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tv   Worldwide Exchange  CNBC  May 3, 2010 4:00am-6:00am EDT

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how is all this weighing on the cnbc ftse global 300 index? well, not looking too good. down 19 points, 4549. overall a very weak session in asia. louisa, good seeing you again. >> hi, christine. here in new york, it's past 9:00 a.m. in london, that means the markets have been trading for just over an hour. some markets like the uk not trading in today's session because of a bank holiday. but the xetra dax, cac 40, smi, aex all pointing slightly down. construction, chemicals and industrials, those are the three main sectors leading us lower to the upside. telecoms relatively flat to just a little bit higher. now with regards to greece, we've now seen the commitments with the eurozone finance ministers and the imf saying that they'll provide $146 billion to rescue greece from financial collapse. this is the biggest-ever financial bailout of a country.
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athens has promised to adopt further austerity measures to receive the much-needed aid. steve is in athens. steve, good to see you. i think for viewers just joining us now, it's worth just going over what the details are. what exactly does the bailout package look like? >> yeah, well, let's go through the numbers. as you just mentioned, $146 billion u.s. dollars which is 110 billion euros. 80 billion euros of that will come from eurozone partners led by germany. 30 billion euros will come from the imf. in return the greeks have promised to cut their budget deficit aggressively. it's 13.6% of gdp now. it will go down to under 3% by 2014. they're talking about 30 billion euros worth of new austerity cuts. they're going to invees v.a.t. from 21% to 23%. increasing the sales tax by 10% on alcohol, tobacco and fuel. there will be public sector wage freezes, pension freezes. there will be crackdown on invasion and corruption.
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and all of this will mean the economy will actually have an awe and shock to it. it will be contracting by 4% this year and 2.6% in 2011. it is austere. it is aggressive. and it is tough. and it has been inflicted on the greek people because of years of profligacy but i spoke to the head of the imf mission here in athens, paul thompson, earlier on and he disputes the fact that this is external clout, including the imf, dictating terms to greece. let's listen to what he had to say. >> look, this is the government's program. long before we came here the government was well under way with this program, and adopted fiscal measures of 5% of gdp. this program was negotiated very fast, exactly because the government when we calm here knew what it wanted to do. it knew that it had to do some things that were socially difficult, and so above all, this is the government's program. so this thing about imf program, i think that misses the point completely.
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>> louisa, this is far from a done deal. the austerity has to be proven at various stages before on a quarter by quarter basis the greeks get their money. the socialist government traditionally very close to the unions, to the public sector workers, they are potentially alienating their own backing. we spoke to the head of the largest public sector union on "squawk box" europe and he said he was going to resist the austerity. it is far from a done deal in terms of what the greek people believe. they believe the austerity is too much and a lot of them will fight this. it's a huge political gamble and many people say if papandreou can't do it, nobody in greece can do it. >> steve, thank you very much. we'll be crossing to steve throughout the rest of the day. in fact steve's staying with us, joining us as well for the discussion is our guest host for the next hour, managing director head of investment strategy asia the hsbc private bank. we just heard the measures outlined by steve there. three-year aid package as opposed to one-year aid package
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we thought we were initially looking at awhile ago. do you think it's enough to prevent contagion? >> i think it will probably prevent contagion in the short term. i think these measures, i expressedly focused on that trying to settle the debt markets, and the cost of greek debt doesn't really spiral out of control. but there are lots of unanswered questions about the longer term. greece has a gdp ratio of about 125%. that will probably rise during this three-year period to about 140%. and a lot of government expenditure is really consumed in these debt repayments. and debt servicing. so i suspect there will have to be some form of debt rescheduling along the way, which, you know, could raise jitters once again about the desirability of holding on to greek debt as an investment vehicle. the other issue is can a democratically elected government realistically reduce a fiscal deficit from 14% down
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to 3% in three years? it seems, you know, very improbable going on the experience of other countries. >> arjuna, let me ask you a question, is this just a giant game of pass the parcel? how can countries such as italy, which has a debt-to-gdp ratio of 120%, such as spain which has its own 50 billion austerity package and unemployment around the 20% mark, how can these kind of countries afford to give money to greece? surely it's just nonsensical to think of countries which are in a very similar predicament actually passing money to the greeks? >> well, i mean, by the same stretch of argument you could argue that, you know, the united kingdom and the united states are also on a debt-to-gdp basis looking pretty desperate. but i guess, you know, the debt-to-gdp statistic is a bit misleading in my view. you have to look at the cumulative economic growth over decades of these countries, and the stock of access in each country. when you think of it, countries like the u.s. and the uk obviously have much more
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sophisticated, diverse economies, you know, stocks of access in the broader sense, which are very desirable from foreign investors' point of view. and therefore, enough to verify their debt. >> all right. let's look at the stock of ack sets over in spain, let's look at the peculiarities of their economy. youth employment of 44%, housing up 1.3 million, 1.5 million with a peak valuation of only 15%. that's half of the fall in the u.s. ie the regionals haven't started to take their hit. combined gdp-to-debt ratio of 342%. in fact i don't want to know any more spanish statistics. they scare me too much. >> i agree. in the short-term definitely i think the real risk we're all facing is that of deflation accelerating, if you like, on the downside. and you know, spain, which is you know, 20% or something of european gdp, if all these countries together are deflating
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their economies by cutting public sector wages and you know, really tightening their belts even further at a time when inflation is barely positive, that's really, i think, going to be the big challenge for the global economy in not just the month, but the years ahead. how can we avoid, you know, falling into a deflationary situation like what we saw in japan in parts of europe? >> arjuna, hi, this is christine. i'm a little bit disappointed you're not seated next to me. i'm going to have to make due with this question from over here to you in london. markets looking at the way it is, not terribly convinced by the greece package, what's it going to take for markets to really move on from here? >> well, i think we'll have to wait till the, you know, the whole package itself has been, you know, turned out, if you like. we have to wait till the german state elections on the 9th of may. we have the british elections coming up next, you know, next week. all this sort of thing. i think the political noise in the background is simply too
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overwhelming for us to really, you know, make a fix in terms of where this agreement is heading. i suspect, once we've had these elections out of the way, you might have a calmer heads addressing these issues, and perhaps more of visibility in terms of where we're heading on europe as a whole. that's a key issue, i think, for foreign investors such as myself, looking at europe. the concept of the euro is really under attack. i mean, can europe hang together to help itself out of this sort of issue, not just for greece, but in future, you're going to have lots of other greeces in the years ahead. and that really is almost a philosophical question. can the europeans really bring themselves together to handle this sort of issue? >> from the philosophical to the practical, nicole lapin in the united states, if you're saying no to the euro, are you saying yes to bonds? what are you saying to commodities? where are you putting your money? how do you play the greek situation? >> well, right now i think
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everybody has sort of jumped on the risk aversion bandwagon. everybody is heading for the exits, risk assets are not in favor, it's very clear from the performance of equity markets, and high yield bond markets. so i think you're going to have a fairly calm second quarter, globally, in terms of risk assets. and therefore, i wouldn't certainly be taking any bets. i wouldn't be jumping in to greek bonds as yet. even on the currencies, i reckon the euro could still be for -- in for a few choppy weeks until all the details of this deal are really nailed down. so, you know, i think you're going to see a lot of people perhaps just sitting on their cash and taking profits here and there, you know, in more risky assets, wherever possible. so, really, i wouldn't be too aggressive at this point in terms of ratcheting up my exposure to risk. not for another two to three months. >> okay, arjuna stays with us, managing director and head of investment strategy at hsbc
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private bank as our guest host for the hour. meanwhile let's get some big stories we're following for you from around the world. it could be a match meant to soar for united and continental today. the two carriers are set to announce the merger later today with $3 billion in a stock swap. the new airline would fly under the united flag, but the continental ceo would take the helm. the deal would make united the world's largest airline. president obama, meanwhile, visiting the coastal region of louisiana to survey damage from april 20th oil spill yesterday. the president said it could take many days to stop the oil from leaking from the damaged offshore rig, and he's also warning of a massive and potentially unprecedented environmental disaster. >> bp is responsible for this leak. bp will be paying the bill. >> the damaged rig currently leased by bp is leaking 210,000
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gallons of oil each and every day. bp says it's spending $6 million a day in an effort to stop the leak. the ceo is set to meet with u.s. lawmakers, christine, to try and discuss the issue, as, of course, the conversations are urgent and ongoing. >> i'm sure, nicole. here in asia, also weighing on the markets, china's central bank will now raise the amount banks must keep in reserve as part of beijing's latest bid to rein in inflation and mop up excess liquidity. this is the central bank's third such hike for 2010 this year. the central bank will list its lenders reserve requirement by 50 basis points effective may the 10th. and chinese shares of major chinese banks tumbling in hong kong as a result following the news today. the hang seng down more than 1%. louisa? >> well, coming up right here on "worldwide exchange," deutsche bank will pay over $660 million to greece's private sector bailout package. find out which other german company also be contributing to
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the greek aid, and also a quick look at how the euro is trading as we head to break. we'll be talking more about the forex strategies in a moment. ask me. even if you think your mattress is just fine... ask me what it's like to get your best night's sleep every night. why not talk to someone who's sleeping on the most highly recommended bed in america... it's not a sealy...
