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tv   Worldwide Exchange  CNBC  July 16, 2009 4:00am-6:00am EDT

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i'm can christine tan. in asia, china's economy grows 7.9% in the second quarter, but beijing warnings the recovery may be unbalanced. >> i'm ross westgate in europe. it's all on the hand for hand setmakers. nikkei ya may contract 10%. >> and i'm scott wapner. cit may be on the brink of bankruptcy as talks between the government and the century old bank break down. >> hello and welcome to cnbc's "worldwide exchange."
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global equities had a good day yesterday. as we go through today, the ftse cnbc 300 is up two points. the ftse 100 off 0.2%, along with the xetra dax and the cac 40. smi is up 0.2%. we had numbers out from novartis today. oil and banks are off after a few days of rises. the ftse was off 2% yesterday. we're just seeing -- well, i couldn't call it profit taking. jm morgan amongst them, of course. on the currency markets, the yen earlier on during the asian session rose fairly broadly. again, seems to be some sort of profit being taken. so dollar/yen back down to below 94. euro/dollar, just back below 1.41 and sterling/dollar, back below 1.64.
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but we were at 1.61 at the beginning of the week. christine, always a pleasure. >> here in asia, stocks rising for the third straight session. u.s. corporate earnings helped fuel a recovery. we had strong gdp growth coming from china and that is helping to lift sentiment across the region. nikkei 225 up 0.8%. kospi up 0.8%. shanghai composite, this particular market ending lower, 0.1%. and the hang seng is up 0.4%. and the bombay sensex is trading down 0.2%. in terms of crude oil, we are seeing a slight recovery, as well, moving higher. but now it is trading downward, 34 credence. $61.20 a barrel. and brent is trading down 39 cents, $63.13 a barrel. scott, always good to see you.
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>> and it's always good to see you, christine. good morning. this will be an interesting day with jp morgan chase earnings this morning and certainly the market is going to react to the news that commercial lender cit could be on the brink of bankruptcy. so as we take a look at the futures here, not a surprise that we're below fair value. this is coming off a huge day yesterday, the best in many months, as a matter of fact. nasdaq below fair value by about 7 points and the s&p under a bit of pressure. take a look at the fixed income market. the bund yield right now is at 3.38%. there was considerable selling in treasuries yesterday as a result of that big move in equities and thus the ten-year is at 3.57%. let's get a quick check on gold, as well this morning, as we set you up on this trading day. $935.60, down about 0.25%.
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joirchbing us now is martin marnik. it's good to see you this morning. i set the table on really what the market is going to face. i'm just curious, what are your thoughts, what we heard from the fed yesterday, giving a boost to the market saying the recession will end soon and earnings have been better than expected thus far. >> scott, it's -- it was a strange one. the f fomc meeting, it was all the same, still dovish. but overall, we're still -- we're still in a recession, we're still bottoming out. the u.s. will always -- they'll always try and put a positive spin on things. but i am still very cautious as we go forward through the summer months. i still think that we have a lot of downward move.
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it's come suddenly at 800 on the s&p is highly likely in the next coming months. the earnings that we've seen, you saw goldman sachs came out very well. you've talked about jpmorgan, which is going to be important tonight. but also we've got bank of america and citigroup tomorrow and we're going to see how they actually do for i think goldman is a little different animal to the other banks. but it will be interesting to see what they come out with. >> where are you invested right now? what do you like? >> well, what we still like, we still like asia as a whole, even though it is looking overstretched at the moment. india we've liked. certainly post the budget, so we saw this pullback. we like india. we like china. we like braville, as well. russia we're not too keen on. round about the break territory,
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we're still very, very interested in. we don't like europe. you had a commentator before saying exactly the same thing that we're saying. the uk, it's sporadic, but we certainly don't like europe. and the u.s. major stocks in the u.s., yes, but not anything more. >>. >> it's christine. when you look at china growing 7.9% in the second quarter, you remain weary. why is that? >> the chinese said they were going to do 8% and the economic numbers that come out of china, you have on to be a little cautious with them. sometimes the -- i think the general direction is right and it is correct, but you shouldn't read -- i wouldn't read too much
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into them. take it as a general trend, a general view, but my problem is, there's been a lot of cheap money going into stimulus packages in china. i want to make sure that they spend on the right areas. infrastructure projects, building out china rather than it speculating on the stock market or the property market, for instance, that the actual money goes to where it's actually needed. and we're not getting to an inflatable bubble, you know, not promoting concern consumption, which is something slightly different from what we have in the u.s. and europe. >> what would be a more realistic growth forecast as far as you're concerned? >> i think a little lower, 7%, say. even if you look at india, they're at 7.9%, which is very
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hard to do. for these two economies, that is where everybody has to be looking at them and getting invested is that they are the ones that are going to achieve the best returns over the coming years. but you have to -- buyer beware, you have to do your homework here. >> if you don't like europe, i'm sure it's not a personal thing. it's ross here. i'll pick up on that in just a second. but pick up on the earnings, it's interesting, we've heard from electrolux and they had a much better than expected second call profit but they've warned that market demand will fall this year. sony ericsson has come out and said, look, we think the global demand for hand sets might fall again this year. these companies are doing well on cost cutting and generating better than expected numbers. but when they say demand is still going to be weak or
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falling, what does that mean for investors? do you have to go for a company that is increasing market share or does that make you wary of any consumer products? >> that's absolutely right. what they've said is demand is still falling. what happens with any recession is people are perceiving that within a recession one minute and we're out of a recession the next. this is not the case. these companies, electrolux, know key yeah, and you'll see with other companies, they are cutting costs. they're not actually generating growth. we don't expect growth to start until way, way into the middle of 2010. so when you're picking stocks, are you picking stocks because they're aggressively cutting, making people redundant, or do you want to go back and look at companies? they're growing. who is taking market share?
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who is doing really good business? where are they actually growing? where is that going to be? infrastructure play. we've seen where the demand comes from there. air lines, no, that's not the case. you know already what stocks and areas you should be playing in. to pick a stock just because they're cutting costs does not make it a right investment. >> okay. martin, good to speak to you. martin marnik from helmsman global trading. now, sony ericsson expects demand for hand sets to go down this year. it's confident its performance is starting to turn around thanks to cost cutting messages. nokia is expected to return second quarter earnings today.
