tv Worldwide Exchange CNBC May 7, 2010 4:00am-6:00am EDT
linked to trader or computer error. now that the dust has settled were here is where we're expecting markets to open. we're slightly higher on the futures right now. dow futures are up -- or they're basically flat at this hour. we were up just a few minutes ago and we're basically flat, christine. some fund managers have been telling me this could be an opportunity to buy this morning. we could see maybe a flat or even higher open here in the united states. what do you guys think? >> i'm hearing that, as well. in asia, we took the cue from you guys as nervous investors sold off on the back of the dow's 1,000 point fall. adding to that, fears about greek debt crisis. but markets did manage to crawl back some ground late in the trading day. the nikkei 225 is down 3.1%.
the hang seng is down 1%. the shanghai composite down 1.8%. elsewhere, the kospi is down more than 2%. the hang seng down 1.1%. the bombay sensex down 1.1% and the aussie market down 271%. cnbc ftse global 300 index, this is how it's looking. all of this negative news is hitting that index, down 37 points, 4,247. louisa, how are you looking in europe? >> we're looking red. market early understand cages, the opening calls were dramatically lower this morning. we've moderated a bit, it has to be said and it has to be said that banks were among the falling sector initially. now it's the sector that is fairing the best. it's off by less than 1%. we are being led lower by travel and leisure, technology and media. all of those sectors off by 3.5%. it's definitely an important day
for the markets to digest all the news that we've had on the political front, especially with regards to greece, with regards to the potential sovereign debt crisis with, continuing that we could be looking at contagion across the markets. i want to talk about the fixed income markets, too. we initially saw this morning's bunch opening higher. the german/greece aid package is very much in focus today. the italian banks are less exposed in a global crisis and you have some notes out from a number of analysts indicating that the 10-year bund yield could fall to 10.5%. that's according to seb. nicole, lots to talk about today. >> lots to talk about. what exactly happened? there was no parent news event to spark the plunge. it was peck speculated to be a
trade entered correctly by human hands. there are rumors that a trader put in a b for billion instead of an m for millions. there is talk about a large liquidation for hedge funds. we have accenture briefly falling at one point to a penny. it set off this chain reaction of computer generated sell programs that cascaded into a broader market drop. the nasdaq, the nyse exchange had to cancel some of their stock trades during that 16-minute period i was talking about just a second ago that was more than 60% way from the last print. the s.e.c. and commodities markets are reviewing the unusual activity and the house finance services committee has scheduled a hearing on the matter for next tuesday, lou. >> and all of this comes amid a
fe briel atmosphere here in europe. right now, a hung parliament looks likely. in other words, the parliament where you don't have a clear majority to either side. berlin is voting on the age package for greece. athens passed its austerity measures last night, but violent protests continued for a second day running. the finance ministers meet by phone later today to discuss the crisis. the white house and federal reserve officials are watching these developments closely. >> and on our show for the next half an hour, our correspondents are standing by with the latest updates coming out of europe. we have ross westgate in westminster with the latest on the uk election. silvia wadhwa is in berlin with updates on the greek bailout vote in the german parliament. steve sedgwick is in london with reaction to yesterday's historic market blip. plus, our global stock watchers are here, anna martin, saijal
patel and our guest for the next hour, jane foley in london on the set with us. nicole. >> so how are triggers coming to term with the sell off? steve sedgwick is on the nomura trading floor. steve, what is the sentiment there now? >> the sentiment is very calm. this is the biggest trading room in london. you've got retail sales operations pretty much all around me, the structured products, the derivatives guys, the electronic trading operations all pretty much as you can see. people are looking at yesterday's event in two ways, saying it's part of a general sell-off, and yes, there was a discrepancy. but by .large, i was talking to the trade of electronic trading,
and he believes this benefits trading institutions. but the traders are concerned about not just the one-off event, but they're talking about the longer term picture and the worries about inaction and action, as well. it's inaction of cutting these budget deficits, then the concerns linger about sovereign. but even when there's auction, as well, let us not forget one of the big catalysts for the sell-off this week were the australians tapping a 40% tax on their mining companies. what are the sectors that led us higher, nicole? it's the banks and mining and resource companies, as well. those are the ones which the government around the world, if and when they do take action to get these budgets down will go looking to to have the biggest tax take. that's where these equity markets come in. yes, the outlooks and revenues have been better, nicole, and yes, they've been beating on expectations.