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hello, everybody, welcome back, you're watching "worldwide exchange" i'm louisa bow jessen. here in europe, 20 minutes past 9:00 in london. 20 minutes past 9:00 continental time. let's talk about the fixed income moment. the european bond yields telling us that the greek 10-year bond yield around 9% at the moment. a little bit later at the moment in comparison to the bund, you're ways away from the 3% that the german bonds now are offering. portugal, relatively steady at some 5.5% which is where it's been over the past week or so, if not inching up a bit. the spanish bond yield also around 4%. ireland, 5.25%. still looking at some very, very troubling yield spreads, i dare to say. also worth noting that you've got bond auctions from spain and portugal this week which will be closely watched. let's glance at the u.s. yield, too, not to leave out our american brothers and sisters, as well, in the u.s., of course,
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slightly different story there. they continue to be watching who's going on at the european bond yields, 3.66% is what we're looking at on the ten-year u.s. bond deal. a lot of economic date a, nicol out of the u.s. this week? >> yes, your u.s. sister is here to tell you all about that. sales figures, specifically, being released all day from major car companies. at 8:30 in the morning u.s. time personal income, consumer spending and core cpi for march are out. and personal income and cpi expected to remain pretty unchanged. also at 10:00 in the morning, the ism manufacturing index for april and construction spending for march will be released. lou? >> well, nicole, the currency markets not to be forgotten. felix adam is the ceo of aix currency partners. he joins us as we glance at the euro/dollar, especially, seeing a little bit of selling in the euro against the dollar. failing to keep a steady footing, felix, despite the fact that we now know more details of
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this aid package. i would think details that are good. it's a longer-term package, not just a short-term, 2010 package. >> i mean, you speak about euro/dollar in general. i mean, the dollar is gaining up, and euro is falling. but if you look at the very long picture, euro still higher than when they started with the euro. so i think overall the euro is still a strong currency. we know the problems in actually the u.s. dollar is still looking somehow weak. and specifically, we talk about the dollar and the you're row in china, i think these two currency pairs -- yes, sorry. >> how much of that has been priced in? nicole lapin in the states. >> sorry, didn't get the question? >> how much of that -- how much of the devaluation has been priced in already, do you think? >> about the u.s. dollar? >> for the euro? >> i think generally in
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euroland, actually, i would think that most of the facts are actually on the table. i mean, we have had in the last couple of weeks and months we have spoken about collapsing of old countries and that is now on the table. i mean i remember about six months ago that was not on the table. but that is now on the table. people are scaring and worrying what is going to happen in euroland. and i'm actually glad that that is now in the market. and now is the key what is going to happen with all that bad news, the different countries, the democrats, the population, the politicians are going to handle this situation. can it keep the people happy? can it keep the people working and when i speak about the people, i also speak about the german people. they still keep on going. and i think it looks like they can, you know, make the market moving and goes in the right direction and things go back to usual. but the question is, you know, the history has to, you know, we have first to do it before we
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confirm that everything is all right and everything goes well. i think basically back to your question, things are on the table now, and so on. they should be priced in. >> felix, hi, this is arjuna. when you look at the fundamentals of europe, the trade balance is improving, capital flows into europe are improving when you look at the statistics. so really from a fundamental perspective, i think the weaker currency has actually attracted flows of money into the region, as it should. and you know, on a fundamental basis it seems things aren't as bad as the markets suggest they are. i mean, obviously the whole market issue is about this concept of the euro and whether it's workable. now, in that context, if, for instance, we saw a fairly placid market over the next few weeks, you know, elections in germany and the uk go according to plan, no big surprises there, we see the spanish and the portuguese bond auctions later this week, if all that is handled
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reasonably well, do you think we could see a sudden pop in the euro? do you think we're close to the bottom now? >> i think, actually, i thought with the price action should be much more dramatic with all the news we have. i thought that really should, we should have had enough news to push euro/dollar down to one penny. the fact is we see still at 1.30. it shows that actually, you know, it's still stronger than i thought. actually i was wrong, if you would have told me a couple of weeks ago, months ago, that we will have all these, you know, facts on the table, i would have said euro line is probably going down to 1.20. and here, you know, some more year lows. but the fact we have not done that shows me that the market was well prepared, or is not so strong, or the dollar on the other side is just not as strong that euro/dollar can drop that fast. >> felix, thank you very much. felix adam, from act currency partners. arjuna is with us in the studio.
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you can get your questions and comments in from the remainder of the program. we'll put the e-mail address on you throughout the show. let's take an overview of our european equities, flat to a little bit lower. the uk market off on holiday today, bank holiday. to update us on the action market by market first we're joined by -- we've got annette joining us out of frankfurt. what are we seeing out of germny? slower trade, and a lot of focus on how much money germany is going to be contributing to this bailout package for greece. >> yeah, that's totally true. we are seeing some weakness with big industrial stocks such as siemens and deutsche was down. if you look at siemens shares, they had a good rally in the recent couple of weeks, and that's why traders are now saying as well that profit taking is not really substantial news. so there is a general weakness, and general uncertainties, as well, regarding the whole greek situation, as well, what we are hearing from the ecb is not
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really increasing the mood of investors over here in germany, the ecb is now accepting, as well, greek debt as collateral even though it is x-junk status, sluice. >> thank you very much for that. we'll come back and we'll talk a little bit more about the german market here in the next hour with annette. stephane is in paris, joining us, as well. stephane, just kind of raund up the french action for us this morning, especially also what the banks are doing. >> yes, because i was about to speak in french, actually. yes, the french paung banks are reacting very positively to the greek pailout package. that was important to them. the largest exporter to the greek economy. 51 billion euros. the most exposed creditor and it's one of the biggest gainers today in paris. it's actually the top gainer up 1.9%. also in the banking sector, two big groups reporting this week,
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societe generale and bnp paribas. numbers will be released on wednesday. and bnp paribas, also on thursday, we're expecting an increase of net profit for the first quarter. all the banks are trading higher, as you can see. also, in the news today, we've got positive announcement for renault. the ceo of the carmaker believes that the company will return to profit in 2011. the announcement was made friday after the market closed. renault is flat but outperforming the french market. christine, i send it back to you. >> stephane, thank you very much. still with us our guest host arjuna mahendran managing director of investment strategy hsbc bank. arjuna, one of the top stories we're watching in asia is that triple-r rate hike over in china. over the weekend, to what extent do you think this is going to go
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to tame inflation over in the mainland? >> well, i think there's more to go, christine. you know, i expect at least another 150 basis points of further increases in research requirements for chinese banks in the months and quarters ahead. we are now at about 17% overall research requirements for the larger banks in china. i reckon we could head to 18.5% by the end of the year. but there's also the prospect of rises in interest rates. and i think this move over the weekend has basically preempted the chinese having to raise interest rates as yet, because they are quite concerned that could lead to capital floins china which would put pressure. there's a very delicate balancing act going on between these different monetary policy instruments, raising bank reserve requirements, raising interest rates and eventually raising the renminbi seeing that it appreciates against other international currencies.
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>> how soon will that happen? >> i think it will happen sometime in the second quarter. that's my hunch. so, you know, we're hoping that by the end of june, it will be more or less a done deal. >> all right, arjuna, we'll come back to you in just a little bit. arjuna mahendran, managing director ahead of investment strategy asia hsbc private bank. coming up next on "worldwide exchange," we will take you to the shanghai's $44 billion world expo. >> and also who's next, if there is a next? greece has its bailout. does it just beg the question, though, of whether or not there will be other countries that will have to go, cap in hand, to europe? come back for more on the other side of the break.