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shares in electrolux posted much higher than estimated. strong branding and cost cutting, including outsourcing and staff cuts helped boost numbers, but electrolux still expects demand to fall this year. autonomy has better than expected earnings were helped for search technology on the back of increased regulation. the ceo of the company joined us on "squawk box" earlier. he says he's cautiously optimistic about the outlook. >> well, at the moment, we think the outlook is pretty good. in terms of the broader maco market, we're afraid we're not seeing any change in that. >> here in asia, china's economy gathered momentum in the second
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quarter thanks to a massive stimulus. gdp was up from 1% in the first quarter to 7.9%, making china the best economy in the world. the target of gdp growth for 8% appears to be in hand. angelo australian miner rio tinto has reported they evacuated their staff. the unsourced report says other foreign companies are moving employees out of the country. rio tinto said it could not comment on the report. meanwhile, shares in sydney and london are trading mixed at this point. in sydney, up 4.6% and in london it's down 1.2%. toyota is planning to supply mazda for core components for
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the manufacture of hybrid vehicles. mazda plans to launch a hybrid in 2013. toyota is a pioneer in hybrid technology and has at least a ten-year lead on most of its rivals. it supplies hybrid components to nissan. both toyota and mazda won't say whether talks are taking place. still, news of the possible paring is closing up for mazda 6.19%. talks between cit and the treasury department to secure emergency funding have fallen apart. the commercial lender could file for chapter 11 on friday. cit is trying to line up $2 billion in financing from existing debt holders. it became clear cit aets's liquidity had deteriorated too much and the company failed to
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show it could still solvent. cit ended march with $75 billion in assets, roughly 1/9 the size of lehman brothers and one-quarter the size of washington mutual, the biggest firms to collapse since september. jpmorgan results second quarter results at about 6:30 this morning. analysts think it will see a lift in the markets. the company could benefit from solid fixed income, commodities and the one trouble spot may be its retail banking business as consumers struggle to pay off debt amid the recession. jp morguon closed up 4.5% on wednesday. and citigroup is reportedly in talks with the fdic about entering a called memo of understanding. citi has been operating under a similar deal with the office of
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the controller of the currency since late last year. bank of america has such an agreement with regulators to overhaul its board and address liquidity issues. in frankfurt, citigroup this morning up 1.75%. you can get more news, videos and blogs on today's market-moving news at cnbc.com. still to come on today's program within china's economy has bounced back. bankruptcy looms with cit after rescue talks break down, as we said, so how far have we come since last september? welcome to the now network. currently, thousands of people are enjoying the new palm pre with its revolutionary web os. they're running multiple live applications at the same time.
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with the mr. clean magic eraser. afternoon gains in the previous equity sessions, european equities are just a little flatter. becky meehan kicks us off in london. >> thanks, ross. here we are looking at modest declines for the ftse 100. we are lower by about 0.25%. on the down side from the biggest decliners on the uk
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markets, autonomy, moving lower by about 8% or so. we have the ceo mike lynch on "squawk box" earlier this morning on cnbc saying his company is cautiously optimistic about how things are shaping up. and yesterday yet the stock is falling. there could be an element on profit taking there. basic resources stocks are dropping. we are looking at the likes of anglo american down by the 3.5%. similar declines for eurasian, kazakhmy's and legal & general. we got earnings today from some of the enterprise companies, too. there seems to be a bit of stability at least coming back into the uk public companies. the rates of decline in beer sales has started to slow down. and mitchells & butlers saying for its part, for the most
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recent eight weeks that have this data, like-for-like sales increased by 7.1%. let's get out to patricia now so often out what's going on in germany. >> at the moment, we are down 0.3% on news that volumes midcap and dax on the other hand in positive territory. at the moment, what is gaining is up 1.3% and m.a.n., which did strike a deal with sinotrack in asia, up about 1.1%. lufthansa reacting very well to the announcement of their cost cutting program. porsche is now in positive territory, up about 0.7%. it was down as much as 2% earlier on in the session. we spoke to porsche this morning from cnbc. they're unaware of a deal being struck already between the owning families of vw and porsche. as far as they are concerned, the ceo of porsche is to stay
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until the end of his contract, 2012. we will be watching the 23rd of july which is next week where we have board meetings at vw as well as porsche. on the agenda at porsche, a possible investment from qatar to come through and bring around $5 billion euros to reduce the 10 billion euro debt at porsche. all in all, that's frankfurt. over to paris now. >> in paris, patricia, the market is slightly down. but that's limited compared to the 3.6% gain we had over the last three sessions for the french markets. reno, nissan is trading higher in paris after the ceo of the company indicated that it wants to double the market share of the company in brazil from 5% to 10%. they believe it's important to remain competitive in that
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country. we have this morning a couple of numbers to digest. in line with expectations on a gain for the quarter, is guichard-perrachon. also up is a group which met expectations in the third quarter, but the company confirmed its operating target, should be around $% in march. on the downside, the wine and spiritmaker reniqatom dropped 7.5% in the first quarter. the company says it's confident, it can deal with the difficult market conditions, but the stock is down by almost 2% and dragging lower. that's the story in paris. now let's have a look t swiss
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market. hi, carolyn. >> well, thank you very much, stephane. the smi is higher by roughly 0.3% and we see some mixed trading here, although a lot of the financials are under pressure. but the biggest gainer, novartis, higher by more than 2% after it posted very positive second quarter figures. net profit was down 10% at around $2 billion. however, the stronger dollar, that really weighed on its sales growth and that's a problem because novartis reports in dollars. as expected, the pharma division was its best division, a local currency growth of 11% there and a positive surprise because novartis raised its sales guidance for that division in 2009. let's quickly talk about sandus. we may see some improvement
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there because the fda said it will inspect its program in the third quarter of 2009. finally, novartis reiterated guidance, but said it will have to watch the dollar meempt and that may keep it from reaching its full year guidance. now over to saijal in singapore. >> thanks, carolyn. we had the markets here closing mostly higher. on the back of q2 figures, we saw a strong rally across the region in sectors like ship builders as well as steel and metal stocks. so the shanghai composite was the only market that closed slightly lower. the hang seng, hoe, up 0.6%. we saw preseason gains in some of the shipping stocks there. in japan, the nikkei up 0.8%. most of the tech stocks retaining their gains, even though we started to see the yen
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strengthen a little bit. of course, mazda is being talked about as well as toyota, this report that they may be collaborating when it comes to hybrids, that stock up 6.2%. as for south korea, the kospi closing up 0.8%. i want to talk about the lcdmakers. it came in at $238 million on the net profit line, almost 50% better than what analysts had forecast. you're seeing strong tv demand, especially from china. there was glad shortage, as well. that stock is up 0.9 peshs. in the meantime, there are reports that its rival, samsung, may be considering expanding its lcd line. now over to scott in the u.s. >> it's yesterday another busy
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day for data. weekly jobless claims are out at 8:30 new york time. at 10:00 a.m., the july philly fed survey of regional conditions and manufacturing conditions will be released. then at 1:00 p.m., the national association of home builders puts out its monthly housing endecks. after today, chicago's sears tower will be named willis tower. that was built in -- is that right? 1973. i had to do a double-take there. the sears tower has been owned
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by a real estate investment firm since 2004. christine, i looked at 1973 for the sears tower, and for some reason, i don't know, that just didn't look right to me. >> well, coming up next on "worldwide exchange," a recovery is still weak. we have growth, momentum unstable and china's gdp slumped 7.9% in the second quarter. we will bring you the analysis. the optimism continues.
