Skip to main content

tv   Worldwide Exchange  CNBC  September 21, 2009 4:00am-6:00am EDT

4:00 am
malaysia, mostly a weaker picture as you can see. the shanghai composite falling 3%. plenty of supply concerns given the ipo coming online. not only for the shanghai market, china actually had a pop of 28% towards the close. a lot more rational just as what the company head was telling the media today. but, of course, a lot of ipos coming on to this nasdaq and later this year to the tune of about $500 million. 13 approvals today alone, another 10 going on road shows. as you can see the hang seng market closing lower by .7%, as well. the crude tracking lower by 69 cents, 71.35, of course, the impact of the dollar trickling down to the energy complex and brent crude falling off by 78 cents and got to say hello to julia in the united states. good morning.
4:01 am
>> good morning to you. let's take a quick look at how futures are trading ahead of the market open. looks like we're heading towards a lower open. dow is down by about 30 -- i'm sorry by nearly 45 points from fair value, nasdaq and s&p 500 also pointing to a lower open. this comes on the heels in which the week the market gained over 2% and trading near 2009 highs. so really coming up against, you know, the question of whether or not we'll start to see some profit taking. let's take a quick look at the bond yields. the 10-year is down to 3.39% and the ten-year keynote is at 3.47%. that's flat, of course, we're coming up against two, five, and seven-year note auctions, $107 billion worth that are going to be sold in the coming week. and gold prices falling below $1,000 an ounce as the dollar's
4:02 am
picked up strength against the euro. they're down 700 and 998.8. joining us for market strategy is roger and the chief executive of peru's wealth management. let me begin with you. there seems to be valuation concerns right across the board in asia. have we come too far too fast? what are your thoughts? >> well, depends on your time frame, chloe, we invested long-term on behalf of our clients. and we are still very optimistic for the next two or three years because we have a massive crash last year in all sectors across the year when we had the credit crisis, lending dried up and saw some unbelievable bargains last autumn during the crash. we have had a nice bounce over the last few months, but given the steep yield curve, extremely low interest rates, these sort of valuations don't seem to
4:03 am
successive. you've got to be selective in what you buy. we're looking at companies which are trading at reasonable valuations, even today you can find some fantastic businesses in relatively stable sectors, which are trading at 15 times earnings, 1.5 book value. and given the low rates all over the world, these valuations are justified. we can't, i don't think, get valuations in sort of seven or eight or nine times earnings because back in 1974 and 1982, interest rates for significantly higher and cash and fixed income offered more competition. this time around, they are very low and that's why i think stocks are justified at current valuations by and large. >> justified at current valuations. well, roger, do you think that now is a good time to get equities? and do they have more room to rally? the f-20 -- excuse me the g-20
4:04 am
meeting and fomc meeting this week. >> i'm very worried about the politicians, because they always call things wrongly and i'm very worried about the economy, i think that's going to be dull. and for the next 18 months or so and possibly weaken again when the downturn kicks in. but i don't see that as much of a negative for the market. absolutely agree what we've got are low interest rates and we're going to keep it for as far ahead as the eye can see. and profits aren't too bad because it's not the corporate sector taking the hit in the weak economy, it's the wage earner. wage settlements are falling nearly everywhere in the world, moderating and that's providing the room for corporate profits to be satisfactory. in the context of those low interest rates and easy money. i think the market is going up. >> puru's contention is that in a low-interest rate environment we justify high valuations we have done maybe in previous periods.
4:05 am
why might we not get -- the fear is, of course, we might get some kind of inflation shock with all of the stimulus and it's going to force interest rates up and provide a big head wind. why are not concerned about that? >> because the money supply does not produce inflation unless it's associated with foster levels of activity. the japanese have had 19 years of easy money and dull economy. >> they didn't go as early and hard -- >> and the americans and the rest of us had the same thing in the 1930s. you do not get -- money supply in itself does not create inflation, only when it's associated with real activity. and if we are talking about a big increase, yeah, i'd be much more cautious about the market. it's because i don't think we have that problem that i'm optimistic about the market. >> puru, is that the point when you liquidate positions, do you share roger's view that's not going to happen for sometime?
4:06 am
>> absolutely. i think roger has it right. we don't think there's going to be huge inflation until such time when the economic activity picks up. you have to realize the central banks can throw money into the system and they can add huge amounts of bank reserves. but unless the commercial banks loan out this money and they're eager borrowers for the debt, you don't get money velocity picking up, and as long as it remains sluggish, you're not going to see inflation. however, i think at some point whenever the economy has stabilized, we are going to see a huge surge in inflation. and we are probably going to see a doubling of the standard of living or the cost of living over the next ten years or so all over the world because of this huge amount of money, which is basically inflationary. but you've got to time it proper and you have to wait until the velocity of money picks up in the private sector and that's when you'll get high commodity prices, possibly higher interest rates and further pressure on the u.s. dollar.
4:07 am
but for the next two to three years, i think we could basically muddle along here, equity markets could go up higher, and when they start raising interest rates again and when the yield curve becomes flat or inverted, that would be the time for us to reduce risk from the table. but at the moment, we are fully invested in our preferred companies. >> roger, what do you think? do you think inflation is a big concern? >> no, inflation is negative in more than half the world at the moment. and i suggest it'll probably be negative in most of the rest of the world by middle of next year. i don't see we have a particular problem on commodity prices, we certainly have no problem on pay settlements, no level of demand. the wage earner is not buying the stuff because the producer isn't desperate to get resources and labor to produce it. so i think we're going backwards here. in fact, i would say we don't have a problem in two year's time. in two year's time the cyclical
4:08 am
slowdown begins and we have two years after that of very possibly dire circumstances. i reckon the earliest you have inflation is five or six years out. >> roger, puru, plenty more to come from our two guests. other stories today. the world bank's considering a modest reduction in the use of the government money to insure its bank debt. the state-controlled banks, the news comes days after said it's looking for protection from the asset protection scheme. also says the eu should proceed with limits on bankers' bonuses even if the u.s. bank doesn't agree at the g-20 meeting in pittsburgh. he said it'd be important to have washington on board, but said european leaders would have to address the ethical problem as he called it on their own. the french minister said an
4:09 am
agreement for the g-20 to set a percentage limit would be a big victory for eu and france. in shanghai, shares of china 5.4 apiece, shared opened up 35% earlier higher than forecast but lower than the first-day ride. mcc will start trading in hong kong come thursday, the ipo held mcc raise more than $5 billion making it the second biggest ipo. mcc was the engineering contractor that helped build beijing's bird nest olympic stadium. las vegas casino company wynn plans to raise to $1.66 billion. that is a 25% bigger than its initial offer. analysts expect the ipo of that
4:10 am
in hong kong to be well received and could outperform las vegas sans potential hong kong listing at the end of the year and separately wynn posted a 33 percentumable in the profits. this is according to dow jones news wires. and moving on now, set to be investing $250 million into gd automobile according to the "wall street journal." the move will free up capital for the parent to bid for volvo. the proceeds will be used to boost the car-making capacity. goldman is expected to purchase geely's personal bonds which will give a minority stake in the car maker. president obama says he'll push world leaders at this week's g-20 segment to boost the global economy. appearing on the sunday news talk shows, the president says the u.s. is recovering even if unemployment remains high.
4:11 am
and now's the time to rebalance the world economy after years of overconsumption by the united states. and the white house is proposing a broad framework in hopes the g-20 will adopt and suggest the u.s. should cut the budget deficit. while europe should make structural changes to make itself more attractive to investment. president obama will head to new york before heading to the g-20 in pittsburgh this week. he's talking to a community college and will also appear tonight on "late show" with david letterman. you can get more news, video, and blogs on today's market moving news at cnbc.com. julia, still to come on today's programs, shares surged, but ipo is a bit hohum by chinese standards. also the recovery isn't clear from the bank of
4:12 am
international sentiment. has the market become complacent? and the eu says europe should curb banker bonuses even if the u.s. doesn't. we'll be looking ahead to the g-20 meeting.