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welcome to "worldwide exchange." the headlines we're watching today. here in asia, mining stocks in australia plundered after the government unveils plans to impose a hefty 40% tax on resource companies. in europe, there's agreement on the bailout package for greece. plus share markets express skepticism as stocks fall across the continent. and in the united states, continental and united airlines set to announce a merger today creating the world's largest airline.
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>> hi, everybody, welcome back again, this is "worldwide exchange" brought to you from europe, asia and the united states, as said, we're looking at the ftse global 300 index this morning indicating that european markets opened just slightly to the downside. off by 0.4%. we're saying they failed to hold onto gains. let's not forget it is a day with thin volumes as the ftse is off for trade, bank holiday in the uk. 4549 is the level on this index. but it might have something to do with a little bit of waiting coming from the session highs that we saw on friday. christine, hi, again. >> hi, louisa. good to see you on this holiday. here in asia, not a pretty session. markets here kind of in negative territory. lots of concerns about whether greece is going to deliver on its promises. also add to the uncertainty we had the triple-r rate hike over in china. that is adding to all the uncertainty. china, japan, the philippines, thailand are all closed today for public holiday. they will come back tomorrow and kind of react to what's going on on the global scene. meanwhile this is how the picture is shaping up. the australian market is down
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0.5%. that proposed 40% tax on mining profits really hurting the market there. the kospi down more than 1%. the hang seng down 1.4%. china banks getting hit because of the triple-r hike in china. the sensex in bomb bay trading down more than 1%. obviously not a good session here in asia, nicole. >> and christine, we are actually expecting u.s. markets to open higher across the board. but it is still early. it's still 4:30 in the morning new york time. and we're expecting the dow to open, well futures are now up about 25 above fair value. nasdaq futures also up about 6, and s&p 500 futures up about 3. this is, of course, after we had a decline of 4% in the financial sector last week. last week we ended lower, louisa. but for the month of april, major indexes in the united states did edge a little bit higher. >> well, nicole, the eurozone finance ministers and the imf
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will provide $146 billion now to rescue greece from financial collapse. the aid is going to be formally launched on friday of this week. in a special eurozone meeting will be held. carlina is in brussels. we were talking in the studio about whether or not it's surprising we're not seeing a market reaction. i would argue it's not that surprising because we've known for a long time that it probably was coming, and also as our guest host was pointing out, that it's the longer-term prospect now that people are maybe a little bit jittery about. not so much the short-term prospects. >> yes, i think so, louisa. i think the markets have been waiting for so long to know all the details about this bailout, now we know how much it's going to be. we have an idea about the interest rates that it's going to be. we don't know exactly how much is going to come on the second and third year, but we know the overall plan, 110 billion euros for the three years. 80 billion from the eurozone countries, 30 billion from the imf. so that's a lot of details to digest. possibly this is what the
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markets are doing today. although there are some rates still out there. for example in the population of greece doesn't support all the new measures that were announced, and therefore these measures are not put into practice 100% as they should, also, these measures could create another recession, or even a depression in greece. that would be really, really difficult to help the growth in the country in the coming four to five years, when it's expected. also, there is a risk of contagion still to other countries like portugal, like spain or italy or ireland. i had a chance to catch up with the president of the european central bank jean-claude trichet after the meeting yesterday and i had to ask him, is this enough now, or are we going to see other new measures in this case doesn't work? look what he had to say. >> what we think, of course, is that what has been negotiated in a sense by the imf, the european commission, and we were present, as you know, i had several member of staff of the ecb, which were present, and were
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reporting. so we trust that what has been done and what has been decided by the government of greece, which is, of course, the owner, if i may, of this program, that we consider a good one, come enis yourate to the difficulty, then i would say that we trust this program, and that is the position of the governing council of the ecb. >> now, obviously the eurozone and the european union as a whole, they need to learn lessons from this crisis. that's why they are calling for a eurozone summit on friday here in brussels to discuss what to change in the european treaty. in the rules of the eurozone, to have this kind of problem not to happen again, to have the growth and stability paths respected in the future. we'll see what they come up with on friday, louisa. but for the moment, that's all. back to you. >> carlina, thank you. david casper is a chief
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economist. let's bring you into the discussion as well. also the element we haven't touched on yet, that the ecb is suspending its ratings threshold for greek bonds which means it avoids greek debt falling off its collateral list and keeps money flowing, especially, to the greek banks. it does seem to me that the ecb is being pretty flexible here. >> yes, that's true. the past couple of weeks it's been one of the key worries about the greek financial system that the banks would not be able to continue borrowing at the ecb. so this worry is now gone and greek banks are flying, and i think they should have calm markets for the next year or so, at least, but who knows what's happening after that. i mean, for the next three years, the austerity packages will be implemented. the question is to what degree. because the greek government is
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more known for its ability to choke rather than walk. and the debt-to-gdp ratio is set to peak in 2013 at 149% of gdp, with some projections, and i still think that's a huge number, with a deficit at that time suggested to be around 3% of gdp. so this is not sustainable. you also see that 30-year greek treasuries are still trading around 62, indicating a massive back cut to greek government bond investors. >> david, what about australia? we have seen home prices in australia surging 20% in the year to march. fastest pace on increase on record. does this give more ammunition for the rba to hike tomorrow? >> i think it definitely does, because, well you might say that australia is just a subsidiary of chinese growth, and surely china has been enjoying some
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massive growth in the past year. but are they also trying to cool the economy? by hiking. so i think it's a logical step for the rba to follow steps, and also you have to keep in mind that inflation expectation should be relatively high in australia, since they have traditional have had quite high inflation, and that should also be filtering in to the house prices, which is also is doing right now with the massive house price increase we saw this morning. >> david, nicole lapin in the united states, as you are weighing that, as a u.s. investor, we are also weighing huge oil spill, we're weighing the situation in greece, we're weighing goldman. is that too much headline risk, because investors are looking at that, and then also balancing fundamentals, earnings, and economic reports that we're getting fast and furious this week? >> yes, that's true.
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we see earnings expectations going higher, as well in the stock market, and i think with the u.s. gdp figures recently released they've been quite strong. we expect that to continue. i still think u.s. gdp figures were surprising to the upside. if you look at how they were compromised with the private sector contributing most of the growth. we certainly see that as a very positive thing. we were a bit worried to see that disposable income was not as strong as what it could have been. but we see nonresidential investments of 4.1%. that's clearly a good sign, so we see some recovery in the u.s., and i think that's also filtering in to the sector which has been going through trenches in the u.s. recently. >> david, thank you very much. good talking to you, chief economist at saxo bank. and arjuna mahendran will continue to stay with us as our guest host. coming up next on "worldwide
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exchange," the world's biggest expo gets under way in shanghai. we'll find out why companies from all over the world have been flocking to china's latest, greatest show on earth. plus, we'll be live here in athens discussing the $30 billion budget deficit reductions the greek government is trying to deliver. can the papandreou government deliver despite a domestic backlash? we'll discuss that and all the key investment issues on the back of the story right here on "worldwide exchange."
