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tv   Worldwide Exchange  CNBC  July 27, 2009 4:00am-6:00am EDT

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i'm christine tan in asia. sichuan expressway shares power head in the first ipo in nearly a year. >> i'm steve sedgwick. in europe, german consumer morale rises to its highest level in over a year. >> i'm bertha coombs. in the u.s., investors turn their attention to economic data, including the second quarter gdp. hello and welcome to cnbc's "worldwide exchange." let's start off by looking at the markets. the ftse global 300 index
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continuing to power ahead. now trading at best levels of the session, up 5.3%. the proof is in the pudding. let's look at the european individual bosses. we've got gains across the board. last time i looked the ftse was a lager. the german market up 0.9%. and the foreign exchange markets look like this. we have the dollar-yen trading up 0.2 of 1%. let's get out to christine. good morning to you. >> steve, good to see you. in asia, corporate earnings providing upward momentum. take a look at some of the boards in asia. in japan, the nikkei is up 1.5%.
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the kospi up 1.4%. the shang hang market up as well. sichuan expressway lifting things as a whole. property sectors are gaining. the bombay index buck the overall trend, down 0.3%. oil is following equity markets higher. the last time we checked it is 75 cents higher. brent is tacking on gains as well. following nymex up 78 cents. bertha, good to see you. happy monday. >> happy monday, christine. although i know you don't believe in happy mondays. so far at least the futures are printing to a higher start. markets extending grains last week. a very busy calendar this year in the u.s. the earnings parade will continue. but the focus this week will be on the economic data.
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we've got dow jones futures up 25 points ahead of value. nasdaq futures are higher as well. and s&p futures up two points above fair value. looking at the ten-year bund, we did get that consumer data out of germany. that is a bit more bullish. we've got the ten-year bund at 3.5%. here in the united states, huge week for trish issuance. the treasury is going to be auctioning off some $200 billion, most in near-term notes. more than 100 billion, two, five and seven of year notes. and 90 billion of one-year bills november not quite as fraught with concern because they're more near term. nonetheless, folks will be watching auctions. taking a look at gold. up 4.5, at 955. goal extending a little bit this morning. steve? >> i really do believe in happy mondays, one of my favorite
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groups. ryanair is warning the rest of the year will be tough after first quartered profits were skewed by 42% destruction due to fuel costs. europe's largest diskrount air traffic group graduate thanks to loyer fares. but they're warning they'll come in at the lower end of guidance. they hope to mop up business from cost conscious travelers. >> what's happening in this recession, consumers are trading down from the high-end carriers like lufthansa and air france. they switch to low fare carriers. generally a recession is good for us. >> shares are bearish. up 2.5 after the swiss bank posted a better than expected rise in profits.
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they said they have stead outflows from its hedge fund business. but investors are shying away from risk. we will be speaking to the cfo of julius baer at 5:30 new york time. >> you don't want to miss that. in asia, china's first ipo skyrocketing, sichuan expressway, suspended for the second time after the stock more than doubled. approximate analysts say investors were drawn in by the company's small growth prospects and relatively low price. this bodes well for other chinese listings, including the world's biggest ipo, china's state construction engineering, widely expected to kick off trade on wednesday. the u.s. top creditor for china is in washington today for the strategic and economic dialogue talks. approximate the meetings will be
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attended by u.s. secretary of state, hillary clinton, and treasury secretary timothy geithner with china's vice premier. the u.s. is expecteded to urge china to push for broader economic reforms to shore out the global economy. both countries may touch on the nuclear weapons program of north korea and iran's suspected nuclear arms ambitions. south korea's key consumer index hit its highest in nearly seven years. consumer sentiment hit 109 in july. up from 106 in june. highest reading since the third quarter of 2002. morgan stanley upgraded its forecast to south korea's gdp to contract half a percent in 2009 and grow 5% in 2010. the upbeat sentiment data lifted seoul shares up 1%. >> fed chairman ben bernanke is defending the central bank's
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actions in tackling the financial crisis, saying he did not want to be the person who presided over the second great depression. bernanke answered questions in a town hall forum in kansas city sunday for a special that will air on pbs this fall. he said he's answerable to the american people. bern keep said the fed is doing all it can to turn the economy around and he's confident the u.s. will be back to strong growth within a few hours. citigroup completed a $58 billion tender offer that clears the way for the u.s. deposit to take a 34% stake in the bank. citi could soon be in a showdown with its newest shareholder. reports say andrew hall wants the company to honor his 2009 pay package, which is estimated to be worth $100 million. citi and other companies that got big government bailouts must submit compensation froemz
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president obama's new pay czar by mid-august. they have the power to refinance finance packages found excessive. the ceo of an have not company which is 10% owned by citi was found dead in his home. regulators accuse them of having improperly earned millions of dollars from trades in two u.s. companies, harmon international and textron. christine? >> joining us on market strategy this monday, we have the co-founder at key capital. good to have you with us. despite the gains in the equity markets, you think the market is too overbought and too hot to handle. aren't you afraid of missing the boat?
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>> good morning, christine. basically, i could as well stand here and tell people to buy stuff on the turn in u.s. housing and better than expected corporate earnings, blah, blah. just like everybody else. but unfortunately the markets are way too overbought. i think stocks are pretty much like human beings. at some point they need to take a breather. that's what i think is going to happen, christine. >> that breather that you're talking about, when do you think that fallback is going to happen? >> well, i can't imagine that it's going to happen sometime this week. we have interesting data coming out. people are figuring right now -- they look at earnings like caterpillar or abb in europe last week and figure, if these companies can make these numbers in a bad environment, what can they make when things are
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actually on fire? that's why they rush in the market and buy everything before things are sold out. i think that's not reasonable. i think if you look at the top lines of the corporate earnings, then you see that stuff is going down. so that the bottom line is not sustainable. for that, i think the earnings policy is not great. that's why p.e.s shouldn't be there right now. >> this is bertha in the u.s. you say you're not overrule bearish. what's your long-term outlook in terms of fundamentals? do you not see the economy turning around everywhere? do you not see opportunity around anywhere at this point? you seem to be talking a lot about the u.s. >> bertha, i think a lot of good things are happening, especially in the u.s. and asia. europe is not so hot at the moment. good stuff is happening, but prices are moving way too fast far what is happening. i think the market is priced for
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perfection. the market is expecting that some of the better capitalized retailers are going to be on fire. because they can pick up cheap dollars from cit. i think the market is generally in that space priced for perfection. where i see some opportunity is the technology space. i would not buy a single stock at the moment if i were a retail investor. because the market is too hot. if things cool down, then there's a place where i pick up some stocks, especially in the life science oriented technology sector. i think 70% of the net worth in the u.s. is being owned by the baby boomers. there was an interesting article on businessweek this weekend that the baby boomers are basically cheap when it comes to
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capital expenditures. that's why they have to save more money for the health. that's why i think that's a nice place to be. >> so you like life sciences. you like i would imagine things like medical devices. what about looking outside of the united states? what are your favorite sectors there? >> looking outside of the united states, there's a lot of good places outside of the united states as well. for example, i like motor in japan. also c.j. corps in korea. that's one i like. in the biotech space, these equities are basically priced like cheap call options. that's where i could pick up equity if things cool down. there is no obama interference or political interference that might happen.