4:13 am
4:14 am
4:15 am
okay, it's the start of a new trading week. and after two weeks of solid gains, just started this session this week a slightly negative touch. bring you up to speed where we stand right now. with us in london. we'll start off with becky. >> thank you. since friday, we saw fresh lows and highs, at least, for 2009. today they were pulling back from those levels. pretty much unchanged. but as you can see in the past couple of hours, we have lost some ground, we're currently trading low in the uk markets, almost 40%, .25%, in fact. let's take a look. oil has been a real strong gainer recently after some fines and they found some oil. which is what they like. tullot oil was down 3%.
4:16 am
plus we have citi to a hold on the back of that share price. also looking a bit weak this week. the rio tinto back a bit this week. and shares of rbs in the next few sessions. reports that rbs is thinking about the rights issue between 3 billion and 4 billion pounds. at the early stages it would seem, the management out there finding out how that would be received, shall we say, and if indeed it was to go ahead. also, media stocks have been in the spotlight today. check in shares at itv, which is a big uk commercial broadcaster. the shares of itv has been pretty weak this morning. there's been concern about some advertising environment of likes of itv. and this morning jpmorgan cut their stocks to neutral, sending
4:17 am
the shares down by 2.75%. that's enough for the uk market, how are the french markets? >> according to the "new york times," going to sell itself 20 percent stake in nbc universal that could pave the way for a possible ipo of the company early next year, the company indeed said it doesn't want to comment on the report and just indicated that the ceo has made a decision yet regarding this stake in nbc universal. we know that said in the past it would not remain a shareholder forever. the stock is trading higher. 1.3% higher, the company said it would be happy. he says suez would buy a stake. we've got also today a lot of news around edf, the company says it has no plan to sell another stake in british. reporting that edf was
4:18 am
considering to sell another 20% stake in the company. but still wanted to remain the main shareholder of british energy. they have to address the depth issue, $25 billion euro, british energy and the part of the nuclear activity of constellation in the u.s. a board meeting dedicated to the choice of the next ceo has been postponed to next week. it was supposed to take place on wednesday. but it looks like there's no agreement on who could be the next ceo of the company. now, let's have a look at the germany market. well, few companies putting the dax under pressure this monday morning. at the moment, down 1.4%. did warn on future business. so this is putting a bit of pressure on their steel makers. thyssenkrupp down about 2.4%.
4:19 am
a lot of pressure, continues to come on banks because they will be the ones listed, from the index, another one, of course, joining today and the confirmation, up about 2.8%. we h about a couple of weeks ago they're going to rejoin the dax after being out about 2.8% as bmw this morning definitely profiting from an upgrade from jpmorgan at the moment, up 0.8%. price target is around 104 euros, 82.85 is the earliest quote. also look out, that retailer is a lot in talks because of the mail-order business. the financial times talking about really quite a bit of interest surrounding the business on the back of that oe the stock was up about 6%. now it's down about 5.6%. so huge volatility for that
4:20 am
particular stock. they'll continue cutting jobs. >> thank you, patricia. well, lower slightly by about .3%, but the biggest gainer on the index, vartas up 1%. we also got positive comments from the ceo about the company's strong drug product line. let's move on the second biggest gainer, that's credit suisse. he told a newspaper he does expect to increase the bank's market share for the swiss private banking market and let's stay with the private banking market. still interested in buying private ing assets, despite reports of the opposite. also news for you coming from ubs and the irs. sources say the irs will
4:21 am
announce an extension of the debt line of the voluntary disclosure program till october 15th while the original deadline was this coming wednesday and the irs has said that so far more than 3,000 u.s. clients of swiss or other foreign bank accounts use this program and disclose their accounts. that's it from switzerland, and now adam in singapore. >> thank you very much, carline. overall, a fresh trading week, and many markets were closed. let's talk about the ones that were open to north asia. the south korean kospi coming off the six month highs after a strong week last week, huge foreign purchases of equities. and while foreign buyers continue to be buying for the 12th consecutive session, the pace has slowed down dramatically. this market has converted from advanced to emerging markets. and perhaps the other reason, we saw some strength in the korean one, this is a negative for the
4:22 am
exporter stocks, particularly the blue chips such as the samsung and electronics in terms of competitive currency. we saw some softness there, but the flip side, it does benefit companies such as costco. we did see that stock close higher. one of the biggest gainers, this is the world's fifth largest carrier. there's talk that the company's confirmed they are in talks on a potential contract to deliver iron ore. let's go to the greater china region. we did see the shanghai, volatile trade today down 3%, and closed in the afternoon session by .2% and only because we saw strength coming out of the retail stocks, the holiday. a lot of concerns about ipos coming to the market. china, of course, the latest listing in shanghai today will list in hong kong on thursday. it was up 35%, but by the end of the day closed higher by 28% and
4:23 am
still a lot more in the pipeline in terms of coming on the second board. steel stocks were also low, and there was news that the u.s. might slap on them. they're seeing rising inventories and falling prices, perhaps that was weighing down on the steel stocks in china today, as well. well, there's a smaller number of reports on the economical dar th calendar thist that doesn't make them less important. the fed meets on wednesday. today just one item of note, leading indicateders out at 10:00 a.m. new york time. americans who are used offshore bank accounts to avoid paying taxes will get a little additional time to disclose. the irs will announce they're extending a leniency program.
4:24 am
after that deadline, they could impose penalties of at least 50% for all years in which an offshore account wasn't disclosed. and that's your global stock watch. still to come on the program, asian markets, strong from china, we'll assess investor enthusiasm for new investing and the ceo of kraft is heading to london to try to persuade cadbury. is it really the start of an m&a revital? welcome to the now network. population: 49 million.
4:25 am
right now 1.2 million people are on sprint mobile broadband. 31 are streaming a sales conference from the road. eight are wearing bathrobes. two... less. - 154 people are tracking shipments on a train. - ( train whistles ) 33 are im'ing on a ferry. and 1300 are secretly checking email... - on a vacation. - hmm? ( groans ) that's happening now. america's most dependable 3g network. bringing you the first and only wireless 4g network. sprint. the now network. deaf, hard of hearing and people with speech disabilities access www.sprintrelay.com.
