tv Worldwide Exchange CNBC August 19, 2009 4:00am-6:00am EDT
breaking news, as well, with what's going on in the euro zone. euro zone is a current account deficit at 5.3 billion euro in june is which is a big bump up from what we saw in may. chloe, how is it looking in asia? >> you know, we're seeing a sea of red right across the board. the markets did have a lot more resilience earlier on in the morning. but as you can see, a lot of investors keeping their eyes focused on what comes out of the shanghai composite. the hang seng down 1.7%, as well. a lot of investors there apparently having jitters that the regulators aren't going to step in to pump up the markets again. certainly a lot of losses today. let's move on to what's happening in the energy complex
with nymex light sweet crude. of course, we did see that bounce up to $70 a barrel overnight on a surprise drop in inventory peps but in asia trade, it is dropping by 63 cents in europe trade, excuse me, down to $68.56. we are looking out for that all important eia data later out 10:30 a.m. new york time. in terms of brent crude, keeping a tad above just above at $71 a barrel. of course, inventory expectations, crude expected at 1.5 million barrels. that's certainly a call by dow jones average and gasoline distillates to fall by 800,000 barrels and in terms of distillates 50,000 barrels plus. let's take a look at futures in the united states with bertha. good morning. good morning, chloe. this week, it's a seesaw ride down on monday, up on tuesday,
futures are pointing to a lower start at least right now. dow futures are down about 70 points or so below fair value. we don't have any data today so it will be very interesting. warren buffett had an op-ed opinion piece in the "new york times" saying that the u.s. continues to need that stimulus, do everything that's important right now, but they have to keep an eye on the future, he says. estimate ewe husband and the net debt of the country is growing at 1 percentage point per month and that's something to worry about long-term. we'll talk more about that in a moment. taking a look at bond, the 10-year bund at this point trading down right now. the yield is lower at 3.27% ahead of the boe minutes which which are due out in the next hour. and also we've got the ten-year note here down to 3.45% having
rallied at this point yesterday. taking a look at gold with a bit of dollar strength this morning, we are seeing a bit of gold weakness just a skosh, off 0.4% down about $3.85. joining us now is ivan mamale and simon grose-hodge in lichtenstein. simon, i want to start with you. in your notes, you say essentially the data that everyone has been pinning their recovery hopes on is starting to plateau. i'm wondering if you see the markets kind of in that same sort of stall pattern heading here into the fall. >> yeah, probably at best in a stalled pattern. we do think the markets got a little bit overextended. we have had some good news out of earnings, but if you look at yesterday's earnings, again, it was very much a case of coming
through on the cost cutting side rather than on the revenue side and that's not really a sustainable part. so there are some concerns with that as we look ahead to the next six to nine months. we have improved from extremely low levels, but now those improvements seem to be getting less and less. we've always had very serious concerns about the state of the consumer balance sheet. the housing market may be bottoming, but out doesn't show any signs of bouncing. the latest data from california showed that price are still under extreme appreciate why you because of the amount of foreclosures. so really, all of the previous recoveries we have had from a recession have been led by the consumer. and it seems that this time around, the consumer will be a notable absentee from that recovery and that's going to make us the ability to get back to those previous sorts of levels of growth a great deal harder. so for the markets to take a pause and perhaps retreat a bit, we don't think that's unthinkable at all and we have been inviting clients to be
taking some of the profits that they've made during the past few months. >> it's interesting. ivan, i'm going to put this question to you. a lot of folks have said, talking about what simon has talked about, that the fundamentals of this market has not been so great. and yet the leadership, if you look back at the march lows, have been the companies that haven't necessarily been making the money. financials have done incredibly well. people have been very speculative in this market. if you look at the fundamentals, you've been left behind. is there a chance that that might continue here, ivan? >> i think that if we look at what happens in the last few months, we have a strong rally. we should see some sort of console daegz in the coming weeks and with some profit taking in the market. and basically, if you look at valuation, valuations are very
low and we now look at low, neutral valuation. and we now need some more catalyst for equity markets to continue to grow. so that's one of the reasons why i think equity markets are going to probably stabilize in the coming week or even for in the coming weeks. >> now, if i can jump into the conversation here, simon, you are expecting a pullback, but you think the pullback will be a bit deeper than what many think and you think this will take place in a lot of the emerging markets. which ones? >> the emerging markets have led the rally on the upside this year. if you look at the china market, we've almost doubled. so the fact that it's off some 15 or so percent, it -- think that this year in particular, a lot of the new money has been flowing into those emerging
markets. people who had by big losses last year, if they're sitting on losses, they're not going to run the risk again of allowing those profits disappear and turn into a loss, so people are going to be much quicker. they don't have the pain threshold that they used to have a couple of years ago. those markets that have seen the gains, those gains will be taken away quickly. yvan, what can you tell us about investors taking their cues from what is happening to the shanghai market? >> actually, with i think it's probably risk aversion in the market. we've seen that on many risky assets flowing out into risky assets. and that's probably normal after such strong rally we've seen over the last few months. however, if you look at some of the fundamentals are quite, quite good.
we are on recovery story for the global economy and the recession is technically over in france and germany. we should see some better earning news coming on from at least in europe and the u.s. and also probably in china and the earnings momentum would then turn up and this will be positive, but probably in one month's time, not currently as investor needs to take a breath. >> simon, let's get to the nuts and bolts, if you look, and some strategy on these issues. from what you said, gains could be taken away in the equity markets. the consumer is conspicketus by their absence. how can investors best position themselves for the rather bearish outlook which you seem to hold? >> well, we're very much in a trading market and we're probably going to stay in a trading market rather than a buy
and hold market for the next 12 to 18 months. this is very much the message that we try and get into our clients. those that got into a rally back in march and april when we were suggesting the mining and resource stocks, those have performed very well, then there's still a lot of profit there to be taken and that's never a particularly bad idea. perhaps in terms of hedging, they can look at some of the index trackers while you're able to short the market for a very short-term period rather than actually getting out of more of your core investments. but we don't necessarily think the market is going back to the march lows or worse. we just think that the markets have been on a sugar rush provided by the amount of stimulus. now, we saw the first sign from the fed that that stimulus is going to start to end with the fact they're not going to buy any more treasuries after october. and we all have to find out how the economy is going to react when that stimulus is taken away. and our view probably is that that is going to be considerably weaker than some of the expectations that we've had.
so it's just the fact that after these types of gains, it's a good idea to put percentaging on to try to benefit from these short-term corrections and trade the market rather than sit there and watch a bumpy ride. >> and yvan, a trading market says simon, but if you believe that earnings are going to continue with an upward momentum, then your outlook in terms of strategy will be a bit different? >> not really. we are all talking about short-term correction and loolg at a bumpy recovery for the coming months. basically, it would seem that the equity market, first of all, the market started to believe in deflation and the deflation story for the global economy then recovered and play recovery
story and now the main question is whether this recovery will be sustained or not. and that will probably drive the equity market for the foreseeable future. and that's where probably the risk is. >> thanks for your thoughts, gentlemen. yvan mamalet and simon grose-hodge. moving on with some of the stories we're watching for you today, the u.s. has confirmed it's building a criminal case against more than 150 americans suspected of using ubs of evading taxes. ten more european banks are implicated in the probe. the u.s. authorities are expected to announce details of a negotiated settlement of their legal dispute a bit later today. chloe.
