Skip to main content

tv   Worldwide Exchange  CNBC  August 28, 2009 4:00am-6:00am EDT

4:00 am
4:01 am
i'm christine tan. a new era, old problems dog
4:02 am
japan giving the opposition party more fuel ahead of sunday's national election. >> i'm ross westgate. here in europe, shares reverse two days of losses as investors wait for the new uk growth data. >> and in the u.s., a top fed official says the central bank will likely exit its current monetary stance next year, but a rate hike is still a ways off. >> hello and welcome to cnbc's "worldwide exchange." we'll kick off with the global equity session right now. the ftse cnbc global 300 is 22 points higher. we had the european markets yesterday down some 21 points or so, but we've reversed that an hour into trade right now. this is where we currently trade. the ftse 100 up nearly 0.5%.
4:03 am
the dax up 0.835%. cac up 0.8%, as well. the dollar is trying to make gains today, as well. dollar edging back to 94 against the yen. euro/dollar, 1.4331. sterling/dollar, 1.6282 after getting below 1.62 and euro/sterling on that 0.88 mark. christine, good to see you. >> hey, ross, good to see you. happy friday. here in asia, increased confidence from the global economy helped to pull stocks higher, but not the picture we're seeing in shanghai right now. this particular market ending lower 279%. that dragged down the hang seng, as well, down 0.7%. the bombay sensex is down 0.4%. we have the nikkei 225 and the kospi putting on gains.
4:04 am
the national elections are this sunday. the nikkei 225 managing to tack on gains of 0.6%. the kospi up 0.5%. in terms of crude, this is where the picture stands right now for nymex light sweet crude, $72.888 a barrel. brent is tacking on gains of 27 cents, $72.78 a barrel. hi, courtney. good to see you. >> hi, good morning, christine. good to see you, too. here in the u.s., of course, we're quite a couple hours away from the open market trading. but right now, futures are looking okay. looks like we are in positive territory right now. fair value up marginally after we finished the day with another day of gains for stocks on the back of good economic data. we're going to get more on the consumer today, so we'll see what happens there. with equities moving higher today, treasuries are moving in the opposite direction.
4:05 am
if we take a look at the bund yield, 3.27%. u.s. treasury prices fell. right now, we're up a bit been 3.49% in the u.s. gold prices edging up a bit today. at least they were last week. we are still at $949, a bit higher, 949.6. we're less than 1% higher, but still, it's a gain. we'll take it. christine. >> thanks, courtney. joining us now for market strategy, james bevan, cclc investigate management and roger gobley, lgt capital management. gentlemen, thank you very much for being with us this friday. roger, asian markets are holding up pretty well despite the fall we're seeing in the chinese markets. do you think global markets are pretty much immune to what's happening over in shanghai? >> not, not at all.
4:06 am
actually, everybody was aware, more or less, that the chinese domestic market was facing macro overheating situation and if you see that the money supply was growing seven times faster than normal gdp, this is an unhealthy situation. so the market was pretty much aware that once the government might point out some measurements or might talk about some tightenings to monetary policy, this will have a negative impact so far. on the other side, of course, it will have a negative impact for the market and market has corrected 20%. still, the market is an outperformer. therefore, i don't think that the global investors will reach that dollar, but certainly we will see the market is going to pull down. and while the global recovery is still ongoing, the market might be -- i mean, this negative impact on banks and the prty stocks might be offset by a recovery in the export stocks in
4:07 am
a couple of weeks' time. >> james, what about you, what's your outlook on china? what do you see in terms of influence in global markets? >> i'd like to disagree, but i can't. i see a situation where, indeed, the domestic economy was overheated. people were clearly concerned that a tightening of policy would shrink the support for the global economic position. and i think that the export story is going to be very robust. we've seen a significant pick up in all the books associated with the restocks that had followed the significant inventory clearout that has occurred in the back end of last year. and that's why i see long-term good news coming out of china and i continue to expect long-term premium growth. >> hi, james. it's courtney here in the u.s. yesterday we got our first read on the division for the gdp, came in better than expected. we're looking for some consumer
4:08 am
data out today. some experts are still afraid we're going to slip backwards. where are you, do you fear a double dip? >> i prescribe to the upswing perspective. what i had done is look at lead indicators to try and ascertain where we are likely to head. and i think the more one can discern most significantly is the probability that in the fourth quarter, we will begin to see positive movement in the unemployment numbers and i think that will be extremely good for consumer spending. i do not prescribe to the views that we have to have a really very sudden and significant pick up to the savings ratios. i think most of it is in the bag. >> roger, are you in that same group, are you a bit more bearish?
4:09 am
again, are we on our way out? >> no, basically we are still positive for equities. and we believe now that since we have more evidence that also europe is coming out of the recession led by germany and france, we think that the global investors will reallocate some assets. the impact might be that some of the countries here, like korea, is a market which is typically driven by market in-flow. these will slow down a bit in favor of european stocks and european stock markets who are clearly lag ards, and i think the concern that eastern europe might get dragged for the markets, i think this has been now wide ly offset. so we are basically still positive for equities. >> it says in your notes, roger, that you're overweight europe and the u.s. over asia this
4:10 am
particular junction. is that because of the large gains we've seen in asia you think are unsustainable? >> yeah, absolutely. you remember saying constantly buy the dips, constantly buy the dips, but now the valuation of the markets here have reached the fair value. that doesn't mean that we are negative on asian market, not at all, but we still believe that there is more opportunities short-term to be seen in euro, as well as also in the u.s. and therefore we -- for the first time, we underweight asian market emerging i have to say and we're still overweight japan because we think that japan might come back in the limelight of the investors. >> i'm very intrigued by everything you said and absolutely agree, but i wonder about the detail with end markets. one of the things that upsets me
4:11 am
most is the relative lack of discrimination in terms of the rally so far, less robust fundamentals have led the charge. i think it's time that we had a return looking at fundamentals and big caps in particular, which appear to have been -- do you subscribe to that view or are you still after the stocks with more risk characteristics? >> i think what you say is precisely the reason why most of the analysts didn't get the markets right because they were looking fundamentally before and the rally was mainly driven by those companies who had the worst earnings, actually, so mainly bank, financial stocks and technology stocks. and they were the leader, actually, of the rally. we see now a shift out of industrial companies, out of cyclical companies. and i think it's time now to look for value stocks.
4:12 am
maybe we might see a shift from so-called growth stocks into value stocks again. it started here in asia where with only the recent two or three weeks actually -- no, it might be five or six weeks already -- where investors started to look into smaller midcaps. and i think this is definitely a good sign that the broader markets will be carrying the next rally. >> just one thing, james, and roger, i just want to get clear here. the consensus is whatever growth we get in the redc country is going to be pretty sluggish, pretty low, right? that's what the central banks are telling us. how much growth do we need to change the outlook for earnings and to make it -- make stocks a compelling buy? do you understand the question? >> absolutely, i do. my perspective is valuations are fine. i think actually corporate earnings have 10% to 15% up side
4:13 am
current levels simply because you see how much cost cutting they have very high leverage or gearing towards quite small improvements or revenue. >> we just need a little bit of growth. >> a little bit of growth. >> james, good to see you. thanks very much for joining us. roger, niece to see you, too, thank you for joining us. some of the corporate news here in europe, french retail er carrefour is sticking to its annual target. operating profit dropped 28% from a year ago.w the group's domestic market is suffering from price cuts and a sluggish consumption. the business in asia why and latin america is still pretty strong. investors have been giving a thumbs up to l' oreal this morning. the beauty product group beat
4:14 am
analyst forecasts in the first half. it did fall more than %, but they were hit by drastic destocking by distributors. l' oreal says the worst is now over and rel revenue will improve for the rest of the year. it says it's ready to make some strategic acquisitions. >> roll, here in asia, the spotlight is on japan ahead of the elections this weekend. now, the struggling economy is a key issue for voters. fresh data out of japan today show deflation continues to dog the world's second biggest economy and no relief for job seekers unemployment rate hitting a record high last month. still in japan, toyota says it will shut down a plant it has held in california for 25 years. the news comes a few days after toyota said it is shutting down a production line in japan.