4:26 am
4:27 am
europe will go it alone. barroso says you should limit bankers bonuses even if the u.s. does not. i'm julia boorstin. a fed meeting and the g-20 summit. worldwide exchange, we have a few technical issues, we're trying to sort those out, but we have to reestablish that line fairly quickly. meanwhile, getting news out of stocks, retail banks outside of france of the kraft flying over this week to try to come talk to some cadbury sha
4:28 am
shareholde shareholders. maybe the capital market is just persuading to think about, okay, maybe we can come out and launch some m&a. we've been well up over 6% the last two days, today the global 300 is down, but markets in asia have been closed, japan closed most of the week, forced close today, for example. current losses, down .8% and about .25% of a loss for the french market. and in light of gains, not a huge amount. on the currency market, dollar's a little bit firm against the yen, but no real japanese traders today. euro dollar's back below the level. and sterling against the green back is below 1.62. julia, nice to have you along. how are the futures looking? >> looks like we're pointing towards a lower open. let's take a look here at how futures are looking. dow is pointing down, and in
4:29 am
fact, the futures pointed lower than half an hour ago. dow is off by about 75 points from fair value, nasdaq and s&p also pointing to a lower open, after a week when the stock market rose over 2%. we could see some profit-taking. and also we have a number of different types of data coming out this week. we'll be watching that. let's take a look at the ten-year yield. that's 3.46%, down .008. we saw some selling for treasuries friday ahead of the $107 billion in two year and seven-year option this week. >> thanks so much. the bank of england has warned against complacency once recovery picks up. global imbalances must be addressed. the central bank says the financial crisis has helped to rebalance the global economy to some degree but advises that structural changes are needed to sustain increased savings and deficit and encourage spending
4:30 am
in the surplus countries. and a hot topic of the g-20 summit this week when president obama's already said he'll push world leaders to reshape the global economy. says now is the time to rebalance it. >> we can't go back to the era where the chinese or the germans or other countries are selling to us and we're taking out home equity loans but not selling anything to them. >> how is it the challenge of rebalance the global economy? joining us the deputy head of the foreign exchange strategy. still with us roger nightingale. thanks for joining us. as the bank of england says, okay, we temporarily had a little bit of rebalancing. how important, how difficult is it going to be, though, in the years to come to achieve that? >> to be honest, massively difficult. they may see this as an opportunity for rebalancing, but
4:31 am
really it's one over crisis rather than a policy shift. and they've been talking for years and years about rebalancing, even the bank of england talking about the need to get exports going and less reliance on consumption. and it's going to be difficult for them. if you're trying to encourage savings in the uk and u.s. to rebalance away from spending, how are you going to do that when you have interest rates at zero? so, you know, as you say it needs structural changes, but sadly we tend not to get them. >> actually, roger, those in the uk and the u.s., you have and will will be paying down debt or in a sense they will be doing that, won't they? that's part of the reason we're going to have sort of fairly weak demand? >> well, yes, i didn't understand what the bank of england man said but, of course, nothing greatly new in that. >> you're not understanding the bank of england. >> yes, indeed. i don't know what he wants. does he want, actually consumers
4:32 am
here not to spend so that, in fact, the external count? because if that's what he wants, he's going to deepen the recession, possibly turn into it recession. that's a jolly good way of getting the payments. tell me, does he want that or not? >> well, no. i think that -- his point is, it's a long-term problem. and puru, it's a question whether the saver nations in asia will want to spend more domestically. whether you have the ability to do that. >> well, ross, i can tell you one thing for sure. there is no doubt in my mind that over the next decade, we're going to see rising consumption in asia and other emerging markets because this is where the savings are, the money is, unfortunately the consumers in the west leveraged themselves, and now it's pay back time. roger is absolutely right, we're going to see secular
4:33 am
deleveraging on the private balance sheets in the west. and the question is whether asians are going to buy cheap goods made in asia such as china, vietnam, or india, or are they going to import expensive goods from the west? i think it will be the former. because in today's day in age where you have globalization and free trade in every country going into the wto, the consumer has a lot of choice. and people would opt for the cheaper source for all of the goods. look at america and the uk and other parts of europe, people have been gorging on cheap products, kitchen sinks, toilets, refrigerator, air conditioners and so forth made in asia and i don't see will asia would support the west. people will pie cheaper goods made in asia. i don't think this is going to take place. i think consumption is going to go up in this part of the world for sure, but the beneficiaries are going to be the corporations which produce goods cheaply, ie the companies in china, taiwan, korea, india, and so forth.
4:34 am
>> puru, question about that free trade. we got out a report friday that reported there were 121 blatantly protectionist measures being implemented effectively by the g-20. as we head into this meeting this week, what kind of protectionism do you think we'll see implemented? and what kind of impact do you think it'll have? >> well, julia, i really hope that they don't come up with anything stupid because protectionism hasn't had anybody -- in fact, it's led to a depression and world wars and so forth. i think that protectionism would be insanity at this point because the last thing the economy needs is trade barriers. this is a time where people should get together and companies and corporations should try and get this thing off the floor. i think policy should be put in place which foster a trade. and i think any policy which goes towards embargoes and so forth and even protectionism would be a massive mistake.
4:35 am
i don't think the leaders are that stupid that they're going to do something on this scale. >> what do you think? what's your outlook on protectionism? >> well, i think, you know most economists would argue it is a mistake and will be detrimental to global growth. i think there's two other issues, as well in the context of rebalancing. one as roger mentioned, we don't have no consumption, but maybe we've had excess consumption and what we need to do is moderate that, get that better balance. in terms of whether the west benefits from asia, as well, i think another important thing to remember is that for the most part, what the west in five or ten or 15 years will be exporting to asia most likely will be services not cars, not refrigerators, not goods. this is what the west is producing, this is what it can export, this is where it can be competitive. i think that might be a crucial element of a rebalancing. that might be our export edge if you'd like. >> puru, let me pick up on this consumption story that you're talking about here in asia. you know, it is true this is
4:36 am
probably the way to go forward here in asia, but given that if you take a look at china, still the per capita spending power only about 1/10 of the levels with see in the u.s. the japanese, one of the fastest-growing societies. korea, we don't have a pick up in the consumer demand. how do you see this growth story being led by consumers actually being carried out? >> well, chloe, we've had huge economic growth in asia over the last 10 or 15 years. india has now joined in, vietnam has joined the wto. they're big exporters, and as these companies start producing more and exporting more, you get a wealth effect on the societies nominal wages go up. and if you see in india, for example, over the last four or five years, real wages have increased at the fastest clip all over the world in india and people are now consuming more. growing middle class in china
4:37 am
and in india and vietnam and other developing countries in latin america. and it is clear to me that this is where the growth will come from. maybe not in the year or two years from now, but i don't think anybody can argue when i say that in 10 or 15 years from now, consumption in asia and the other markets are going to be far greater than the west. simple economics that the people which produce and export and sell their goods and services to the whole world go home to the money and eventually the riches and people who live beyond their means and borrow and consume tomorrow's consumption today eventually have to pay back. and this is what's going on now. if you look at gdp levels or the gdp growth rates or the savings, they are much healthier in asian that in the west. >> we're going to let you go because we're going to lose your line. thanks for joining us. sorry we couldn't extend it, but roger you wanted to come back on what puru was saying?
4:38 am
>> certainly the trend in asia has been fantastic. nobody would question that. extrapolating trend was actually leads you quite often to trouble. look -- if you take economists long-term forecasts, they've nearly almost always been embarrassing. earlier, whatever, they said brazil or what was going to be one of the really big world leaders. it's never made it. they said the same about japan. japan was going to dominate the world. what happens with all of these countries is they grow for certain amount of time and then for reasons which none of us can forecast, they hit the buffers and they stop. now, it hasn't happened to china yet, but it's probably going to. the phenomenon will occur and probably india, as well. i would be reluctant to forecast an extrapolation of the straight line trends for as long as ten years. >> okay. we'll leave it there. roger and puru, sticking around, more to come from them. and let's take a look at top stories here in asia.
4:39 am
top companies, ten companies rather to be listed on china's second board will take bids from retail investors on friday. the move comes as china readies a launch of a nasdaq-style market to fund start-up. companies have received regulatory approval to list and are expected to raise just under $500 million in total although the amount is small, the analysts said it'll have a psychological impact on investors worried about a flood of new equity. and moving on to thailand now, the world's longest ranging has been treated with antibio c antibiotics and put on saline drip at a bangkok hospital according to the bureau, the 81-year-old monarch was admitted late saturday after developing a fever. we are watching the story very closely and will keep you updated of the events as they happen. and it's over to ross. >> thanks, chloe.
4:40 am
planning to cut 5% of stock costs per year till 2011, and the airline matches a previous report. companies plan to cut 15% of its administrative workforce by 2012. fighting for a shared $50 billion defense contract that the white house seems ready to ax. the company shares the engine-making responsibility for the f-35 joint strike fighter program, which is expected to replace most fighter jets currently in service. loss of the contract would be pretty devastating for the struggling defense business. shares of rolls royse today in london is a little bit lower. julia? >> thanks, ross. bank of america's board meeting this week to name dupont chairman charles holliday as a new director. the "wall street journal" says they'll also discuss options that ken lewis was charged with
4:41 am
civil fraud. andr andrew cuomo has threatened to sue. the "new york times" reports the house committee has given b of a until noon today to divulge information on the merger. in france fort b of a is trading down by 15 cents, 1.25% to 11.81. a coalition of top u.s. companies and investors is calling for a radical overhaul of executive pay. the group formed by the conference board wants to eliminate such practices as big severance payments or golden parachutes, tax refunds, or personal use of company jets. the reports by at&t and others criticizes corporate america for not reforming pay structures before the financial crisis hit. they blame that failure for causing a loss of trust in u.s. companies. and the head of disney's movie studio has resigned
4:42 am
reportedly telling his staff he no longer fits in at the entertainment giant. in a statement -- >> okay, we seem to have another technical problem there. still, don't mind looking at pictures of game section. right, chloe, are you with us? >> yes, i'm still online. >> good. great. >> okay. let's talk about china's ipos today. china reportedly stopped granting new licenses to banks looking to invest in ipos via offline subscriptions. the move is to cool a heated market there. earlier today, medlergica corp. raised money, the hong kong listing will begin on thursday. and more for the red hot --
4:43 am
joining us from hong kong, great to see you again. first of all, the interesting thing that you saw with china medilurgical, it finished higher by 28%. what does this tell us based on your observations today? >> actually, if you look back, all of those that have been launch after they assume the ipo has been doing quite well, you know, most of the others actually went up even higher. if you look at some of the smaller caps. the exception is china construction being a big issue. at the end it actually ended up quite a bit. so it's not surprise again the liquidity in the system. and i think investors in the mainland are actually looking at ipo very different from the secondary market investing. this is rial kind of a little bit like a lottery really. you manage to actually get it, the allocation obviously at the very beginning.