>> becomeky, petrochina has sealed a $41 billion keel with exxon mobil to buy australian liquified natural gas. the trade deal is the largest lb0,vñíar]x9 and comes at a time of between the two nations. ace trailan resources minister said he does not expect any political opposition to the deal. checking on shares of petrochina today listed in hong kong, if we have those, they were trading to the upside, but i guess we don't have the board at this moment. there we go. the shanghai listing, as you can see, pretty much ae raising all of their earlier losses in hong kong. down about 2.3%. bertha. >> thanks very much, chloe. warren buffett says the u.s. is out of the emergency room and in
a low path to recovery. in today's "new york times," mr. buffett says the u.s. will have to deal with huge doses of monetary medicine being administered. he says the net debt is climbing to 56% of gdp. buffett says our immediate problem is to get our country back on its feet and flourishing. whatever it takes still makes sense. and u.s. regulators reportedly put direct pressure on citigroup to replace cfo ned kelly weeks before his surprise departure in july. citi signed an agreement with the fed office of the controller of the currency and fdic in june saying it would consider whether to replace kelly before october. kelly re-signed after hearing of that agreement, prompting citi to release him.
the u.s. government owns some 34% of citigroup. frankfurt at this hour, shares are trading fractionally to the downside. if you want to know more about what's going on with banking regulation, if you missed any interviews this morning or overnight, check out what's going on at cnbc.com. one of the things you may want to check out today is jim goldman's blog on hp results. coming up on "worldwide exchange," is a correction over? what's the best way to play a sideways market? we'll have analysis on that. d
joined by ow team of reporters from around the globe. we have carolin, annette, stephane pedrazzi in paris and adam will be rounding up the asian markets as a whole, as well. let me start by telling you what's going on right here in the uk. the ftse 100 after a decent performance yet yesterday is declining again today. we're off the lows, but down by about 45 points or so. we're losing about 1% overall. let's take a look at some individual stocks that are moving. the only standout gainer on the uk markets, which is eurasian and natural resources. the shares in that company are higher by 7% at this stage. they came out with earnings this morning. we've seen a strong performance in eurasian. today is particularly strong because they beat expectations. in terms of the outlook, they say they see things improving in the markets, as well. so this basic resources stock is certainly having a very strong
performance today. they're not really doing much to pull up the sector in general because elsewhere in the basic resources sector not looking quite so convincing. still, we have a couple other stocks i want to mention, as well. lloyd's in the banking sector. an interesting call for rbs. the analysts for rbs increasing their stake on the shares of lloyd's banking group. they're bumping up their price targets, as well, to 150 p per share. they said 60 p was the price target there. the companies is a compelling restructuring opportunity, as they call it. we're down by 1.5%. banking stocks are taking a hit today. overall, markets are looking pretty weak on the uk at the moment. let's get out now to zurich and speak to carolin who is following is swiss mblth for us. >> thank you, becky. we are trading lower on the smi, down 0.5%. the biggest gainer is the
biotech company up by around 2% and that's after analysts at bank of america and merrill lynch upgraded that stock to overweight from underweight and increased the company's price starting. we are watching ubs. that stock is lower, in line with the rest of the financials here in zurich. we are expecting the deal with the u.s. to be signed in washington later on today. that's when we may get some more details out on the settlement and sales including how many client names will be handed over to the u.s. authorities. there's a possibility of when the swiss government will sell its stake in ubs. ubs authorities have said they're preparing criminal investigations into 150 ubs clients in the u.s. and the wall street journal is reporting that up to 10 swiss and european banks among them. chris swiss and julius bear were identified in the ubs tax probe. that's after ubs clients in the u.s. have come forward and disclosed their ubs accounts,
also other foreign accounts and they have said that they're with either credit suisse or other banks. but that doesn't necessarily mean that those banks will be involved in the tax evasion practices. that's it from here. now let's go to stephane in paris. >> in paris, that's a negative session for the french market. eads is trading lower, despite a report saying that military aircraft will do its first flight test by the end of the year since the problem with software regulating tension has been sorted out. that's a report which has not been confirmed yet by the company. but it could be good news for eads which is due to renegotiate a contract with its client by tend of october of this year. in focus of air france klm announcing that it will not make a bid for the airline. they have decided to withdraw
from the privatization industry. that leaves the checz airline with one bidder. the company has announced a net loss of $426 million euro and the company doesn't want to spend more cash. also in focus today, the top gainer on the french market today despite the announcement from the u.s. that it will review the patent of the plavix drug buster. let's have a look at the german market with annette in frankfurt. >> the dax is down by more than 1%, one of the worst markets today here in europe. 1.3% is the price development for the benchmark index. well, the main drag on the index development is volkswagen, again, down by almost 3%. we have it down by roughly 2.6% now. and traders here are saying that
the volkswagen shares are more and more moving towards the direction. analysts are predictioning it to be fairly valued. as we all know, volkswagen is overvalued right now due to the whole speculation with porsche. and we have news, as well, that hedge funds are increasingly going short. volkswagen shares, this time, it should be good, bad, we remember last october when the short sellers had huge problems because of the volkswagen share development. other than that, we are seeing drugmakers quite friendly. these are the only shares which are trading in positive territory, frezinos medical care and it's a buyer's stock which just now dropped into negative territory. from the economy, we have heard -- we have news from the producer prices and they are down in july by more than 1.5% on a month on month basis, but
economists are saying there is no deflationary pressure. now we are heading to singapore. >> thank you very much, annette. we had a rather ugly trading session in the afternoon here. take a look at the shanghai composite, the epicenter of today's market sell-off here. thin decks dropping by as much as 5% of the low point of the day, down by the end of the day cracking a two-month low. according to the analysts, they say the reason for the decline in the market, they said basically investors are rather upset that the regulator over in china haven't taken any concrete measures to support this market. remember, we've seen this market fall up about 20% in the last two weeks. now, when we started to see this fall off in the shanghai composite, basically everybody was bailing out of risky trades. we saw base metal prices drop in
asian trade. all the resources stocks in china were quite a bit lower here despite the deal with petrochina and australia is worth about 41 billion, chloe, massive deal. we still have that um billickal cord with the china markets. >> china seems to be the focus. everybody keep their eyes on the shanghai market. thank you very much, adam. still much more to come here on "worldwide exchange." governments around the world are expected to pump as much as $100 billion of stimulus spending into infrastructure projects. so is it time to dive into utility stocks? >> plus, to expand or not to expand. the bank of england's decision to pump another $80 billion into the economy comes under fire.