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so the eurozone finance ministers and the imf will provide $146 billion to rescue greece from financial collapse, as we've been hearing. this is the biggest-ever financial bailout of a country and athens has promised to adopt further austerity measures to receive the much-needed aid. steve is in athens, and has been following the story as it's been breaking over the weekend. steve, we were just discussing in the studio the implications that this potentially could have on the markets in the longer-term, and in the shorter-term we might still see some enthusiasm that at least the package has been underwritten. in the longer-term, though, you've got these governments that have a lot, a lot of debt hat has to be paid back and you're going to see austerity measures elsewhere, not only in
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greece. >> oh, yeah, part and parcel, deck chairs on the "titanic," call it what you want, the debt is still there until someone gets hold of the situation and gets the figure down. then the markets will believe it's got some credibility. let's not say the euro is collapsing. 1.32 that is still ten cents above fair value according to people like jim o'neil from goldman sachs. let me show you why this is a europe-wide problem. this isn't just about greece. this is about the whole of europe and those big exporting nations, including, of course, germany who is leading the bailout. this is the acropolis, and this is the car park where the buses turn around, where the cabs drop off the tourists. what can you see? i'll tell you what i can see. i can see mercedes. i can siaddy. i can see volkswagen. i can see bmws. the point is this is a majorers port market for the germans. this is a major export market for a huge number exporters throughout the continent. i.e., it's still important for those countries. this isn't just about bailing out a peripheral offender, a
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serial offender in greece. this is about the broader european project. and the fact is, we talk all day long about those u.s. and chinese imbalances, they are here alive and well. perhaps even greater than that u.s./chinese imbalance between germany and greece and germany and a lot of other countries. germany has gained a lot in terms of its productivity out of the euro. greece, it hasn't. let me give you one stat before i go. since 1995, greek exports have increased in price terms by 45%. tell me that there isn't a broader problem. and that problem could well be the euro. back to you, louisa. >> thanks, steve. although now they might have to get use to deflation, i guess in greece or cpi leveling off, as well. thank you, steve. well, we're talking about numbers. take london's roughly 7 million people and you multiply that by 10, that's the number of people expected to attend china's $55 billion expo, happening in shanghai right now. the shanghai expo will likely be the mecca of the branding world. companies representing more than
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190 countries will go all-out exhibiting their latest innovations in technology, science, culture, you name it. to talk more about it, joining us now is tim richards, ceo of singapore growth officer of future brands. tim, good to have you with us. this event has been described as the olympics of branding. you agree? >> i think it's a fantastic description. it's certainly the most competitive, the most competitive environment that it's possible to imagine for most brands. >> i'm hearing that companies, you know, dare not even shun this event because it's going to be such a big, significant event for them. this is really the chance to show off to the rest of the world. >> absolutely. i mean i, i think it's typical of business in china that companies feel an obligation to be seen to be doing the right thing and not to miss opportunities in a market as important as that. >> what does that mean in chinaa? because we know in china networking is important politically and economically. >> i think most, you know, most chinese business partners, most chinese government officials do look quite carefully at the corporate behavior of overseas
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companies, and being seen to contribute, being seen to invest in the market, take the market seriously, take chinese partners and consumers very seriously is an important part of building a business in that market. >> how do you measure the effectiveness of an event like that? how do you measure it? >> well i wouldn't like to be given that particular task. i think it's hard to imagine a more contested, a more complicated thing to measure than an event like this. i mean it's interesting the whole expo concept, you may say, has kind of evolved over a long time. it's an interesting thing to even think about what an expo means. a set of real-life experiences now, a kind of virtual or digitally dominated world. so measuring the importance of those kind of personal interactions, those kind of experiences that companies and countries can mount for chinese partners, chinese customers, it's important but tough to qualify. >> everybody's looking at china saying hey, this is such a big consumer market, to what extent is all this focus in investment
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mainly the target the chinese consumer? >> well, firstly, yeah, that's a key part. the necessity of establishing some awareness for your brand, trying to make an impact on chinese consumers through expo. if you're not in the market already, i can see why companies would find that very appealing. i can also imagine how hard they're going to have to work to actually stand out in an environment. so intensely contested as expo. of course, there's a massive amount of business in china that is about doing business, in china and even in those markets, i think expose is important to establish the contact and the networks that you need to make. >> what kind of deals are you hoping to see out of this event? >> i think we'll see a bunch of new brands entering the market. we know already that there's a whole lot of brands, and officially participating in the event, taking sort of a guerrilla marketing approach. >> who's that? >> i won't name any names right now. but they're already starting to
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fly around commentary marketing circles about who is doing a good job of disrupting what's going on in shanghai. and who is doing a good job, i guess, in terms of capturing people's attention. not just in those in the actual pavilions of the expo itself but in the surrounding digital and traditional media. >> good talking to you. interesting discussion. >> thank you. >> tim riches, growth officer of futurebrand talking to us about the branding strategy over at shanghai expo. another story we're watching very closely, australian mining stocks skidded after the government's latest proposal to slap a 40% tax on the booming profits and resource companies. prime minister kevin rudd said the tax, which is expected to go into effect in 2012, will raise approximately $8 billion for australia's coffers a year. the mining industry has warned against such a tax, saying it would stall investment, or shift it to other countries. let's talk more about this now with scott brown, cfo of mosaic
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oil and oil and gas mining company based in sydney. scott, good to have you with us. to what extent if this proposal goes into effect, to what extent is this going to hurt your bottom line? >> well, firstly, thanks for your question. mosaic is obviously not happy about the resource tax. in terms of the evaluation, we are currently looking at stimulation of our assets which could triple our revenues. and we're in the cooper base, which is highly prospective for oil. and the success of that means we will pay -- we will make higher profits but also a much higher tax bill. >> you know, we know this proposed tax doesn't come into effect until 2012, would you, would mosaic oil, go to the government and try to negotiate for something less?
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would you lobby for it? >> well there is a consultation period, and obviously we will have comments to the government, and certainly try and lobby the government around measures of this tax and shop of the detail which hadn't been released yet. >> scott, hi, louisa in london. you could argue it's only fair, isn't it? if you want to prevent the two-speed economy from developing, this is what you should be doing. >> well, i think the tax imposed at 40% will make new opportunities and our evaluation of new opportunities a lot harder to get projects away. but we will make other areas
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such as areas -- more attractive. >> all right, scott, we'll leave it there for now. thank you very much for being with us on the line today. scott brown, cfo of mosaic oil talking to us in sydney about the new proposed mining tax in australia. let's head over to adam bakhtiar for a look at some of the markets. not a good session. mining tax focus, triple-r in china as well. lots of things happening in asia. >> we look forward to the weekends, christine. a lot happens on the weekend. those regulatory changes happened over the weekend. i'll kick off the with aussie stocks as we were talking with the guest today. top/bottom the australian market didn't react all that badly. take a look at the s&p/asx, not bad. the mining stocks absolutely getting slaughtered across here as the australian government is going to slap them with this 40% supertax. that's going dwindle to some degree. but the big argument here the companies are trying to make is
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the fact that they could delay or could risk $100 billion australian dollars worth of mine being projects in australia. this is a big, big concern. the other thing, sent a chill through the marriagers and acquisition space. macarthur coal is a target takeover by peabody energy, and there's concerns that maybe they might not go ahead of it. that one dropped the most, 9.5%. let's go back to china. that's the other big story of the day. over the weekend, tightening the triple ratio 50 basis points. that will sap 300 billion from the renminbi or $440 billion. for the third time this year authorities are reining in on lending in china. the result of that plus debt kleins we saw in the u.s. markets and remember the agriculture bank of china, apparently sources say they're going to be raising $30 billion u.s. dollars in a new ipo plus the capital raisings by some of the other listed banks in china, christine, there was a lot of concern, of course, we see a lot
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of script come to the markets. may not just be because of the tightening by pboc. that's $30 billion ipo. >> in other news, the markets are slow today. we'll see what happens tomorrow. let's go over to india live from mumbai for the india business report. >> a lot of business in india following the asian market. 1% coming in on the sensex. in the broader markets base, it has outperformed the front liners on a relative basis. down by quarter to third a percent on the midcap and the small cap index. you are seeing pressure kicking in to real estate, and capital goods, and on the flip side you have your traditional defenses like pharma which are seeing
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some interest. one stock under a lot of pressure, lost about 5.5%, this afternoon losing 2.5%, being punished. a very disappointing set of numbers. the bottom line it's difficult because of the forex loss. but nevertheless the markets clearly unhappy with the numbers. as i was telling you, siemens, all of them showing 2% to 3%. in the real estate, you have two phases which are seeing some profit booking. one stock you need to focus on is hdsc. very good set of numbers. 12 7. more importantly if the company has announced stock split. that's keeping the stock in the green. nevertheless ahead of those numbers it's trading with a lot
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of strength up about 3.5%. >> thank you very much for that. live in mumbai. let's get a final thought now from arjuna mahendran from hsbc private bank. we heard about the proposed 40% tax on mining companies over in australia. in terms of strategy are you now a little bit more, less -- more bearish now on mining companies in australia? >> yes, i am not as enthusiastic as i was say three months ago, christine. for very simple reason, which is that we've had this progressive monetary tightening starting in china, and in india, and all these large emerging markets, brazil. and i think that's going to continue for another six, seven months. and as a consequence, you're going to see the demand for lots of raw materials out of australia and other emerging markets, producers perhaps plateauing, if not coming off of it. so you know, we've been taking some profits on some of these
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mining company exposure over the last few weeks and months. but, having said that, i don't think, you know, this is the end of the resources game. i think they've been going in for a bit of softness in the next three, six months and then you will have another resumption of growth. the key to look at is inflation in emerging markets. once the back of inflation is broken in china, and in india, and other major emerging markets, then i think the markets will get a lot more optimistic about a resumption of growth, sort of a hold-back in terms of monetary tightening and that, you know, would be good for risk assets. so it's not the end of the game. but you've got to play the waves, as it were. >> always a pleasure having you on the show. thank you very much for dropping by. arjuna mahendran, managing director head of investment strategy asia at hsbc private bank. coming up next, on "worldwide exchange," obama says bp will be paying the bill for the oil
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spill. but how much will it cost for the oil giant? >> and also we'll be looking at stocks to watch in the energy and the auto space, especially we'll give you some hot stock picks after the break.