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i'm christine tan. in asia, china's economy grows 7.9% in the second quarter, but asia warns the recovery may be unbalanced. >> and i'm ross westgate. sony ericsson has washed that the hand set market will contract 10%. and i'm scott wapner pt in the u.s., cit mank on the brink of bankruptcy after talks we know the government and the century-old lender break down? >> earn pgs are coming in thick and fast from around the world with economic data, as well. on the thus, the ftse cnbc global 300 is up two points.
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so eve dropped away from some of the gains we've made in the market earlier on. resources, units, oil and gas, which i am kals yb is looking where we're looking at the lights to see the closure. on the currency markets, well, we saw is yen trying to crawl back some grounds. eu euro/dollar is back, nudged under 1.41 and the dollar is just under 1.64. >> hey, ross, good to see you. in the end, markets finished mixed. a time of the support came from the gdp from china. nikkei 225 up 0.8%.
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kospi up 0.8%. the shanghai composite, do down 0.1%. the hang seng up 0.6% and the bombay sensex is basically flat at this stage. scott. >> we're coming off a 3% gain and we're just a touch below fair value. perhaps that news that we read to you by the cit group, that is a large commercial lender that appears on be on the brink of bankruptcy, that could be having an impact on the futures right now as the dow is sitting 60 points below fair valuable. nasdaq under a bit of pressure, as well. take a look at the ten-year
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yield. not a surprise there, the 10-year yield at 3.57%. >> let's get a view where we stand with all of this. joining us now, steven edge with morgan stanley. the picture still seems clouded to me. we had this sort of recovery trade going on and then we decided that wasn't right. then we got a couple of earnings coming through. intel got everybody excited on the tech sector. companies coming out saying we still see demand falling. where are we here, steven? >> well, the markets are pretty euphor euphoric, ross, given the anemic character of the markets that are unfolding. for lack of a better candidate, i would say this sa visible manifestation of all the excess liquidity that the monetary authorities have poured into the system. liquidity is seeking return and right now, i think these markets are priced for a recovery that's
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going to end up disappointmenting the optimistic earnings. why? >> well, sorry to break the news, but the financial crisis is not over, ala cit. there are plenty more write-offs of bad paper to come. 5% of the world's economies today are still contracting. and the biggest piece on the demand side of the global economy is the american consumer who is dead in the water. so this would be an unusually anemic recovery. when markets start pricing in vigorous earnings expectations. >> steven, it's scott here in the u.s. er you mentioned cit. apparently the government has decided that cit is not too big to fail. what sort of systemic risk do you see from the fallout of this? as you mentioned, the financial
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crisis is not over when you talk about cit potentially filing for bankruptcy. >> well, scott, no specific comments on this one institution, but, you know, if you look at the latest estimates, we're looking at approximately $4 trillion of bad assets will be written down and thus far, the financial institutions have written off, at most, half of that. so there's plenty more to come. and cit is indicate ir of what it means in the financial system and in financial markets ahead, and dhaes obviously going to continue to impair both the earnings capacity and the intermediation of the function of fm markets in terms of driving the global me.
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so i just think this is another one of they unfortunate, but painfully predicted mine fields on the road. >> has anything on the data and earnings front this week, has any of that cause youed you to amend any of your predictions for the recovery time frame in the u.s.? >> well, yeah, the idea that further declines are good is a stretch of the imagination. but you know, they have no idea what to expect there. when central output is still declining, consumer spending appears to be still contracting in the second quarter of 2009, marking the worst four-quarter
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downturn for u.s. consumer demand in 358 years, i mean, you've still got a really subdued recovery dynamic. maybe you get a positive quarter in the third quarter, but the ultimate question here, where is the demand? as i go around the world, especially in asia, i don't see any follow through on the demand front. the chinese are good at manufacturing economic growth for aggressive policy stimulus and we'll talk about that later, but you even have to raise serious questions about the sustainability of that. >> steven, you sound pretty bare yesh. are you not a believer at all in the green shoots theory? >> that's a really simplistic way to look at the world, scott. green shoots give you this the impression that there are these
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butch spoking out of the earth that just dying to turn into flowering plants, bushes and large trees. we've had an amazingly steep downturn in the global economy and we're going to have an amazingly anemic upturn. these green shoots are not going to go the up the sky. my advice is to pick a different met for. >> steven, this is christine. all right, fine, we get your point of view. what about japan, for instance, the imf today expects the japanese economy to contract by 6% this year. do you see the slump deepening in japan? how bearish are you on japan? >> look, i -- i can the worst of the downturn is behind us in japan, but you know, that's sort of a no-brainer. this is an economy that contracted at a 12% to 13% annual rate in the fourth quarter of last year and the first quarter of this year. so you know, we, like everybody else, think that the rate of decline is moderating. but you know, keep in mind that
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as of may, ex ports going out of japan were still contracting 40%. that's 4-0 percent year on year. this is an economy that doesn't have much going for it from the standpoint of internal private consumption. so when you have export drops of that magnitude, it's a real problem. but sequentially going forward, the second half will be better than the first half. but again, that's a no braener given the severity of decline that we saw late last year and early this year. this is an economy, obviously, that is suffering just a very acute downturn this year. >> steven, do you think the political uncertainty -- i mean, we have lawmakers calling for taro aso to step down. do you think the political uncertainty is going to delay
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any pick up in japan? >> not really. the policy from japan have pretty much -- it's something that the markets understand, the electorate understands. there is a real leadership initial japan right now, but i can the downside of that has been pretty well incorporated into the markets. there might be some upside that market participants begin to focus on as we move through the summer and into the autumn. steven, we want you to continue staying with us. let's bring in ming tuunsuun. first of all, looking at the data today, 7.the% gdp growth from clean na.