>> we are going to take a close look at what's going on in the u.s. because we just had the bank of england minutes out. the mpc voted 6 to 3 to raise kwaunlt tafb easing by 50 billion pounds in august. king, berkeley and miles all wanted a bigger hike. also, they did agree on keeping rates at 0.5% on the need for what they quote as substantial service asset purchases. the inflation report suggested that 50 billion pound qe increase and that lower market rate pass needed. they did think about, at least, arguments for bigger increase in the qu program and a more moderate expansion, too. but they say one of the arguments for a big qe rise included danger of doing too
little more than doing too much. let's get some comments on this before we move on. they were unanimous, by the way, in deciding to keep the rates unchanged and the split came in how much qe to add. michael taylor is with us, senior economist at lombard street research. unanimity in the rate decision, but a bit of a split as far as whether to do this much qe or whether to do more. is this a surprise to you? does ta indicate we should have further qe down the line? i think it will be a surprise to the markets, yes. so far, they have been fairly unanimous in the degree of interest rate cuts and the scale of quantitative easing. i think the clear implication is that we are likely to get a further expansion of quantitative easing later on this year. and i think that is the right
policy. at the risk of doing too little, slipping into deflation and all the problems that could generate are more than doing too much. dealing with inflation is a difficult thing. i think that's the right bias to have is the bias to do more. >> and they do say that. the harm from doing too little is worse than if doing too much. let's take a look at a couple of the other comments here. the bank of england saying public confidence could be damaged and the recovery itself could falter if confidence does weaken, though down side risks to the economy have receded, as they put it. do you think there's been any update in the bank of england assessment of the risk -- the down side risk that still remains or are you fairly confident now that we are beyond the worst of it? >> yeah.
i think that the clear implication now is that q2 will be the low point of this recession. there is a good chance we think there will be growth in the second half of this year. and i can that is increasingly guaranteed almost, if you like. i think at the moment, king outlined the inflation press conference last week that the issue is very where do we go from there? what's next year going to look like? they outlined the down side risk to the economy from consumers repaying debt, from the continued weakness in the global economy. there are significant downside risks to the economy in 2010 and i think that is where the issue lies rather than in the second half of this year where he think we will partly because of the rebound in stocks, we will see some positive economic growth in the second half of this year. >> michael, do stay with us. we're going to take a quick check on what's going on in the markets generally. this has been an impact on the
mpc minutes. ftse cnbc global 300 index, stet steady and down by 0.5%. moving on to what's going on in individual european markets, the ftse 100 at this stage is down by 0.9% while we see similar kind of levels of the cac down by almost % there. the smi is holding up relatively well, down by 0.75%. it's still the dax suffering the most today with declines of over 1%. in terms of the forex markets, it's particularly interesting to see what's going on with sterling. we have seen a decline in sterling as we have the mpc minutes a few minutes ago. sterling down by 0.9% at this stage. dollar/yen, 94.32. euro/dollar, 1.4096. euro/sterling, reaching a day high, as well. obviously an impact on that in the minutes, too. u.s., sterling, 0.8592.
chloe, how is it looking in asia? >> lots of investors taking their cues from what came out of the moerchlts of the shanghai composite. the final score is not looking pretty at all. off 4.3% on the shanghai composite. not stepping in to prop up the markets. there is something else. we were talking about bank earnings. with bocom, that would be bank of communications kicking off the earnings season in china. numbers, up about 15.5 billion yuan, pretty much in line with the forecast. tomorrow wealth the big one, icbc, the world's largest lender. the growing concern is that they had the record pace of lending in the first half but that their net interest margins were under a lot of pressure. that's a look at the market asian action. let me toss it over to bertha. >> thanks, chloe. we're taking our cue from asia
this morning, as well. futures are pointing to a lower start. we don't have any data today to speak of the oil inventories. those are out at 10:30 a.m. the oil markets are likely to be down because of the strong dollar. taking a look at the ten-year note here, we've got the ten-year yield back below 3.5%. we're at 3.44%. a lot of the economists are probably headed out west with. the fed is headed to the kc fed conference. ben bernanke is going to talk about that and talk with them in jackson hill, wyoming, on friday. warren buffett, meantime, is worried about the u.s. economy. he says it's out of the emergency room and on the slow path to recovery. but writing in today's "new york times," buffett says the u.s. is going to have to deal with the side effects of huge doses of monetary medicine being administers. he says the country's net debt is mushrooming at a rate of about 1% per month.
buffett says our immediate problem is to get our country bas back on its feet and flushishing. whatever it takes, but it must keep growth in line with resources. let's bring back in michael taylor from lombard street research. we have the boe coming out and saying they were worried about doing too little at this point rather than too much in terms of economic stimulus. warren buffett seems to be in that camp. he talks about the butterfly effect. that's a butterfly flapping its wings has a bigger effect than one can imagine and he says the greenback effect here may be bigger than one can imagine with all of this stimulus. where do you see the danger coming in with all of this activity that's going on in central banks? >> well, clearly, it's an unprecedented amount of liquidity and monetary injections going on into the global economy.
i do think the concerns about inflation are misplaced. the issue is, when we see this monetary stimulus work in the sense that the economy is not picking up, more than japan and germany, for example, it's very important that the u.s. and other anglo-saxon economies with high debt levels respond to this monetary easing, the appropriate withdrawal of the massive amounts of liquidity that i think the markets will be looking for so that there is no rising expectation inflation, no fears about what central bank's commitment to ability, that's the longer term issue. but i think in the near term, i think it set out clearly today that the incentives very much lie on the risk of doing too much rather than doing too little. doing too little could present great dangers to the global economy.
those are problems that central banks know how to deal with much more than inflation. >> as far as the markets, it seems as though there's so much risk appetite out there, you know, as we've seen with the run up in china now, china starting to move back. are these markets getting ahead of themselves? because you are very concerned that things will start to fall off in 2010. >> yes. i think the markets are priced against the sort of depression scenario that they were discounting earlier on this year. i think perhaps they did get a little bit ahead of themselves in terms of pricing in a strong, sustained recovery. i think that the gdp data we've had so far in the second quarter is very interesting in that japan, germany, etcetera, they've all grown, but they've grown on the back of higher ex ports and that means other economies have having higher imports and less ex ports.
overall, the global economy remains very fragile and it's very much dependent on the u.s., the uk, the private sector, paying down its debt, rebuilding its balance sheets and getting into a position where it can increase consumer spending in particular, rather than the asian economies which although they have some domestic demand, they don't have their own drivers of domestic demand, if you like. until we have that position whereby the u.s. and the uk and other anglo-saxon economies are growing of their own volition, then i do think it would be wrong for markets to price in a strong sustained recovery. i think the there is a risk in 2010 that the growth begins to fade away again especially as these fiscal packages are withdrawn throughout the global economy. >> good morning, michael. this is chloe in asia.