4:15 am
toyota and other carmakers have been scaling back capacity in recent weeks to match a slowdown in sales. and elsewhere, another deal in the resource space today, china's baosteel plans to invest $240 million for a 15% stake in aquila resources. the deal would give baosteel the right toni vest and codevelop most of aquila projects. a kwu ila surged 8.75% in sydney 7.15. courtney. >> dell's second quarter profits fell 27% as the company is being squeezed by week corporate funding. but revenues did rise for the first quarter and dell sees demand stabilizing. the ceo says he's optimistic
4:16 am
that customers will start buying new pcs this year. dell hopes china and india will drive revenue growth next year. it looks like we are up big on those earnings reports. good news there. dell enjoying nearly 8.5% higher. hank greenberg tells cnbc that there's no truth that he's leading a grew buyback for aig. aig rose 26% on tuesday on reports of reaching out to determine how to run the company. well, you can get more news, videos and blogs online at
4:17 am ross. >> still to come on today's program, as well, deflation unemployment hit record highs in japan. we'll assess the likelihood of the land slide victory and what it means to investors. the u.s. economy that long 1% in the second quarter, unchanged from our initial estimates.
4:18 am
from post party sickness syndrome? there's a revolutionary cure. it's called cascade all-in-one actionpacs. and it's like adding the ultimate button to your dishwasher. because it has the power to pre-wash... dissolve... and rinse the whole mess away. so in the morning your dishes will feel like new again.
4:19 am
and so will you. cascade complete all-in-one actionpacs.
4:20 am
okay. we've got the global up date markets. >> thanks, ross. let's take a check on the ftse 100. we are looking for a bit of positive trade today after two days of decline on the ftse on the uk markets. today we're managing just about 1%, so reversing the couple of declines that we have already seen. about 47 points or so is where we are right now. if we take a check on the biggest gainers, it's become obvious that the basic resource stocks are stronger today.
4:21 am
kazakhmy's, 5% higher. eurasian natural, lloyd's banking group also higher by 4% or so. lloyd's banking group is up 4.1% in today's trade and just out of the top five, but still performing strongly, the likes of barclay's, adding over 3% and rbs, too. banking stocks, basic resource stocks both putting in a decent bit of strength today. consumer confidence data shows sentiment was unchanged again in the month of august. that shows that the uk consumer assistant remaining cautious on the economy but still not as negative as they were a year or so ago. now out to sylvia for more on the german trade. sylvia. >> an overall slow day because we have a lack of corporate news to drive us forward.
4:22 am
but having said that, there was a late recovery in the u.s. and part of that is technical for the german market. we've talked about that before. the futures market is saying we've test today downside a couple of times. the 5443, the 5430 something. we've bounced back the from there and there's a good chance we can test up theside again. 1%, 1.4% up is a good run for our money. and when we say testing the upside, the lid for the market at the moment is for the 5572 that this year's high. i daresay we should ae tack that before too long. maybe this week but more likely next week and then we see what this market is made of to take us further. stephane, lack of corporate news in germany, but certainly not in paris. >> plenty of numbers to digest in paris. it looks like the numbers are worth it for l' oreal. dp posted a 40% decline of net
4:23 am
profit for the first half of the year. but still, it's better than expectsed. also despite the crisis, people are still buying cosmetics. l' oreal posted the numbers yet. today we've got numbers from carrefour, the retail company which posted a wider than expected loss for the first half of the year, but carrefour confirmed its guidance for the rest of the year in terms of operating profit which should range between 2.7 and 2.8 billion euro this year. the cfo of the company says there's no degradation trend in july. the stock is up 5%. we've got positive reaction and weak, the company posted yesterday a 22% decline of earnings on the first half of the year, but it was better than expected. they raised its full year revenue guidance slightly and that explained why the stock is doing so well.
4:24 am
so these are the stocks making headlines in paris this morning. now let's have a look at the polish market. >> the main news from poland today is surprisingly good data about the economy. the data comes above the estimates, the analyst expected the economy to grow by 0.5% year on year. and the polish government is going to the stock exchange here. you can see the map in the way of europe and the green color in poland as it is the only eu member avoiding to rethanks to the market which is still quite vibrant despite the high unemployment rate. the internal consumption in q2
4:25 am
rose nearly 2% year on year. the retail sales rose by 5.7% year on year. the on the products. the polish currency gains after the positive data and it is gaining 0.4%. that's all from warsaw. now let's move to adam in singapo singapore. >> thank you very much. it's a split mission down the markets today. a lot of caution in japan, given that we're building up for this, what could be a landmark election on sunday. there was a lot of negative data out of japan, as well. investors pretty much shrugged that off. i have to say the volumes are very, very thin. moving on to the greater china region, net activity in the shanghai market, concerns that bank lending may be slowing down
4:26 am
sharply in the month of august compared to july and, of course, the average that we're seeing in the first half of this year. we got numbers out of bank of china yesterday and they said lending is slowing down in the second half. a lot of banking stocks closed down in negative territory as investors are digest ago slew of earnings coming up. just breaking the wires, we could touch on some of them, petrochina reporting its numbers a few minutes ago, first half profit of 5 yuan, versus 54 yuan a year ago. if you look at what cnooc reported just three days ago, it looks all right. also we've got china unicom numbers coming up. first half net profits of 6.62 billion yuan. that's half of what it was a year ago. that looks concerning. the number has come in better than expected. analysts were looking for a profit of 6.2 billion yuan. so it has beaten expectations.
4:27 am
the telco stocks did close down lower. china telecom managed to close higher. we'll check on the stock prices tomorrow in terms of reactions of these numbers that have just broken on the wires. now back to courtney in the u.s. >> good morning. u.s. investors will get a pair of economic reports as they wrap up the trading week here in the u.s. july personal income and spending figures will be out at 8:30 a.m. new york time. income is forecast to rise by 0.1%, spending by 0.3%. also part of this report, the personal consumption index. at 10:00 a.m., the august consumer sentiment will be out and analysts are looking for a reading of 64. tiffany's iconic blue boxes will report second quarter profits before the opening bell. the luxury retailer has hunkered down to ride out the recession
4:28 am
cutting staff and expansion plans. tiffany's hasn't broadly cut prices which has helped maintain margins and will pay off when the economy improves. in march, tiffany shares have nearly doubled and that's your global stock watch. >> coming up on "worldwide exchange," vying for change -- voting for change, rather. opinion calls tipping a land slide victory for japan's opposition part party. can the dpj turn the economy around? we'll discuss that in a bit.
4:29 am
4:30 am
4:31 am
i'm christine tan. old problems dog the area. >> and i'm ross westgate here in europe. stocks reverse two days of losses. they're putting on more gains. we're about to get the latest uk growth data. >> good morning. i'm courtney reagan. in the u.s., a top fed official says the central bank will likely exit its current monetary stance next year, but a rate hike is still a ways off.
