can we expect . After the phone call to putin yesterday stating that sanctions are going to be stepped up, these actions are inscoreble, the comments are clear, something will happen. It may not happen here in milan or tomorrow at the eu council, maybe more information on possible sanctions. So far, we know that the sanctions that have been put out are, of course, concerning arms and finance banks cannot access longterm debt within the eu. The russians have imposed counter sanctions within the eu, it has affected the berry market, fish, fruit, wheat and vegetables that are clearly having an effect on our economies. It needs about 157 billion euros in the next year to continue to work. So, of course, if these were somehow blocked then, of course, this would create a larger problem for russia. So these could be some sanctions as well as countersanctions that then could come, of course, to us once again on aerospace, auto and naval industry. So its a concern of what could happen in terms of stepping up these sanctions. We may know more tomorrow. Obama will be in a nato meeting next week, so certainly the ukraine situation will stay top of the agenda. Certainly. Thank you so much for that, claudia. Were now joined by andrew, director of the center at the Henry Jackson society. Andrew, what exactly do you expect from that meeting or do you have higher hopes from the nato meeting . First of all, after todays meeting, i would expect an expansion and a tougher sanctioning of the sanctions. The sanctions are limited in scope. Particularly with regards to the russian Financial System in the western market. And what about nato, then, do you think we can expect some serious steps that would limit russias anxiouses that its taken over the last couple of months and weeks . Assuming what nato fate is next week in whales, its seen as very troubling and problematic questions. Clearly, nato failed to deter russias aggression in crimea and ukraine and its likely failed to deter further aggression and further escalation in the ukraine. With the absence of military support, it remains to be seen really what nato can do. The thing is, russia doesnt have much leverage here. Oil prices have moved lower contrary to what you would expect with all this geopolitical risk going on. Why is the west not putting more pressure on russia . Once again, it doesnt hold a trump card as far as russia is concerned. I think its simply with regard to oil. Most remember stiff. Edly with regard to ukraine, ukraine is reliance on russia for its supply of gas for the winter. 5 million square meters ukraine is used to taking receipt of. As the conflict continues, as we get closer to winter, russias hand is effectively strengthened should any political negotiations take place. You dont think russian sanctions are likely . I dont think its likely at all, to be honest. The west thus far has shown very little inclination to impose sanctions on russia. But i dont think they will be forthcoming after this. Which, after all, its simply a continuation of russias tactics over the last three months. Do you get a sense that mr. Putin has lost control over what the rebels are doing even if he is secretly supporting them . I think theres been a reshuffling of the leadership in Eastern Ukraine and amongst the pro russian separatists. It seems to me the treatments over recent days are meant to strengthen the positions. I dont think theyre a precursor to their russian invasion. Do you think theres the possibility of a further escalation or a further invasion . I think what we have seen is a continuation over what weve been seeing over recent months. It is an important notable escalation, certainly in the context that it disappeared that this conflict was deescalating. Thank you so much for that. On todays show from Driverless Cars to selfrun vehicles, we look at googles latest experiment outside the world of the west. Coming to save the world this summer, more details of ghost busters returns to the Movie Theater to mark its 30th anniversary. And weve seen california startups, putting the core into the computer signs. Wonder how you do that . Stay with us. A long time google executive megan smith is the top candidate for the u. S. Chief technical officer. Amazon isnt the only group looking to get into the drone business. Google is, as well. This flies up to 90 kilometers or up to 30 miles per hour. More than 30 successful flights have been made delivering items such as first aid kits. What do you think of googles Drone Program . Is it a good idea or is google simply going too far . Join the conversation here on worldwide exchange. Worldwide cnbc. Com, cnbcwex or direct to me carolincnbc. It will take a couple of years before they get government approval for this but maybe google and the likes of amazon would do well to work on something for ecommerce deliveries. Japan is no closer to its 2 inflation target. Prices fall in july. Meanwhile, Household Spending slumped 5. 