given that there are plenty of people questioning whether the stimulus effects are wearing off, also the u.s. area is plateauing, what is it going to take for companies to improve on their top line numbers? how many quarters? >> well, potentially, it should be relatively quick, two or three quarters. if china is indooel deed boosting its demand in the way that so far we've been able to suggest that it is. and you are seeing, for example, the japan and korea, their ex ports to china have boomed in recent months. and you would expect that to gibb to feed through in at least top line sales for the corporate sector in the next coming months. of course, whether or not it results in better profits and margins is another matter entirely. a lot of that will depend on currency movements and commodity prices wherefore some economies
that's not been so encouraging. >> we'll have to leave it there. thank you very much for your thoughts there, michael taylor, senior economist at lombard street research. let's head over live to mumbai with ayesha iffaridi for a chec on the india business report. >> following it up from asia, down by 50 points for the nifty right now. almost over 1%, though it's recovered from the low point of the day. we were staring down by about a 2%. you are seeing heavyweight selling, beat up markets are selling off and you are seeing institutional selling coming in. so reliance industries or in gc, both of these counters are giving off a lot by way of momentum. you have counters from the entire real estate space like unitech and glenn mark
pharmaceuticals, that is one count which is in focus and trade today. here is perhaps the reason why. forest labs currently says they did not show positive results in the phase 2b trials pop so any jerk reaction coming in on opening bell. the counter was down about 18 odd percent. still continues to suffer, down about 14% on last count. some bit of recovery in ranbaxy, idn and a couple of other counters which have which has sold off a bit in the last week or so. with that, it's back to you. >> ayesha faridi, thank you very much. and it's back to becky now. >> the world is focusing on the economic downturn, fo forcing another global crisis to take the back seat. water scarcity is fast becoming an issue both to environmentalists and to
investors. our next guest tracks water equipment and infrastructure enterprises. steve golden is head of strategy and custom indices for standard & poors index services. let's get straight to it. the s&p global water index, i know from looking at the figures is outperformed the markets in general. certainly just looking at the year-to-date figures, adding, what was 10% or so which would indicate that water and water-related investments are a pretty good bet. why is that? >> well, water is a unique commodity. there's no substitute. it pervades every level of society from cities, to finances, xherz, to economic stability to you and i getting fresh drink.ing water every day and it's scarce. i think one-third of the world's population lives in water stressed areas. and that's due to rise. if we put a dollar figure on, if
we look at the amount of investment needed to bring the aged infrastructure up to speed, i think in the u.s., to bring everything up to speed in terms of transport and water and infrastructure and everything else is something like $2 trillion. >> steve, they've developed this new technology called new water cells at nu. could they be sitting on a potential gold mine here? >> well, in terms of major trends, one of the major trends is obviously infrastructure and i think it's something like less than 1% of the water available on the planet is fit for human consumption. that takes into account things that are locked up in the polar ice caps. so a huge amount of water is sitting in the sea. so that is a big opportunity. that's one of many.
>> as far as investors, what's leading the index higher and in what areas are they finding the most spending in infrastructure? i have to imagine that china is a big play here. >> yes. if you look at the representation in the index itself, you're talking about 50 of the leading global companies across domestic developed markets as well as emerging markets. so you have the opportunities in brazil, they're in china, but if you look at representation in the index, you're seeing 70% of that representation is actually developed market representation. >> very interesting. steve, thank you very much for joining us. steve goldman, head of strategy for emea at standard & poors
welcome back. halfway through our emerging markets week, we turn our focus to latin america. today we're joined by the senior political analyst at nomura. first of all, we've got plenty of elections coming up in a handful of the latin america companies. judging from what's happening in honduras, which one us would you say is a success story or stories at least in latin america? >> the big success is brazil and we're still over a year away from the brazilian presidential elections. close to the net, we've got the chilean elections coming up. chi chile has come far. we can see a right center government coming in despite the fact that the present president remains popular. more widely, columbia coming up in the new year, will seek a
constitution to seek a third team. uraguay, less than that. a lot of focus on venezuela, a lot of focus on mexico, as well, if you want to include that in latin america for this discussion. big question in mexico, remittances, of course. >> alistair, one of the big questions one has to ask is the commodities boom that certainly influences countries like venezuela and brazil have their forchs turned since we've seen particularly the oil market come back, although brazil, of course, has that huge find that they have right now. >> well, it's certainly the case earlier in the year latin america got caught up in general market sentiment and that was clearly related to commodities. i think we have seen some recovery in latin american sentiment since then. first of all, the gloss, with as you've been saying earlier on
today in this program, has come off emerging market stocks globally right now. that stands to have an impact on latin america. nomura went underweight for global emerging markets about five weeks ago, having been overweight for the first half of the year. secondly, there is a very good piece of research published by the oecd last year correlates a very close correlation between politics in latin america and market sentiment in particular as far as the bond market is concerned. so watch out for that as these elections come up. they tend to generate market uncertainty. >> allan, within that, looking at latin america and mexico, are there any particular markets which you still rate more highly than that which have come out a bit better than the others? >> well, obviously, our strategists are taking an overall view of the global. from our personal perspective, i still see a lot of positives in
brazil. as we were saying a moment ago, necessary net ex ports are food and we have to look at average global food commodity prices at the moment. sound macroeconomic policies we've seen. the big question for me with brazil is are we going to see a repeat in 2001, 2002, a year before the presidential election when markets started to focus on the fact when cardosa was going. from october 2001, we saw a big dip, both in stock markets and in the real, which went through until about march, april 2002. so still five months before presidential elections. we maifrz a repeat of that this year. it's still not clear who is going to succeed lula. but overall, i think brazil is a positive story and investors will continue to look at it as such. pri did very well in the parliamentary elections a few weeks ago. it remains to be seen whether
the pri will be more cooperative than they were when this happened six year ago. >> thanks very much for that. >> good luck. >> still ahead, alistair eaton, senior political analyst at nomura. quick check on the currency markets right now, looking particularly close at sterling, in fact, at the moment because we had those bank of england minutes a few moments ago. down by 1% at this stage. as we can see, it's taken a bit of a move since those boe minutes came out. let's speak to our guest. we will talk about elsewhere from the uk in a second, but why don't we just focus on that. we heard from the bank of england today. we heard from the inflation numbers yesterday. let's try a bit of an impact on
sterling. what happens next, do you think, for the uk currency? i think really we tend to argue and get away with it. so i think they've sort of pulled the rug out of yesterday's sterling buyers. our overall view is that sterling is undervalued on a long-term basis. so we'll be looking for levels down to be buying. you know, euro/sterling, anything over 1.75 is a little bit too high. so yeah, i think this will be an opportunity. i think the market is short. i think euro/sterling will bounce a bit more. anything above 86 is longer term. >> paul, based on last week's cpi and ppi numbers, it didn't seem like inflation would come on any time soon. do you think any waste inflation
could be on the table at that fed retreat? >> i wouldn't have thought so. i think everyone is getting carried away from the gdp numbers recently. it's not one, it's probably not two. i think we'll have to be patient, sit back and see how things go. i think really, we've just got to get the economy going up more, get the green shoots higher. so no, i don't think inflation really is the main problem. >> paul, what about risk appetite? if these markets start to pull back, what's the prospect for the dollar? it seems as things have gotten riskier, the dollar has gotten weaker. >> we've got a situation going on for quite a long time now where wherever the risk appetite has come down, we've seen euro/dollar go down. it didn't used to happen in the '90s and the early part of 2000. so i think basically, if we see
risk appetite shrinking again, euro/dollar will go down. i think people are long the dollar for that reason. but there's a chance that we might still get that positive dollar and positive ebb equity correlation. it's going to take a while to get in. you know, we're still looking for basically the market is short of dollar to buy some. we don't think dollar/yen has a lot of shelf life below 100. i think the fundamental necessary japan are looking horrible. at the moment, we are looking fairly positive on the dollar. >> all right. thank you very much, paul, thanks for joining us, currency strategist at 4cast. we have much more to come in our next hour. markets pulled back from a shallow sell-off.0c that's hard to say. so is this a pause in momentum or is the summer rally start to go fade out here? we'll have analysis right on the other side of the break.