4:32 am
>> britain's economy a stronger 4.7% in the second quarter. so they've revised up their estimates for the manufacturing sectors. the o&s says that took the annual drop up to 5.7%. remember, the flash estimate was 0.el% on the quarter. the upward revision mainly due to manufacturing, energy extraction and supply. wholesale and motor vehicle selling, as well. he says there was an ek total evidence that the car's scrap scheme had helped. the data confirmed they suffered their biggest annual fall since 1968. fixed capital information also suffered its biggest quarterly fall since the first quarter of 1991. so that's where we stand on that. we'll hopefully get some points
4:33 am
on the breakdown on spending. sterling just bounced up on that news, trevor williams. what do you make of it? >> well, i think it confirms that the uk is facing its worst session since the second world war, that the economy was still in recession in the second quarter like germany and france, of course, and in the current quarter, i think we are most certainly out of the recession. but the breakdown is interesting. the car scrappage scheme seems to have some impact. but it doesn't compare with those who said that the figure was unbelievable and that they expected it to be radically revised away. >> yeah, by 0.1%. 7% is not a radical revision, is it, from the flat. consumer spending, what do you think breakdowns of consumer spending tell us at the moment? retail sales figures have been surprisingly resilient. can that last even as we come
4:34 am
out of recession, as you say, as we're doing now in the third quarter? >> well, the problem with retail sales is that it's going to face strong head winds in 2010 as much from the rising level of unemployment that is still not likely to even even though the economy will, i think, start coming out of recession in the third quarter of this year. there's going to be tax rises next year. there's going to be not the sort of falls in commodity prices that we saw this year, which helped to boost real incomes. so i think that the headwinds for consumer spending are still quite considerable. retail sales in particular, i think, has been helped by the fall in closing and textile prices and i wonder to what extent that can continue, as well. so pretty tough times for consumer facing industries, i think. >> okay. all right. you have to stick around. we're going to talk about the breakdowns in gdp that we had and look at what's is going on in japan, as well. the ftse cnbc global 300 up 28 points. european stock markets a short
4:35 am
while ago hit the session high. we were up for the ftse 100, 1%, just a little below that. up 1.25% for the xetra dax. on the currency markets, the dollar is trying to regain ground against currencies. euro/dollar, fairly steady, 1.4335. sterling/dollar, just below 1.63 level. euro/sterling, just below 0.88 is where where he stand. christine. >> hey, ross. here in asia, a lot of optimism after that better than expected gdp data coming out from the u.s. and that gave markets sentiment here. prospects about the global recovery seem to be looking better right now. nikkei 225 up 0.5%. the kospi up 0.a%. the shanghai composite down
4:36 am
2.9%. lots of concerns about a fall in the market. the bombay sensex is now in positive territory, up 0.1%. overall, a pretty mixed picture here in asia kra. courtney, over to you. >> thanks, chris tier. here in the u.s., we're still a good five hours ahead of what open. we're going to get personal income and spending numbers. we're going to hear from retailer tiffany's. we'll see if that can do us more good. let's take a look over at the bonds right now and let's take a look at the ten-year yield. we are up to 3.5%. that's good. a little better than what we saw earlier this morning, so it looks like we are trending upwards right now. let's get back to trevor williams, chief economist at lloyd's. if i can ask you quickly here, trevor, we got this nice revision yesterday for the u.s. gdp. we're going to get consumer
4:37 am
sentiment numbers out today. james bullard thinks we are on the heels of recovery. we'll see the recession end by the end of the year and things are stabilizing. what do you think? are we out of the really tough part? >> well, it's a good question. i think when does the recession end? is it when you first get to rise in gdp or is it when gdp surp s surpasses the previous level or is it when you start seeing falls in unemployment and rise in employment? i think what the economy is likely to see, absolutely for the u.s. as much as for the uk is that i think the u.s. economy is going to expand and it's likely my view to expand by up to possibly 5% in annualized rate. so you could argue that it will start coming after recession from the third quarter of this year. >> and we're so driven by the consumer. consumers have to start spending to move that expansion forward. we're going to get some consumer
4:38 am
numbers today. what are you expecting? are we opening up our purse strings yep yet? are we going ahead and spending that money in the stores? what are we seeing for consumers now? >> i think consumers are struggling in the u.s. they've borrowed a lot of money over the last decade or so. i'm not so sure that the recovery is going to be powered solely by consumer spending. i think it's going to be powered by potential for growth ex ports. i think the recovery in the u.s. will be relatively muted by the fact that it's not going be led initially by consumer spending. nevertheless, i think the figures today for spending will be quite good. i think income will be up and i think spending will be up. so the figures for july are likely to continue to confirm that q3 is looking considerably better than q2. hey region trevor, this is
4:39 am
christine here. can we talk about japan? we have record high jobless rate there. do you think this is going to put more pressure on the boj to revert back to full blown quantitative easing? >> well, japan is in a very tough position, isn't it? it's facing record levels of deflation after a long period of suffering from deflation and nothing that they've done seems to have worked. i think they need to start printing money, which is to say quantitative easing. i think they need to do so aggressively and get the money supply up into positive territory. numbers that they've done so far have not been successful in doing that. maybe a change in government will help to energize some of the policy initiatives. >> do you think the new government could be the linchpin
4:40 am
that pressures the uk to do more to revive the economy? >> it's possible. i'm not so sure that the economic policies which have been suggested are radically different. but it may be that if, as seems likely, they get into power that they may very well start to be more aggressive about trying to get the economy going. i think you'll need more than just policy changes from the bank of japan, though. it will mean overall economic policy, opening the economy up to competition, revitalizing some of the services sector and perhaps even opening up some sectors which have previously been closed to foreign competition to give them a jolt and a kick start. trevor, we'll be watching out to see what happens this sunday. thanks for being with us today trevor williams, lloyd's tsb corporate markets. we've been talking about japan. the country's ruling democratic party looks set for a landslide
4:41 am
defeat in this weekend's election. the polls show the opposition democratic party of japan is likely to win a two-thirds majority in the powerful lower house of parliament. japan says the promise of change rather than the dpj's policies are the main reason that the opposition party is so popular. >> the dpj doesn't have to do anything as long as they're not the ldp people will vote for them. people are sick and tired of the ldp. they've run out of fresh ideas, they've run out of time. a perfect storm is brewing and they are going to see the japanese voters give them a big, hearty, sayonara come august 30th. >> for more on japan and elections this weekend, let's get out with richard for more on japan. you heard the sound bite. we have consumer price egg
4:42 am
falling, we have jobless rate climbing. surely this is not going to be good news for the ldp. they can't possibly use that to champion their caught to get japanese voters to vote for them. >> no, i think that's right. there are signs that the economy is turning around and probably faster than most developed economies at the moment. but it's too late for the ldp, and they're tarnished of the mismanagement by the past 20 years. people are fed up with it. and i think the first time really in a long time, they have a credible choice, as well. of course, you have to remember, the economy was terrible many times in the 1990s, but the opposition was so shambolic, they will be kept on winning. >> if the opposition democratic party wins, how much power do they truly have on make real reform? >> well, they have power probably in the sense that they're going to be there for the best part of four years, so
4:43 am
you can't just ignore them and hope they're going to go away. which was the case when those temporarily a change of government in 1993. exactly how much of the change they'll be able to push through the bureaucrats i think is a very different question because they're very entrenched and these new politicians don't understand the system. so i think it's questionable whether they'll have as much impact as they seem to think they will. >> richard, bearing in mind -- it's ross here. bearing in mind these latest unemployment figures, the dpj has indicated it's going to try and roll back some of the improvements that we've had in labor market flexibility. surely that's self-defeating, isn't it? is that how they're setting this all out? >> yeah, i think that basically they're setting that out to offer comfort to the -- probably the broad bottom court of the population. they have a sort of za say socialist problem to try and
4:44 am
product the weak, try and reduce inequality. one thing that has caused hardship is they don't have any job securities and they're not paid very much. they've suffered tremendously over the past year. but if you simply reregulate the labor markets, as the economy comes back, you'll be pushing some of those jobs offshore. in general, they seem to have quite a few of the ideas on the economy, but many of them seem to be bad ideas. >> hi, richard. it's courtney here in the u.s. japan has been dealing with a long period of deflation. we have an election coming up, we've got the data out. will the data and the election combined or one or the to other do anything to change the bank of japan's approach to the situation? >> well, the deflation really is a problem. it's not just that the headline numbers are showing record declines. if you take out food and energy, that's deteriorating fairly
4:45 am
quickly, as well. that's falling 1% compared to the u.s. and europe where it's around 1.5% for those numbers. so japan has a tremendous problem and a central bank which doesn't seem interested in doing anything about that problem. and it has the dpj, which if anything looks like it's going to be more forgiving of the central bank than the ldp was. so i don't think there's any real prospect of any approach to try to fight deflation of the new government. >> where does this leave the quantitative easing for the new policy? the boj said they would have to resort to printing more money. >> well, there's no sign they're going to do that. indications are that they're looking at the improving economy. they're saying we're past the worst of the crisis, which they're probably right. they're talking about exit policies and, in fact, they've largely exited from the funds that they've injected at the start of the year already.