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do you worry that somehow the recovery in china is not broad based enough? >> i'm not worry about that. ej in china we see investment of ming driver, investment is for production, overall. we will the keep getting stronger and stronger. eventually we are going to see stronger consumption latter this year and later next year. anwari are not apebility of proofing this route. the problem is, we have too much investment, too much liquidity and that is going to push up as the et price inflation next year. >> we are seeing deflation in china right now. do you think that stimulus
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package will be in you to left the company out of deflation by tend of this year? >> i think it's possible. the we we do have some facts there. especially in food price. you know, we think that things are get can better, but it's getting to be very, very low inflation, i think. at the end of this year and next year, as well. >> steven, when a your thoughts on china? do you agree with what ming chung just said? >> no, i don't. i think a couple of years ago, march of 2007 to be specific, the premier warned pleasitly that the chinese balance was up balanced and unstable. i think he's stated his needs quickly.
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this is a seconder that's now probably greater than 40% of the chooin he's gdp. it's all about supply. the demand side of the know is amazingly low at 35%. so the economy is generating its growth on the supply side. the demand side is lagging. and i think this raises serious sustainability issues down the road. the chinese panic was very weak. they've thrown all caution aside in trying to jump start the economy, but they're dining it in an unbalanced recession. i've been a bull on china for 12 years and i'm now kwoot concerned about these mounting imbalances in china.
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>> i also have a different opinion, to be honest. i think it's directing to the infrastructure area, i think in china, remember, we are still a developing economy. real gdp per capita is the majority of $3. this time, according to a lot of conversation i had with like more than ten local governments, none of them is actual investing in sectors already with overcapacity. so i think that's -- i don't think this economy will create oversupply issue. i think china still needs to invest. you know, i think it's not only this year, but next year, probably in the next two decades, we still have 700
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million people leaving the rural area. i'm not worried about this investment. what i worry about is in the short-term, in a very short time period, too much investment going into the economy. that's something i worry about because that will have some, you know, impact on the monetary policy. some say it will force monetary policy to be very loose next year and probably through 2011 and 2012. >> gentlemen, i'd like to ask you both this question and steven, let me pose it first to you and, really, looking at the situation in china with the rio tinto employees there. is it at all possible that china risks attracting foreign investment as a result of actions like this? >> i don't think so, scott. i think this is a specific case as opposed to a general trend. foreign direct investment is --
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even in this global recession, the in-flows into china remain most impressive and china is a very attractive offshore platform for multi nationals, high cost multi nationals seeking efficiency solutions. the government has been very aggressive in providing incentives, tax incentives, infrastructure, and a low cost labor in making that work and i don't see the government backing down in that and i really don't see multi nationals rethinking their outsourcing decisions, either. i recognize this is an issue, but i think it's very much tied to the specifics of one case rather than something that i would generalize. >> and the latest headline here is that rio -- >> yeah. let me update you here that rio tinto has pulled researchers out
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of china who follow the steel industry there. what are your thoughts on this whole issue and the risk of, you know, when it comes to foreign investment? >> i agree with steven, actually. i think, you know, china is a solid fundamental, very good infrastructure, chief laborer, and i think, you know, also very, very big domestic market is -- the reason that is coming. i don't think one or two particular events will stop this. i think fdi will continue to come to china. i think the second half we will still see positive growth in fdi. >> steven, you're cautious on the consumer. you're worried about what's going on in assets in china in terms of the cost cuts and stimulus. come on, where are you positive? >> i love india, ross.
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india, of all the economies and countries that i spent my time at in asia, the outlook for india looks terrific right now. the microis good in terms of the companies and the workforce and the markets and the financial institutions, the macro is getting a lot better in terms of saving foreign direct investment. the infrastructure is still a problem and the politics, you know, the communists are now out of the government as of the election in mid-may and there's a real chance to push through reform. so when you've got microand macro politics working the same direction, you've got a sweet spot. so everybody is fixated on china as the savior of the world right now. and i think that is something that we need to think very carefully about. people are ignoring india because, you know, india really fell far behind china over the last 15 to 20 years. but you know, i like what's going on there now. i think it could be a big surprise in the years ahead. >> okay, steven, we want to have
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you on just a little bit more in the show. you like india, of course. we'll go on to india later. steven roche and ming chung, thank you very much for your views, as well. steven roche is positive about india. let's head over to mumbai right now and join ayesha faridi for the business report. >> not turning out to be such a good day, though, for the indian equity markets. it started off with gains of about 0.5%. but ever since that, it's flattened out in trade. you also have to factor in the 6% appreciation that the markets have seen for the past two trading sessions. so a little quiet in trade. nonetheless, it is maintaining that 4,200 mark for the nifty right now. it's relatively a bit better for the broader markets, but of course, a lot of stocks specifically, sterlite industries, you will correlate that with the counter definitely
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sul canning in trade. the company has raised about $1.5 billion. that counter is acutely under pressure today. big news in the entertainment space. adlux is in foech. dreamworks studios will get about $825 million from reliance. lombarney has told cnbc that it has no correlation with any of the listed entities back home, but nonetheless, we are seeing a bit of sentiment rub off. and ad labs is seeing a very good case, almost a 15% notchup is what you are seeing on that stock. meantime, a new listing today after mahindra holidays and it has listed from the good premium. this is from the stakes of the family of mahindra groups. that counter is up an 8% odd premium from its listing price. meantime, we've got some concerns in terms of the monsoon
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pick up or daily that we have seen in the northern parts of the country. markets, of course, for now looking a tad bit quiet. earnings coming in, llt, that counter is putting pressure. auto has delivered a very good set of numbers, a 67% appreciation in terms of their numbers. that is seeing a fair amount of pick up for the entire auto space. most of those numbers holding up. reliance industry is supplying pressure to the market. 4,8 huven being maintained for now. >> scott, over to you. >> okay. coming up on "worldwide exchange," it's a hard act to follow. what can jpmorgan do to top goldman's second quarter earnings? >> sure to be a big focus for today. plus we'll get the latest on the currency markets.