but we'll still have to deal with the side effects of massive economic stimulus. >> if you're just joining us in the united states, welcome to the start of your global day with "worldwide exchange." we broadcast live from the u.s., asia and europe. u.s. futures are pointing to a bit of a lower start here. we've got dow futures right now just over 60 and change flow fair value. hs last night came in with earnings just above expectations but sales were kind of weak and the margins were weak, as want. so that could well hang on to the market today. as far as economic data, it is a day without data. how often does that happen? maybe because a lot of economists and fed heads are headed out west to the fed's retreat in jackson hole,
welcome. that highlight will be ben bernanke on friday. folks may be traveling there. we've got the ten-year bund. the yield is down to 2.7% on the back of boe minutes. becky will have more on that in just a second. we've got the ten-year yield down here to 3.45%. becky, as equities are pulling back, we're seeing a little bit of caution here. >> and equities are continuing to pull back globally, to be honest. let's check the bourses. declines of about 1.25% for the dax across in germany. the ftse 100 down in germany about 0.75%. 0.8% for the cac. it looks like a negative picture right across europe, in fact. moving on, let's take a look at what's going on in the for ex markets, as well. we are looking at declines for sterling against the dollar after the boe minutes from earlier on which shows that the members of the mpc, the monetary policy committee were united on
their decision to keep rates very low. but a bit divided on quantitative easing. king himself wanted to increase quantitative easing a bit more. euro slrl dosh, 1.4100. 9 h 94.29 for dollar/yen. >> a lot of resilience. it was really the focus, again, on what's coming out of these shanghai market and what happened there was a pretty steep sell-off, as you can see. off 4.3%. within the past three weeks or so, that market has lost nearly 30%. so that's the kind of jitters that you're seeing. today the theme was the regulators may not prop up to help the market. we heard from bocom. in line with expectation webs but the big one tomorrow will be
icbc, the world's biggest lender. moving on, we are looking out for that eia data, nymex light sweet crude backing away from that $70 per level at this moment off about 12 cents, $69.07. let's take a quick check on brent, higher, but off about 50 cents, $71.92. and it's over to bertha now. >> we both have names begin, b and i'll take it from here. mark oswald is with us from monument securities. mark, thanks for coming you say with us. the markets, let's start with markets. we overall are still looking at the recovery picture when it comes to equity markets. but this week has been interesting. we had a sell yau at the beginning of the week very much led by the shanghai composite. today it looks like we're seeing something similar again with the shanghai composite taking a turn
for the worst. and european markets, certainly following them lower. what should we take away from those moves? >> i wouldn't want to overinterpret them. underlying follows throughout the year have not been fantastic and the fact that a lot of the rally has been speculative in nature will always be much more speculative than long-term investors. so it's not a surprise that this particular moment in time with doubts about the chinese growth stories emerging that everything should suddenly start to perhaps get a bit of vertigo at current levels and that the market should be so volatile because underlying volumes are very weak. so i wouldn't want to get overexcited. i think it is a reality check. when we look at the german and french gdp numbers last week, there was a bit too much overexcitement and not enough in appreciation of the long-term trend, which essentially is --
that was a pick up from a precipitous fall. now if we're going to have a real recovery, we want to see two or three quarters of that growth before we can feel comfortable that we've got contraction. >> mark, are you feeling that basically you're saying this rally has been speculative, you're questioning a real recovery. do you think we're not going to see a real sustained recovery? >> not in terms of looking at something, saying, in the usa where we're looking at, say, 3%, 4% growth or in western europe where a much weaker performance, but something in the sort of 1.5% range i think we're still a long, long way away from that. so yes, i think really we've got a lot mover pain to endure. >> if pain is what we have to endure, mark, this is chloe and
given that the equity markets are very much focused on how the shanghai composite is behaving and if the regulators don't step in, then are we all on the way down and if so, by how much? >> saying how much is very difficult to say, because it really boils down to how much speculative money and how much money which is effectively borrowed money from governments is actually in the market at the moment. and whether fears about the strength of the recovery then translates into something perhaps a little more deep, which would be resurgentsy is about the health of the financial sector. and it really depends how that plays out. making a prediction on it, given what i would call a very labile fluctuating market sentiment, in other words, people really don't stick to their opinions for more than about five minutes, which is typical of a speculative rally. it's difficult to see at what point you get a clearer picture
emerging which sparks a more definitive market direction. at the moment, i think all we've got primarily is the sideways turn with a considerable amount of volatility. >> sounds like teenage puppy love. mark, you're going to stay with us through the hour, i'm glad. mark ostwald will continue with us. we've got much more to come during the hour. we're going to get details on swiss bank ubs. plus, the answer to the recession may have taken the heat from the biofield debate, but the issue still hasn't gone away. we'll be talking to the ceo of novazime after the break to find out where his company stands. businesses more efficiently, so we've brought in a team of experts to help. one suggestion is to make your shipping more efficient with priority mail flat rate boxes from the postal service.
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hello and welcome back to "worldwide exchange." having a little problem with my prompter here. the crisis in the global recession halted the global debate over biofuel peps but pressure remains on country toes curb greenhouse gas emissions, making it clear that the issues haven't gone away. biofuels are considered a
renewable and more friendly source of energy. but the economic downturn has made it harder for firms to receive financing. novazimes ames to be the first company to develop cellulosic ethanol. the ceo will be joining us in just a second. we seem to be having a bit of a gremlin problem. becky, let's bring in mark. >> yeah. i was going to say, why don't you come back to me. before we get to the ceo, let's bring in mark ostwald. we mentioned a little bit earlier on. i have just managed to unplug myself, but i'll plug myself back in while i ask you another question. maybe we can talk for a second about emerging markets because this is an issue that we've been covering all week with particular focus here on cnbc.