4:44 am
so far, all of these 20 odd companies you listing, you'd never lose money, at least what we've been seeing. that's sort of reenforcing their belief that this is the game, you know, at the moment. >> right. you just said there is plenty of liquidity, but there's this new wire saying that china is starting to limit financial companies' access to ipo investments, there seems to be a little bit of a concern. and if you take a look at what happened in the market activity today, a lot of concern as to whether a stream of ipos comes on to the nasdaq-style board could divert some of the money going into existing equities. what do you think of that? >> right. you're talking about different tiers in the market. if you're talking about financial institutions, some of the bigger money going into the bigger caps, like probably the one today. that you managed you're talking about companies that can go as small as $5 million. so i think it's actually
4:45 am
different tiers of market we're talking about here. and i won't be surprised that really the launches of those new companies. it's going to bring in even, you know, let's say a bigger hype into the whole thing, especially for the individuals. for the bigger caps, the interest is actually for the stocks to be in the hands of some of the stronger holders, be it the institutions, be it some of the other ones. so i can imagine why they want to regulate that a little bit to make sure that really the stocks are not in the hands of the punters eventually. i don't see that being such a big problem for the liquidity. look at all of those that have been listed so far. and now they're talking about probably another 80 up to 100 companies being listed together with this export until the end of the year. so it's still to be seen, but i think the confidence in the market is still very high at the moment. >> daniel, julia boorstin in the united states, here we're
4:46 am
expecting to see about eight small ipos this week, this will be the biggest ipo week since 2007. do you think any of that international money will flow into the ipos here in the u.s.? >> if you're talking about chinese money going out, as you know this well, most of them are till still pretty much regulated by qdi and all that. but actually it was just in beijing last week some of the major institutions and i can really tell you that the interest of investing outside of the country is, in fact, very high. and, you know, i won't be surprised that some of the institutional money or some of those, actually, you know, managed to have the approval to go out of the country, out of the united states or the other developed markets. my feeling i got from them is they can't get enough at the moment and they would like to see that diversification going much faster. so yes, i think there'll be a lot of interest coming up from china. >> interesting stuff over there,
4:47 am
thank you very much for your time today. managing director, tripod management limited. now, you can get plenty of ipo news and more at cnbc's market moving news site at cnbc.com. and still to come, we'll check in on what's happening on the currency market sterling harsh words for the bank of england. dollars are recovering a little bit ahead of the fed meeting in g-20. plenty more to come after this. um bill--
4:48 am
why is dick butkus here? i hired him to speak. a lot of fortune 500 companies use him. but-- i'm your only employee. we're gonna start using fedex to ship globally-- that means billions of potential customers. we're gonna be huge. good morning! you know business is a lot like football... i just don't understand... i'm sorry dick butkus.
4:49 am
(announcer) we understand.
4:50 am
okay. on the currency market today, starting to be a little bit under the cost. the bank of england, talking about the rebalancing in sterling, the long-term sustainable rates may have changed a little bit. sterling down 86. some caution ahead of that. joining us for more, jamie jemson, the corporate currency -- jamie, thank you so much for joining us. is there a little cautious ahead of the fed? they've come out and told us we're going to have rates low for sometime. is there a sense we've got to tread cautiously in case there's some comment suggesting that might not be the case? >> me personally, i don't really see any change to the fed.
4:51 am
they have over the last few months really stated rates are going to need to be remain low for a long period of time to be accommodated. the thing about people are going to be keeping an eye out for, if there's any change to what they're going to be doing is the asset program in a moment and if they're going to be withdrawing. and that's what the market's really speculating on at the moment. we've seen conditions improving in the u.s. over the last couple of months. the leading indicators, which is true for the first consecutive month in a row. and if we do see a move away and withdraw, then the dollar can strengthen as it becomes a better process. >> jamie, my question to you is in terms of the dollar class versus the yen, currently the dollar staging a bit of a comeback. but what about the libor yield rate differential? and also the fiscal half year-end repatriations that we're going to see? shouldn't that give a bit of weight to the japanese yen once
4:52 am
again? >> i'm still relatively bearish on the yen if i'm being honest. if you look at fundamentally the yen. fundamentally it's still very poor. if you're trying to look at going forward from here, the japanese, the only g-10 country in 2010 going to make a move on the base rates. i doe so the yen weakening, probably up 98 cents towards 1.43 level against the euro. to me the japanese yen is a particularly good prospect at the moment. >> jamie, we just saw the news that iran plans to shift the currency reserves from dollars to euros, how does that fit in with overall trends you're seeing? and what do you expect moving forward? are we going to see more of this? >> well, we've seen this continue over the last couple of weeks. we've heard this wordy verseification away from the dollar. the euro's always the currency that's going to benefit the most from diversification. but we've seen it into the who
4:53 am
he would euros currency. really as the dollar gets used as a carry trade item. but, going away from that, diversification is always going to benefit the euro when you're moving away from the dollar. >> okay. thanks for joining us. i said sterling was a bit weaker again today, as well. let's come back to you for a second. what do you think the bank of england's getting at here. they're not trying to get an export. anyone can get exports going -- that's not going to happen in that sense is it? >> i don't know what the bank of england wants. the uk economy is unbalanced relative to where it was. it's not so much that the consumer has increased an allegation of resources greatly. it's that the public sector has. and the thing that has to happen is we need 10%, 15%, 20% reduction in the allocation of resources to the public sector and some of had those we'd like
4:54 am
to see released for export. everything would be sort of fine in that situation. on the currency side, i always say don't bother with actually trying to make the currency what you want it to be. get the economy right. once the economy's right, then the currency's fine. >> and on that point, puru, what do you think about chinese diversificati diversification? >> well, over the next few years, i suspect, ross, more and more money by the chinese would be invested in strategic assets. for the last few years, they've been holding treasuries. and i suspect they'll continue to do so because they desperately need consumption in america. so this game or this monopoly game may continue for many, many years. however, i think the rate of the purchase of treasuries will slow down henceforth. i suspect the chinese are painfully aware of the resource scarcity developing all over the world. and if you see what they've been doing over the past couple of years during this recession when
4:55 am
prices have been weak, they've been gobbling up all of the resources they can find. they're striking deals in africa for oil, they've been buying metals, striking deals with australian companies. so i suspect over the next few years, they're going to try to secure their share of natural resources. the chinese government has also struck a deal giving them money for the development of their offshore oil fields in return for a fixed supply of oil. they're not even getting a fixed price. they're just demanding that they should be able to get a fixed amount of barrels of oil a day in return for interest in the loan. this shows you that the world faces a shortage of scarcity of commodities and natural resources and the chinese are going to buy more and more of that. >> puru, thanks for that. of puru sa. coming up, we celebrate the
4:56 am
first birthday of t.a.r.p. as it was one year ago today that hank paulson submitted his $700 billion request. stay tuned.
4:57 am
4:58 am
hello, ooirm i'm chloe cho
4:59 am
in asia. mcc closes up 28%, in modest by chinese standards. and here in europe, we'll go it alone, the commission president says the eu should limit bankers bonuses even if the u.s. doesn't. and i'm julia boorstin in the u.s., investors bombarded with data and events this week including reports on housing and the consumer. a fed meeting and the g-20 summit. if you're just joining us here in the united states, welcome to the start of your global day with "worldwide exchange" broadcast live from the u.s., asia, and europe. in the u.s., let's take a look at how futures are pointing, looking like a lower open. the dow down by about 77 points from fair value, nasdaq, and s&p also pointing to a lower open. this, of course, comes on the heels of a week where the markets gain over 2%. dow, s&p, and nasdaq gaining over 2%. we'll see where we're headed today.