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welcome to "worldwide exchange." the headlines making news today. out of the united states, continental and united airlines set to announce a merger today, creating the world's largest airline. >> and in europe, finally, it's happened. there's agreement on the bailout package for greece, but share markets expressing a little bit of skepticism as stocks fall a bit across the continent. here in asia, china's tightened the research requirement for the third time this year in an attempt to crack down on inflation. >> greet to see you here on "worldwide exchange." a very happy monday to you, i'm nicole lapin in the united states. it's 5:00 in the morning on wall street. welcome to the start of your global trading day. we are expecting u.s. markets to open higher across the board. this is after we snapped our eight-week winning streak last week, ending the longest run of gains in six years with dow
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futures up about 20 above fair value. nasdaq futures up about 7, and s&p 500 futures up about 20. this is, as we're getting, about 20% of the s&p 500 reporting earnings this week. no major earnings to report this week but -- excuse me, today. this week we do, sluice. but we are weighing oil, we're weighing greece and goldman today as major headline risks in the united states. how are you guys looking across the pond? >> we're a little bit lower here in europe. just after 10:00 a.m. here in london. just after 11:00 mainland europe, so we've been trading for some two hours. looking at the sectors at the moment. last we checked in on sectors we had a couple that were still in positive territory. not the case now. autos down the most by more than 2%. banks and construction following closely behind. and main european markets off by a half percent to one percent. the ftse 100 not active in trade today as it's a bank holiday in the uk. of course a lot of focus on this
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mining story as we're looking at a supertax being slapped on miners in profitability of miners in australia. that will have an impact on our big mining companies, especially in the uk. but greece continues to be in focus. christine, what are we looking at in asia? >> well, greece continues to be in focus. that's weighing on the equity markets. also the triple-r rate hike over in china weighing on sentiment. in terms of the currency markets, we continue to watch the euro continuing to fall against the dollar 1.3230. the aid package for greece was supposed to stabilize the euro. we haven't seen that happen yet. so we're continuing to watch the single currency. sterling/dollar 1.5227. euro continues to fall against the sterling 0.8686 and dollar/yen, dollar stronger against the yen trading around 94 to the dollar/yen. that's how it is looking, louisa. >> well, the eurozone finance ministers and the imf, as mentioned, will provide $146
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billion to rescue greece from financial collapse. the aid will be formally launched on friday of this week. but a special eurozone meeting will be held. carolina is in brussels. we've been talking through kind of the details of this package all morning long, carolina. just for the case of viewers just joining us right now, flesh out what we're looking at. >> we are looking at 110 billion euros package for the coming three years. 80 billion euros are going to come from eurozone countries, 30 billion euros are going to come from the imf on the first year. so 2010 the eurozone is going to participate with 30 billion euros and the imf is still to announce how much it's going to be giving this first year. it could be 10, 15 billion euros maybe. totalling 45 billion aid this year to greece. and the first tranche of this money will be in greece before may the 19th. which is the deadline for a payment, a bond payment that greek government has to do. so the markets shouldn't be
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scared anymore about greek banks at the moment because everything should be saved for this year, next year, and the third year ahead. and by then, greece should have its economy back on track. in fact this is exactly the question that i put to all the finance ministers i spoke with after this meeting yesterday here in brussels, that actually created this mechanism to help greece. and i asked the french finance minister christine lagarde if this decision isn't coming a bit too late. if this decision was taken some months before, wouldn't we all be paying a little less to greece? >> we've been through a process that was not contemplated at the time when the eurozone was set up, okay? we're showing now solidarity, determination. the greek authorities have made huge progress in elaborating the program under which they commit to deliver 11 percentage point of deficit in the next three years.
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i think, you know, we have achieved something today which is probably going to open a new era for europe. >> it's also interesting to see that the average of the interest rates that greece is going to pay for these loans is 5%. but some countries are participating on this aid are going to receive more than 5% on interest rates. that's the case of portugal, for example. simply because portugal, to raise this money that they are going to have to raise to participate in this program, are going to pay more to the markets than the 5%. so the interest rate is going to be based on a country by country case. this is how it's going to be decided. nicole, back to you. >> thanks so much, carolina. and president obama visiting the coastal region of louisiana to survey the damage from april 20th's oil spill yesterday. the president said it could take many days to stop the oil leaking from the damaged offshore rig, and warned of a massive and potentially unprecedented environmental disaster.
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>> bp is responsible for this leak. bp will be paying the bill. >> the damaged rig currently leased by bp is leaking 210,000 gallons of oil each and every day. bp says it's spending $6 million a day in an effort to stop the leak. the ceo is set to meet with u.s. lawmakers today to discuss the issue. could be a match meant for a soaring airline. the united and continental merger announce dad. the two carriers were set to announce the merger later today with a $3 billion stock swap. the new airline will fly under the united flag, but the continental ceo will take the helm. the deal will take united to be the world's largest airline. christine? >> well, nicole, china central bank will now raise the amount banks must keep in reserve as part of beijing's latest bid to
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rein in inflation, and mop up excess liquidity. this is the central bank's first such hike for 2010. the central bank will lift the ratio by 20 basis points effective may 10th. surprisingly shares in major chinese banks tumbling in hong kong following the views. pulling the hang seng lower. over in australia the other story we're watching the country's house prices surge a whopping 20% year-on-year in march, favsest pace of increase so far. house prices climbed 4.8% in the quarter, topping expectations. now, the data increases speculation that the country's central bank could hike interest rates when it convenes tomorrow. now, reuters poll points to a cash rate increase of 25 basis points to 4.5%. nicole? and so much more to come on "worldwide exchange." how much would the spill off the coast of louisiana actually cost, and what will it do to oil prices this summer?
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toy tuned for more on the commodities market ahead as "worldwide exchange" continues.