there's been quite a bit of discussion today on the show about latin america in particular and the way that it seems to be turning into a bit of a two-speed picture as far as the markets are concerned. that's what we're seeing here in europe, too. germany in particular favorites among the latin american markets. >> i certainly wouldn't be opposing anybody who likes brazil. i think fundamentally brazil has a good picture. it plugs well into the global economic picture and has a lot of things the world will want, particularly a world which is perhaps less focused on finance and more focused on basic materials. then i supposed one looks beyond that as much the same sort of story. and i supposed one people neglect a lot of time is argentina. yes, there are well known problems there in respect is more inflation in argentina than most of the rest of the
continental. but fundamentally, it has much of the same back drop as brazil and chile. mexico i have my doubts about. >> mexico was going be my next question. guests we have had on this morning pointed out that mexico had problems with the swine flu. also, in fact, guests this morning telling us that they believe one of the mexico's biggest problems is that they're neighbors with the u.s. and he heavily dependent on the u.s. are they going to be in a position to get over that relationship and be able to stand up in their own right? >> i suppose the proper comparison with this is with canada because canada is the other party within nafta and canada is doing exceptionally well. it doesn't have any problems in the financial sector worth mentioning compared with anybody else and it has decoupled in terms of what -- well, decoupled
somewhat from the u.s. mexico is more problematic simply because of what it depends on. it's dependent on oil, it's dependent on the auto industry. now, it's probably not dependent on the newer things like biofuels. the auto industry in the states is obviously in huge trouble and as much as mexico is a cheap alternative in terms of production, overall demand i can't see picking up in a meaningful way to boost the mexican economy. so -- and, of course, there is a sort of inherent underlyingdy trust for particularly the south americans or the mexicans. so i would be -- they're not in my first pick. >> mark, thanks for that. mark ostwald is going to stay with us. i believe we have our next guest standing by now. >> we do. and marc mentioned biofuels and
that's a perfect segue. steve reeseguard, i believe our technical glitches are fixed. thank you so much for joining us and for your patience with us this morning. our interview god sidelined by technology, but in some ways, this whole debate about biofueles and moving forward has been sidelined by the world economic crisis. is it still moving forward? i know the u.s. has said they want to invest in alternative energy jobs, but are we seeing investment really flow there? is that stimulus money propping things up? >> at this point in time, we are not seeing a lot of investments in the biofuels area. we have the corn-based biofuel, which is doing well again after a period of consolidation. but nevertheless, we have seen that production of corn-based
fuel go up by 17% in the first six months, so it's growing still. there's plenty of capacity in the u.s. for a while pl. so for the next two years, three years, there's capacity enough for continued growth. the really exciting thing, of course, is the advance in biofuels. and with those, we are ready next year so that it will be possible from next year to deploy that technology. and there, of course, the opportunity is to reuse agricultural waste for further production of advanced biofuels. >> steen, thank you so much for joining us. i guess the debate in terms of where you're going to source it is also that you would be taking up about 8% of global corn production. what do you -- do you think that's going to create
speculative trading and jack up food prices even more? >> well, i think the -- for the corn base, the increase is the yield that people tend to forget. if you look at the yield curve in the u.s., it has gone up markedly. so most of the increase will be kind of compensated by increased yield of corn. but if you go to the advanced biofuels, then, of course, we will not use food at all. we will just use the corncobs and the cornstalks. deployment next year, research base is over and we are ready for deployment of that technology as of next year. >> it's becky in london here. if i can draw you away from the specifics of your own business and just ask you, as the ceo of a major business, what your impression is of the current
economic environment in which you're operating, plenty of ceos in this business particularly are starting to give us the impression that we may have turned the corner as far as the global economy is concerned. what is your taig take? >> well, first of all, we are doing okay with -- we will grow this year. we will come out with an even better margin and the return on investment capital, around 20% both. so we are in an okay situation. we begin to see sales picking up in china, in latin america. europe has not really been so badly affected. we are waiting for the turn around in the united states. >> steen riisgaard, thank you so much for that from novozynes. let's move on and tell you
what's going on with the bank of england minutes today. sterling has been hit this morning. there was a disagreement within its monetary policy on the extent to which it should extend its quantitative easing program. most members wanted to raise it, but in fact, some members wanted to increase it by even more. chloe. >> thank you very much. still much more to come here on "worldwide exchange." we're going to head out to zurich to get the latest on the ubs story. now, the u.s. announces it's building tax evasion cases against 150 americans. also, of course, we would love to hear from you. tell us what you think about the future of the ubs bank. these days, when you have to spend, shopping online can help save. doing it with bank of america can help save a lot more. up to 20% cash back from over 300 online retailers with our add it up program.
welcome back to "worldwide exchange." time to check in with our global equity markets. annette will be speaking to us from germany, stephane is in france and switzerland will be covered by carolin and for the asian markets, we've got add many to rely on for those. first of all, the ftse cnbc 100 is down by 0.8%. we are still down by about 38 points or so. a few things to note about the day so far, we've had the bank
of england minutes for a start. indicating that the bank of england's monetary policy will be somewhat divided about the extent to which they should include 3e. also note individual stocks that are on the move, on the upside, eurasian natural resources is the only standout gainer on the uk markets today. that company reported earnings earlier on and managed the beat all the major metrics. their outlook didn't look too bad, either. they say markets improving, so that helped to add a bit of optimism, too. fresnillo is lagging behind eurasian natural resources, but it is on the positive. let me show you what's going on to the downside where you can see some significant movements lower, down by almost 5% shyer for scottish & southern.
i want to mention lloyd's. the stock, lloyd's banking group, is a bit lower today, but rbs increased their rating on that stock to a buy saying it's a compelling restructuring activity and it's moved higher, but now, adding about 0.3%. let's get out to annette now who is standing by in frankfurt. >> the dax is lower by more than %. 1.2% is the dax is declining right now. the main drag on the index development is volkswagen. volkswagen is down by almost 4% and if you have a look at the volkswagen share development since the beginning of august, it lost almost 30%. and so it is more or less going into the direction analysts have seen the fair value of the volkswagen shares and will is no reason of any share price increase any more.
traders here are saying with the volkswagen deal progressing, the air is getting cleaner for volkswagen shares. now to paris, stephane. >> in paris, the market is still down with eads off %. the company has not confirmed a report from a newspaper saying that the first flight for the military aircraft a-400n will take place in october. it's due to renegotiate a contract with its client for that aircraft by the end of october. also trading lower, air france klm this morning. the airline announced that i will tell would not make a bit for checz airline. the airline decided to withdrawal because of the downturn in the airport industry. the stock is down 1%. surprisingly, the stock is the best performer on the cac 40
despite the u.s. reviewing plavix. now let's have a look at the swiss stock market with carolin. >> thanks, stephane. very view gainers here. up by 1.7% or so after an upgrade from bank of america and merrill lynch. apart from that, of course, we are still watching ubs. that stock is lower by about 1.7%. but really, in line with the rest of the financials here in zurich. we are expecting the tax bill to be signed in the u.s. later on today. we may get more details especially on that settlement especially on how many client names will be handed over to u.s. authorities and when the swiss government will exit the stakes in that country. while the u.s. has said they're preparing criminal investigations into 1r50 clients in the u.s. and the wall street journal is reporting that 10 swiss and european banks have been identified in the ubs tax
probe. that doesn't necessarily mean that they were involved in the tax evasion practices. now to adam in singapore. >> thank you very much, carolin. as we saw the shanghai composite plummet in the afternoon trading session, it took the rest of the asian markets with it into losses across the board here. take a look at the session in north asia. we didn't touch what in the first hour of "worldwide exchange." the nikkei 225 closing do down 0.8%. the topix closing down by 0.7% and kospi closing down in inti 0.3%. we saw fairly weak picture across the board from some of the top names within that space. as the risk aversion hit in the industry, it didn't affect the auto stocks. one of the reasons was -- in fact, we saw gains in that area resilient. this is after know moisturup was upgraded from bullish to neut l
neutral. we could see, of course, bullish time for the automakers in japan. but that remain toes be seen. back to the u.s. with bertha. good morning. >> good morning, adam. we have no economic data to speak of today. we will get inventory nebs at 10:30 as far as energy. earnings continue, as well, mostly from retailers today. bj's wholesale club and deere will be after the close. we're going to hear from hot topic, petsmart, and victoria's secret. the secretaries of xherz, homeland security and health and human services will hold a joint news conference at 11:00 a.m. new york time.