4:46 am
so i don't think there's any real prospect that they're going to push forward any type of easing policy and certainly not any type of radical easing of policy to try deflation. i think they're going to be sitting there hanging on saying the economy is going to get better, give it time and he deflation might go away. i wouldn't want to put money on it, but possibly out long enough to beat deflation. it's a longered period of deflation you're looking at and we all know that does ka rode the underlying part of the economy. >> it could be ten years. thank you very much, richard, for your views today. good talking to you. let's talk about india right now. ayesha faridi joins us live for the india business report. just stepped into the september series today. it's been shopping, but for now it's holding up in the green. 15,800 is where we're standing and the sensex is almost 100-odd
4:47 am
point gain is what the sensex is nudging. and 4,7 must know, they will break out above that level yesterday and now it's firmly standing above it. almost a 33-odd point gain is what we're standing at right now. midcap cement companies are holding up very well. there are signs of demand pick up, which is why we're seeing a whole host of these plays pick up. besides that, amongst the heavyweights, you have meltses which have made a very good comeback. yesterday the stock was down almost 6% on close. a knee jerk reaction coming on very poor numbers. they have reported a loss this time around, but today the stock is making a good comeback and you are seeing it hold up in the green besides that capital goods is another pocket which is looking quite good. with that, it's back to you. >> ayesha, thank you very much.
4:48 am
you have a good weekend. ayesha faridi. courtney, back to you. >> al.operating system is ready to launch today. the snow leopard upgrade will cost $9. but you can't download it. the software won't run on older maces that don't use intel chip, which may be apple's subtle hint that it's time to buy a new computer. let's check on apple trading. it looks up nearly 1%, good news there ahead of the u.s. open. we'll have to see what happens when we get more news there. fed chairman ben bernanke and his wife were victims of an identity theft ring which reportedly stole more than $2 million. anna bernanke's purse was snatched at a starbucks not far from their home last year. someone soon began cashing
4:49 am
personal checkes from their bank account, so no one is safe. federal authorities have wrapped up an investigation that did result in a series of arrests and indictments. in a statement released by ben bernanke, he says his family was one of several incidents traced to one ring. we've been taking a special look at how crucial the back to school market is for retailers over here in the uk. >> back to school means back to the shops for helen robinson and her 12-year-old son, james. >> 6.50. i don't know about that, james. >> like many mums, helen is mindful of her budget at an expensive time of year. >> you need something for pe, something for cricket, they have to have certain things for math, so there's more and more equipment they need the older they get. >> and those unavoidable
4:50 am
purchases make this a crucial season for retailers. in the u.s., it's the second most important shopping period after christmas. but how about the uk? christmas is the key time of year, but back to school is extremely important for us, as well, in terms of being a major driver. >> after a relatively good back to school season last year, many retailers were full of inventory for the key winter season. but lehman collapse, prices had to be slashed to clear it. this year, are they any better prepared? >> i'm afraid it's the good retailers who win and the bad retailers who don't. the good retailers can read what their customers want. >> so what do customers want? >> bargains. i'm not looking at one door, definitely going around to see where i can get the cheapest deal. >> if customers want to go and
4:51 am
buy cheap products, then yes, there are plenty of options on the high street that they can go to. but i think they trust in terms of the john lewis values that we provide quality that will last. >> but the competition is fierce with asra offering school uniforms for two pounds. marks & expenser selling a full uniform for 3 pounds 50. >> it's mainly interest rates, the fact that interest rates were cut so much that consumers are better off at the moment than they were at this time last year. >> as for this consumer, when the uniforms are bought, what he really wants is -- >> mostly gadgets, if they can be occupied. so when i finish my homework, i can just work on that and i won't be bored or stuck in front of the tv. unfortunately for james, gadgets aren't likely to be in his mum's
4:52 am
back to school budget this year. he'll be hoping for a pickup in spending for 2010. >> great report, ross. thank you for that. coming up, stocks shrink in shanghai. are we finally becoming immune to the shanghai slide. >> we'll talk about that and get more on the currency markets. the dollar is recovering against some of yesterday's losses.
4:53 am
4:54 am
4:55 am
we will try and get something for you on that. meanwhile, on the currency markets, the dollar has tried to claw back its losses against baskets of currency today. euro slshl dollar flat, 1.4348. sterling has been an interesting move. it's further today against the screen, 1.63. for more, we're joined by sam stanley from halo financial. we just had that slight revision upwards in the gdp figure. but sterling really has been sort of getting steadily weaker for the last -- for most of this week and last week, as well.
4:56 am
are we coming to the end of that move? >> certainly today we'll provide a bit of a catalyst ahead of profit taking for the weekend. sterling has had a bad week. profit taking on selling sterling is what you're saying? >> exactly. it's had a bad week, it really has. it's been down 1.65 against the dollar. we are now back above pretty strong support at 1.6243. we may get a bit more out of this move, possibly as high as 1.65 up to resistance before it goes back down again. >> we're on the 88 mark. what's the key level? 0.8840 is the big level and we've touched that and 0.8865 above that. but we could get a move now down quite easily to 0.8650. we might see a bit of pound buyback this day or two. >> hey, sam, this is christine. our previous guest was talking about japan national election these sunday, the opposition
4:57 am
democratic party is widely expected to win. is the opposition going to influence trading at all any time next week? >> i don't think so. it does look like the dpj is going to get interesting. i don't know that it's going to alter things that much. a lot of it is obviously factored in. with regards to the yen, they're probably less likely to intervene in the markets. that's probably more yen strengths than anything. but really, when it comes to things like tightening of interest rates, etcetera, i don't see a lot of change from the ldp, to be honest. i think it's not going to have much of an influence at all. >> hi, sam. it's courtney here in the u.s. we've seen the dollar fall the last two of three days. are you seeing a merging in the as we head into august? where is the dollar going to go in the fall? >> the dollar hasn't had a bad
4:58 am
week, really. it is sort of coming back and bouncing back. the question is whether it has the legs to keep going. technically, i see the dollar up against the yen today. i think we could see the dollar/yen back up. so i think the dollar is still hanging in there and it's done some great work against the pound, for example. it's broken major support there. in many ways, there's more voices out there saying we could see dollar strength going forward. of course, you've always got the economic fundamentals. of all the printing presses and all the inflation that's out there suggesting that the dollar possibly longer term is going to come in for a pounding. >> most people believe that we've finished the recession now and, therefore, we're going to start pricing in and get growth numbers coming out. >> that's right. >> we've had that growth figure from the euro zone for germany and france and we now have to
4:59 am
price it into the u.s., i suppose. >> that could be bouncing back, by far the strongest growth out there. fundamentally, that doesn't sit well with me. however, the markets are slightly irrational at the moment from the perspective that they're selling the u.s. dollar on good u.s. data. so basically, good for the stock market, saiven haven, it doesn't need to be on. sell the dollar. if we break that connection and people start looking at the fundamentals of the u.s., the u.s. will strengthen dramatically. i'm not sure that's going to happen, though, ross. >> sam stanley, dealing director at halo financial. coming up in the next hour of "worldwide exchange," we will continue to focus on stories making headlines around the global. >> plus, data out of japan today
5:00 am
raised questions about the economic recovery. are we really out of the woods? (announcer) we understand. you need to save money.