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we've seen a move in these names on an earnings estimate basis from being undervalued to a premium valuation. wait for a cooldown and then i think you're going to make some pretty nice picks in that environment. >> i want to go back to notes you wrote about the consumer not being hot. about how cost cutting does not fill the consumer's stomach. i would like to disagree with that actually. because 90% of people in the united states, we understand, are still working. most working in the job they want to be doing. they've got the lowest borrowing costs ever, certainly in the last couple of generations. when they have repaired their personal finances, they are going to go out and spend. when they've got their personal finance levels up to reasonable levels, they'll spend in some style, aren't they? >> yeah. that's good for you, steve. you can do that. but i don't think the majority is able to pull that off. not everyone works for general
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electric. seriously, i think the cost-cutting mode in a lot of these corporations, why would you benefit from that? i don't actually see that. i think that's not going to -- if you look at the average retail guy out there, why is that going to benefit from a jobless claims? that's going to be interesting to watch out for this week. i expect a negative number here. so in the consumer-related sectors, that's an area where i would stay extremely cautious, maybe look for a short trade to put on here. >> ge as much as anyone else, we've cut our costs aggressively. 89 to 90% of people will be working and will be saving more money than they've saved in several generations. they have low borrowing costs and getting savings rates up to perhaps even asian levels. once they have done that, they will go out and spend money.
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>> yeah, maybe. but i think that in the prices you see, i was mentioning polo ralph lauren, trading at $126. a lot of people expect too much from what you just described. i think that's already reflected in the price. the only thing i'm looking for is a reverse and i think that's going to happen this week. >> all right. thanks so much for joining us. always a pleasure. co-founder and fund manager of capital. still to come -- by the way, if you want to know more and take a look at what's coming up this week in that heavy economic calendar, check out where you can get news and videos and blogs. >> coming up on "worldwide exchange," markets rising for
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the ninth day in ten. will corporate earnings and gdp data extend the rally? and will demand for bonds be termered ahead of $115 billion worth of supply this week? and chinese and u.s. officials kick off talks today. stay with us right here on cnbc. we need to send an expert. a walking, talking... know-it-all... expert. a guru. how about wu? wu will do. where to? first stop... peru. vincent wu to katmandu. what's next? timbuktu. area code 212. so, timbuktu, katmandu, peru, and 212. all by half past 2:00. not a problem. [ female announcer ] need an expert? push a button. that's the human network effect. learn more at phew!
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welcome back. let's get to our global round-up of these equity markets. we've got zurich. christine will talk us through the asia markets. patricia is in frankfurt. let's start off with rebecca in london. >> i'm losing my voice, i'm so upset at being called old by steve. let's talk about the markets. we're looking at a flat ftse 100. we opened the day in markedly positive territory. now we're only higher by one point, which isn't convincing at all. let me see the movers behind those changes we're seeing today. on the up side, pearson is very
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high. the company is trading ahead of expectations, particularly seeing strength in the educational publication business, helping to offset declines at the publishing company. telling us 2009 earnings will match 2008. the stock is reacting very positively. on the down side, a few things to note. one is rexon trading sharply lower. that company is considering an equity rating, among other options to protect their credit rating. that news is sending shares lower. we are also seeing weakness in airline stocks as well. ryanair in ireland told us they are guiding for the full year, earnings lower than previous expectations. that news having a negative expectation on b.a. shares of easy jet declining as
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well. overall, that's balancing out pretty much unchanged for the u.k. markets today. patricia, how is it looking if germany? >> the direction still positive. up 0.7%. volumes are fairly low, 10.9 million shares have traded. but there are big movers out here. it is a cyclical leading in the comeback. deutsche bank, the day before the second quarter results, up 2.7%. the poll is expecting an increase in pretext profits, up 129% at 5 billion euros. tomorrow we will know more. however, german papers are writing there might be friction between the supervisory board chief and mr. akerman because of an affair that started last week in terms of investigations and
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eavesdropping going on in the economy. we have articles out about c commair. they're gaining market share and investment banking is doing extremely well. restructuring could be done by december 2009. watch out for the car stocks today. volkswagen down about 4%. one of the main culprits an article in the times. 4 billion euros being planned by vw in order to pull off the takeover of porsche. i talked to vax wolkswagen. they said over the next few days, we should see more details on the planned takeover.
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bmw numbers and daimler. >> we are trading higher, up 0.3%. we see weakness in some of the defenses. apart from that, most of the stocks are in the positive territory. the biggest gainer is the implant maker. shares higher almost 5%. that's because analysts raised that company to a sector from a buy. let's move on and talk about the biggest story of the day, julius baer, shares higher by 2%. net profit was down 37% when compared to last year. that was a lot better than analyst expectations. the focus on net new money flows with inflows into private banks. those are very strong although
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short of analyst expectations. the big surprise was outflows from the hedge fund slowed considerably in the first half of the year after we saw massive outflows of 24 billion swiss francs in the second half of 2008. apart from that, they also said it's on track with separating the two businesses. one private banking and one asset management arm. that will probably be finalized in the third quarter of the year. that's also when we'll see more updates on the financial guidance for the rest of the year. that's it from here for now. let's go back to christine in singapore. >> asian markets powering ahead for the ninth session. in japan, the nikkei closing above the psychological 10,000 level.
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hitachi ended higher and the nikkei soared 1.9% higher. the kospi closing up 1.4%. in china, the market gets a lift from the country's first ipo in about a year. shares and toll road operator, sichuan expressway, more than doubled, prompting authorities to suspend the stocks several times. seeing sichuan express there. closing at 22,251. australia, closing up thanks to gains in commodity prices. over to you, bertha. >> a very busy week for economic data. nobz housing, consumer
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confidence and the first read on second quarter gdp. one report of note today. new home sales, which are forecast to rise just over 2% in june to an annual rate of 350,000. of course, the earnings parade matches on this week with about another 140 companies in the s&p 500 reporting results. today, we'll hear from dow component verizon before the opening bell, along with corning and honeywell. amgen reporting after the close. >> coming up on "worldwide exchange," shares in sichuan expressway, we've been talking about it, soar. is this another sign of a market bubble such. >> plus, fed chairman ben bernanke wants that the u.s. jobless rate is likely to stay high after the nation exits recession. is the central bank doing all it can to turn the economy around? we'll discuss after this break. during times like these
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i'm christine tan in asia, china/u.s. relations in focus. the economic dialogue between both nations gets under way in washington. >> in europe, posts better than expected first half earnings.