but the problem is, the better the governments do, the more the government will need to claw back more tax on them. that will be a sustainable break in the equity crisis. that's what the traders are fearing. back to you. >> if they stay there, keep talking to those traders. let's get a comment quickly from our guest host, jane foley and adrian mowett, asian and emerging market equity strategist. adrian, ublt this is just an error. what are we going to see in the u.s. trading day coming up? >> i think it was just an error and i would go back to focusing on the strong economic data coming out of the u.s. if you look at household income, we're now seeing job creation, we're seeing people working more hours. on the business investment side, we're at a 25-year high in the growth rate of business investment. i think you have a sustainable growth story with low inflation.
that's good for equities. my view on this fat finger story, look, think about the billions of trades that go on every year in capital markets. it's amazing that we ohm get a few errors like this. let's not question the system. it will be like stopping anyone from ever driving a car because there were a few car accidents. >> aid ree cran, your point is well taken and a trading error .is a trading error. but jane, heading into last week, it did seem as though sentiment changed a bit and especially looking at the banks, they started to worry more. there were more and more reports about banks holding back on lending to each other. >> again, i think we're in the next phase of the credit crisis, if you look. we've seen the government spent a lot of money. the governments need to get back that money. and the market is right about sovereignty faults. it is the banks. so we're just in another phase.
yes, we can look at the better economic data in the u.s. and that is good. but, of course, we know that that fiscal incentive that we had from you is government and every other government will go into averse sooner or later. in the u.s. we probably have the fiscal situation reversed next year and the uk hopefully will start this year. with this situation having to be cleaned up, this will be a big cloud for the growth prospects. that, of course, will impinge on the corporate situation. >> adrian, you basically think this is going to below over. take a look at the bank of japan today. in order to calm the markets, they had to pump 2 trillion yen into the liquidity markets here. how do you know for sure it won't trigger another liquidity crisis here? >> well, at the moment, it is triggering a liquidity crisis in terms of inter bank markets
aren't working as well as they normally do. but the central banks know how to resolve that. we've been through the experience of the last couple of years. clearly, the best way to get rid of a fiscal deficit is to remove growth. in my part of the world, emerging markets, i'm worried that we have too much growth. the chinese economy growing at 30% is too fast. ba zill, at a 25-year high at 7% is too fast. >> adrian, you're staying with us. thank you very much, adrian moller. jane foley is staying with us. we'll be talking more about the currencies. a reminder, though, that politics are front and center in europe and beyond as the world watches what is unfolding here.
the election in the uk is far from throwing up a certain result of the hung parliament being the most likely possibility. in wider europe, berlin is voting on the aid package for greece. we have silvia wadhwa. we heard that the french yesterday approved france's part of the aid package to greece and today we have the german vote, then. >> yes, absolutely. the finance minister speaking defending the aid package as the necessary step for solidarity with europe. that is pretty much along the same lines what we heard from angela merkel over the past few days. we've had members of the opposition speaking today, as well. amongst them, one of the leading members of the leftist party calling the speculators taliban
in pinstripes. so there is a very heated debate going on at the moment. the vote will go through. there is no doubt about that. around 11:00, we will start voting in the house. the 622 mps, they will talk. and the pretty broad consensus there and then off to the president. but let's make no mistakes about this. this is no longer the greece, but this is about possibly a german crisis. yesterday we had threats. angela merkel is coming out of this, whatever happens, weaker and weakened and possibly even more weakened after this weekend's regional electrics. but political uncertainties are
smlg we have to live with in europe, ross, it seems. similar picture, but different story in britain. >> absolutely. in germany, it's the parliamentarians. in europe, it's been the electric rat trying to vote in new parliamentarians. today, i think gilt traders are reassessing. this is going to prove we're going to have a weak government. no party is going to have a majority. the conservatives will end up with the largest number of seats. but perhaps the biggest surprise is the liberal democrats aren't going to have enough votes to form a coalition with the government currently led by gordon brown. when is going to happen? we'll have quite a few hours, possibly days, deciding who would try and form the next government. if i was a betting man, i would
suggest that the conservatives would argue they had they have the ability to form a government first. what he might say, you try and form a government, we'll perhaps lend you our support and then we'll see how we go from there. that may be where we end up. it's not certain whatsoever that that is what will happen. but of course, that lends itself to the government that is surviving bill by bill and takes us into the prospect of perhaps having another general election within the year. >> ross, i want to get an opinion from our guest hosts about what happens to sterling if this is the case. before we do that, hsbc numbers are just hitting the wires. >> good morning, everybody. hsbc, the bank listed in london and in hong kong, as well. it's a global business. it's slightly more global than
many of the other banks. the numbers themselves, it's way ahead of the first quarter of 2009. this is a trading update. what was interesting for the u.s. to look out for, the u.s. business resulted in a pretax profit for the first time since the financial crisis began in 2007. if you cast your mind back, you may remember that it was hsbc that pulled the plug on the credit boom first. they were the ones that said they had problems in their business that used to be known as household. that was where we were starting to see issues. this is essentially a real turn around for hsbc and a real performance. the stock was up in early trading in london reflecting the expectations of good numbers. the market seems to like what it's hearing, generally speaking, from hsbc today.