that is your global stock watch. >> coming up, our next guest thinks current momentum and market carriers for some time. how long? we'll find out after this break. i'm racing cross country in this small sidecar, but i've still got room for the internet. with my new netbook from at&t. with its built-in 3g network, it's fast and small, so it goes places other laptops can't. i'm bill kurtis, and wherever i go, i've got plenty of room for the internet. and the nation's fastest 3g network. gun it, mick. (announcer) sign up today and get a netbook for $199.99 after mail-in rebate. with built-in access to the nation's fastest 3g network. only from at&t.
it's a little more than half past the hour. here is the top business stories from around the world. in the u.s., warren buffett says the united states is on a slow path to recovery but still has to deal with the side effects of massive economic stimulus. >> and i'm becky meehan. mervin kwing wanted to pump even more money into the economy. >> and here in asia, china stocks up again, dragging the rest of the markets lower triggering fresh fears that global investors are pulling the drug on a six-month rally. >> hello and welcome to "worldwide exchange." if you're just joining us here in the u.s., u.s. futures are
pointing to a lower start. asian markets are lower, european markets are lower and we're following suit. right now we've got dow joins futures down about 70 and change below fair value. tech likely to be laid today on earnings from hue let paieu let yard. taking a look at the ten-year, we don't have any economic numbers to speak about today. hurricane bill has been upgraded to a category 4 story, but it's not expected to be impacting the energy producing or impact the u.s. mainland. becky. >> let's check on the european bourses. we have seen a day of weakness so far and that is continuing. about 0.9% lower for the ftse 100. 1.5% lower approximately for the dax in germany. the cac down about 1%, too.
the smi is still down abo about 0.6%. in terms of dollar rates, dollar/yen standing at 94.32. eu euro/dollar, 1.4097. we have sterling/dollar down about 1%, 1.6383 is where we stand and euro is moving higher against sterling, too, 0.8602. chloe, what is happening in a a asia? >> a lot of weakness in asia. the focus was all about what's happening in china and a couple of concerns that the regulators are not going to step in to problem up the equity scene and also number two, bank earnings get under way. we heard from bocom, pretty much in line with expectations, but interest margins will be under a lot of pressure for the first time and tomorrow is the big one, icbc. moving on to what is happening
in the energy complex, nymex light sweet crude did hit above that $70 per barrel level overnight. at this moment, it's skidding lower, $69.0. brent at this moment, off about 50 cents at $71.89. let me hand it over to bertha now. i got your name right this time. >> thanks very much, chloe. it's been a whipsaw week for the markets. let's get some analysis here as far as what's going on. still with us is mark ostwald. he has been our guest host since the top of the hour. will, i want to start with you. you know, we're seeing this whipsaw action. we seem to be following what's going on in shanghai. but it's got a lot of people wondering whether maybe this rally that we have seen this summer is really starting to peter out here and we're due for
a pullback. what do you think? >> well, it's a great question. playing out essentially from what happens in july. july was a replay of the first half. the drawn yao the first two week wag parked by a rally in earnings in q2. at this point in time, taking a look at august, i think you're seeing a battle between the real money coming in, people who thought they were under invested in the market and wanted to play the trend. a lot of valuations had become overextended. >> but what's interesting is that if you have played for value, if you have played it defensively, you have not gained in this rally since march or certainly this summer. so one would think you would want to get defensive, you want want to get more cautious here,
but you might get hurt again. >> and that is very true. the quality stocks have rallied and people who benefit the most are those who rallied in the equity markets. trying to play the trend is a very dangerous thing. what you understand is really value. we've been very defensively positioned and remain so. long u.s. equity and trying to build short positions and things. >> mark, would you like to give us any comments on your outlook? >> i think that the problem i have with the people who say the momentum will carry it is then looking at the kiss krepsys. are you worried about the fact that we have, say, dividend yields on some equities being now completely disassociated from the yield on the equivalent corporate credit, which tends to
suggest that money is tracing certain stocks and certain names vicariously, but without the underlying fundamental view really supporting it. >> at this time, as well, i would suggest that, you know, the battle is going on when august has some slight differences from the battle we saw in june and again in july. and as some of the leading indicators are starting to turn downward. for instance, you all have been talking about the shanghai market this morning. i think that's one of the things that people have been watching as a sentiment monitor as well as the battlic dry index has started to turn slightly lower. and so that might suggest shipping and economic activity is going down. most of the earnings view has been driven almost entirely by cost cutting. and the hope is that these leaner businesses will be able to provide praeting leverage for when the top line returns. but the situation is, when is top line going to recover? and so the businesses that we
think long-term will be positioned to benefit are ones positioned for secular growth in the economy, such as certain sectors of health care, services, supply and devices most specifically. they're very clean balance sheets, set to position from an aging demographic in the u.s. which we're sure is going to grow. margins are pretty clean. they're showing good cash flow. given the fact that the rally has not been led at quality are now trading is a significant premium. that's the contactics we'll be looking for. >> william, good morning. what do you do when there's so much fear and attention on what is happening to the shanghai composite, a market that is still shut out for a lot of inest havers, even with the earnings numbers that you talk about, it's still herd mentality that is driving investors.