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european central bank president jean-claude trichet told cnbc that the aid package for greece is a good one. he added that all eu members must do their job regarding fiscal stability. plus, sell in may may go away
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now more than ever an analyst cold cnbc. banks are in a holding pattern. bob mccawle of tao group also said. and the total bill for the bp oil spill could exceed $14 billion according to analysts. we have a slide show at the world's worst oil disasters. welcome back to "worldwide exchange." let's take a look at the gold price and see how that is stacking up in light of what's happening with the aid package for greece, and see how the commodity is doing right now. right now the precious metal of gold is trading like this. wait for the boards to pull up. down 30 cents. 1177 right now an ounce. in terms of oil, pretty much flat. 86.13 an ounce -- a barrel, rather. sorry. over brent, as well, this is how the picture is trading as well. wait for the boards to change. pretty much flat, as well, 87.50
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a barrel. let's talk a little bit more about stocks and markets. joining us now alexa wand a fund manager at global cap. good to have you with us. you seem to like in your stock picking, you like a company in china called china yuicahi which is a diesel engine manufacturer. what is it about this company that appeals to you? >> hello, good morning. yes, the idea is that you've got more than 1 million cars sold every month in china. currently this number is higher than what's happening in the united states. so it's a very interesting trend to look at. but the other problem sls that chinese are focusing more and more on environmental issues. so, we believe that the diesel engine is probably an interesting solution, because now they're lowering their emissions, and they also usually have a 35% more efficiency in terms of fuel than the regular gasoline engine. so the idea here is to play to buy china yuchai, one of the largest diesel engine
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manufacturers in china. they also focusing more and more in to hybrid engines and also producing now gas engines with this low price of gas, it's also an interesting move, and gas engines have also lower emissions. approximately 90% lower than regular engines. finally what's interesting with china yuchai it's the valuation. currently the company is trading at 0.4 times sales. when you look at competitors, they're trading at 1.3 times sales. so, and finally they're also doing some interesting joint venture, one with caterpillar and one with ge, to produce a smaller diesel car. >> alexis, i want to talk about nuclear energy. it's louisa in london, by the way, good morning. because you have a pick in the nuclear energy sector and i wasn't actually aware before reading your knnotes how many planned reactors are in the planning to be built. >> yes, actually we're trying to
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identify growing themes and growing segments and typically the nuclear energy is currently a growing theme. you've got 436 reactors worldwide. and you have almost 50 reactors under construction. plus you've got 136 reactors getting planned. so this is a growing industry, and if you look also at the current administration of the united states, who just granted $8.3 billion loan to build one of the first nuclear plants in three decades. so this is also a strong commitment from the u.s. government to go back into the nuclear energy. and would be an even interesting way to play this theme is to look at the energy service sector, especially the nuclear energy service sector. we like a company called energy solutions. they're one of the largest reintegrated energy service companies in the u.s. they're doing soil contamination, they're looking also at decommissioning of nuclear plants, and on top of
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that, they're also taking care of the nuclear waste, and we believe this is a very interesting point. they own one of the largest waste disposal facility in utah. and they have also many different contracts around the world. they've been working in the uk, and in china. so we like the idea of strong earnings visibility, long-term very high market share. they're working with 84 reactors out of 100 for the u.s. plus it's a good valuation. >> you're bringing up the united states, alexis, of course this is nicole lapin in the united states, and $8.3 billion for nuclear energy is not the only bit of stimulus we're getting out of the united states. this is part of the administration's huge push, of course, for clean energy, renewable energy, and nuclear energy. what other plays do you see coming out of that? >> i mean, with the recent spill, what's happening currently in the gulf of mexico, i think this will also push the
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public opinion to pressurize the government, and to increase the spending even more into renewable energy. and probably to have more offshore wind than offshore drilling. >> alexis, thank you very much. alexis dawance a fund manager at global cap. now on to our global roundup of the equity markets. and we're looking at the german market in particular today, especially the uk market is closed for trade. annette joins us from frankfurt. we've been talking about the banking stocks in particular, and whether or not we are looking at any type of relief that we know a little bit more what type of money is going to go to greece now. >> well, there was a certain kind of relief at least with bank shares but now they're trading down in negative territory. although bottom line is the relief was due to the fact that commerzbank actually had more than 20 billion euros of so-called pick bonds in their balance sheet, and now with the
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greek bailout package, the contagion risk is limited. so that was a relief. but now it has totally turned. in general german banks are trading in negative territory. there are reports in financial times deutschland that deutsche bank is having, or is lending 500 million euros to greece in a private sector greek bailout package, which is still to be officially published. we are just talking here about speculation. there are other companies probably, as well, involved and allia allianz. we are hearing that they have rejected such a private bailout package, which is very popular with german politicians. that's all from here for a moment. stephane, what is the news out of france? >> bank stocks higher, especially credit agricole up
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1.2%. the top gainer on the cac quarante. the other banks well above, including bnp paribas. there's a bit of rebalancing between the french banks. also on the agenda, we've got societe generale and bnp paribas reporting later this week. we're expecting societe generale to return to profits for the first quarter of the year, 640 millions for the net profit. that's the forecast. bnp paribas due on thursday is expected to announce a 5% increase of its net profit for the first quarter for the time being. the stock is trading lower. and that wraps up our market watch in europe. let's have a look now at the asian trade with adam. >> thank you very much, stephane. well for those markets that were open, it was a fairly negative day following the triple digit declines we saw on the dow jones industrial average last friday. we had japan and china closed, but it doesn't mean there was no shortage of big stories coming out of china with the pboc
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hiking for the third time in four months. the triple-r research requirement ratio for banks up to 17% so 50 basis points which will likely stop about 300 billion yuan or $44 billion from the banks being able to lend out. we did see declines across the board, some of the banks including icbc will be planning more capital raisings to the tune of about 12 billion. that came on the bank of china construction bank last week saying they're going to raise 11 billion u.s. dollars. and looming in the background we'll see a lot more script come to the market eventually when the fourth largest state bank, the agriculture bank of china plans to list and sources say that will come soon. they apply for the listing in shanghai and hong kong and this will be the world's biggest ipo valued at about $30 billion u.s. dollars. overall a very weak session here in asia. back to new the u.s., nicole. good morning. >> and good morning to you. so much more to come, adam, on "worldwide exchange." the price of oil has been
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fluctuating since the bp disaster two weeks ago. what will be moving prices in the long-term? we'll drill down in just a moment. "worldwide exchange" continues on cnbc's first in business and finance worldwide.
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welcome back to "worldwide exchange," it's 5:23 on the east coast of the united states. we're expecting u.s. markets to open higher across the board. this is after the dow broke an eight-week winning streak last week, and the largest winning streak in six years. dow futures have narrowed a little bit in the last hour and a half or so. now above about 10 above fair value right now. nasdaq futures also higher about 5, and s&p 500 futures are basically flat. we're getting a slew of economic data all this week. today, specifically, sales figures being released all day from major car companies. at 8:30 in the morning u.s. time, personal income consumer spending and core cpi for march are out with personal income and cpi expected to remain unchanged. at 10:00 in the morning, the ism manufacturing index for april and construction spending for march, lou, will be released, as well. >> let's check in on the oil
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markets now. because nymex has been trading a bit lower after fluctuating for two weeks since the bp oil disaster. let's talk more about this. analyst at commerzbank joining us to talk about boil. first of all, how much of an impact do you think that the bp disaster is having on the oil price itself? i mean not so much reaction today, but in general, should we anticipate that this will have a direct effect on the oil price? >> i think the oil spill is one factor that supported oil prices in recent days. in particular, as the market is mainly focused on factors that push oil prices higher at the moment. and so, every factor pointing in that direction is being used as an opportunity to buy higher. >> do you think that people who want to be invested in oil stocks now, they're thinking,
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we're going to stay away from bp and we're going to put our money in other large oil companies? or are they thinking, until we wait and see what the settlement is going to be we're not going to be investing in commodities at the moment? >> i think the big news is that the concerns about oil supply in the u.s., just a few weeks ago, the obama administration surprisingly announced to expand offshore oil drilling, but last week they announced that new oil drilling is being suspended until further notice. and that questions whether this expansion plan will be maintained after this disaster. and another factor that this oil spill could also impact in the short-term oil inventories in the u.s. so far there is not yet any impact on oil traffic transportation, but there's a risk that this would be the case in the coming days, and will be
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mirrored in the upcoming inventory reports. >> carsten, hi, this is christine in asia. we have china tightening for the third time this year. to what extent is that going to hurt demand coming from china? >> so far we haven't seen any impact on markets from china from these tightening measures. but for sure, there's the risk that demand could slow down in the future, in particular as china is already importing more than it needs, increasing net exports of refined product. >> so you're saying essentially carsten that prices want to go up, that there is an increasing appetite. basically why are you saying this? is this just pent-up demand that's all coming to flew igs right now?
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>> there's a clear decoupling between oil market fundamentals and prices. this demand for oil is related to financial investors, and linked to rising equity markets, and declining risk aversion. so between stock market developments and the oil price, and there is actually more important at the moment than pure fundamentals of the oil market. >> carsten, thank you very much, market analyst from commerzbank. coming up here on "worldwide exchange," greece is in trouble, and the european union now stepping in. does this pave the way for other member states to start asking for bailouts? write in. let your voice be heard.