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okay. we turn our attention to the currency markets. we have seen the yen claw back from losses over the last few sessions. euro and sterling have made grounds this week on the back of equity prices. but euro/dollar and sterling has just come back slightly. joining us now, steven roche is
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with us and peter rosenberg. peter, let's kick off with you. look, the relationship between risk as evidenced by currency markets and equity markets is still pretty strong. >> yeah. what is it going to take to -- do you see us breaking out of these ranges on the upside or the downside when we get through these earnings season? well, i think we're going to get a break on the upside, meaning a weaker dollar when we come out of this, you know, sort of doldrums, if you will. i don't think in the near term we're going to break out of the pressure. but you know, right now, the market is very confused. we're at maybe the heat in the summer low volatility has gone the to traders' heads. fx is looking at equities. commodities are looking at china. who exactly is leading this economy on what news is very, very weak. we think right now tlt not
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enough support to move the market one way or the other and the optimism will wane and we'll see a pullback in risk appetite. >> do you have any medium term view on the dollar? what is your medium term view on the dollar? >> medium term view, we see a weaker dollar. i think one of the clear drivers is repatriation or the reverse repatriation of flow we saw during the financial crisis. a massive flow of capital in the u.s. for the safe haven reason, much more than we saw in 2000 in the tech bubble collapse. that capital is going to look for a higher risk premium. and inside the u.s. is not going to beware. money manager will be looking to emerging markets, looking to europe, and then we'll see a massive flow outside of the u.s. dollar. >> do you concur with that? >> well, i think piecer is right to focus on dollar risks, ross. you know, american consumers
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have started to save again, which is terrific news, but that's been overwhelmed by this widening budget deficit in the u.s. and so america's overall savings rate, when you add up the personal sector, the business sector and subtract out the government deficits and adjust it for appreciation, the net national savings rate is negative for the united states. so america is hooked on foreign borrowing. what peter didn't say, but i think he would if we asked him, that speaks for the need for america's lenders to get some concessions from the u.s. in terms of the way the foreign borrowing is financed. those are concessions that could show up on the currency and/or real interest rates. >> briefly, peter, your response? >> you know, i agree 00%.
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i think obama is celebrating the fact that the chinese reserves are moving as fast as they can meaning cheaper borrowing, but at the end of the day, he's going to have to pay up and these lenders will not put up with the same sort of conditions both on interest rate and currency that they have in the past and that means a weaker dollar. >> peter rosenstreich, thank you for joining us. steven, we'll let you go. good to see one though, steven roche, of morgan stanley asia on his way back to hong kong. coming up on the next hour of "worldwide exchange," has rio tinto evacuated staff from china? the story gets more complicated as the tension builds between rio and china. christine, plus, cit is not too big to fail, apparently. what are the implications of a possible bankruptcy there?
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i'm christine tan. in asia, china's economy grows 7.9% in the second quarter. but beijing warnings that a recovery may be unbalanced. >> i'm ross westgate. in europe, it's all on the line for hand setmakers as nokia earnings are due in an hour. and i'm scott wapner in the u.s. cit may be on the brink of
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bankruptcy after rescue talks between the government and the century old lender breakdown. >> if you're just joining us in the united states, walk tort to the saturday of your global day. in the u.s. at this hour, i should say, it is going to be quite a busy day as we take a look at how futures are shaping up today. there is a lot on the menu today. we have google, ibm out with earnings today, jpmorgan, data will be heavy, as well. and we're below fair value after those huge gains yesterday. about 50 points below for the dow, fair value in the s&p is about six, as well. . take a look at the bund yield, as well, this morning. 3.39%. they sold some treasuries yesterday and they bought equities and take a look at the
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ten-year creeping up there. 3.58% is where the ten-year now stands. mr. westgate. >> yeah, scott, you know, with all those earnings you just mentioned come out, we've gone into cautious mode ahead of that. the ftse cnbc global 300 just up five points. it was stronger during the asian session. christine will detail us in on that. here in europe, we're pretty flat. what is the strongest sector? that is health care, mainly on the back of novartis. one of the company has come out and raised its full year impact and it sees limited impact of the u.s. health care reform and that's why health care is the best performer. we have weakness in resource stocks, oil and gas, banks, travel and leisure, shah sort of thing. on the currency markets, that's reflected in what we see on the currency markets. dollar/yen has just come back to below 94. we've taken the edge off euro/sterling and sterling/dollar. the euro has nudged up against
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the pound. but look, the key thing is here they currency markets in the flat range of their ranges. and it doesn't look like anything is going to shake them out of that, christine. >> in india and asia, markets ended mixed. there were strong gains earlier but investors decided to markets. 7.9%, meeting expectations of 7.5%. so that kind of helped sentiment. nikkei 225 up 0.8%. kospi up 0.8%. the hang seng up 0.6% and the bombay sensex now positive, up 0.5%. oil is dipping at this point in time, but still trading above the $61 mark. $61.13, to be exact. and brent is trading lower, as well. $63.05 a barrel. ross. >> okay. so how do we wrap this all up? so far, the earnings season has
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kicked off ahead of uk and european quantitative strategy at bank of america merrill lynch. what do you make of it? >> i think this is a very interesting spot at the moment. you have the most watched quarterly earnings season for a long time and generally, we've started off with the financials. the financials are generally going to be in an environment where because yield curves are sdeep, you'll generally see they're going to come out with better results and further upgrades on the back of that. the season overall will remain negative high on average, more companies are dmomg line with expectations. the key to drive the stock market up, how much do we get in terms of earnings upgrades
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following these numbers? and my mind-set is still much that the follow through may be weaker. good set of numbers overall, but will we get that upgrade? we need to see what analysts are doing with earnings as a result of the news flow. >> sorry, scott. i want to follow in on that. when you look at consumer related companies, electrolux saying they think the overall market might decline, how different is that going to be sector to sector because those two kms are talking about difficulties. >> you then have to break it down. it seems unlikely that top line growth or demand will be a big feature of these results. so it comes back to how will are companies managing their costs? and in the case of a rising euro, a rising sterling, many of the export currencies, we start
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to see things like the oil price and commodity prices rising significantly. this is the type of news that we need to see. it's how well have these companies managed their costs and what does that mean going forward? >> occur rakhuram, what are you watching today? is it the earnings front or data? >> i think effectivively, the earnings front is where it is. individual comes out with expectations can change the market direction rapidly. we've seen in the last week or so volatility has generally creeped up in equity markets and this is on the back of if you have a good set of numbers, the markets are up sharply. if you have uncertainty of where the markets are heading, then
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they drift back down. it's a wait and see. europe is stick in an environment where it's waiting to see guidance from the u.s. and europe is virtually flat. >> everybody is watching china. do you agree with what steven roche says, that maybe we shouldn't be looking at china as the savior of the world? >> my view is kwiets simple. if the u.s. consumer is -- the demand curve in the global economy in china is the supply curve, china's gdp numbers are very supportive. but indirectly, a lot of the stimulus going into place is one that is increasing supply on that cost base. for me, i don't regard china as being the strongest component. it's really today very much a commodity and sort of export play. we need to start to see china become a domestic demand story before we can say this is a new
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or differenting growth. at the moment, the china story is still very much what we have seen between 2030 the and 2007. that needs to change in dynamics. up and to that point, the u.s. consumer is very much the key focus of demand in the global economy. okay. more to come from churam chaudhry. still to come on today's program, nokia is expected to post a minor improvement in second quarter profits. what is the outlook for the hand set market and for the companies that make them?