5:00 am
let's take a quick look at the bond yields. the ten he have year bund is down to 3.3%, and the ten-year is down .008. ross, over to you. >> thanks, julia. softer today, a number of markets closed in asia that we'll detail, but we're down 27 points on the global 300. two hours into the session, just hit the low point for european stock markets, .8%, down 1.2, but of course we've been up over 6.5% in the last two trading weeks for these markets. resources, chemicals, construction, banks the weaker sectors, defensive end is up. on the currency market, dollar is up across the board, up 92 against the yen, with the fed meeting coming up, a little bit of caution ahead of those. euro dollar, back below 1.47, sterling lower suggesting the long-term exchange rate for the pound may have changed because of imbalances.
5:01 am
chloe? well, ross, of course, a lot of investors will be looking out for those key events that you mentioned, the fomc meeting and the g-20. as far as the action is concerned, muted many of the key markets. japan, india, along with others closed for public holidays. in terms of the key event, of course, china plenty of concerns about ipos coming online, especially on the nasdaq. a lot of people think that could be a bit of a psychological factor, the shanghai composite actually traded lower as much as 3% before closing higher by about .1%. retailers there especially ahead of the week-longdy bragss last week offered cushion to market, as well. the hang seng lower. joined the market status today, it is did close down about .25% but trading at the highs of the
5:02 am
market. turning to the energy complex, of course, the strength of the dollar, a little bit of comeback that we're seeing seems to be weighing on the nymex. crude futures trading lower by about $1.25 or $1.29. and as far as rent is concerned, getting even lower, back below that $70 a barrel mark. well, our guest host today is the chief economist and head of strategy the ecu group. kit, thanks so much for joining us. >> thank you, good morning. >> good morning. so the big question is, what kind of rebound do you expect to see? what's your outlook for the rest of the year and into 2010? >> i'm still relatively optimistic about the rebound in asset markets and economic activity. there's a lot of caution to say, look, this might not last, we've got to keep our foot on the gas,
5:03 am
we've got to keep money flowing into it, but the result of that is, you know, we'll have a good third quarter, probably a fourth quarter. i think this can be reasonably robust. simply because policy makers cannot afford to run risks with the double dip, to run risks that this isn't self-sustaining once policy stimulus is removed. i'm pretty optimistic over the next, let's call it six to even nine months that this can be better than people seem to want to say. >> now, you point out credit has had a huge rally and you think the credit markets are mature. where is the opportunity? where is there yet to see growth? >> i think credit markets which were the problem, here we are a year on from top and we've seen a lot of buying coming into that space from policy makers. in a sense, credit benefit was the -- it was priced for armageddon for the end of the world as we knew it. and the fact that the world is surviving is good enough for
5:04 am
corporate bonds. corporate bonds don't need massive growth. they've done it like equities in that sense, they just need companies to be able to pay interest and in an orderly fashion. so corporate bonds get more boring, but still attractive. where, i think the foot stays on the gas for the policy makers trying to drive it is looking for further equity gains, further gains in emerging equities, further gains in particular in hard assets. so gold, i think, is going to have another lift from this whole story about how we can change global financial architecture and some of the discussion that may just start at grk-20. i think that's where the next piece of reinflation goes on. but the underlying theme is we're going to see monetary reflation continue until this either alleviated or materializes, of course. >> this is chloe in asia. if you are as optimistic about
5:05 am
equities and the asset classes, what about this discussion that's going to creep up g-20? bankers bonuses. and if they do decide on some sort of measure to curve the pay levels, is that going to bring some of the rally we saw in banks, is that going to take the steam out? >> if it does, on bonuses, at least, then i would see that as misplaced. if you don't pay the starts, you'll have to pay the shareholders instead. so the shareholders may feel happy about that. i don't believe paying bankers a lot of money or less money has very much impact on their desire to make as much money for the company as possible. and the conditions right now are very good for banks to make money. what's more difficult for the sector long-term is the desire to regulate more, to require much more capital to be put aside for a rainy day and possibly to shrink the size of the biggest banks because the global economy's now so synchronized that the correlation between asset markets and geographies is so
5:06 am
high that big banks are no longer diversifying risks, they're seeing bigger risks. that's the long-term danger. but right now the concerns for the financial sector to be able to make money are pretty good. >> and how much of a risk -- you talk about the reflation. how much risk is the earnings? that seems like the biggest hurdle to get through in the next month or so. >> yeah, i think right now we've had an absolutely flabber gassing rally. we are going to hit some speed bumps. i think there are only speed bumps as we continue to see policy makers so intent on keeping this going. so i'm not -- i'm bothered this week. you have a g-20 meeting, the possibility the fed might say anything other than we're keeping every possibility open, you get speed bumps. you know, if you look at what people are expecting from earnings beyond this quarter in
5:07 am
general, there's more earnings benefit from the fallen interest rates, from easier funding cuts. more benefit from a recovery in m&a than the equity markets than there is from concerns of oh, there isn't enough growth to go with it. so a bubble, a speed bump, possibly this next earnings season the first one where we have seen the market run on. and bigger speed bump than some. but i think the problems for the middle of next year are not for now. >> you're sticking around. you're with us for most of the rest of the show. julia? coming up on "worldwide exchange," uk banks seem to be doing everything they can to exit the asset protection scheme. does that mean the crisis is over? stay tuned for now. we're back right after the break. q
5:08 am
5:09 am
5:10 am
welcome back to worldwide exchange. this weekend marked the one-year anniversary of the incarnation of hank paulson's t.a.r.p. the then secretary of the treasury asked congress for $700 billion to formed the troubled asset relief program. the aim was to buy up toxic products causing massive write-downs. congress initially disapproved
5:11 am
of the proposal because of the limited oversight. on this day one year ago also marks the death of the investment bank goldman sachs and morgan stanley were the last standing investment banks. and it was one year ago today that they allowed them to become bank holding companies, the ability to take and hold deposits offered larger capital base and therefore more security. this weekend, also marks the anniversary of the barclay's by lehman brothers core business for around $1.3 billion. one year on, it's unclear how the banking world is fairing. in signs it could be turning up, considering $6.5 billion rights issue that would reduce its participation in the british government's asset protection scheme and days after that lloyd's group is thinking along similar lines. but the head of the international banking sentiments is pessimistic, he says the market rebound should not lull
5:12 am
the world into a state of complacency. joining us -- joining myself in the studio in london, the director at tower group. would it be wrong to assume that things are turned up for the better? >> i think we can say they're not going to get worse. but i think the problem with the financial services industry is that the status quo is actually in negative position. we have to have the economy in a growth position for the banks to begin recovery. if they stay stagnant, they're going to continue to lose. >> they've got huge margins. they're borrowing nothing and charging extortion of rates. >> that's the good part of it. there's no new business. hopefully we're going to get more m&a activity, more investment banking activity, but the retail environment has actually gone down. but they still have the infrastructure costs and they have to maintain those costs when the recovery does occur and
5:13 am
that's why it's problematic for them. >> we've got these reports, rbs is looking at potentially exploring the shareholders whether they should have a new issue to get out of the scheme. i should ask you both this, do you think the market would welcome, you know, would you want to stump up to help rbs do that? >> i think at the right price the market is looking for, you know, if the market is looking to buy the reinflation trade or at least a lot of people have been less behind. so if someone comes up and says we want to raise capital at a discounted price, yeah. i think those people who will participate in that. >> is that the right reason? to raise capital? to pay down participation and asset protection? >> to get the government out of your house. >> only partially out of your hair. these organizations both rbs and lloyd have spent the past year and a half reducing their capacity, making sure they're focussed on the corps. they're actually extremely and good effective bapgs today and at enormously low rates and hsbc
5:14 am