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welcome to "worldwide exchange." the headlines making news today, out of the united states, continental and united set to announce a major merger today, creating the world's largest
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airline. in europe, finally there's agreement on the bailout package for greece. but share markets express a bit of concern as stocks fall slightly across the continent. and here in asia, china's central bank tightens its reserve requirement ratio for the third time this year in an attempt to crack down on inflation. and welcome to "worldwide exchange." it is 5:30 on the east coast of the united states. we have just learned that united the parent ual corporation, the parent company of united will buy continental airlines for $3.2 billion, forming the largest airline in the world. the largest carrier in the world. further shrinking embattled u.s. airline industry. could drive up fares. markets are looking at this merger very closely today as futures are higher. they have been higher for the
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last hour and a half or so with dow futures up about 11 above fair value. nasdaq futures also higher and s&p 500 futures basically higher, as well. but this is a major story coming out of the united states today, louisa, that markets will be focused on, especially as we are leading into trading hours. still early, though, 5:30 in the morning. >> yeah. still early for you, a little bit later for us here in europe markets have been trading for about 2 1/2 hours now at the moment. and we're looking at the markets in europe being slightly lower across the board. ftse, of course, not open for trade today because it is a bank holiday here in europe. but the rest of our european markets are trading lower. those off the most, by 3% plus -- excuse me, off a full 1.25% at the moment. banks and chemicals also lower by approximately 1%. telecoms completely flat at the moment. still a lot of focus on greece and the basic resource sector. also with the super tax being
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slapped on some of the big australian metal and mining companies also listed on the ftse. let's talk about the dollar strength and how this is impacting the currency markets. >> louisa, trading is a little bit light today because we have japan, china, of course the uk being closed for holiday. so this is how the trade's looking. we continue to watch the euro, like you say, louisa, continuing to remain under pressure. after digesting news of the package coming from greece, euro/dollar trading at 1.3234. sterling/dollar 1.5227. euro/sterling 0.8690 and dollar/yen lovering around the levels of 94 level. nicole? >> so the europe row zone finance ministers and the imf will provide $146 billion to rescue greece from financial collapse. this is the biggest-ever financial bailout of a country. athens has promised to adopt further austerity measures to receive the much-needed aid, as well. steve is in athens. he has the details.
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steve, can you do me a favor, it's 5:30 in the morning in the states. if people are just waking up here, can you recap what they need to know today out of greece? >> yeah, absolutely. $146 billion, 110 billion euros has been promised to the greeks over three-year period. $110 million, as i say, in terms of european billions. that's 80 billion from the eurozone partners and 30 billion from the imf. and the imf program is starved all over this. austerity is what the greeks have promised in return. 30 billion euros worth of cuts to their budget over a three-year period. they say this will get their budget deficit down from the staggering 13.6% budget deficit now to under 3% by 2014. it's going to really cost them in the meantime. their economy will contract 4% this year. it will contract 2.6% next year. and there's going to be a whole host of measures, including putting up v.a.t. up to 23% from the current 21%. taxes on alcohol, on tobacco, on
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fuel will go up 10%. there will be freezes in public sector pay, public sector pensions, and also a clampdown on evasion, as well. george papandreou has worked very hard to build a consensus politically both within the country and in the eurozone, as well, to get this through. but there is trouble ahead. there's going to be a strike tomorrow from some public sector workers. and then a general strike on wednesday. we've already spoken to the boss of one of the biggest unions, the public sector edey union here in greece and they said they're going to oppose the plans. these are normally quite close allies to mr. papandreou and his socialist government. so there's potential troubles ahead. don't believe all you see in the papers. yes, there has been some disruption over the weekend, the may day protest went largely peacefully. there is the communist union who have vowed to fight this more aggressively and some fringe elements, as well, talking about blood on the streets. by and large, greeks taking this quite well at the moment. 94% of them believe the
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situation will get worse for them. but 51% according to one poll still back the government. >> steve, still a lot more to discuss here, as some people are scratching their heads wondering how can greece grow out of this debt if there's still deflation? so let's continue that conversation in just a moment. we are getting some flashes out of the united states in terms of the airline industry, united and continental just announcing their merger creating the world's largest airline. the new airline would fly under the united flag but the continental ceo would still be at the helm. joining us for a quick comment, leo tilman, president of l.m. tillman and company. want to get your reaction here because this is going to create not only the largest airline in the world but it is also going to do quite a bit to fares and the shrinking airline industry in the united states, as well. what's your initial reaction? >> well, this is part of the strategy by nonfinancial companies to grow and struggle with this fairly difficult and uncertain environment.
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and again, i'm not an expert in the airline industry. but there seems to be significant synergies between the two. >> what does it see about m&a activity? >> m&a activity is ramping up slowly. and it's a general trend, again, to combat earnings pressures and grow out of this recession. >> okay, so let's continue the conversation, because we had to get that in, as markets are going to be focused on that in the united states. but go back to greece, and we were discussion with steve just a second ago, this idea of deflation. there's a negative or low growth increasing an already sizable employment sector in greece. how is that going to do anything to get greece out of its debt? a lot of people are wondering that this morning. >> yeah, absolutely.
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i think, if i can jump in here, leo, i think a lot of people are asking about the greek situation, what it represents. is it the canary in the coal mine for budget deficits globally in bigger countries such as the united kingdom and united states, as well? of course, greece got into this situation, leo, by the fact that it couldn't raise money on the international markets. do you ever a situation where these huge deficits we're seeing in big ircountries, dare i say such as the united states as well, will that ever give a situation where international investors just don't want to buy their paper? >> i think it's totally possible. and -- >> leo, this makes us more concerned about our own fiscal house in the united states? this inures something along the lines of what could happen with california long-term, of course. not near erm. >> well, greece, is a sneak preview, in my mind of what could happen to the united states if we don't take very specific steps in reining in our
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budget deficits. greece is in a particularly difficult situation because they do not have their own monetary policy and they do not have their own currency. the united states has those, in addition to fiscal tools. but again, all of this is -- needs to be balanced very carefully, because you can certainly inflate yourself out of the problems, but that will have massive ripple effects across financial markets. >> okay. thank you so much for rolling with us, both of you. leo tilman, stay with us for some more comments. president of l.m. 'tilman and company. coming up on "worldwide exchange," china's commercial capital shanghai has been the country's one-stop shop for all things entrepreneurial and that's the spirit cisco wants to tap into. we'll be back with cisco live from this year's shanghai expo. also here's a quick look at how oil is trading as we go to break.
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♪ well, look who's here. it's ellen. hey, mayor white. how you doing? great. come on in. would you like to see our new police department? yeah, all right. this way. and here it is. completely networked. so, anything happening, suz? she's all good. oh, my gosh. is that my car? [ whirring ] [ female announcer ] the new community. see it. live it. share it. on the human network. cisco.
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welcome back to cnbc's "worldwide exchange." our very own bernie low is always at the right place at the right time and he's not missing the year's hottest show, the shanghai 2010 expo. bernie standing by right now live from shanghai.
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what's attracting you at the scene right now? what are you looking at? >> i've never seen so many people gathered in one place at the right place at the right time. my goodness, there are so many people in chinese. this is only day three of the 180-day expo. and this morning when i came in in the wee hours, already like 150,000 people congregating at the gates, ready to come in to enjoy all the sites. nearly 200 companies taking part in the pavilion displays, cultural exchanges and all that stuff. one of the reasons we're able to come to you like we are is because of our next guest on the program, here you know all the name, cisco systems which is the big network here in enabling company and the chairman of greater china was kind enough to join us on the program today. jim, welcome to the program. >> thank you. >> thanks for enabling us all. you're one of the big sponsors of this shanghai expo. thank you for your financial support and your moral support and all that stuff. are you getting all the bang for
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your buck here at the big 2010 expo? >> cisco is very, very excited about both our role as a senior sponsor for the expo, which means we help enable the infrastructure for all these different pavilions, but also we actually have our own corporate pavilion. we're the only information technology company that actually has a corporate pavilion here at expo. >> we enjoy looking forward to that. it was very recently that you said that you -- i don't know if you're been complaining or lamenting you underforecast demand and you said the migration patterns in china, china's been investing so much in the west and you have so much of your capacity in the southeast of the country, you're going, what happened? was that -- were you whining or was that kind of like, okay, we need 0 retool here? >> i don't think it's whining. i think we just have a terrific opportunity. most of growth in the past has been on the coastal parts of china. >> sure. >> what we're seeing now is explosive growth towards the west, which is creating great opportunities. >> tell me about the restructuring plan which has been in effect for what, about
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four months, five months now. it used to be that markets like hong kong, china, taiwan for subsumed or incorporated with like the rest of asia, and then, you know, the top brass at the company decided wait a minute, we've got enough going on in the china market that we need focus on greater china, hence you're the chief of the new greater china unit. is that just lip service or is that actually functional? and how is it progressing? >> cisco's been on a multiple year journey in terms of stepping up to our commitment in china. the most recent announcement was creating china as a theater, which is our largest field operating unit, but with that what we find is it's much easier to get the type of leadership investments and the over all commitment from all the different functions into china. it's actually working out terrifically well. >> when i look at the matrix and different numbers you have a different climate in china than other markets. one very isolated example, in the enterprise ether net switcher market, typically cisco, you go into any market,
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three quarters of the market, you'll own that space here and now. in china it's something more like half because you've got home grown bellwethers, which means that the dynamics in the prc market very different than other markets, correct? >> it is. it's a very, very competitive market. but cisco has never driven its strategy around competitors. we drive our strategy around market transitions. and we look at the market transitions that are taking place in china. we're very excited about it. that's one of the reasons why we're at expo to demonstrate what we call the smart plus connected community, which is basically a platform, an architecture for helping cities and city leaders and developers actually create the cities of the future to deal with all the urbanization that's taking place in china. >> okay. great job with the wiring here and everything, man this thing was built on a fast track. thank you for your time. >> thank you. >> and christine, that will do it for our coverage at the shanghai world exposition 2010. see you tomorrow. >> i like your chinese.