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for a review of the nokia numbers, we're joined by perry. i was just looking at the notes ahead of this. you have nokia on a cell. you seem to be rather downbeat. why? >> first and foremost, it's a modest difference between our tashth price value and the share price. we have clearly articulated that. it's anything between a neutral stance at this price levels.
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we think fair value gets around 10 for europe. it's not a big difference. ? what are we going to see in these numbers? what's the most important thing for you? >> back to the core issue, why are we concerned? why don't we have a buy? we believe nokia will benefit from an uptick in demand. volumes will be up 20% to 25% compared to the the fifty six months of this year. but we believe nokia faces a change in the competitive intensities, both in the low end where samsung is very aggressive at this point in time and clearly in the smart phone race. these are the competitive issues that are underpinning our stance for nokia. >> this is christine. you talked about the competitive land scaping and you brought in samsung. how much of a threat are these south koreanmakers, samsung and
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lg to nokia? >> samsung has not about the in the entry level space before the middle of last year. you may recall that new profit warningings last year hit the screens on the 5th of september, a weeks plus before the big financial crisis started in north america. and that was down to samsung attacking nokia in the low end. when you have a fairly astonishing 20% market, that is where the biggest disappointments will come in the coming years. >> we have nokia warning that the global hand set market will contract by 10% this year. are you as gloomy? >> what we look at is not the second quarter from sony ericsson or nokia. it's rather what are the earnings capacity of these
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companies, alcatel-lucent, nokia, in 2010 and beyond? this is really what will determine the mind-set of long-term fundamental investors later today and probably also in the coming weeks. >> this is scott. is a recovery for the hand setmakers more at risk because they're so overly reliant on consumer demand? >> that is clearly a short-term risk and has been the big headwind in the recent past. it's also the upside with those with exposure to the emerging markets. we still have pent up demand in parts of southeast asia. but as a highlight in which i think the stock market perhaps is not fully appreciates, there is the capacity in terms of the overall hand set supply and we do believe that competition will
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intensify very significantly in short order. >> hi. it's churam choudry here. can you mention your views on how you pure receive nokia or others in the industry are managing their costs? for example, how significant are things like exchange rates when we see some of these q2 numbers being reported? >> starting with the first issue, nokia's cost containment, it's picking up. i think nokia was late to the party in terms of adjusting its cost base. we would expect know key na to, again, up the targets later today when it speaks and we do believe that nokia will have to overhaul much of its supply chain in order to adapt to lower capacities. in terms of the fx movements, as
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they have been quite radical of late, especially the two important asian currencies, the korean won, which is down approximately 20% compared with the situation a year ago and the japanese yen on the other hand is approximately 50% to 20% stronger. both of these movements are negative from a new competitive point of view. the one negative, of course, that's the reporting cost currency of this world and the japanese yen represents approximately 20% to 25% of nokia's component. nokia will not benefit from the hedges that nokia has in place in the first half of this year much longer. so that's another element to watch later today, what will nokia said about the fx effect on its growth margin, on its operating margin and will nokia stick to its margin guidance for hand set in the second half?
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i think there is a clear risk or a clear chance that nokia will dampen expectations for at least the september quarter which tends to be the weak et for nokia in a calendar year. >> thank you so much, pat lindgergh, as well. we'll be speaking to the ceo of nokia on the back of the earnings numbers. wherever you are, you'll be able to catch it. look at the website, failing that. so no reason for missing its, scott. >> absolutely not, ross. let's turn to another top story today. talks between cit and the treasury department to secure emergency funding have fallen apart. cnbc has learned the commercial lender could file for chapter 11 on friday.
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cit is trying to line up $2 billion in financing from existing debt holders. it became clear cit's liquidity had failed too much and it became unclear that the company could raise enough money to keep it insolvent. cit ended march with are youly $71 billion in assets, one-quarter the size of washington mutual, the biggest firnls to collapse since september. novartis shares have been trading higher today after the company raised its forecasted full year drug sales. the swiss drugmaker has been hit by the u.s. dollar strength and high financing costs. but it's now forecasting growth in the high single digits or better for the rest of the year. well, in asia, china's economy, that country gathered momentum in the second quarter.