5:01 am
5:02 am
i'm christine tan. a new era, old problems dog japan, giving the opposition democratic party more fuel ahead of sunday's election.
5:03 am
>> here in europe, the british economy slank less than expected in the second quarter. i'm courtney reagan in the u.s. a top fed official says they will likely exit their current monetary stance next year, but a rate hike is still a ways off. if you're just joining us in the united states, welcome to the start of your global day with "worldwide exchange" broadcast live from the u.s., asia and europe. so far in the u.s., we're looking at green across the board for u.s. futures. things will appear to be getting a bit stronger here ahead of the open. we've enjoyed a couple days of gains. it looks right now that we're going to continue that way when the opening bell sounds. take a look at the bund yield, things are higher in the morning and they still are at 3.92%. up 0.25% for the bund. things are looking good there. let's look at the ten-year note,
5:04 am
up 3.5%. we've been that way for most of the morning. >> courtney, auto here in europe, meanwhile, we're up near the best levels of the day. the ftse cnbc global 300 is up. european stock markets are up two hours into the trading session today. the dax is around 1.4%. lower on the cac 40 and the smi up nearly 1%. resources, technology, chemicals, construction, retail, those are the best performing of them. on the currency markets, that translates into a dollar/yen that's clawing back up to the 94 level. euro/dollar, consolidating gains made over the last couple of days and sterling has rallied back after being further below 1.62. back up 1.6327. gdp had a slight revision upwards today in terms of the uk and it was -- the initial contraction was 1.8 and they're
5:05 am
now saying it's 1.7. christine. >> increased confidence about the global recovery is what helped support the markets here after better than expected data coming in from the u.s. the nikkei 225 up 0.6%. we have weakening data, rather, that showed consumer prices at a record low and joeless rate at a record high. despite that, the markets still managed to climb higher. the dpj widely expected to win. the shanghai market and the hang seng, the only market in the red today. there are lots of concerns about the fall in bank lending in the greater china market. in terms of nymex light sweet crude, this is how the picture looks, nymex putting on gains of 63 cents, $73.08 a barrel and brent is tacking on gains, $7
5:06 am
3.04 a barrel. ross. >> that's where we stand with the markets increasing consensus, as well. the u.s. is now probably out of recession. we're likely to prove when we get those third quarter numbers. joining us for more is larry hathaway. joinings now is peter cardillo, as well. the key question, against, is what happens next? there are the bulls who believe this huge stimulus we've had in cheap liquidity will drive a strong recovery to support stock markets and it's the bears, of course, who believe we still have a huge debt overhang and that deaf ledge raejing has a long way to go and that will cause us to have very poor growth. peter, which camp are you in, first of all? >> well, i think we're headed for strong growth over the next few quarters. i think the united states is certainly out of recession and i think we're going to see growth somewhere between 2.5% and 3% for the next two or three quarters. obviously, you know, we do have
5:07 am
long-term problems, no question about that. but i think all the stimulus and government programs, certainly, are kicking in. i mean, we saw that in the housing market, you know? the gains that we saw the other day in new home sales, obviously, was helped by the tax credit and lower home prices, which are lowering -- which are lowering buyers back into the housing market. however, you know, that's -- the growth in the housing market is going to be somewhat uneven, because we have, richard, lending practices and that's going to at one point take effect. nevertheless, i think we're looking at growth here over the next to quarters. >> larry, will it be able to stand on its own two legs after all the government support is taken away? >> the issue of strong growth is noted here.
5:08 am
2% to 3% is miserable, particularly coming out of the depths of the recession we've had and that speaks to many that are out there. credit conditions remain restrictive. households are still trying to repair balance sheets. high rates of unemployment not only subtract from income, but they increase the insecurity of those that have jobs that they might lose their jobs. all of those things are acting as restraints. policy is not likely to move quickly in this environment. so to your question, i don't think the central banks will be trigger happy here to raise rates, particularly in the most affected economies, the u.s. and the uk. there is some chance we'll see earlier moves in some parts of the world, emerging economies, china is an example where that's happened. >> larry, it's courtney here in the u.s. st. louis fed president james ballard saying yesterday that they're not going to raise rates any time soon, they need to see significant improvements in the
5:09 am
economic data to do so. however, he did say the fed needs to start thinking about this exit strategy and keep inflation in check? >> first of all, i think the inflation issue is not likely to be top on their agenda. that's not to say central bankers are complacent. but given what we know about wage foration, after hourly earnings continue to deceleration. the employment cost index is decelerating. inflation is a phenomenon that may occur, but it's still some ways off. that doesn't mean that they won't begin to exit exit strategies. i think the first move will be rather passive, allowing existing balances on their balance sheet to roll off and thereby drain the liquidity in the banking system. they may scale back some of the programs that are in place and allow that to drain liquidity. at some point, of course, maybe more active measures will be required, including reverse repo operations or outright open market operations to drain that
5:10 am
liquidity. actual interest rate hikes from the federal reserve, we suspect, are not going to occur until about a year from now. >> okay. peter, here, it's courtney in the u.s. again. i have a question question for you about the consumer. that's in focus today with our economic data out with personal income and spending as well as consumer sentiment. we have to get the consumer spending before we can see this expansion and turn around. what is it going to take? i hear lay away programs in retail stores are doing better than ever. customers aren't ready to buy right now. what is it going to take to get them to buy and what are we going to see from the numbers? >> well, i think we're looking at probably consumer spending up about 0.3%. there's no question that the consumer is very frugal and it's going to continue to look for bargains and he's certainly not going out there spending at full speed. obviously, the consumer is very much strapped here in the united states, still heavily loaded with debt and trying to work its
5:11 am
way -- work there way out of debt. but i think what we're going to see here is, you know, the employment data begin to show signs that the labor market is peaking. and i think once we get to that peak, which is probably that far away, maybe 9.8%, 10%, i think that will lift the spirits of the consumer. because the consumer out there is fearful of perhaps losing his job. there's, you know, the -- there's that fear that's embedded. and i think until we see the employment market leveling off, which i think, you know, next week we're going to see some real good numbers, i think the economy probably lost somewhere between 195 to 200,000. which will be consistent with less and less job losses. so we could be peaking somewhere perhaps by the end of the year, close to 10%. and i can that's what will certainly do the trick in terms of consumers being more
5:12 am
confident. >> hey, peter, this is christine here. while the consumer demand is uncertain at home, do you think u.s. companies in terms of top line growth will be forced to look elsewhere for growth or for instance could they look at emerging asia to help drive top line earnings? >> absolutely. and i think we're looking at the emerging markets of china and india, actually, and the united states leading the world out of this global recession. and i kind of think that what we're going to see here is the recession being led by businesses. there's no question about that. i don't think that this is certainly not going to be a consumer-led -- consumer is certainly not going to lead the groekt here. so i think we're looking at increase ex ports in the united states and i think that that is going to come from -- demand is going to come from the emerging markets, in particular china and india. >> and larry, what do you think? to what extent can the u.s. dmend depend on china and help
5:13 am
fuel this recovery in the u.s.? >> oh, well, i think the whole world is looking at asia as the source of growth both in terms of where we are today, but perspectively in the years to come. that's not a revelation. it's pretty well understood that china in particular is going to be a strong contributor to global economic activity. i think, however, one of the stories that may be missed here is what's happening in the euro zone. some work that we have recently published suggests that cap ex in the euro zone fell extraordinarily during this particular recycle below replacement rates, and, therefore, something that may surprise on the upside that very few people are taking notice of is the ability of business investment spending to recovery within the european arena. so i would sort of watch that one as one of the hidden nuggets that may be out there. >> thank you, larry hathaway and peter cardillo. larry, i believe you're sticking
5:14 am
around, so we'll hear from you more after the break. still to come, a drought in i.t. spending hits profits at dell. but the world's number two pcmaker sees the market stabilizing. more on that story after the break. welcome to progressive. how may i help you? i'm looking for a deal on car insurance. i think i might have a coupon in here. there's an easier way. we've got the "name your price" option. you do? follow me. you tell us how much you want to pay, and we'll build you a policy that fits your budget. and i still get great coverage? uh-huh. go ahead. you're the boss. i'm the boss of savings. more like the c.e.o. oh, oh. no glass ceiling. the freedom to name your price. now, that's progressive. call or click today. upbeat rock ♪ so i could hear myself myseas a ringtone ♪hone ♪ ♪ who knew the store would go and check my credit score ♪ ♪ now all they let me have is this dinosaur ♪ ♪ hello hello hello can anybody hear me? ♪
5:15 am
♪ i know i know i know i shoulda gone to ♪ ♪ free credit report dot com! ♪ that's where i shoulda gone! coulda got my knowledge on! ♪ ♪ vo: free credit score and report with enrollment in triple advantage.