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see you tomorrow. [ speaking chinese ] speaking of china, china's central bank will raise the amount banks must keep in reserve as part of beijing's latest bid to rein in inflation and mop up ek sis liquidity. this is the central bank's third such hike for 2010. it will lift the reserve requirement ratio by 50 basis points effective may 10th. checking shares of major chinese banks tumbling in hong kong following the news as a result. pulling the hang seng lower by more than 1%. nicole? >> and christine, the or acking of omaha has spoken during his annual shareholders meeting over the weekend, with 40,000 investors attending. warren buffett defended goldman sachs and was less critical of wall street than some had expected. the billionaire investor also told shareholders that he sees jobs in manufacturing recovering but no big pickup in u.s. housing just yet. what buffett didn't speak to was who, though, would be in line to succeed him as ceo of berkshire
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hathaway. lou? >> well, u.s. "squawk box" follows "worldwide exchange," this program, becky quick can tell us what to expect. hi, becky. >> hey, louisa. it's great to see you. you know, we do have a lot going on today. the oil spill in the gulf. the terror scare in new york. we've got the bailout in greece. and a deal to create the largest airline, all of it coming up. we're going to have live reports from louisiana on that situation on the oil spill. it seems to be getting worse by the hour. plus, we're going to be checking out the reaction in the energy markets, as well. plus, united and continental flying together after agreeing to a $3 billion merger. the ceos of both airlines will be joining us at 7:00 a.m. eastern time to talk about it. we also have the reason we're in omaha today. we're going to be talking to the legendary investor warren buffett live for a full hour at 8:00 a.m. eastern time. he is fresh from the berkshire hathaway annual meeting where he spoke to about 40,000 of his shareholders. we'll get him today to comment
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on everything from the state of the economy to the s.e.c. investigation of goldman sachs. also we've got interviews with buffett's longtime partner charlie munger who had some very tough words for wall street. also his bridge buddy and microsoft's bill gates. "squawk box" coming up at the top of the hour. louisa, we've got a lot to see you in just a few minutes. >> sounds good, becky, thank you. and until then, for the next ten minutes "worldwide exchange" continues with more on the united/continental merger and other details to get you set for successful trading day.
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united and continental have just announced their merger, creating the world's largest airline. the new airline will fly under the united flag and have the continental -- that is a tongue twister, ceo be at the helm. a lot of data coming out of the united states today. hopefully i can roll this off the tongue a little bit easier. sales figures being released for
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major car companies at 8:30 in the morning u.s. time. personal income, consumer spending and core cpi are out for march. the ism manufacturing index for april and construction spending for march will be released. so let's get back to leo tilman, the author of "financial darwinism" and the president of l.m. tilman and company. we have a lot of headline risks. we have slickonics, greece, the oil spill. what wins out in the end? >> i think the momentum, the positive momentum in the markets should continue in the near-term. the merger between united and continental is generally positive news. it indicates, you know, general confidence in the ability of companies to consolidate and cut costs and grow market shares. so that's positive. ism is generally expected to be stronger, perhaps crossing the 60 threshold. consumer spending was fairly positive in the gdp report. so all in all, near-term, positive data and the trends should continue in the market.
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>> so selling may go away? is that old adage going to ring true? >> say it again, please? >> never mind. let's talk about warren buffett for a second. he came out this weekend really coming to the defend of goldman. that had made headlines not only this weekend but today, as well. what's your reaction to that? because you are also coming out and saying that the financial bailout didn't work, and the financial services are due again for another correction. what do you mean by that? >> well, opinions change if you have a lot of financial interest at stake. obviously buffet is a major investor in goldman sachs. also, buffett, who was highly critical of derivatives was fairly active on capitol hill trying to lobby for significant provisions for derivatives for his own portfolio. so, again, opinions change as new developments come in, and as
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you realize the impact of financial regulatory and other developments on your business. but, in general, i think finance ral industry has not learned as much as we had hoped as a result of this crisis. equity analysts and ceos continue to be focused on accounting earnings rather than long-term value creation, financial companies are taking on more risk in response to pressures. so all of this bodes fairly badly for future financial stability. >> leo, hi, it's louisa in london. very simple question, have you made money this year? and where would you be looking to make money for the rest of the year if you are playing the markets? >> it's a -- it's an extremely difficult environment. and you have to separate short-term strategies and long-term strategies. short-term, ride the recovery trades. equity markets, continuing compression of credit spreads, decline in interest rates. things of that kind.
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pretty much what we have seen so far. but you have to be ready to change these strategies the moment you see warning signals and it's very difficult to predict when and how they're going to come. so, again, separation of near-term and long-term dynamism in detecting change and reacting to it. >> leo tilman, author of "financial darwinism" and president of l.p. tilman and company. thank you this morning, we appreciate it. it's looking like a fine morning for futures. dow futures are up, and have been up for the last couple of hours right now. about 15 above fair value, of course, as we're getting big news out of the airline industry with united and continental. much more on that to come throughout the rest of the day, no doubt on the network. but that's going to do it for today's show. i'm nicole lapin in the states. >> and i'm louisa bojesen in europe. >> and here in asia, i'm christine tan. thank you very much for your company here on "worldwide exchange."
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this is a special presentation of "squawk box." warren buffett, headlining a weekend woodstock for capitalists. ♪ a mega merger in the air. unitedant continental piloting a multibillion dollar deal. oil slick. a massive spill threatening the gulf coast. "squawk box" begins right now. this is a special edition, different music.
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melissa lee is here. good morning, welcome to "squawk box" on cnbc, i'm joe kernen. becky is here as well. but she's not really here. she'll be on the show. she's reporting live from omaha, again this morning. carl is off. melissa lee, as i said, joining us, because it's going to be -- it's not going to be fast money, but it's going to be a fast show. >> fast show. >> it's always a fast show. >> we need fast. >> it is always fast. all building to our headline guest at 8:00 eastern, warren buffett live. and becky, my first question, as suggested by someone, do you feel that you've made enough money? because there should be a point where you've made enough money. i think. and i don't think mr. buffett hasn't learned that. didn't get to that point. maybe it will be on message now. but, you know, when you make money, someone else loses. so sooner or later you've got to stop making money. >> you're right. >> you're not creating wealth. you're taking it from someone else and we've got to spread it around. >> that's actually not true. sometimes you are creating wealth sometimes. >> is that possible? >> actually letting people -- by
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letting people go out and do their thing and taking companies and boosting them and helping them. >> in washington, d.c. -- >> maybe go to washington. and philanthropy, some of it in mr. buffet's case, $60 billion will make its way to philanthropic causes. some of the money he made with some tax revenues, too, wasn't it? didn't some of it go back to the government? >> yep. >> really. what a concept? >> a lot of it. he made a comment about that this weekend. he's got something like $2.5 billion or $3 billion in tax credits that he can't use, that are sitting there accruing. so he's still paying a lot of taxes, too. we'll talk to him coming up at 8:00. >> let's bring everyone up to speed on a flurry of important news this morning, melissa. >> these are all stories we're tracking for you this morning. eu finance ministers activating billions of dollars in bailout loans to greece. the country agreeing in return to impose spending cuts, and tax increases. huge oil slick still creeping toward the gulf coast.


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