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that's thanks to a palace itch fiscal and monetary stimulus. gdp in china grew 7.9% from a year ago. making china the best performing major economy in the world. the chinese government's full year growth target of 8% appears in reach. there is plenty of headlines moving markets today. you can find them all at cnbc.com. porsche says it's not aware of any merger deal between its company and bmw. stay tuned to wgs was. businesses more efficiently,
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ahead of more earnings news and the start of the u.s. trading session, we'll bring you up to speed with where we are in the rest of the global equity markets. >> thanks, ross. we have seen the uk markets flicking in and out of positive territory, looking for a bit of direction. at the moment, we are almost entirely flat, actually, just down by about two points or so. still struggling on the directional front. mujs the the movers, autonomy has been the biggest decliner all morning long. the company reported earnings a little earlier this morning and the ceo of that business, mike
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lynch, came on "squawk box" here on cnbc and told us that he is cautiously optimistic about the outlook and the shares are falling a bit hard. one of our guests suggested a bit of profit taking going on there. we also heard this morning, speaking of earnings, from enterprise, mitchells & barclay's and both of those suggesting there is stability coming back into the market, saying that their underlying sales is declining. mitchells & butlers stating that their most recent period up to july 11th have increased up to .7%. patricia, how is it looking in germany? >> just up about 7.7% in the last three trading sessions. at the moment, m.a.n. up about 3.4%. a couple of things this year. the deal was sign or track. there might be a deal coming through sooner or later. watch out for just breaking news
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coming through from infineon. a couple of minutes ago, they did publish their film third quarter results and they look good. the infineon shares up 4.3%. and the seems that the quality of the its earnings are rising. they saw a revenue of about 1% of the third quarter which is good on the entire year. so far, they are down about 18%. however, this is one thing. the other thing, of course, because of their cash pog, they say they have growth cash position of 871 million euros, as well, and their net debt is at 43 million euros. so the stocks are definitely reacting. up about 3 points, 2% at the moment. stephane. >> i'll take it from here, patricia. the asian markets doing fairy well today, getting some support on that upbeat ecoc data. this gdp growth, part of the reason there is we have seen a
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bank lending surge in china today. and today, the a shares are doing particularly well. over in hong kong, the hang seng index was up 0.6%. h shares up 0.4%. in general, not just in hong kong, but japan and south korea, the ship building stocks have done well also on the back of these positive prospects coming from china. over in japan, the nikkei closed up 0.8% higher. in general, the techs doing fairly well. also, these reports that mazda as well as toyota may collaborate when it comes to hybrids. that's toyota may supply mazda with core spoents for their hybrid cars in 2013, also supporting the autos, especially mazda which was up 3.2%. the xossy closing at 1430 to lcd panels were in focus.
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coming in at 238 net profit, you're seeing strong demand for tvs in china. in fact, they're considering building a panel plat in china, saying that glass shortage had something to do with their positive profits. on that note, it's over to scott in the u.s. >> saijal, it is yet another busy day for both data and on the economy today, weekly jobless claims are out at 8:30 a.m. new york time, forecast to drop by 52,000 to a total of 513,000. at 10:00 a.m., the july philly fed survey of regional business and manufacturing conditions will be released. then at 1:00 p.m., the national hoeshgz of home builders puts out its index. we get numbers from the likes of harley davidson and marriott from the bell and we'll hear from tech giants ibm and google after the close. after today, an interesting
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story here. chicago's sears tower, at one time, the world's tallest building will no longer officially be known by that name. it's being renamed the willis tower after london's willis group which agreed to lease several floors. built in 1973, that's been the highest priced company. still to come, we'll see what's in store for jpmorgan. รบรบรบ
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lg 30 minutes past the hour. in the u.s., cit may be on the brink of bankruptcy after rescue talks between the government and the century old lender break down. >> here in europe, it's all on line with hand setmakers with nokia numbers suggesting that
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the overall market will contract 10%. here in asia, china's economy grows 7.9% in the second quarter, but warning that the recovery may be unbalanced. >> and good morning. let's take a look at where futures are shaping up. we've got four hours ahead of the opening bell. earnings this week have been strong, but there's a lot of news to digest today. jpmorgan out before the bell. we've got cit and that possible bankruptcy looming there. thus, futures are below 50 points there. take a look at treasuries, as well. 3.59% is where the ten-year note, ross, is going to begin its day. >> and ahead of all the earnings season, equity markets are pretty cautious, really.
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it's fairly flat. the cac 40 a little firmer than where it was earlier. novartis is upgrading its forecast. there will be a huge hit in the health care reform in the united states and taking confidence from that as the dollar -- well, the currency markets reflecting that a bit. the dollar is weaker against the euro and the pound, christine. >> ross, here in asia, some of the markets are giving up earlier gains. the uncertainty with cit leaving investors weary. the nikkei 225 up 0.8%. kosty the pup 0.8%. and the shanghai composite down 0.15%. the hang seng index is up 0.6%. the hang seng is up 0.6%. it was much higher earlier. the bombay sensex up 072%.
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the nymex light sweet crude is trading at $60.86, down 68 cents, and brent should be moving lower, 89 cents lower, $62.63 a barrel. over to you, scott. >> christine, thanks. joining us now for market strategy, david sowerby. and still with us is khuram choudry. david, let me begin with you. we're in a pretty good week here. the earnings have been better than inspected and where do we stand? >> well, you nailed it. all right is better than the low expectations that headed into the week. some skepticism still around the goldman earnings what we more financial companies to report. but the real shocking number was
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tin tell number. a rally as a result of that. the key was better revenue growth than expected, better growth margins than expected and in a world that's searching for a catalyst for the market to fight higher ground the rest of this year, that was an important one. >> did you already like tech? or where are you putting your money in in the market 12347. >> i think tech is something that you want to be overweight. mind you, a lot of portfolio managers like tech, but what's quite a feeling is the valuation on a precash flow deal basis and precash flow to enterprise value. from that per speculative, tech is one of the most attractive sectors out there on an evaluation basis which importantly therein back seat much better capital spending in
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tech. that's helped out the cash flow. and now with the cyclical companies, like intel, starting to see better revenue growth, we're not out of the woods yet, but still better revenue growth. in addition to that, the pockets of the consumer are going to do quite well. 9 out of 10 times, the consumer sector has provided excess return to the overall market off bear market bottoms and yet again that's been a very good sector. >> khuram, what do you make of what david is saying? >> i would generally agree with that. the preference, however, would you about the u.s. than europeanmakers. my preference in europe would be for software rather than the sort of hardware companies. >> in a net environment, i think
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a couple of tech names to profile. one is harris corporation. it's a midcap sized company. i think small and midcap stock still have a good ways to go off this bear market bottom. communication equipment, particularly for the defense industry. sth a stock that i found over the years when it sells off relative to the market, and it had because their defense rsl can radio what slower sequential growth. it's a good time to be a net buyer of harris, valuation quite compelling on a pe cash flow base ifs. implied materials on a semi conductor area, even despite the uncertainty in the solar business. it's not exciting to talk about microsoft, let's be frank, but i think we will switch, as well.
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>> do you think can rise on the coat tails of even dma. >> i think americans will be faesing manned for materials picks up, a stronger command for material products. but the thinking evidence boost will be this intense monetary stimulation is pursued since the third or fourth year of september of last year. that's continued at least until the latest parts of the second quarter this year. maybe the most aggressiv monetary stimulation i'll ever see in my lifetime. it's just exploded. now, the fed has started to back off here in the last couple of months, but that will be, i think, the most important catalyst for u.s. markets. >> yeah. it's maybe a good point. we spoke to steven reesh this
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morning and he was cautious. he mentioned that, but he's generally cautious. let's listen to what he has to say and then i'll get both your views on it. >> sorry to break the news, but the financial crisis is is not over tb ala cit. you will have plenty more write-offs of bad paper to come. 75% of the world anticipates economies today are still contracting and the biggest piece on the demand side of the global economy is the american consumer who is dead in the water. >> okay. khuram, your reaction first? >> the u.s. consumer is the biggest building block we have to watch. we had a big fallout in perceived demand. we've now seen that come through. but to carry growth ahead, we need to see top growth rise which is very much going to be depressed because there's too much incapacity in the world.