9 from a year earlier. Nearly double the forecast of the april sales tax hike continues to weigh on the economy. Charles dumas, from lombard aets Street Research joins me now. Charles, some say the data we got out this morning, it was impacted by bad weather and this is why were off to a weak start in the third quarter. Others say it points to failures of abenomics. Which camp are you in . Abenomics is sailing. The inflation rate, of course, is over 3 . If they were smart, they would leave the field. Theres about two Percentage Points of a consumption tax in there. And the inflationary excludeing that, one of three quarters percent a few months ago, entirely because of import pricing increases which resulted entirely because of devaluation. For the last year, theres been no change in the Exchange Rate. As a result, import prices are level and cpi excludeing the effect of import prices is going to drift back. Okay. I see youre pretty skeptical of abenomics. I want to play devils advocate here. Cut him some slack. Abe is shooting the third era in business about Structural Reforms. This is not going to take effect for a couple of years. Maybe this wont even be visible for another two or three years. Abes Structural Reforms are making the basic problem of japan worse. Japans exports share of World Markets has come down by half over the last 20 years. The main reason for this is that gentleman japanese businesses have huge cash flow and are complacent. Japanese households have too little money and the economy stag nates. The abenomics third arrow is designed to give more money to japanese businesses at the expense of households as if they need encouraging. But, in fact, what they need is a firm dose of fiscal discipline. What we need is higher wages, too, but were not seeing that. Youre not going to get higher wages because the mash force is relatively theyre shifting away as a structural matter and the high wages being paid are under the lifetime employment system of big bonuses. More people retire each year out of that and the new people under the low system. In any case, the devaluation takes money from households and gives it to business. The cop assumption tax increase offset by Corporation Tax cuts and investment incentives takes money from households and gives it to business. Literally, now theyre trying to pretend that businesses will somehow give it to households. Its a bit like trying to scratch your left ear with your right hands, but behind your back. It couldnt be stupider. So, what else, what do you suggest they do . Yeah, absolutely, they shouldnt. They should roll back the first hike and roll back any proposals to give investment incentives and rolling back the first hike . Of course its feasible. They just have to decide to do it. The only kinds of things that will happen will involve, of course, the government changing habits of a lifetime. But thats exactly why japan is in trouble is because of the habits of a lifetime not being changed. Can we bank on the boj to support the economy . Well, the boj has a dilemma here and that is that it does what it needs to do in order to achieve 2 inflation on a sustained basis. It has to devalue a whole heap more and that is the consensus about what will happen and that has its reality. Theres a better chance of that happening than not. But you need to remember that if the poj does do this and does create 2 inflation, then at that stage, they presume to stop their qe because theyve achieved their goal. And at that stage, the japanese government bonds move from 0. 5 yield to about 3 or 4 yield, 2 yield, and since Government Debt is 140 of gdp, they could be plunging straight into a crisis. So the japanese the poor old bank of japan is left picking up the pieces from the mess that is abenomics. Charles, thank you so much for that. I did realize that you had a pretty critical view, but i didnt think it was going to be this negative, but refreshing. Charles, thank you so much for that, Charles Dumas from lombard Street Research. Send in your emails to tell us whether you agree with charles or whether you disagree completely worldwide cnbc. Com or find me on twitter, carolincnbc. Are uk bankers still getting the lion shares of bonuses . After the break, how many workers enjoy a bump in their pay packet this year. Tesco slashes dif depends by 75 sending shares lower. The ceo of the Italian Luxury Group says currency headwinds are in its favor. From asset core is the strengthening of the dollar. Being a company that produced 100 in italy, we have been struggling in the past few years with a strong euro. Germany and the u. S. Discuss tougher russian sanctions after nato releases images showing russia is supporting rebels in Eastern Ukraine. The euro is falling again ahead of the release. The ftse 100 is up by 0. 1 . Tesco weighing on that index