70% over the last year. if we get anywhere near that rate, it's a great buy opportunity. >> ralph, we heard kit's comment on this. i want to hear what you think. as we head into this g-20 meeting later this week, do you think we'll see some real regulation of bonuses? and do you think we'll see enough of a compromise that there are actually some rules enacted? >> i think we may see some compromise in terms of board level bonuses. i think that's probably the extent of the g-20 can go to. but i don't believe that every country in the -- every one of the g-20 countries is going to abide by this simply because there's some parts of the world that simply don't want to put any restrictions and they want to continue to bring in the talent. i don't think we're going to have one consensus, some kind of statement that says we all agree to look into it and that's a problem. >> but that does sound like a real problem. how will you really regulate bonuses if there's only a handful of countries, only the eu that has really agreed to
5:15 am
rules? isn't that sort of making it not really worth it? kit, what do you think? >> i'm not sure the problem is bankers bonuses. the issue is regulating the financial system. that the banks got to be very big in an attempt to diversify their risk, the risk got more correlated because the global economy globalized, and the policy makers gave us a period where monetary policy was far too common. and regulators were asleep at the wheel as far as i can see. so bankers bonuses are probably, you know, a topic that will remain in every newspaper and news wire for a long time. but the core issue is bank regulation. bank capital regulation, and probably the size of the biggest global banks. that's the key issue for me. >> well, this is chloe in singapore, what do you think about the issue of toxic assets? the issue never got fully resolved. we have problem with pricing, also problems what to do with them. as far as you're concerned, as
5:16 am
we see the banks actually starting to pick up and actually starting to make some profits, is that something that's going to come back and haunt us again? >> yeah, i don't think that problem's ever gone away. i don't think we have a solution to that problem yet. i think what we have are banks better equipped to deal with it and that's a positive thing. the toxic assets are still there. let's keep in mind a lot are real estate based and as the economy comes back and real estate comes back, those toxic assets essentially cease to become toxic assets and become assets. time will deal with this far more than any regulation cap. >> well, kit, what do you think? we've been talking about how commercial real estate could be the next big shoe to drop. do you think the issue of bank toxic assets will come back and haunt us again today? and that could be a way to another leg down? >> it's haunting us every day. the banks are able to make money on their investment banking activities and any lending they do at the moment. so they're making money day today, but they have a huge pile of -- let's not call them toxic
5:17 am
assets, let's call them bad loans to keep it relatively simple. as was pointed out, the best thing for a bad loan is an economic recovery. and you can sell it. you can spin it off or wait for time to run down. but that is still there. and that's why policy makers are doing pretty much the only thing they can do, which is to keep their feet flat, flat down on the pedal, hard on, to keep monetary inflation in place and help this problem go away. and none of them are finding the all clear until the problem does go away. and commercial real estate of -- >> we can take all of these bad loans, repackage them, right? how's that for an idea? there'll be somebody out there who hasn't heard what's been going on. you're sticking around, thanks very much for joining us. julia? and don't forget you can find more of our one-year later conch
5:18 am
coverage of the month that shook the world on cnbc.com. >> ross, could be a pretty good portfolio manager there. is it the end of bank bonuses as we know them? the issue is high on the agenda on this week's g-20. we'd love to hear from you. drop us a line. if the eu can convince obama to change his mind, should europe go it alone? e-mail us at worldwide@cnbc.com. welcome to the now network t now five coworkers
5:19 am
are working from the road using a mifi-- a mobile hotspot that provides up to five shared wi-fi connections. two are downloading the final final revised final presentation. - one just got an email. - woman: what?! hmph. it's being revised again. the copilot is on mapquest. and tom is streaming meeting psych-up music - from meltedmetal.com. - ( heavy metal music playing ) that's happening now with the new mifi from sprint-- the mobile hotspot that fits in your pocket. sprint. the now network. deaf, hard-of-hearing, and people with speech disabilities access www.sprintrelay.com.
5:20 am
so now we've turned her toffee into a business. my goal was to take an idea and make it happen. i'm janet long and i formed my toffee company through legalzoom. i never really thought i would make money doing what i love. robert shapiro: we created legalzoom to help people start their business and launch their dreams. go to legalzoom.com today and make your business dream a reality. at legalzoom.com we put the law on your side.
5:21 am
okay. ahead of the u.s. open a little bit later, global equities are slightly weaker, but we've been on a good run this week. we're in london. >> yes, we have been good recently. and friday's close for the uk market saw fresh closing attitude in 2009. today, though, going back, they were pretty much unchanged really, but we still lost some ground since then. .8%, about 41 points lower. let's check on some of the movers. markets declining today. rbs is losing ground, almost 5% lower, reports that rbs could be putting out the feelers over a rights issue between 3 billion
5:22 am
and 4 billion pounds. the shares are reacting. also tullow oil is losing, they have had a good run-up recently. and major signs and as a result of the run-up we've seen in the price there, citi causing the rating on the stocks to hold to the shares of that company down. how's it going in france? >> start off with the french market today. the banks are driving were up. the finance ministers say over the weekend that the u.s. proposal would be unfair for french and europe banks because they have a lower risk profile than the u.s. banks. also expecting the french banks to be required to shore up their capital. and the other banks are trading lower right now. we've got edf flat almost on the french market after the company said it has no plan to sell another stake in british.
5:23 am
reporting that edf was considering to sell another 20% of british energy to reduce its debt level. and we've got almost flat the company doesn't want to come in on the report from the "new york times" saying it would sell its 20% stake in nbc universal. let's take a look at the german market. >> thank you very much indeed, stephane. the volumes look quite healthy, as well, only three stocks in positive at this juncture, up about 2.8%, today joining the main index, bmw and sap in positive territory, s.a.p. is working to regain renewal of a contract they have. knf under pressure, also watch out for solar stocks tlr, there couple of days conference with regards to the solar energy infrastructure sector in
5:24 am
general. and we just heard from solar, which is the main player that they're actually running at full capacity. and also said that here the government subsidies should start to pace out, prices could come down for the consumers helping the german industry to kind of back the trend from a very strong asian competitiveness. still no word right now. 3% over to asia, and adam now. well, overall, a weak session for the asian market, at least for those that were open. but one of them, of course, managed to close in the green, not without volatility. and that was the shanghai composite, closing up by .2%, the market was fairly negative. the number of winners to losers about two to one there. a lot of concern about money flooding into ipo markets. the metallurgical corps, $5 billion ipo in terms of shanghai
5:25 am
and hong kong managed to gain 28%, but coming off the morning highs and there's certainly a lot more in the pipeline. 13 companies have been approved. and the chinese security looking at another 11. fuel stocks continue to be weak. firms are cutting back production because of rising inventories and falling prices. but did see strength. apparently the chinese regulators are loosening the restrictions, allowing more to travel to gamble a fairly big week to the golden days in china. on that note, back to the u.s. with julia. >> thanks so much, adam. well, there's a smaller number of reports on the economical d calendar this weekt that doesn't make them less important. and the fed meets on wednesday. today there's just one item of note. leading indicators out at 10:00 a.m. new york time. their forecasts have risen by .7% last month.
5:26 am
americans have using offshore bank accounts will get a little additional time to voluntarily disclose their assets. the irs will announce today it's extending a leniency program until october 15th. after that deadline, the irs could impose penalties of at least 50% for all years in which an offshore account wasn't disclosed and that's your global stock watch. chloe? and coming up on worldwide exchange, it's been one year since the death of the investment bank model. could this week be the death of banker bonuses? it'll be if the european union gets its way at the pittsburgh g-20 summit. stay tuned to find out if obama will succumb to european pressure.
5:27 am
5:28 am
it's 30 minutes past the hour. here are the top business stories from around the world. in the u.s., investors will be bombarded with data and events this week, including reports on housing and the consumer, a fed meeting, and the g-20 summit. in europe, we'll go it alone.