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and outflow earnings flow. >> u.s. investors turn their attention to a huge slate of treasury options and economic data, including the first read on the second quarter gdp. >> let's take a look at these equity markets. the ftse global 300 index off highs but still up 0.4%. the london market was down to flat. that's exactly where it's trading now. that aside, we've still got fairly decent gains over in paris and germany. let's look at the foreign exchange markets where the euro was making good gains against the dollar. >> here in asia, solid gains. corporate earnings the main driver, pushing some markets higher. look at japan, closing above the key 10,000 level for the first time in a long time.
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the kospi up 1.4%. the shang hang market up 1.4 market. sichuan expressway pouring some of the shares higher. the hang seng up 1.35%. the only one bucking the trend is india, down 0.57 at the moment. >> futures right now pointing higher. we have lost steam in the last half hour. dow futures 15 points above fair value. nasdaq futures are flat. s&p futures are flat as well. we've got a lot of economic data ahead this week. a huge number of treasury auctions, at least in financial terms. over $200 billion of treasury notes, ranging from three months to seven years. those are going to be watched very closely.
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no ten-year auction this week. the ten-year note is at 3.7% in terms of a yield. steve? >> thanks, bertha. you mentioned the wealth of data. let's dig into that with david page, an economist. we've had more data out this morning. the german consumer sentiment figure highest in a year. they have a bit of unliquidity in the market. very mixed data at the moment still. is it providing a decent enough foundation for the rally? >> probably not. the rally seems to be going in excess of the actual economic numbers themselves. germany suffered aggressively as did japan. because their economies are so highly geared into that trade. we would hope to see some rebound as world activity looks it starts to grow again. germany has been on its knees since 2003. we are hopeful some of the
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stimulus policies see german consumption pick up and lead to investor pick-up in germany. we still see a fairly large contribution in q2. we're hoping for stabilization in q3. >> i look at the front page of the financial times, talking about the ill wind of credit card losses hitting european institutions. is that a rehashed old story? >> i think it's a rehashed old story. generally the banking sector does tend to suffer late cycle. unemployment picked up and that's what leads to default. we've seen one wave of hits on the banking system. that's still leaving uncertainties as to where it stands. the question marks on the european banking system as a whole are pretty well founded. that's why the central bank has forecast such pessimistic growth outlook. >> i read about unemployment and nonperforming loans.
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if unemployment is at 10%, are nonperforming loans at the same? >> in u.k., the level of unemployment is not as high as the default rates. we haven't seen such a big shock to the economic system. any of the models are always going to have some error of margin. >> david, ben bernanke did a kind of open house on our public broadcasting network. it hasn't aired yet. essentially he said, hey -- defended his actions. i didn't want to be the guy who presided over the second great depression. does it feel as though he's out and being very defensive? >> yes, he has been very defensive. i think that's because of the aggression directed at the fed over the last three months or so. we were of the view that having
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somebody a master opportunity of the depression was a great person to have at the helm of the federal reserve as it tried to navigate its ways through the stormy weathers. now that we seem to be hopefully signs of avoid happening the dprepgz, lookidepression, looki subdued growth, there are misplaced concerns about inflationary build up, some actions to reflat the economy. all of that aggression has been laid at the fed's doorstep three to six months or so. the fed has taken a more defensive stance. it was again repeated this weekend. at this weekend's town hall meeting was set up to provide the fed an opportunity to give a defense. >> of course, this week we'll get a report card on the fed's progress, if you will. the first read on succeed quarter gdp and expecting the
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beige book. at what point should people start to say this isn't working if these numbers don't turn? >> we wouldn't expect to see the gdp numbers to have positive growth this time around. we're hoping to see stabilization in the second half of the year. the criticism of the fed to date almost has been it's providing too much stimulus. there's too much risk of inflation building up over the next few years. that's not a question you'll be able to definitively answer the phoenix two to three years. in terms of the economy picking up, that's really a question that the fed has been at the heart of trying to drive. i think it would be unfair to see that weaker growth numbers is proof that the policy is not working. >> hey, david, this is christine. in south korea, we have consumer sentiment data at the highest level in seven years.
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in japan, lots of krngz about deflation deepening. is japan going to be lagging behind? >> to some comment, yes. we are seeing continued price pressure. and the japanese economy is going to continue to weigh. given the scale of contribution we saw in japan over the fourth quarter of last year and the first quarter of this year, the fact that it looks like it's going to post positive growth in q2 is a sharp turnaround. it's not as sharp as singapore and other asian economies. nevertheless, given japan's usual slower growth, we don't think it's doing too badly at the moment. but the outlook does remain a concern. >> when you look at the fortunes of some of the asian economies, to what extent does it depend on
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china going forward to help the region as a whole? >> i think china is a key drivers here. given that one of the key drivers to the region as a whole before that was export growth. export growth is clearly going to be much lower and much more subdu subdued. you are looking at alternative measures of stimulus. china provides one of those, because it had a large fiscal surplus. some of the other east asian economies have provided stimulus. some of the surplus countries running down those surpluses and trying to generate domestic demand. china is one of the key regional players and will be an absolute critical part of the development of east asia and global growth over the next six to 12 quarters. >> all right, david. we'll have to leave it there. thank you for the global tour. david page. we've been talking about china. one particular story we're watching is the u.s. top
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creditor. china is in washington today for the strategic and economic dialogue talks on a wide range of diplomatic and energy platforms. let's go to frank and ask him what he thinks is going to happen at this meeting. is there going to be anything specific come out of this meeting? >> i think there will be a lot come out of this. remember, this is not a decision-making meeting. this is not trade negotiations. we're not going tonend up with specific set of steps. korea, north korea issues, climate change, global economic recovery, those kinds of issues. >> on the issue of economic recovery, the u.s. wants deeper economic cooperation as far as the u.s. is concerned. how do you think the u.s. is
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going to make use of this growing economic clout of china? >> it induces these kind of get-togethers. that both countries agree that a little more balance in china's economy would be helpful. meaning shifting away from purely export-led growth to domestic consumption would help all around. the united states can help in that process and also benefit from it. it allows the united states to have greater access to china's market. there is common ground on a lot of the core economic issues. >> frank, it's bertha here in the u.s. it's interesting they're having these talks in a week when the treasury is auctioning off $200 billion worth of supply. obviously china is usually one of the big buyers there or they hoped china to be. how does that affect the dialogue? >> i think both sides are pretty mature on this point. meaning, china deploys its