not a bad performance for a bank on a day like this. >> no, it isn't. i think people would be pleased to hear that, actually. i promise a reaction to the election outcome, potential election outcome from jane foley, director of research at for ex.com. jane, we initially saw the pound falling significantly to a fresh one-year low. how much further pressure do you think we'll see on sterling? >> we'll see some. right now, we don't know who is going to be the next government and we certainly don't know what is going to be done with respect to the budget deficit. the budget deficit matters is what sterling wants to hear. >> we'll come back and discuss all these issues more. in the meantime, though, christine. >> we're going for a quick break, lou. coming up on "worldwide exchange," yesterday the market shook investors to their core. after this break, we'll have more on how the after shocks are
hello, everybody. welcome back. you're watching "worldwide exchange." what you're looking at here are the uk election results that we have so far. 326 seats, that's the total that is needed in order for a particular party to win. what we're looking at now is increasingly the likelihood of a hung parliament. conservatives, 289 seats at the moment. labor and the liberal democrats altogether, 296 seats. those two parties, labor, 245 seats and the lib dems, 51. so it looks like a very, very close tally, nicole. >> lou, what may be lost in talk is the fact that we have a major economic piece of data out of the united states in the form of the u.s. jobs report. the april numbers are out at 8:30 in the morning. nonfarm payrolls are forecast to rise 18 on 0,000 following the march increase of 162,000.
that would be the best number since before the recession began in late 2008. unemployment is seen as holding steady at 9.7%, though. still with us, jane foley and adrian mowette at jpmorgan. aid ree can, if we get this surprising, perhaps positive jobs report, is that going to even make a difference in the markets today? >> i think it will make a significant difference. it's very important that the jobs report comes out with a number that the markets are expecting. that is indicative that households will be growing. it's a very important number. >> jane, do you agree? >> i do. indeed, i do. we've got to see some decent growth data. and if we get it from the world's largest economy, that really is the best case scenario. but investors are going to be
very watchful of various stock markets across the globe and there will be many that will suffer. >> so we are looking ahead to that. let's take a quick look at how we're expecting u.s. markets to open. we are looking pretty flat at this hour. it's still about 4:30 in the morning, though. this is after we still feel sea sick here in the united states after we're down almost 1,000 points. i don't need to remind you at one point yesterday coming off our interday high. we're higher, we're significantly higher at this point and this has changed just in the last 20 minutes or so. still trying to make sense of some of the action. we're up about 35 points on the dow, 10 on the nasdaq and about 7 on the s&p 500. louisa, it seems leak some people, at least from the traders i've been talking to are looking at this as an opportunity to really make some money, especially in the open of the u.s. trading day.
>> oh, for sure. >> are you guys seeing a lot of red still? >> we are, but we're seen the banking sector turn higher. i'm wondering how much of that has to do with the hsbc results. but that's what we're seeing. european equity markets are still lower, but coming off the lows that we initially had right after the open. speaking of what's going on on the equity markets on the ftse 100 in particular, anna edwards has the details with the hsbc numbers. >> absolutely. hsbc is giving us a quarterly update. the markets look to be pleased by the markets. the company talking about the impairment trend improving. they're saying for the first time since the credit crisis started, hsbc in america has turned in some level of profitability. also on the upside for the london market, some of the mining stocks bouncing from yesterday's sell-off.