5:29 am
the eu should limit banker bonuses even if the u.s. doesn't. and here in asia, the second largest ipo this year, china metallurgical closes 28%, modest by chinese standards. let's take a quick look at how futures are headed before the market close. they are pointed down. looks like increasingly down over the course of the morning. the dow pointing to 77 points below fair value, nasdaq and s&p 500 also pointing to a lower open. this, of course, comes on the heels of a week when all three indexes gained at least 2%. let's take a look at the ten-year t bill at 3.16%. we're going to be seeing the treasuries coming up this week. >> julia, resources, banks, construction, financial services, all weaker here in europe with 3% gains last week,
5:30 am
3% the week before that. 5,130, .8%, dax -- a little bit of caution, i guess, ahead of the fed meeting and the g-20 at the end of it. dollar/yen, up 92 against the yen, euro dollar back 1.47. also signals from the bank of england, which is questioning what the long-term sort of exchange rate for sterling should be, chloe. well, plenty of cautious sentiment out in asia given a lot of the markets were testing fresh highs for the year. so not surprising to see the slight weaker picture that we see. you can see we have muted activity given that japan, india, and indonesia and other markets closed for public holidays. what's interesting to note that the shanghai had a struggling day today. it skidded lower as much as 3%.
5:31 am
we, of course, had the world's second largest ipo china meth lunch call. given the approving 13 ipos for the nasdaq. we're looking at a volume of about $500 million, but going forward, a lot of investors questioning, perhaps, this sorts of ipos could divert money from existing equities to this smaller type ipo. and turning to the energy complex. take a look at how nymex pulling back by about $1.26 at this moment, below $71 per barrel and brent lower below that $70 per barrel level. and julia? >> thanks so much, chloe. joining us for market strategy is don, chief investment officer
5:32 am
of landover capital management. and still with us, chief economist and head of strategy at ecu group. we have the report on leading indicators coming out today. expected to be higher. we've seen a lot of good data lately. what do you think people will be watching this week? do you think that today's information will be as important as the housing numbers or what we're hearing from the fed later this week? >> i suspect so, yes. but i'm looking at more from an investment point of view, not in terms of the fundamentals and the economic realities of what is happening. but from the market point of view, i think that we could be subject to a pullback. and so any number that comes out this week will be looked at in terms of giving a reason or rational for taking some chips off the table. >> we are so close to that key 10,000 mark, what do you anticipate to happen? and we haven't been here in nearly a year. do you think the pullback is going to come sooner or later? >> the first pullback that will
5:33 am
come back will not be a meaningful one. i think it'll bring some doubt into the market. we're looking at 1,060 on the dow and 9,740 on the dow, 1060 on the s&p, and 2, 150 on the nasdaq. all of those would have to fail and we'd start to close below before we'd feel the pullback would be meaningful. >> caught these sort of speed bumps. lets get through this week and we've gone the earnings season, but nothing's going to be too detrimental to a longer rally because it's a reinflation trade. do you agree with that? >> absolutely. got it right. we suspect any pullback will continue to be viewed as a buying opportunity. we don't see much of a concern for the market point of view. for the rest of this year, we'll go through a couple of speed bumps, but over the full quarter, that's all they'll be. >> kit, what is the risk to that? where's the biggest risk for you
5:34 am
changing your opinion on that? >> i think there are two theorys. one is the economy rolls over right here right now as opposed to slows down in the middle of next year. and i think that's a small risk and all of the data suggests we're going to go on and see momentum building. the bigger risk is what's happening in the government bond market. the surprise of september if you like is that we're seeing so much government debt absorb so easily at such low yields simply because we know that interest rates are staying low for a very long time. but you look at this and think can we go on seeing these auctions even after everything we know? inflation -- >> aren't they been absorbed -- there's just a lot of cash being pumped out there. and if your institution's being given cash or the fed of the bank of england, take your share of government bonds along with everything else. >> yes, but your concern might be, i don't know, if kraft turns up and wants to buy cadbury, you might buy the debt they issue.
5:35 am
but if you think all of this is going to undermine the dollar, you might buy somebody else's debt, and if you think this will be inflationary, you might buy gold. but reinflation relies on keeping not just feds very low, but the whole interest rate market at the very worst not with yields breaking higher. >> dodge, this is chloe here in ariel sharon yachsia asia, airlines, casinos, hotels, seems like you are pretty much thinking the consumers are going to be coming back and spending into these leisure-related industries. but given the unemployment rate is still near 10%, is that going to happen? >> exactly, chloe. you've hit the nail right on the head. from a fundamental point of view, there very little support for this. but what we're looking at is the action, the activity in the stocks. momentum in all of those sectors and we're seeing buying with
5:36 am
the -- and i suspect what's happening is the anticipation of better news from a fundamental point of view next year. and so we're anticipating a recovery in retail and the consumer. i'm not sure i buy into that. but from an investment point of view, i have to go on the long side of those sectors because those are the ones that are moving. >> kit, do you agree with that? even though the demand picture, even though the unemployment rates are high on both sides of the pond that it is -- is it now time to jump into these? casinos, airlines, hotels, oil-related stocks? >> sounds like a recommendation to buy funds, at least emotionally that appeals to me. but, you know, we do need economic recovery to become more self-sustaining. we need employment growth to come back next year. but you can't knock the recovery because at the very beginning of economic recovery there's no employment creation. employment is a lagging indic e indicator and has been since the dawn of time. you can't say we can't have a
5:37 am
recovery without employment growth because that's like, you know, that's like saying i can't have a cart without a horse. absolutely. let's get the things in the right order. this recovery, you know, stock building, low rates, reflation of the monetary sector has to lead to employment creation to justify a better in the consumer stocks now. but my bet is the people who think this all runs out of steam in fundamental terms after one quarter or two quarters at most, they'll be wrong by several quarters. >> dodge, what's your view? i head hate to use the phrase, but seems we're in this temporary goldie locks phrase where they're reacting to lagging data and market participants are looking ahead to the future. where for the moment, you know, there's no reason not to take on more risk. >> exactly right. kit's looking at some fundamental points of view. but i'm looking at what the market's reaction to the
5:38 am
fundamental reality. right now we are in that period. it would be very difficult for any fundamental news to come out now that would shake the confidence longer term of those who are investing in the market now. and that's really what we're talking. we're talking about sentiment and momentum right now, not about the realities of fundamentals. >> we're going to have to leave it there for now, but you're both sticking around. we'll be back speaking with both of you soon. could golden parachutes come crashing to the ground? top u.s. firms are calling for an overhaul of corporate pay structures. we'll update you on that story right after the break. before that, here's how the u.s. futures are trading right now. remember the anticipation of hearing the ice cream truck?
5:39 am
5:40 am
in poland, cargill borrowed the idea... for something quite different. small polish farms had difficulty getting... affordable feed for their smaller herds of animals. so cargill created a way to bring the feed... directly to them... on musical delivery trucks, selling a few bags per visit. ( dog barks, horse neighs ) keeping the small farmers competitive, and their animals happier.