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capital overseas in the way that it thinks best in terms of return and liquidity, security and so forth. and the burden is on the united states to always make sure the united states' dollar provides the best locale for that investment. i think both sides have wisely kept that out of day to day politics or day to day political issues. it wouldn't help either country's economy to politicize china's investment strategy. >> this week the dialogue becomes more political. we are seeing the secretary of state, hillary clinton, side by side with tim geithner. how does that change the dynamics in terms of talking about all these issues? >> yeah. i think here's the central point. i participated in the first three of these that took place under the bush administration, when hank paulson was treasury secretary. here's the central point. these are two great powers that
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need to define their relationship. we cannot have sino-american relations solely on trade issues. other incidences come up. we can't have that to be the sole basis for discussion. it makes sense for american leadership and chinese leadership to remu matteview ma general and push that agenda ahead. global economic growth is in that category. i would also say north korea is in that category. both sides need to think very carefully about north korea's missile program and nuclear proliferation efforts and what implications that might have for northeast asian stability. there is a basis for discussion there. we're not looking for a treaty to be signed. but it's good on a regular basis for both beijing and washington
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to have an open discussion on these critical topics. >> people aren't telling the truth. the u.s. administration saying we want a strong dollar. they don't want a strong dollar against the chinese currency. this phony debate about holdings in u.s. treasuries. as you alluded to, it's all about reducing imbalances. you only get rid of them if you reduce the value of the dollar and create better markets for the internal markets in china. these are the real issues. will they be discussed? >> yeah. i think all of those issues will come up in some form or fashion. i think there is a consensus in both countries about the validity of the points to some degree. again, this is not a formal decision-making body where we'll take a vote at the end of it and come up with a 30-day action plan. china tends to move incrementally. it has shifted its currency rather significantly over the
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last few years. my guess is that trend will continue. this particular meeting is not something designed to come up with the next step of currency movement. if anything, china takes a go-slow approach. they don't want to send a single to the market they're only moving currency because of discussions taking place with the u.s. >> is the g2 more relevant than the g8 and the get y-20 in lond earlier this year? >> look, the g-8 works because people on the sideline of the g-8 have bilaterals. the g-8 as a group gathering doesn't particularly work that well. but it allows side meetings to take place. this could be viewed as one such meeting. >> frank levin, former white house political director. going to be an interesting meeting. from china, let's talk about
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india. ayesha joins us live. >> it's been a choppy to walk start for the markets this morning. they're down 21 points. the market struggled all day to hold on to that 45 or 50-mark. you'd have to say the broader market, the small cap index has been better in trade. gaining about 1%. the key reason for the kind of pressure that you have seen on the front line indiocecis. proof prices coming off. it disappointed the street this time around.
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while we have not seen a ratings downgrade, they've had a knee jerk reaction to the first quarter numbers. that stock itself is down about 5%. you're seeing this kind of slump. another oil and gas heavy is slumping under pressure. daimler motors is one stock in focus. friday, we saw an 8% run-up in the stock. % we will be seeing stand-alone numbers come out. we're expecting 63% on the profit. that is looking extremely edgy on trade. all eyes on the federal reserve bank of india. 80% of the analysts are expecting a status quo policy. that is they will leave the rates unchanged it time around is what the street is really
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begging it to be at. with that, it's back do you have. >> thank you for that. in other stories, china's first ipo in a year skyrocketed in shanghai. sichuan expressway's trading was suspended for the second time. investors were drawn in by the company's small growth prospects. the stock's performance boasts well for other chinese listings. that includes the biggest ipo this year, which is widely expected to kick off trade on wednesday. still in china, the world's number three aluminum producer, chalco, warned of a loss in 2009, because of low aluminum demand and prices. it posted a profit of $352.8 million in the first half of last year. they said utilization rate was low while demand fell significantly. investors, however, are shrug
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off the news. the stock of chalco ended up 4.5%. >> shares of at&t are trading higher after it announced it would pay a dividend. second quartered profits fell. but it said it is freeing up enough capital to pay the dividends. the chief executive of the company remains cautious. >> this comes off in a more easy comparative weeks. in our network, the volume declines in the last few weeks of june 2008. approximate so our conclusion is the economy is now relatively stable, but stable at a pretty low level. >> here in the u.s., senator chuck schumer is urging the s.e.c. to ban so-called flash stock orders. the practice routes stocks
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through orders through private liquidity pools, giving certainly high frequency traders the ability to peak before they hit the marketplace. schumer, chairman of the senate ru rules committee, says this gives them an unfair advantage. the s.e.c. hinted legislation is coming to curb flash orders and where large block trades are made anonymously. apple reportedly teamed up with four of the major music doum companies to boost sales of music. they are dubbworking on the pro dubbed "cocktail." it could be ready in time for the holiday shopping season. the device could compete with amazon's kindle. it has a 10-inch screen and
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connects to the internet just as the ipod does. always speculation about apple. coming up on "worldwide exchange," the latest survey shows that the global commercial property market is still on a downward slope. we'll talk to rick about that in 30 minutes. plus, the latest on the currency markets right after the break. here's how they are trading now. undefeated professional boxer floyd "money" mayweather has the fastest hands boxing has ever seen. so i've come to this ring to see who's faster... on the internet. i'll be using the 3g at&t laptopconnect card. he won't. so i can browse the web faster, email business plans faster. all on the go. i'm bill kurtis and i'm faster than floyd mayweather. (announcer) switch to the nation's fastest 3g network and get the at&t laptopconnect card for free.
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welcome back to "worldwide exchange." let's look at the currency markets. our next guest says the dollar is getting a smacking. euro-dollar trading 1.42. let's get straight to david. really good to see you. how important is an assault on the 1.42 level? >> we've been range trading over the summer. you have to tap your computer to see it's working. all the prices are the same no matter what happens. we tried to break on both sides. we haven't managed. they're all trying to push the dollar to new lows for the summer. the dollar is under constant pressure 10 moment.