all of those are trading to the upside. on the down side, though, i have to say it's a completely and utterly mixed bag. let's get to annette where over in germany, also a fairly mixed bag of what investors are choosing to sell today. >> that's true. commerzbank is among the biggest gainers. on the other side, we have munich re with numbers out better than expected. nevertheless, the shares are trading down and that is because the outlook is really a mixed bag there, actually saying that their profit guidance is increasingly ambitious to reach because of all of the natural catastrophes going on this word. munich re is estimating that they will have a damage claim up to 100 million euros from the
oil leak aenl in the gulf of mexico. so nevertheless, the market doesn't really like the figures and munich re is trading down 1 percentage point. e.on is trading ex dividend and they have been paying a dividend of one year 50. and so if we exclude that from e.on trading down more than 5%. it is still in negative territory, but not as badly as we are seeing it now affected in that trading session. now back to london. louisa. >> thank you for that, annette. coming up here on "worldwide exchange," it looks as though we're heading towards a hung parliament.
slidely triple digit points. >> and in europe, as if the down drop wasn't enough, more political pressure has uncertainty on the german voters on the greek rescue and a hung parliament is looming as results trickle in. welcome back, everybody. you are watching "worldwide exchange." i want to mention briefly to you that the uk april producer prices have trickled through on our wires. theorizing faster than anticipated. nonseason equally adjusted output prices, the core input prices, the highest year on year figure. and the input prices, uk april input prices, also the highest level since october of 2008. we're flashing those particulars on screen for you now. nicole. >> and louisa, it is 4:30 in the
morning. investors are on edge today after a wild ride in the markets yesterday. some will recall the panic of 2008. but this actually was just 16 minutes long. the dow plunged nearly 1,000 points just after 2:30 p.m., the largest intraday decline ever before rebounding to close down 347 points or 3.2% to 10,520. traders were left dumb struck as big blue chip names like proctor & gamble tumbled in mere minutes. p&g falling from $60 to under $40. part of the sell-off may be linked to trader or computer error. but there are still more questions there. as the dust has settled off a little bit in the last few hours, we're expecting markets to open across the board higher. we have just flipped heighter after being flat at 4:00 and now at 4:30, we're up about 50 above
fair value. and also about 7 above fair value, christine, on the s&p. >> everybody i'm talking to is talking about a bounce. i hope that's evident. over here in asia, we took the cues from overnight. the jakarta went deep into the red. adding to that, fears about greece debt crisis contagion. but markets did manage to climb back late in the trading day. the nikkei 225 is down 3.1%. we had the bank of japan today pumping $2 trillion yen into the money markets. the nikkei fell as much as 4% before clawing back toned 3.1% lower. the hang seng down 1%. even shanghai was not immune to the contagion. the hang seng index down more
than 1% and the aussie market down 2%. it was the worst week in australia in the year. so the ftse cnbc global 300 index not surprisingly lower. let's pull up the charts for you as i'm speaking. 4,253. >> here in europe, markets are lower. not as much as we saw at the beginning of trade. the main indices indicating the cac 40 off the most by 1.25%. the ftse is relatively nationalish right now. @of that has to do with the banking sector the.banks in higher territory. technology, travel and leisure, technology and retail fill the main sectors to be sold off. we're seeing waiting by a couple of sectors. i also want to mention the bond market, as well.
we are seeing quite a bit of movement here. the 10-year bund yield at 76. but the greek 10-year bond spread to the bunch above 900 basis points and we're seeing the italian yields higher, too, which was interesting, especially as yesterday the italian government increasing its debt to gdp outlook but fitch and moodies underlining that they're keeping a stable outlook on moody, too. so we continue to watch these bond yields. nicole. >> yesterday, stocks sold off, lou. we saw treasury yields go lower, as well. what exactly happened to trigger the market roller coaster ride? there was no parent news event at that point to spark the plunge. it is speculated it could be a fat finger trade or a trade incorrectly entered by human hands. there are rumors that a trader put in b for billions instead of an m for millions. there was a lot of talk about a large liquidation by a hedge fund. now, the unusual trades, with
well known names, like act sen temperature, which briefly fell to a penny in what seems like a nano second set off a reaction. the nasdaq canceled trades that we were talking about. the s.e.c. and commodities futures trading commission say they're reviewing the unusual activity and the house financial services committee has scheduled a hearing on the matter for next tuesday, christine. >> on our show for the next half an hour been, our correspondents are standing by with the latest out of europe. ross westgate has the latest from berlin, sylvia waed wa, plus we have reporters from around the world and adrian and
jane, as well. are you used today's sell-off as an opportunity to buy on dips? >> absolutely. i think what you need to do is target what you like in the markets. and put on let's say cheeky limit orders and news of volatility. but i think it will be with us for a while as we try and resolve what is partly a political as well as an economic issue in europe. and what we like is we actually like exporters. we like tech companies, transportation companies. we like the indian markets. but we're also quite nervous about some things in emerging markets such as brazil and china where we have under weights and we expect the chinese economy to do some significant rebalancing away from fixed asset investment, which is very commodity intensive. >> i just want to mention to viewers that we are seeing the greek german 10-year bond spread widening to 1,028 basis points. a euro lifetime high.