5:41 am
this is how cargill works with customers. welcome back to cnbc's worldwide exchange. here's some of the top stories we're watching from around the world. bank of america's board meets today to reportedly name charles holliday as a new director. the "wall street journal" says they'll also discuss options as ceo ken lewis is charged with civil fraud, new york attorney general has threatened to sue management over a lack of
5:42 am
disclosure about the bank's merger with merrill lynch. the "new york times" reports that the house oversight committee has given b of a until noon today to divulge information on the merger including when it became aware of merrill's mounting losses. in frankfort, b of a trading down 16 cents, about 1.3% at 11.80. in a coalition of top u.s. companies and investors is calling for a radical overhaul of executive pay. the group formed by the conference board wants to eliminate practices so-called golden parachutes, tax refunds, and personal use of company jets. the report, which is backed by at&t, cisco, and hewlett-packard and others criticizes for not reforming pay structures before the financial crisis hit. they blame that failure for causing a loss of trust in u.s. companies. the european commission president said the eu should proceed with limits on bankers bonuses, even if the u.s. doesn't agree at the g-20
5:43 am
meeting this week. speaking on the french television, said it would be important to have washington on board. but said european leaders would have to address what he called the ethical problem on their own if necessary. french finance minister said earlier that agreement by the g-20 to set a percentage limit on bonuses will be a big victory for the eu as well as france. over in shanghai, shares of china metallurgical corps ended up 5.42, well shares that enjoyed a jump at the open, higher than forecast but lower than the first day jump of 60% by other chinese listed companies this year. mcc will start trading in hong kong come thursday, the ipo helped mcc raise more than $5 billion both in hong kong and shanghai, making it the second biggest ipo this year. china metallurgical was the contractor that helped build the
5:44 am
birds nest olympic stadium. the final thought from kit. can we have him talk about the currency market? the dollar up a bit today. maybe it was a bit over going into the fed meeting this week. what's your view, though? there's a universal bearishness about the dollar which makes me twitchy. >> i think the universality. i think as long as monetary reinflation leads to a long period of low interest rates that's necessary to get us out of this hole, that that is very bearish for the dollar over the medium term. >> to be bearish, you've got to buy something else, right? you've got to say i'm going to sell the dollar, you know, you've got to buy another currency. and everything's just as ugly as each other, is isn't it? >> that's why gold, for example, benefits but gold proxies the australian dollar. the canadian dollar may well look pretty attractive. i'd rather have the euro in the
5:45 am
dollar in that sense on a 12-month view. and beaten up, though it is, and anyone who wants to get to the sleepies should read the bank of england's piece this morning which was pretty dry, beaten up though it is, i'd rather own the pound than the dollar on a medium-term view. >> kit, good to see you. thanks so much. julia? up next, looking at the trading day ahead on wall street. we're back right after the break. 90s slacker hip-hop. ♪ that can strain your relationships and hurt yourody 'cause we'pride ♪ng a ride ♪ ♪ it's the credit roller coaster ♪ ♪ and as you can see it kinda bites! ♪ ♪ so sing the lyrics with me: ♪ when your debt goes up your score goes down ♪ ♪ when you pay a little off it goes the other way 'round ♪ ♪ it's just the same for everybody, every boy and girl ♪ ♪ the credit roller coaster makes you wanna hurl ♪ ♪ so throw your hands in the air, and wave 'em around ♪ ♪ like a wanna-be frat boy trying to get down ♪
5:46 am
♪ then bring 'em right back to where your laptop's at... ♪ ♪ log on to free credit report dot com - stat! ♪ vo: free credit score and report with enrollment in triple advantage.
5:47 am
joining us to preview the trading day on wall street is dodge dorland, chief investment officer of landover. while nobody expects any rate moves for the foreseeable future, it does seem there'll be a lo of attention on the commentary, what the balance is between the optimism and sort of a caution. what are you expecting to hear?
5:48 am
and how do you expect the market's response? >> whatever is said, first of all, we do not expect a significant surprise in the words that are added to the actual event. what we're watching, though, is, for example, kit was talking about the u.s. dollar being in longer term bearish move. we agree with that, but short-term, the u.s. dollar may have reached a bottom and started to move up. that would create some negative pressure on the s&p and the dow because we do have a correlation between the two. so we suspect that what will come out on wednesday will help us get the pullback that we all have been waiting for. the real issue, will there be enough of a surprise to the downside to make it more significant than just a pullback? we don't think so. >> well, aside from the fomc meeting, what about the whole host of economic data. new and existing home sales, the weekly jobless claims, what are you focusing your attention on most? >> the reaction to all of those
5:49 am
as a basket. we do not expect to have any significantly negative surprises. there's a lot of momentum in our market, chloe, we suspect that momentum will continue and that unless we break those levels i was discussing before, any kind of pullback will be viewed as a buying opportunity. >> you got any fears ahead of the g-20? i guess they're just going to rubber stamp the finance minister said, but there is this protectionism fear particularly between the u.s. and china? >> yes, ross, i do have a fear of that. and that's a personal point of view, and i do not expect that fear to have much significance in the framework. plus there's very little to derail us for now. i suspect that the real fear will come in in the first quarter of next year. and that's when the market will have to be supported by proof in the fundamentals. >> dodge, looking forward
5:50 am
towards next month, the fed is going to end one of the key bond-buying programs. who, if anyone is going to step in to fill that void? >> i don't know. that's a good question. i really don't have an answer for you. but that's in the future and the perception is that the answer will come in time. and therefore, we do not view that as a significant concern at this point. but it is a question that needs to be answered. >> good to see you, have a good day and a good week. chief investment officer. not long to go until "squawk box." hey, becky. >> hey, good morning, ross. good morning, everybody. larry summers says he's still concerned about the state of commercial real estate. so just how shaky is the foundation right now? our guest host today is daniel tishman. he'll be joining us at 7:00 a.m. eastern time. and coming up at 8:00 a.m., the "squawk" financial summit returning.
5:51 am
the bond king pimco's bill gross, head for the world's largest money management firm. well, he's not but, bob doll is, he's going to be joining us too. everything on these two gentlemen. it's perfect time to catch up with them with gold over 1,000 and the dow topping 9,800. plus reaction to president obama's weekend health care reform push from former health and human services secretary tommy thompson. also ed rendell who, by the way, is about ready to play host to the g-20 summit in pittsburgh later this week. "squawk box" is coming up at the top of the hour, we will see you then. >> and back from your west coast swing last week, as well. >> i am. it's much easier to do this show when we catch up with you in switzerland than in california. because in davos, it's in the middle of the day, california, 3:00 in the morning. >> yeah, yeah.
5:52 am
you don't want to keep going west. it's great weather, but time zone. >> i've learned my lesson. i'll meet up with you in europe any time. >> that's a dee. thanks, becky. >> thanks to you. >> let's -- i was out in the west coast. i do fancy -- i think i need to go over there and sort of december and january when it's really dark and gray here in london. that's the time to shoot over there, right? >> absolutely. you got to make it out to california in january and february just when you're really sick of the winter. but let's take a quick look at how the markets are shaping up before the open. futures are pointing down and increasingly down over the course of the morning. the dow is down now about 80 points from fair value, nasdaq and s&p pointing to a lower open. we had a positive week last week, all three of those indices up over 2%, so we'll see how they shape up today. ross, how's it looking in
5:53 am
london? >> after up nearly 6.5% in the last week, no surprise to see some fall today, down 1.4%. it's the resource stocks, construction, chemicals, financial services banks, they've all been the biggest gainers in the last three weeks. today being the biggest losers in the descent of health care little bit stronger. >> and that's it. thanks, that's it for today's show i'm julia boorstin in the united states. >> and i'm chloe cho here in asia. thank you for tuning into "worldwide exchange." we'll be back here tomorrow.
5:54 am
5:55 am
5:56 am
5:57 am
good morning, the bulls have been on a charge, but can the momentum moose -- there he is, a skinny-looking guy. he's one of those parasites on him. he's not the best-looking moose, but can he remain on the run? u.s. equity futures, however, today pointing to a lower opening. president obama on a media blitz. a round of sunday morning shows, and now an even busier week ahead on the agenda. yep, couldn't talk about health care this week. and the global economy. and the emmy goes to -- >> "30 rock." >> "30 rock" and "mad men" defend their titles for best comedy and drama series. we were left out in the cold
5:58 am
again as "squawk box" begins right now. anyway, good morning, everybody, welcome to "squawk box" right here on cnbc, i'm becky, and we've been watching this futures a this ohour. the s&p futures showing some pressure, as well, down by about 10 points below fair value. nasdaq's down by about 15 points below fair value. the bulls are coming off of a strong week, though. the dow matched a high for the year at 9,280 over the week, major averages rising in nine of the past 11 sessions. you're talking about some major gains for these markets. if you're looking at the number of weeks, i believe eight out of ten weeks, stocks have been higher, the s&p and nasdaq each
5:59 am
up by 2.5%. >> guess what the quarter to date return is on the dow? >> what is it? >> do you have any idea? what would you guess? double digit? >> yeah. >> try 16%. over 1,300 points. >> i like the 56% numbers that go back to the lows. it hasn't been that long. but it's down, 10,000, now some people are raising red flags. raising the red flags. first they raised them here, then they raised them a little more here, now they're raising them here. >> some closing thoughts on this. one thing i thought was interesting in this article, the moves we've seen, 50% gains in a six-month period, only happened six times in the last 100 year, and every time it's been in the 30s and 70s and it's never stuck. they worry about the pullback that you see from those things, where things go, but you also talk to people who say, forget it, get to the end of september, they are chasing these

247 Views

info Stream Only

Uploaded by TV Archive on