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>> this is all about the parallel move of taking more risks. people selling the dollar because they feel more confident about risks globally? >> that's correct. we've seen fantastic equity rallies. whether you think they're genuine or not. the aussie does well. the dollar does well. usually it's a stage when indicators pick up when the numbers will be strong this friday. this should be dollar territory. this should be good for the dollar. history has been turned on its head. this has been seen as negative for the dollar. as the equity markets rally, so the dollar falls. >> david, is it because the trady in currencies is divorced from fundamentals right now and it's more about risk? >> i think you were absolutely right. it's all about this idea of we get in the morning and it's either risk on or risk off. those are the big exceptions
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used by traders used in the morning. they put on a trade and it goes wrong. so it's all about risk. you're absolutely right. i think last year was about liquidity squeeze. now f. it's about if you like risk, get it elsewhere. >> where does this leave the japanese yen though? >> i think it leaves it on the sideline. they're more interested in the brazils, chinas and turkeys of this world and they're leaving japan and the yen behind. i still think the dollar-yen is heading up to the 1.05 mark. >> david, i read my colleagues. they seem so gloomy. the economists very worried
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about germany. the s&p talking about ill winds, and credit cards. is the media gloomy at the moment? >> i don't think so. i think there's realism. but the market wants to see good news. the market can remain solvent longer than expected. the market wants to rally. when it , you can't stand in its way. that's the problem at the moment. the momentum is so powerful that people believe this will carry it through the summer. there's a deep and entrenchable economic problems out there. i don't think the media is wrong to give us a wake-up call in the markets. at the moment, it's not working. >> david, look forward to seeing you in the desk in london season. global head of foreign exchange
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strategy at hsbc. >> coming up next, we will bring you up to speed with the top stories making headlines across the globe. with the u.k. suffering from debt and a shrinking gdp, will london pull it off in time? we'll be live at olympic village to see how preparations are coming along right here on "worldwide exchange." you have questions. who can give you the financial advice you need? where will you find the stability and resources to keep you ahead of this rapidly evolving world? these are tough questions. that's why we brought together two of the most powerful names in the industry. introducing morgan stanley smith barney. here to rethink wealth management. here to answer... your questions. morgan stanley smith barney. a new wealth management firm with over 130 years of experience.
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i'm christine tan in asia. sichuan expressway shares power ahead in china's first ipo in nearly a year. is the market getting ahead of itself? in europe, stocks extend their two-week rally. as german consumer morale rises to its highest level in over a year. >> in the u.s., investor attention turns to the $200 billion worth of treasury auctions and the second quarter gdp. >> if you're just joining us in the united states, hello and welcome to the start of your global day with "worldwide exchange." we broadcast live from the u.s., asia and europe. in the u.s. this morning, the futures are flat, slightly positive. as i mentioned, we'll have a lot
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of data this week. right now dow futures up 18 points or so ahead of fair value. s&p futures under water, slightly better than -- kind of flat essentially. let's leave it at that. it's flat. we have a lot of economic data. in germany, better consumer morale. that's sending yields there a little bit higher. looking at the ten-year bund. we're at 3.5. we've been flat there for the last hour. taking a look at the ten-year yield here in the u.s., we have risen back to 370. $200 billion worth of treasury coming to market. the beige book and the first read of second quarter gdp. steve, what's it looking like in europe? >> a decent rally.
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the ftse global 300 off their highs of the session. the ftse, which was flat a few moments ago, and the dax and the cac as well were in positive territory to the tune of around about a half of 1%. the smi was up 0.3 of 1%. the dax powering ahead after the german consumer sentiment rose. david bloom was pointing out the euro making gains very the greenback. 1.43, pretty significant level to him. >> in asia, pretty solid gains across the region. corporate earnings driving some of the rallying in japan. that particular market closing above the key 10,000 level for the first time in a long time. the kospi up for the tenth consecutive session.
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consumer confidence highest in weeks. the shanghai market up the highest in weeks. the sichuan expressway soaring above. that helped sentiment in this particular market. the hang seng up 1.4%. the only market bucking the uptrend is the bombay index. it's trading down 0.2%. overall, a pretty solid session. in terms of nymex light sweet crude, up 62 cents, $68.67. brent also putting on gains, $71 a barrel. >> joining us to talk global strategies is roger nightingae.y
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people worry about markets. but is all that relevant such it's rally. >> it's rallying because the pain is being borne by the wage earner and not the corporation. pay is moderated in terms of increase and sackings are occurring. but of course that creates a problem. it creates a problem for the consumer. the consumer does not have enough move to buy the stuff he's producing. there's a bad imbalance in the economy. you'll need money supply to be exceedingly easy for a contra d traktd money. >> i had the same argument with a guest at the top of the show. 90% of workers will hope never keep their jobs throughout this recession. those workers are having the lowest borrowing costs in history in some cases. they are keeping their jobs and not seeing significant reductions in their salary.
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they are building their savings. these are positives. >> positives for the financial part of the economy. they are disasters for the real part of the economy. you don't want savings when you're in a recession-stoked depression. you want those to be kept under control. they're not. you say interest rates are low in nominal terms. they're exceedingly high possibly in real terms measured against the pay rise. because in so many countries now, pay is being cut. i mean, you leave aside the public sector, these luxuriant and look at the wealth-creating private sector, you are getting pay cuts. >> if people are saving money, they're money on deposits. and the banks have to go less for the wholesale markets, which means cheaper borrowing costs for the consumer. >> no, it doesn't. just more profit for the banks.
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the banks threw the money down a black hole. now they're taking that money back from the government via taxation. they're taking it back from the customer via excessively higher borrowing costs at high rates. >> steve, i would point you to the front page of the "wall street journal." it talks about the fact that everybody is too scared to sxlelend and to scared to borrow. roger, what happens to these markets if the real economy, the realtime economy continues to falter because people are just too nervous? does that mean that these markets are poised to dip back and fall and test those lows again? >> no. i think the markets were poised to rise to much higher levels. you've got, first of all, good profits being earned. secondly, you've got extraordinarily low inflation, extraordinarily low interest
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rates, staying at 0, and exceedingly easy money. this is the perfect recipe for a bull market. on the contrary, i would say if you did genuinely get green shoots, if the economy were to bounce up again, that would actually be a negative. because that would imply that interest rate increases were on the horizon again. but since they're not, they aren't. >> roger, this is christine. saying the markets were poised to rise again, where are you putting your money? is there more money coming into the market given that people are sitting on the sideline? >> the money coming into the market is relatively modest. as we're discussing at the moment, the level of sentiment amongst investors is low. people are not convinced that everything is going right. so they're sitting on the sideline. as the indises rise and the fund
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manager realizes he hasn't participated as much as his partner, at some stage he's going to rush back in the market. you'll get rises much faster than those at the moment. at least 15% between now and the end of the year and possibly 25% next year. >> i also had an e-mail saying, they're rallying, steve, but on low volumes. roger, we'll leave it there. plenty there over the next hour. three years from today, the summer olympics will kick off in london. the pressure to deliver the games is growing as debt continues to grow in the u.k. and gdp shrinks. we'll be live at the olympic vil wage ross westgate after this break. tdd#: 1-800-345-2550 if i'm breathing, i'm thinking about trading. tdd#: 1-800-345-2550 i always have my eye out for a stock on the move.