5:16 am
5:17 am
dealt's second quarter profits fell 27% as the company is still being squeezed by corporate spending and plunging pc prices. but revenues did stabilize. the ceo says he's optimistic that customers will start buying against this year spurred in part by window new operating system starting in october. in frankfurt, dell is trading very well so far today, up more than 9%. we'll see if they can add to those gains as, of course, we go forward and we'll have to look to see what happens in the u.s. once markets open, as well. hank greenberg tells cnbc there's no truth that he's leading an investment group to by back his former company aig. the new ceo has reached out to greenberg on tips for how to run
5:18 am
the company. mochee is willing to wait as long as three years to sell off life insurance units to get a fair price. >> carrefour had a worse than expected net loss in the first half of the year. operating profit was down 28% farther year ago. the group's domestic market is suffering, but business in asia and latin america is still pretty robust for them. polls point to a massive win for opposition party on sunday. deflation continues to dog the world's second biggest economy. and no relief for job seekerers with the unemployment rate hitting a record high last month.
5:19 am
>> give us your views on japan. the new party comes in, they suggest they'll try and come up with new ways to put more money into people's hands. people carrie spoke to last week said, if i get more money, i'm just going to save it. how do you crack that? >> there are no easy answers in the japanese case. the political environment is full of that word, change. and clearly japanese voters are interested in a change. so it's not exactly clear what they want to see. as an aging population with a declining labor force, many of them simply want to see more of the same, which is a generous system of retirement. and because they have concerns around that issue, the more cash you tend to give the household sector, the more they tend to scroll it away because of their concerns about things like pensions. so this idea of redistributing income may have some marginal
5:20 am
influences, but there are no cures for the japanese economy. >> larry, what would you do to get the japanese to start spending again? >> well, i think it's a question, really, of what you try to do to fix the economy more generally. households in japan have needs and longevity, retirement issues are uppermost amongst them. japan ultimately needs a spry side revolution to boost income in the economy more generally. that can come through measures to try to open the economy and certain sectors of the economy to trade. distribution, agriculture, key areas where there could be significant gains to be made. japan could probably consider ways to boost population through immigration. that would be something very radical in this day and age and in particular for japanese society. ultimately, the long-term structural problems do need supply side solutions. demand-side ones are pallive. tax cuts may be one of those, but i very much doubt that
5:21 am
they're going to give much lift to an economy that is very export dependent. good news as asia and china in particular are helping to lift the japanese economy. but this is about bumps in the cycle rather than the long-term structure changes of that economy that it desperately needs. >> larry, continue staying with us. we are going for a quick break. coming up next on "worldwide exchange," j. crew beats the street, but other retailers are still feeling the pinch. earnings from carrefour and hermes both disappoint the market. 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. tdd#: 1-800-345-2550 doesn't matter if a company sells computer chips tdd#: 1-800-345-2550 or, i don't know, fish and chips. tdd#: 1-800-345-2550 i'll look at all kinds of stocks before i settle on one.
5:22 am
tdd#: 1-800-345-2550 if i think i'm onto something i'll check it out, tdd#: 1-800-345-2550 you know, see what other traders are up to. tdd#: 1-800-345-2550 when everything feels right though, tdd#: 1-800-345-2550 that's when i get serious. tdd#: 1-800-345-2550 and the minute i get into something, tdd#: 1-800-345-2550 i already know when i want to get out. tdd#: 1-800-345-2550 of course, every now and then i'll talk with somebody tdd#: 1-800-345-2550 who knows what i'm trying to do. tdd#: 1-800-345-2550 (announcer) switch to schwab today. tdd#: 1-800-345-2550 you'll get the tools, the technology tdd#: 1-800-345-2550 and the support to trade your way. tdd#: 1-800-345-2550 go to tdd#: 1-800-345-2550 or call 1-800-540-7304 tdd#: 1-800-345-2550 right now. tdd#: 1-800-345-2550 but opportunities can vanish like that... tdd#: 1-800-345-2550 most days, i'm right there tdd#: 1-800-345-2550 when the market opens.
5:23 am
5:24 am
>> it's time to bring you up to speed with our global equity markets. >> thanks, ross. we are looking for gains coming through the markets today. the ftse 100 is down about 50 points or so after a couple of weak days. and it's your basic resources stocks, metals and miners that are doing really well today. kazakhmy's, eurasian natural, top gainers on the market today.
5:25 am
rbs and barclay's are doing well today, as well. plus we had data out this morning which shows unchanged for the third straight month in august according to gfk, indicating that there is a cautious approach to the economy as far as consumer are concerned, but certainly not so negative as we saw basically this time last year. also check out shares of national express, as well, because there have been some news flow as far as national express is concerned. there's newspaper reports overnight suggesting that the possible takeover from the major shareholder of that company doesn't have the approval of the rest of the investors and they, in fact, prefer a rights issue. so over the next few days, we could see some development. there's a board meeting taking place next week. sylvia, how is it looking in europe frankfurt? >> we have a bit of a tailwind from the u.s. and already yesterday the market decided we've tested the downside
5:26 am
support levels and we had bond specs from there. the 5572 is, of course, the hurdle we have to take. that's this year's high. we have to take that one out before this market can significantly move forward, but 1.5% on a slow friday and slow, that's the only vein we've got here. volumes are on the thin side. but we can't complain about that too much. stocks, not too much to write home about. we'll be watching out for the elections, of course, in germany, the regional elections over the weekend and see what that proves for angela merkel. not a lot, i daresay. stephane, what does it look like in paris? plenty of results. >> carrefour, the largest european retailer posts a wider than expected loss for the first half of the company and gained market share on its french domestic market. the stock is up nearly 5%.
5:27 am
we've got l' oreal which posted a smaller than expected earnings for the first half. the kb with despite the crisis, is still selling cosmetics. the sales increased slightly on that period. we have a 22% drop of its earnings for the first half, and that was a smaller than expected decline. they raised their guidance for the full year, and last but not least, we have the company reporting a 17% drop of its core earnings on the first half of the your, but the ceo believes the trading conditions will improve in the second half of the year and that's the reason why the stock is up more than 5%. let's have a look now at the asian market for this friday with adam in singapore. >> thank you very much, stephane. a split picture down the line here in asia today. we had gains up in the north asian markets, japanese stock manages to shrug off concerns
5:28 am
about the weak economic data and big elections for the lower house this weekend. but the market that spoiled the party today with the shanghai composite, ending the day down by 2.9%, a lot of concerns about liquidity being in the market. there's a lot of kerchb there and banking stocks did end a lot softer. meanwhile, investors continue to digest a slew of earnings. petrochina being the biggest oil an gas producer plus the second biggest oil refiner in china, the stock did end down softer today by 0.2%. basically, the numbers came in at about 50 billion yuan, which wasn't too bad compared to a year ago at 54 billion. twice, in fact, this year. and we also were looking at china unico machine, those numbers out today.