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china doesn't help that story too much. tennis. >> if steven roach was taking a test yesterday, i think he would be right. but if he's taking a test today, i think we are bottoming in that we've seen not just the monetary stimulation, but global stimulation. maybe three-quarters of the world's economies are contracting, but that is less likely to be the case as the fourth quarter of this year develops. financials, you still have to be cautious. you still have to be half foot in, half foot out with respect to some of the financials and stay away from the most speculative names in the seconder. so there will be more write-offs. but largely, i think the market has discounted that quite well off the lows of margin, even in this minor setback that was
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preparing in june or the text time in july. >> david, before you go, what is your key plank investment strategy? >> right now, it's very key to what is fundamental. the earnings season is gripping everybody to see what is -- but ulsry, to drive sock mts that is very simply, you know, don't type the sectors are a mix twin cyclical. eats justly the light stocks to by used. >> let's ahead to tokyo and
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check in on the trading day there. we have ken moriyasu from the nikkei. >> hi, christine. tokyo stocks saw gains for the third straight day with the nikkei index closing 0.8% higher. carmakers toyota and mazda both gained after nikkei reported that toyota will spry tore tie brid mazell was iller norring me. mean while, vehicles will be developed in brazil to 10%. still to car he, the chairman of japan's oop manufacturer said today that ol avenue new cars told in japgentlemajapan in may
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this has occurred. after the devastating defeat in this week's municipal election, many in his party want the presidential race within the lgp to replace him before election day. more than a third of his party has dine d decision. this includes the financial minister, as well. christine, a bit of time will he to come. so have to answer questions in the x of aand epa leaver
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welcome to cnbc's "worldwide exchange." here are some of the top stories we're watching from around the world. citigroup is reportedly in talks with the fdic about entering into a so-called memo of understanding with the agency. this would give the bank a chance to work out its problems without the glare of outside attention. citi has been operating under a similar deal with the office of the controller since late last year.
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bank of america has such an agreement with regulators requiring to overhaul its board and assess risk and liquidity issues. in frankfurt this morning, citi shares up by about 2.6%. the number of americans on the verge of losing their homes jumped nearly 15% in the first half of 2009, despite new government programs to help people avoid foreclosure. realty track which monitors activity says more than 1.5 million homes were affected. nevada, arizona, florida and california has the highest foreclosure rates over that period of time. filings jumped more than 33% with one in every 3,300 homes receiving a notice. experts don't expect foreclosures to peak until the middle of next year. >> season near ericsson says the second quarter was in line with forecast.
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the group posted a $1.4 million restructuring charge, but it is confident that its performance is beginning to turn around because of cost cutting measures. mean wile, nokia is due to report second quarter earnings in about 1r5 minutes. u.s. viewers will get their shot to interview the ceo of nokia, as well. >> rio tinto has reportedly evacuated its iron ore and steel staff in china in response to its detainment of staff by authorities. other foreign companies are moving out of the company according to reports. when contacted, rio tinto issued a statement saying it still has staff in china and added it
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could not comment on the issue. that is rio tinto's statement there. scott. christine, finally, it was 40 years ago today that nasa set off on its historic trip to the moon. the apollo rocket launched on its first mission to land on the moon. four days later, armstrong became the first man to set foot on the moon, uttering his famous statement, "one small step for man, one giant leap for man kind. let's talk about "squawk box" today on cnbc. >> that's one small step for sidewalk, ross.
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cit could be filing for bankruptcy after those talks to rescue the company. we're going to talk to a small business owner who may be left high and dry in the fallout. getting to the bank of america merger, hank paulson is expected to get grilled on how that deal went down. we'll talk to the chairman of the housover sight and government reform committee first ahead of that hearing. later on in the program within jpmorgan is expected to report numbers at 6:30 a.m. eastern time and we'll talk trade with ron kirk, health care reformed with john tanunu. jpmorgan could set the tonight after a if week, as well. >> for that, scott and todd. tiger is level at the moment.
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>> he was and lee woods is in tiger's group. so he's off to a rm good start there. up next, ross, we're going to look at the trading day ahead on wall street.
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is. let's get a look lady at the u.s. trading day. david, i mentioned earlier we're having a pretty good week here. are we making too much of just a few earnings reports and, again, more data that was let me tell less bad than really good? are we too quick to look for things as maybe we did with green shoots? >> probably. i think the market has to fight a headwind over the next couple of months here in that seasonal period. stocks are going to tread water very likely before they make their final year-end sprint to positive territory. it will be very interesting when the banks begin to report, particularly after the jpmorgan news. expectations are going to be
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solid for jpmorgan. they've been at the top of the list or near the top of the list. and then, watching the industrials and even into the next month is more of the consumer stocks reports. so we're not out of this summertime soup yet for stock prices. what's interesting on a lighter note, you know, if todd watson is 3 under par in the british open, yet again, here is another sign for the investors. >> not only that, but -- >> two blasts from the past particularly to watch at turnberry. >> i don't know how long it will last, but the weather is perfect right now. what is going to be important about the others, david? >> it will be the same old tune, but important for that same old
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tune of expectations, relative to the whisper numbers, which have been heightened now, but probably even more important is that traditional guidance. what will the company say with respect to guidance over the balance of 2009? and that will be especially of interest to me. but again, if you take a step back and you look at what companies have been doing in this recession with respect to cash flow and free cash flow, that, he think, has been a hidden story nap is at least leaning to the positive side and what's been simply allowed the environment for earnings and the cash flow numbers have been better because there's been better capital discipline for companies on a technology side. there i believe ras a longer term valuation issue. >> thank you, thank you so much.
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let's get a quick look here at the futures which have improved after yesterday's 3% gain across the board. jpmorgan, google, ibm all on today's earnings. that's it for today's show. >> i'm ross westgate in europe. >> and i'm christine tan in asia. thanks for your company on "worldwide exchange."
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