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welcome back to "worldwide exchange." exactly three years until the 2012 london olympics kick off. how is the industry preparing for this momentous occasion during the height of a global recession? ross westgate is standing by at the olympic village. unlike on the other channels, i'm glad to see your not wearing that ridiculous yellow hard hat. how well prepared are we? how is the stadium coming?
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>> reporter: you can see it behind me. three years to date, the opening ceremony will be taking place in that very stadium. they may be confined by this wonderful british weather. if it is rainy and cold, no doubt the british athletes will be happy. it will play into their hands. some of the elements are coming along quite nicely. in one sense, the budget has been blown. the original budget was 2.8 billion pounds. that sort of ballooned up to 9.3 billion. of the projects already completed by the end of march, we had 1.9 billion allocated. 1.4 billion is what's been spent. on the infrastructure side, the ioc and the organizing committee are probably feeling fairly comfortable. raw material costs have gone down. they've been able to get more exacting terms, more competitive
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terms for the process. at this time next year, this site, all the major projects in the stadiums will have been finished. still big question marks because they'll have to turn this from a sports stadium into one that has accommodation and business and commercial ventures and schools. that's where the next built of where is going to be. three years from now, i'd say we'll be here. >> good to see my old neck of the woods, east end, getting a much-needed lick of paint. despite good news last week for the residential housing market, commercial property does not appear to be bfsing from the same sentiment. they found the commercial rent declines at the fastest pace in the survey's five-year history. joining us is simon ruben. i've got to say i thought it was a gloomy report. a check on the exuberance going around at the moment. >> the picture is down beat.
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there are a couple of chinks. most of that is relating to what's happening in asia. we've seen a bounce-back generally in economic activity. asia has been in there. if we're looking in any bright spots, they come from hong kong, india, china. approximate. >> i take your view. asia is not too bad. in fact, the west, europe in particular strikes me as being awful. i've just been so surprised that so many of your colleagues, perhaps the more commercially of oriented colleagues are talking the market up. it's premature. >> it's interesting to hear what you say. the report itself is based on surveyor responses from around the world. we are getting the commercial view coming into the survey. it's interesting. if you look at europe, most of the markets are still pretty downbeat in terms of the outlook. so spain in particular you would expect. germany showing a bit more
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resilience. the u.s. as well. both for rents and capital values, the outlook is still pretty downbeat. >> i'm pleased you mentioned the reds. so many people talk about economic adjustments. we have falling rents in the commercial area and private area. how much longer do you think this is going to go on. >> i was looking at the u.k. experience in the early, 90s. rent on that occasion came down by one-fifth. so far, we're down seve7%. if you look at what we're saying about inducements, they're suggesting these are continuing to rise, which suggests that rents have got further to come down. >> simon, here in the u.s., are things stable?
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is that something that leaves the glass half full? >> it's premature to be talking about stabilization. we saw reports, hard data reports, on the commercial market come out in the last few weeks. capital values are being marked down. that process was slow to start in the u.s. i suspect it's got some way to run. certainly if you look at what members of the u.s., valuers in the u.s. are saying, professionals there, they're telling us that they expect capital values to fall further over the next three months. i think we're premature to talk about stabilization. ild also draw attention to the comments from ben bernanke where he highlighted the issue of lending to the commercial real estate sector. this issue of refinancing loans. it's a big issue in the u.k. as well. how are banks going to deal with that? there are real challenges if they don't have to finance to ensure loans can be refinanced on reasonable terms.
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>> hey, simon, this is christine. i understood hong kong had an upturn. >> obviously the hopping kong market moved down quite sharply. it's benefitting from the sentiment in china. hong kong certainly leads the way. what we're seeing is a pick up in interest. a good proxy for genuine interest in the marketplace. there's no doubt that lack of supply allied to a significant turnaround in sentiment and a considerable markdown in values to start with have contributed to the sentiment in that particular area. >> quick word to viewers in the mideast. i see horrors in the middle
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east. what is the report there? >> not hope that things are going to turn around quickly in the middle east. >> simon, we'll leave it on that note. the chief economist at rick's. he did mention ben bernanke. the fed chairman defendants his actions on the financial crisis, saying he did not want to be the person who presided over the second great depression. bernanke making those comments after answering questions in a town hall forum this past sunday. bernanke tried to alloy concerns that the fed has too much power, saying he's answerable to the american people. bernanke said the fed is doing all it can at this point to turn the economy around. he's confident the u.s. will be back to strong growth within a few years. >> shares of pearson trading at
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the top of the ftse. education, publishing business. it expects subscriptions to withstand further economic pressure but did not see an upturn in advertising any time soon. >> china's first ipo in a year skyrocketed in china. sichuan expressway trading was suspended for the second time. analysts say investors were drawn in by the strong prospects and the low price. china state construction engineering widely expected to kick off this tuesday. and chalco weighed down by low
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aluminum demand and prices. chalco posted a profit of $352.8 million in the first half of the year. the company said the utilization rate was low while demand fell significantly. investors, however, are shrugging off the news. the stock ended up 4.5% after falling 4% earlier today. whether it's earnings news, data, economic data, anything moving market, you can find it all at >> still to come, julius baer said wealthier clients are avoiding risk. we're going to find out if the bank xwexpects that to change a time soon. the cfo will join us in 15 minutes' time. businesses more efficiently,
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welcome back to "worldwide exchange." let's get to the global equity market round-up. we'll start off with becky. >> the ftse 100 is pretty flat. we did see gains at the start of trading. they're almost entirely eroded. 11th straight day of gains. amongst the winners, pearson.
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they told us the education and publishing business doing particularly well. the stock is performing very strongly this morning. on the down side, rexson, saying this morning they are considering an equity rating to cut their debt. shares of that company down 10%. ry ryanair shares down as well. how is it looking in germany? >> up 4.2% approximate at the moment. we are talking about com air bank, talking about things going faster than expected. the market is taking that very positively. deutsche bank up 2.5%. all cyclical stocks, all doing rather nicely.