5:29 am
and the net profits dropped by 50% compared to a year ago. so that's somewhat of a concern. the big news is that they're going to launch the apple iphone in the fourth quarter of 2009. china is the biggest and fastest growing mobile market in the world with about 700 million subscrib subscribers. you may want to check on apple shares today when they get up to trade in the u.s. and we'll check on these share prices on monday morning, not as friday as i suggested in the first hour of trade. on that note, have a good weekend, courtney. it's back to you. >> thank you very much. u.s. investors will get a pair of economic reports as they wrap up the trading day today. july personal income spending figures will be out at 8:30 new york time. income is forecast to rise by 0.1%. spending by 0.3%. part of this report is the personal consumption spending index, or the pce.
5:30 am
and then at 10:00 a.m., the final support on consumer sentiment will be out. analysts are looking for 64. tiffany's, home of the iconic blue boxes will report results before the opening bell. the company cut staff and expansion plans, but tiffany's hasn't broadly cut prices, which analysts say has helped maintain margins and will pay off when the economy does improve. that's your global stock watch. christine. >> well, courtney, q2 gdp was n unrevised in the u.s. and only nudged slightly higher in the uk this morning. are we rooted in recession already for recovery? we'll have expert analysis when "worldwide exchange" returns.
5:31 am
5:32 am
it's 32 minutes past the hour.
5:33 am
here are the top stories from around the world. a top fed official says they will exit their strategy next year, but a ross hike is still a ways off. ross. >> here in europe, the pound came in less than expected in the second quarter. >> and a new era, opposition problems give japan more fuel ahead of sunday's election. >> hi, good morning. let's check in on the u.s. futures and see how we're doing ahead of that opening bell. things have been pretty green all morning here. we're still that way with futures higher just above that even mark. we've had quite a good week so far as the stocks are concerned. we've enjoyed seven of eight days of gains, eight for eight ahead of the dow. let's see if we can hold that up in a couple hours here in the u.s. we've been up most of the
5:34 am
morning. we're still down that way, down slightly from our last check. we were at 3.5% last check, down slightly, 3.49%. we're going to check in on the bund, i think we're still probably that way for the morning and heading into the day. ross. >> yeah. thanks, courtney. meanwhile here in europe, we're not far away from the best levels of the day. 1.4% goes to the german and french markets. those sectors a short while ago were in negative territory. resources is the best performer right now. on the currency markets, the dollar is up against the yen at 93.85. euro/dollar, 1.4360. sterling got a bit of a push after we had the second quarter gdp when the company opened less than they thought. >> and that kind of helped lift asian markets here, ross, because now markets have a lot of confidence that maybe the recovery there is stable.
5:35 am
nikkei 225 is up 0.6%. all eyes, of course, on the national election these weekend on sunday. the kospi up 0..5%. the shanghai market really bucking the overall trend to move lower, 2.9%. lots of concerns about fall in bank lending and that dragged down the hang seng, as well. the bombay sensex currently trading up 1%. in terms of oil, this is how the picture is looking. nymex light swede crude putting on gains on of 71 cents, $73.20. nymex is up 68 cents, $73.19 a barrel. courtney. >> joining us now for market strategy is richard cookson, the global head of asset allocation at hsbc. still with us, of course, is larry hatheway. richard, i'm going to start with you, if i may. we've enjoyed a nice stretch of gains, but we have these
5:36 am
positive economic data points. what is really the path for equities? where are we going and what's going to be the driving force if it's not these good data points? >> well, the question is i guess how sustainable it is. we've had a huge rally in equities since the march lows and valuations, to my mind, current valuations look really rather stretched. so the question is, do we get sort of sustainable growth going forward or is this just simply because we've pushed so much monetary and fiscal medicine into it now? i think if you look at the bond market, it's stelg you something nice or telling you something nasty. growth means fewer deficits in bonds. nice supply side shock where it could be telling you japan in the 1990s, low bond could be telling you that bond investors don't believe this growth story, in which case equities look vulnerable. >> so richard, how does that translate into your strategy at the moment, particularly when
5:37 am
you look at the equity markets that have done well and you look at sort of corporate credit, which has also done pretty well since the beginning of the year and was the favored investment play? >> i'm still very much in corporate credit and very much in a lower end of the spectrum. it seems to me that credit is unambiguously cheap, still. we just don't know whether equities are cheep or not because we don't know whether earnings will pick up because of the operational leverage and top line growth. so from a risk adjusted return perspective, it stil still seems to me that credit is still very, very much the better play. as you said, it has been a good investment strategy this year and my investment grade portfolio overall is up about 25% since the beginning of the year versus 11% from the world market as a whole. >> larry, let's bring you in. what do you make of that? >> well, i think equities, just
5:38 am
a quick recap, what really masters now is stage three. first stage is relaxation of risk aversion. second stage is the evidence of cost cutting by firms, especially in the q2 earnings season. now we embark on stage three, which is to say we need to see top line operating growth to boost margins and sustain further markets. the economic data is probably going to support that. the consumer will probably begin to turn positive, having been negative. in key areas in financials, you're probably going to see it because banks at some point this summer transitioned away from simply trying to raise capital and delever into now seen opportunity and fixed income markets, for example, given the steep yield curves and the attractive credit spreads that are out there, they're probably going to show evidence of revenues. same thing in energy, same thing in basic materials. bigger question marks are in
5:39 am
other areas of the consumer side of the economy and maybe in industrials. but overall, i think the q3 season will probably support the momentum that is in the markets for the rest of this year. >> hey, with richard, this is christine. do you agree with what larry was talking about, especially the financial sector? >> we like financials, we like energy. and he's absolutely right in what he says. if you get top line growth, then the uj operational leverage that companies have bought of this cost cutting will mean a bump of profits in some areas. the question is whether you'll get that top line growth. consumption extremely weak. . and the big question is whether consumers and companies target lower debt levels and higher savings ratios. if that's the case going forward, then you're not going to get that sort of top line growth coming through.