>> you're absolutely right. but whereby goes china goes the economy of the world. people are expecting emerging markets to be the global growth engine. we have to realize any economy is going to have a degree of cyclicality to its growth. as the stimulus package has come out, the degree of loan growth in china has been tremendous. i believe the statistic i read was the first half of 2009 was basically between 2003 and 2005. that then leads you to question what kind of impact that might have on balance balance lending sheets. fxi, 47% banks. so from our perspective, we're looking at the flows. we realize long-term we are bullish on the region, but at the same time, we're probably more on the top of sentiment
than on the bottom of sentiment. we would rather wait for more favorable valuation. >> william skeean, thank you for your time and we have to say good-bye to mark ostwald. thank you very much for your time today. we are going to head live to tokyo and check in on what happens there with ken moriyasu from the nikkei. >> good evening, chloe. the yen extensionened to 94 against the dollar and shack high stocks showed weakness. still, sentiment was lifted by reports that general motors will increase capacity in north america. canyon shares benefited from an upgrade in ratings by goldman sachs. toyota will procure batteries from sanyo electric because the automaker's own battery joint venture cannot keep up with
demand. sales of environmentally friendly hybrids has been growing and now account for 10% of all new cars sold in japan. in automobile news, nissan motors said today they will team up with showa shell to develop a fast charger system for electric cars. sumitomo metal mining has taken a stake in the largest mining firm in the philippines to strengthen its operations. sumitomo metal mining will secure about 5% of asian's outstanding shares. the boj chief is scheduled to attend a symposium hosted by the federal reserve bank of kansas city. that's it for county. thank you very much, chloe. >> thank you very much there, ken moriyasu reporting from the nikkei. let me send it over to bertha. >> thanks, chloe.
welcome back to krns's "worldwide exchange." here are some of the stories that we have been watching from around the world. hewlett packard's third quarter profits fell 19% on q3 sales of weakness on pc and ink sales. hp reaffirmed its full year outlook. consumer spending on pc is improving. and corporate customers are still being tight fitted. hp shares were down about 2% after hours. margined slipped a bit, as well. so they delivered on the bottom line of a bit of cost cutling, but not enough. hewlett packard was not enough. the american people remain skeptical about president
obama's health care reform plan. the same amount believe the quality of their health care would get worse under the president's plan. more than 40% say reform will not do enough to lower costs and cover the uninsured. misconceptions are widespread. a majority believe plan will give insurance to illegal immigrants. >> the bank of england revealed disagreements in its monetary policy committee about how much to extend quantitative easing. the vote was 6 to 3. the bank of england's governor, mervyn king, was among those who wanted to increase the am to 75 billion. chloe. >> thank you very much. take a look, it is smaller, cheaper, and sony hopes it will help claw back some ground in the war in video game consoles.
it is a less bulky and more energy efficient play station 3. the reworked consold will sell for $299 in the u.s., just under 30,000 yen in japan. these lower prices take effect on august 19th for the current play station 3 models. sony shares slipped on the news off a pretty steep 3.9% in tokyo. and let me send it over to becky in london. >> thanks very much. u.s. "squawk box" follows "worldwide exchange" for viewers in europe, asia and the united states. becky quick is here to tell us what we can expect from the show. becky, what's up today? >> good morning, everybody. warren buffett says the u.s. economy is out of the emergency room. that's a quote from him. but he is warning that all the monetary medicine to save this economy could eventually do more harm than good. we're going to break down his comments with our guest host,
doug cass of sea breeze hitters. the cash for clunkers program is giving automakers a boost, but is the government dragging its heels when it comes to paying the dealers? plus the king of all car retailsers, the ceo of auto flagz give us a first hand account on how the program is impacting st entire industry right now. five years ago, going the was priced at $85. it topped $700 a share a couple of years ago and now it's right around $450. what is next for the internet phenom? is this stock still a buy? "squawk box" is coming up at the top of the hour and becky, we will see you soon. >> we certainly will. bertha, back over to you. >> thanks very much, becky. it's a becky fest today. it's a quiet day on earnings. will the markets be holding their breath?
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let's get a look at the u.s. trading day ahead. mark cook, joining us from the cme, it's kwie threat, but it's a quiet day when the comes to data, no major earnings. it seems these markets will focus on what happens in shanghai today. >> absolutely. the chinese stock market doubled and it was about time for a bullback there. and the u.s. market was looking tired and complacent at the end of july. on august 3rd, i said we're looking for a pull back to 950 on the s&p. and i thought the fed would be the catalyst. it wasn't. my number two market was the chinese market selling off. it's gone from lows from 1700 in november up nearly 3,500. so they're calling it a bear mkd now because it corrected almost 20% this morning. but it's going to be the catalyst for the s&p to test this week's lows of 975 and i still have 950 as the near term target. >> kevin, it's becky in london here.
and i know warren buffett writing an op-ed piece in today's "new york times" saying that the a & e, but that we still have to deal with the consequences of what he called the monetary medicine debt as a big issue and that will very to be dealt with in time. do you think buffett is right to focus on that? are the markets worried about the knock on effect? >> no, the markets are not worried about that now, but you know how buffett looks ahead. he highways a 10 to 15-year horizon. so he's glad that the economy is stabilized, so he's looking out several years from now, two, three, four, five years about what the effects of this buildup will be and he wants lawmakers and people at the fed and the treasury to be looking at it and get a handle on it. >> kevin, you know, everyone who has tried to short this market has gotten squeezed. at this point, are you ready to
short it? >> yes, absolutely. the bulls have to take profit here. the bears have gotten crushed in this rally. now the bears have the bulls on their side because there's so much money on the table, you can't let these profits get away. so that's why we'll see 950 on the s&p and we could actually trade lower. we might seen an 800 handle, you know, into september, but i think that we're still in a cyclical bull recovery here. and i think we'll see 1,100 on the s&p before the year is out. >> terrific. we're going to leave it right on that note. thanks so much for joining us, kevin cook. >> you bet. >> and that will wrap it up for us this morning. as you can see, the u.s. futures are pointing to a lower open with not much data ahead of the opening bell. that's it for "worldwide exchange." i'm bertha coombs in the u.s. >> i'm beckiky meehan in europe. >> and i'm chloe cho in asia.
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good morning. the oracle of omaha speaks. good news. he sees the u.s. economy on the path to recovery. but he has a warning for washington. spending has is consequences. tech titans hewlett packard out with quarterly results. meantime, google marking its fifth anniversary as a publicly traded company. under pressure, the global markets seeing a lot of red this morning as "squawk box" welcomes you for a wednesday.
♪ good morning, everybody. welcome to "squawk box" right here on cnbc. i'm becky quick along with joe kernen and carl quintanilla. this morning, the u.s. equity futures are coming under some pressure. this comes after a rough overnight session in asia. in fact, chinese stocks dropping by as much as 5% at one point. other major markets were higher amid fears about a correction to the rally that's been out there. shanghai stocks tuxbling to a three-month low. but the index has lost about 20% since august 4th. that matches most people's definition of a bear market. you'll see the ftse 100 is off by 38 points, cac 40 is off by
30 points and the xetra dax is off by about 63 points. >> so auto broad sell-off overnight. traders citing the sell-off in asia as a big catalyst. the data showed yet u.s. inventories unexpectedly fell last week. we'll get the u.s. inventories and see if that's bullish. crude, $68.87. >> as ford broader markets at this hour, we are expecting a little bit of weakness. what's the problem? >> people are trying to figure out, is this the beginning of a correction or not? >> griffith was showing a bit of volatility. they get narrower and then the vix breaks out and they're narrow again and the vix is breaking out. >> which means move to 2% at least. up 2% on the