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up anywhere between 2.6% and 3.9%. it is the cars underperforming. volkswagen down 2%. bmw down 7%. the company didn't want to confirm any speculation to us about any takeover. >> asian markets powered ahead for the ninth strayed session. hopes of an earnings recovery giving stocks a boost. it marked the longest winning streak. hitachi a company to watch can a plan to turn subsidiaries into whole-ownly institutions. investors all cheering data. they showed a consumer sentiment
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had a seven-year high. the kospi up. in china, the market gets a lift from the country's first ipo in a year. shares in suichuan expressway doubled. in hong kong, financials, property tax acceptsend the han higher. australia closing up 1.2%, 4139. bertha, over to you. >> thanks very much, christine. a big spate of treasuries coming in week. a heavy economic calendar with numbers on consumer confidence and employment and second quarter of gdp on thursday. one report of note today. we'll see about new home sales. they're forecast to have risen
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3.2% in june. the earning parade matches on this week. we've got another 140 companies in the s&p 500 reporting results. we'll hear from verizon and from corning and honeywell, along with amgen which reports after the close. that's your global stock watch. >> coming up, fed chairman ben bernanke wants that the u.s. jobless rate is likely to stay high, even after the nation exits recession.
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in the u.s., investors turn their attention to a spate of treasury options and boat load of economic tastdata. >> in europe, stocks defend their two-week morale. as german morale rises to the highest in a year. >> in asia, the economic
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dialogue between china and the u.s. gets under way in washington. >> hello and welcome to "worldwide exchange." if you're just joining us in the u.s. this morning, the futures this morning here have been fairly flat. we've got right now the dow futures about 15 points or so above fair value. we've got earnings coming out. we've got verizon ahead of the bell. we'll get the beige book and the first read on second quarter gdp. $200 billion treasuries coming to market. the treasury going to auction off over 100 billion on two, three and seven-year notes and have three, six-month notes as well. the ten-year yield inching up to
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3.71%. investors have an appetite for risk. >> let's look at the european boards as well. this is where the risk has been put back on the table. london though has dipped mildly into negative territory. to the tune of four or five points. the data out of germany propelling the dax up another percent. the euro higher against the greenback as well. he said have a look at the 1.43. if surpassed, it could be another green light. christine? >> hey, city of. investors in asia willing to best earnings will be better than expected. look at japan. the nikkei up for the ninth straight session, closing above the key psychological 10,000
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level. the kospi up for the tenth consecutive session. the shanghai up 1.9%. a lot of focus on the new ipo? sichuan expressway. that lifted sentiment in shanghai. bombay sensex now positive. it was trading below water. the nymex trading up 59 cents, $68.64 a barrel brent is up 61 cents, $70.93 a barrel. let's go to tokyo and check in on the trading there at the nikkei. what do you have for us? >> thanks, christine. the nikkei staged its longest rally in 21 years. it rose for the ninth straight
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sepgz, closing 1.5% higher and topping the 10,000 level for the first time since june 15th. it's the index's longest winning streak since the 13-day really. the buying fueled by a wall street rally. this is raising optimistic about a u.s. economic recovery and listings earnings prospects in the japanese market. the dollar-yen rate also gave stocks an extra boost. shares in hitachi rose on reports that the company plans to turn four other firms into wholly owned units. it would allow the company to retain profits on those distributed to minority shareholders. earnings will come in better than a projected 270 billion yen
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loss. two financial firms appeared to have returned to profit after two quarters of losses. kddi has developed a fiber optic cable with the world's largest data transition capacity. with nine times the data capacity now, it can transmit 700 22-hour dvd movies in half a second. that was the nikkei business report. back to you, christine. >> thanks to you. >> shares of julius baer trading higher after the swiss bank posted a better than expected
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profit. the swiss manager said outflows from its hedge fund are slower. investors are sitting on large amounts of cash. we're joined by the cfo of julius baer. thank you very much indeed for joining us. are there structural changes firstly within your company in the splitting of the asset management and the private banks? and secondly, within the swiss banking industry as well? because of the changes of secrecy as relates to the world means that we'll have to get used to lower profits, especially from the private banking operation. >> good morning. thank you for the question. no, so far we've seen no structural changes. i'm referring to the banking market in switzerland. in our company, we have dividends from the first six months. no outflows with banking secrecy
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going on. you pointed want to reluctance of the clients, which should be temporary. when people get more confidence on the markets, they will move back to more equity funds and more structured product. >> let's talk about what clients are doing. down in the swiss market. why have you missed there? >> in the banking, the inflow in the first six months, is 6% of net new money, which we believe is a quite healthy inflow. especially given all the discussions about the banking secrecy. it's in line with the target over the cycle of achieving 5 to 7% of net new money. we believe this is quite a good result. >> it's bertha here in the u.s. you have some plans to list a
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fund here in the u.s. is that being impacted by the u.s. and your country on secrecy? >> yes, we have one company, one out of the three, a u.s. domiciled fund, mainly managing international equities. we have filed an s1 and plan to do an ipo in the rest of 2009. this is not affected by any of the ongoing discussions. this is more subject to the market conditions. whenever we can do the ipo, we will go ahead. >> it's roger. it's not usually that clients don't like risk. it's that they don't think they're being adequately rewarded for it. that is often an historical assessment. when markets are rising for a long period of time, they change their minds about the rewarld. wouldn't you imagine in the possibly near future, your clients will power back into the higher beat or higher risk areas
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of the market? >> yes. it is not -- cannot be excluded. so far our clients have not enough comfort. they believe the markets are still too risky. as you say, it takes some time. maybe a quarter after the recovery of the market. when clients decide to jump back into more risky strategies like equity, hedge funds, and so on. >> we'll leave it on that note. thanks so much for joining us this morning. the cfo of julius baer. joining us for some market strategy and discussions is jason pride, the director of research at havorford investments and our guest host, roger nightingale. i would like to start with you
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first, jason. >> thanks for having me on. >> thank you. you know, these markets have been so high. over the weekend, a number of strategists say they expect to see more up side yet. when you look at the real economy, it doesn't seem to be catching up. can these markets continue to rally if we continue to see unemployment rise and reluctance on the part of banks to lend and reluctance on the part of businesses to borrow? >> here's the thing. things are definitely at the stage of getting better. i'm going to go out on the ledge here and do basically what haverford has been doing all year, going against all the nay sayers. when we look forward to third and fourth quarter, we think the economy has the potential to surprise on the up side relative to expectations. our longer-term outlook may be a little bit more contained at a
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lower level for the economy due to all the head winds that the critics normally comment on. on a near term basis, we think that the snapback has the potential to come in ahead of expectations. the early signs, many of the things you're talking about, we've seen vehicle sales of all things, actually up 21% based on the latest click. we've seen initial jobless claims, not the continuing jobless claims, down a quarter from where they were before. the initial unemployment claims moving in the same sort of direction. at the same time, we've seen earnings estimates starting to inch up. this current quarter, as people are reporting what happened in the second quarter, 73% of companies so far have delivered positive surprises, which is a pretty astronomical amount. the average historically is much lower than that. all those things are pointing to this thought process that things
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are better than expected. >> not because the top line is growing. we can manage these things to look really pretty. even though you're putting makeup on it, the underlying foundation is still not great. >> it works both ways though. cost cutting is one of the pieces. it's something that is always done at the beginning of an economic rebound. it's just a economic trade of it. once companies get their costs in line and feel like they have a little built more control over their environment, then they're going to go into a position of hiring more people of. that ends up affecting the economy in a much better way. first, getting the companies in line helps the economy start moving forward. despite the fact that it is coming from cost cutting at the beginning. i want to mention something on valuations. because of people point this out and start talking about 15 and 16 and 17 times earnings.