5:40 am
>> maybe the top line growth, richard, if you take from what dell is saying, he's saying the companies are looking at china and india for top line growth. do you think that will be the issue for top line companies? >> sure. and that's what investors have been playing. but, of course, in aggregate developed world stock markets are going to be bailed out by top line growth in the emerging world. the question, really, for me is whether the developed world has gone ex growth. >> all right, richard, thank you very much for your views. we want you to continue staying with us, richard cookson and, of course, larry, you'll continue to stay with us. larry hatheway from ubs. we'll head to tokyo and check in on the trading day there with ken moriyasu. moriyasu-san. >> hi, christine. on the last day of trading before the crucial election on sunday, tokyo stocks repointed
5:41 am
to close at 10,534. the july unemployment rate, which reached a record high did not have too much of a negative effect. casio computer climbed 8.5% on reports that casio, hitachi and nec may integrate their bess. nippon airways closed by 2% after suggesting that its dreamliner would make its inaugural seconder by year in. the nikkei has learned that credit default swaps be transferred through clearing houses in an effort to suggest transparency. such clearing houses are now being planned by the tokyo stock
5:42 am
exchange. the g. 20 finance ministers and central bankers are expected to cover changes when they meet next month. that was the nikkei business report. back to you, christine. >> moriyasu-san, thank you for that. ken moriyasu from the nikkei. >> coming up after this break, we'll stay tuned for details about apple's snow leopard. ♪ well i was shopping for a new car, ♪ ♪ which one's me - a cool convertible or an suv? ♪ ♪ too bad i didn't know my credit was whack ♪ ♪ 'cause now i'm driving off the lot in a used sub-compact. ♪ ♪ f-r-e-e, that spells free credit report dot com, baby. ♪ ♪ saw their ads on my tv ♪ thought about going but was too lazy ♪ ♪ now instead of looking fly and rollin' phat ♪ ♪ my legs are sticking to the vinyl ♪ ♪ and my posse's getting laughed at. ♪ ♪ f-r-e-e, that spells free- credit report dot com, baby. ♪
5:43 am
5:44 am
5:45 am
welcome to cnbc's "worldwide exchange" opinion here are some of the top stories we're watching from around the world. j. crew beat forecasts. early this month, the company said it would return to its roots focusing on its catalogs opening fewer retail stores. the company is projected stronger than expected third quarter results. shares rose 5% in after hours to trade at 34.40. well, apple's snow leopard is set to pounce. the computer company is releasing its new system today. it beats microsoft's windows 7
5:46 am
to the market by nearly two months. the big change? application less run faster. you can't download it. the other software is the software won't run on old maces that don't have intel chips. in frankfurt right now, let's check on how apple is trading up, over 1%. hopefully it will do the same for u.s. trading on those bulls in apple. ross. >> final thought for larry hathway. larry, i want to pick up on a point that richard raised. stock markets have been going up and bond markets have been going lower. is there a dichotomy there, or what? >> i don't think it's the bond market telling us something different than the stock market is. i think what's happening here is that the federal reserve and also the bank of england have reinforced expectations that their policy is on hold for considerably longer. yeah, they might tanker around with liquidity division, but ultimately interest rate hikes are still some ways off.
5:47 am
that means bond rates are settling in at earlier levels. number two, that low cost to funds and especially a stable low costs to funds being that banks and other financial inter-meadarys are much more inchiend to play the yield curve. what they can earn at the front end of the curve and the back end of the curve are considerable. banks are re-poing and, therefore, you have a new buyer out there and that's pushing down yields. neither of those things are negative for the equity market. >> implications for banks? >> interest margins can finally add something back to the bottom line. >> who do bank profits translate into better deals for the consumer? >> they're boosting their capital now to retain earnings obviously better than luxury
5:48 am
support. number to, banks, of course, lend against risk and the risk in the consumer sector is still there. we know that there are still problems in collateral values. yes, house prices aren't falling as fast, maybe even stabilizationing, but who knows, the stock of unsold homes are very high, we could see further declines. households are experiencing bad loan problems. it's going to be a while before those better financial conditions for banks translate into better financial conditions for the household sector. >> how long -- i mean, courtney courted, you know, a speaker earlier today and she said we will turn policy when conditions suggest we need to do so. at what point, what figures or more measures to we look at saying now is the time for us to stop with this policy? what central banks are saying is we understand liquidation is over. we understand production,
5:49 am
therefore, can rise. albeit from very depressed levels. there may be quibbles about capacity utilization, but everybody knows there is capacity. look at the level of unemployment and that will give you that answer. they want to see some of that spare capacity recede before they can tighten monetary policy. forethat to happen, you need sustainability and you need final demand. you need to have the consumer come back in a sustainable fashion. so far, the evidence is, at best, patchy and, in fact, consumer spending is not convincing that that is returning. so from that perspective, central banks have a lot of time here to wait before they have to act. >> okay. good to see to see you. thanks so much. we're just over st minutes away from "squawk box." carl is with us to tell us what's coming up. hey, carl. >> good morning to you, ross. friday in the summer, but those earnings from dell giving
5:50 am
sentiment a good boost this morning. we're taking a look at what computermakers tell us about the state of the market and the economy. plus, two unique stories from the american consumer. first, call it the krus tashan lover. when when retain lay away programs were commonplace? now stores frlike sears are seeg an increase. tony krasenzi will be with us and from the futures pits in chicago, jim yurrio will be with us along with mandy drury. you would think this week nothing has happened given the economic calendar, but it has been crazy. we'll start our coverage at the top of the hour. >> it made me think how much i love lobster. >> it is good. next time you're in new york, we'll take you to maine where i guess it's like literally --
5:51 am
it's like $2 a pound and we're going to try and figure out why. >> i'm coming now. that's great. $2 a pound? i'm in. >> straight to heath row. >> yeah, go there now. i'll see you on the weekend. >> okay. >> group rates for maine, i think. up next, will markets end the summer on a high note? stay with us. chloe is 9 months old. she is the greatest thing ever. woman: one little smile, one little laugh. - honey bunny. - ( coos ) we would do anything for her. my name is kim bryant and my husband and i made a will on legalzoom. man: it was really easy to do. - ( blows raspberries ) - ( laughing ) robert shapiro: we created legalzoom to help you take care of the ones you love. go to today and complete your will in minutes. at we put the law on your side.
5:52 am
5:53 am
we'll bring you up to speed on where we stand in europe right now. the ftse 100 up 1%. the zacks and cac up 1.4 prers. we've got resources, technology, we've been looking quite closely at the launches of the operating system from apple and microsoft go, as well. chemicals, construction and retail, but there are no sectors at the moment that are on the
5:54 am
downside. there's plenty of focus on the retail side. carrefour is sticking to its full year target profit as current sales trends continue. that is despite the fact they had a worse than expected net loss of $83 million for the fist half on the year. operating profit down 28% from a year ago. what's going on here is that the domestic market was suffering from price cuts and consumption. it's been a pretty accurate reflection of how investors are viewing the world. so a good jap shot of what's going on there. at the same time, investors are saying l' oreal beat appear list group expect igs for the first half. profit did fall down more than 8% on the year. they've been hit by some drastically stocking price distributors. but l'oreal says the worst of that is over and says revenue will probably this year.
5:55 am
and operating figures for hermes has slipped to $284.4 million. this is a firm better known for its hand bags and silk scarfs. it says revenue ves slowed and expects a slight drop in operating margin in the second half. do you remember, christine, i mean, there was that period, wasn't there, when no self-respecting woman koth out without an hermes scarf. an extraordinary period for the luxury goods company. >> i know. everyone here in asia was clamoring for the kelly, as well. and they're putting names down. you had to wait years for one bag or something. times are changing and that's what happens. polls point to a massive vick forefor japan's opposition
5:56 am
party on sunday. fresh data out of japan today shows inflation seems to dot the world's second biggest economy. and no betterment for job seekers. toyota says it will shut down a plant in california that it has shared with general motors for 25 years. the move to stop operations at the plant in california by march 31st comes a few days after toyota said it is shutting down the production line in japan. ohio ohio and other car markets have been scaling down in the past would you weeks. courtney. >> well, the revenues did rise for the first quarter and dell sees demand stabilizing. the cfo says he's optimist sales will be buying again later this year spurred in part by windows
5:57 am
new operating system 7 due out in october. in frankfurt right now, dell enjoying some nice gains, up more than 9%. look at that stock go. i'm sure we're going to see that for most of the day today as they gave some good news going forward. let's take a quick peek at the u.s. futures. we've seen a lot of green most of the morning. it looks like we're still that way right now, so hopefully we'll make it nine for nine for the dow. that's it for today's show. i'm courtney reagan here in the u.s. >> i'm ross westgate here in europe. >> and here in asia, i'm christine tan. thanks for your company here on "worldwide exchange." 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.
5:58 am
excuse me. well, you're excused. the right insurance for your ride. now, that's progressive. call or click today.
5:59 am


info Stream Only

Uploaded by TV Archive on