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we've got to look at normalized earnings. that's an average of what we can see in a normal economic environment. the market is at 13 times normalized earnings, halfway back from the march low, to what would be a more regular valuation of 16.5. as far as appreciatation, there is a lot of room left. it's not something that can come incredibly easy, given that we've gone through half of it. it is something that can come if we turn to a somewhat more normal economic environment, which we think we're doing. >> good morning, it's roger. i agree with you absolutely about the stock market and what's causing it. it's the profits and the profits caused by the cost cutting. but the cost cutting has implications for spending ability. because the costs that are being cut are principally wage cuts. people are being cut and wages reduced.
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that will make the economy relatively dull. possibly very dull but certainly very dull. my argument to you is, don't argue that economic strength is necessary for the stock market to go healed. on the contrary, economics' dullness is probably the best possible recipe you have for market strength. >> i couldn't agree with you more. i think we're looking in an environment for a good good number of years. it's probably going to be a subpar economic environment. even if you have a pretty good snapback here. just getting from basically a period where people didn't spend at all back in the third and fourth quarter of last year. but that moderate or slower economic growth period is an up side surprise for a lot of the participants. and can get us to a level of more positive valuation movements in the markets. i think we're sitting in the same place. >> we're going to leave it there for now. both of you sitting pretty.
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jason pride and roger nightingale. taking a look ahead, coming up on "worldwide exchange," we'll take the temperature of the u.s. housing market ahead of new home sales data due out today. before we leave you, take a look at u.s. futures. still on the flat side.
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let's get a final thought from roger. strategist at point and york. we were talking heatedly off camera about politicians. i want to bring it back to that. have the politicians actually done their job and created better credit conditions by all their actions over the last year or 18 months? have they come up with something good on their end or make things worse? >> they certainly haven't done what i would have done. let's put it mildly. i think the fiscal adjustments was pure madness. fiscal adjustments do not work. taking money away from consumers and giving it to bankers was in fact pure insanity. absolute insanity. everybody must acknowledge it. it's still not too late to pull the plug on these loathsome banks. we ought to do it straightaway.
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>> economic stability, market rally in spite of politicians potentially. we can discuss this another day at length. roger nightingale. squawk box follows "worldwide exchange." carl is joining us to tell us what we can expect. >> steve, good morning to you. starting the week off strong. the bull enjoying this summer rally. is it here to say? we'll talk to oppenheimer's chief investment strategy and seasoned wall street hand. bernanke hits main street. the fed chairman holding a town hall meeting in middle america. we'll ask what his comments might be telling the street. former fed governor randy crossner.
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honeyro honeywill, verizon and others report earnings as well. >> still to come on this program, earnings from verizon and honeywell, plus new home sales figures out today. we'll bring you a preview of everything you should be keeping your eyes on right after the break. welcome to you must be looking for motorcycle insurance. you're good. thanks. so is our bike insurance. all the coverage you need at a great price. hold on, cowboy. cool. i'm not done -- for less than a dollar a month, you also get 24/7 roadside assistance. right on. yeah, vroom-vroom! sounds like you ran a 500. more like a 900 v-twin. excuse me. well, you're excused. the right insurance for your ride. now, that's progressive. call or click today.
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let's take a look at the trading day here in the u.s. let's talk with jason pride again. you're fairly bullish on the earnings picture. that was the big picture last week. this week it looks like people focus a lot on the heavy economic calendar and that big spate of treasuries coming to market. do you watch these auctions? we've got $200 billion worth of supply this week. >> sure. we all have to remember that the markets work off of news flow. news flow can be both positive and negative. even though the overall direction can be positive and moving in the right way, any weeks' worth of information can
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be on the negative side. we're still talking about second quarter gdp as far as economic releases. we're still talking about treasury octobers in which the treasury is basically pushing a lot of paper into the marketplace. i would argue from that perspective, some of the news this week could be more on the dour side by comparison to where it was last week. last week was very filled with earnings. earnings is really the most positive story right now aside from a couple of the things i highlighted earlier. >> in terms of that second quarter gdp reading, what's your expectation, and how is that going to impact what you do this week? >> so we are very focused on third and fourth quarter and some of the more forward numbers than the second quarter one. the number i've been hearing is somewhere around 1.5 down still.
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if it surprises to the up side on that, i'll be pleasantly surprised. there is a little possibility of that. i think the 1.5 is a pretty accurate believe in for this current quarter. as we said earlier, our general outlook is that we're going to see positive surprises as you move into the third, fourth quarter and first and second quarters of this next year due to the stimulus being ramped up and the monetary stimulus having its true lagged effect. that's going to be good for the markets on the whole still coming from low valuation. we are optimistic on this point. >> this is christine. how are you positioning yourself in the marketplace to position yourself as an upward surprise? >> sure. last year, we were very defensive in nature. over consumer staples and health care. this year, we shifted very different from.
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buying in the basic materials space and industrials space and technology as well as consumer discreti discretionary. basically a lot of the companies got down to really absurd levels of valuations. six, seven, eight times normalized earnings, which is a huge opportunity for a long-term investor and has been working pretty well near term for us so far. >> absurd levels of valuation. does this mean we're going to see a new realm of m&a activity giving any more activity to the up side? >> a lot of companies are actually in pretty decent shape balance sheet wise. i think a lot of the m&a activity starts coming when you hit the absurd levels. we saw financially strong companies doing a lot of m&a last year around the turn of the year. we think that will probably continue for sometime given the
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level of valuations that are out there. it will be the continued story of the strong buying what they want of the weak. as the economy recovers and things become more likely that the weaker companies will be able to make it, i would expect that m&a activity to back off a little bit at that point in time. >> all right, jason. thank you so much for joining us on this monday morning early. jason pride, the director of research at haverford. the futures have been fairly flat. we're seeing the s&p and nasdaq moving up. thanks for watching us. i'm bertha coombs in the u.s. >> i'm steve sedgwick in europe. >> i'm christine tan. thanks for your company here on "worldwide exchange."
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