jane, are we seeing similarities to the pre-lehman era? >> absolutely. we are seeing short end currency traders told me this morning that it feels just like in the aftermath of lehman's failure, banks are starting to get suspicious. good banks can still get funded, but they're start to go pay more first. one important distinction, though, is that the central bank that's overseeing the banks in europe where these problems are now starting to emerge is the ecb. now, where it was a housing driven story a couple of years ago and you had the bank of england embarking on incredibly interesting ways to prevent armageddon. what we saw yesterday was an ostrich with its head in the sand. that could mean this could be even more serious than lehman's.
the european banks are heavily exposed to the debt of european sovereigns and they're starting to worry about who has the biggest losses about to be born. it's serious. >> jane, how serious is it for -- is it just european banks or are we talking u.s. banks with exposure, as well? >> last night, the u.s. stock indices was shown to be a blip, we've had contagions in the system already. we already had pressure. what we've got is a situation where i think that the european governments have to start talking about greece. if you look back to the political history of greece in the 20th century, the fiscal situation, the fiscal record is not good. can they really get over these problems even with the help of the imf? i think it's highly questionable. to stop contagion, i think they have to potentially deal with greece. this is a government issue still with greece. if it wasn't for greece, i think it could raise the question that maybe spain and portugal could
have got through this crisis or could get through this crisis. so this is a huge issue and contagion has to be stopped. >> what is going on there? i absolutely agree. isn't it amazing that nearly ten years ago, a couple of the goddys boys having rich seeners with long departed greek politicians trying to weigh out the numbers could lead to a 1,000 point drop on the dow and the european banking system confronting incredibly serious effects. talk about the butterfly effect. there you go. >> although we're not sure how much of it was down to a fat finger or -- >> no, no, but something that happened eight years ago is delivering armageddon now. >> we've got to go, james. oh, you're staying with us. >> i'm sorry, you're not getting rid of me that quickly, darling. >> let's move on then. because politics are front and center in europe, the election in the uk is far from throwing
up a certain result, as we've been saying. a hung parliament is the most likely possibility. and at the same time in wider europe, berlin is voting on the aid package for greece. sylvia is in berlin. ross is in westminster. let's get out to sylvia again. what are the chances of this not going through? >> very, very slim, indeed. almost nonexistent. in half an hour, the german lower house will vote on this package. the majority for chancellor angela merkel is comfortable because she has the green party in with her vote, as it were, was a 68-vote buffer and she has a reasonable majority. so there is no question that this will go through. there is no question it will go through in the upper house where there is very little question that the president will then sign off the on the deal. although, of course, we have this likely pending suit with the constitutional court. the rebel academics want to file
12:00 sharp before the president has signed this law and hope that the court will stop it. very unlikely scenario. not impossible, but very unlikely. but let's not kid ourselves. this is no longer about parting the greek aid package. this is about where germany goes from here. this is possibly the prelude to german government crisis. angela merkel has been weakened in this whole crisis. a weak germany, an undecided germany or possibly a germany embroiled in its own domestic crisis is the last thing europe needs right now and the last thing the speculators need to push europe more towards the brink. and the political scene in the uk doesn't help, either, ross, does it? >> no. we're looking for leadership in europe and i'm afraid the politics is going to prevent us from getting any strong leadership. you talk about a weak government in germany, we're now going to have a weak government in the
uk. it's now impossible for the conservatives to get a clear overall majority. they will be the largest party. but we're now down to the constitution and who can get the confidence of the number of mps that will form here in the building in a couple of weeks behind me in parliament? this is the most likely option is that the services try and form a minority government. but they will need someone to help back them. i think we're going to hear from nick clegg. and his stance on this is going to be key. so a disappointing night. didn't get the big gain in seats that they wanted. in fact, looks like they may have lost some seats. it's about whether he says to the conservatives, you go ahead, try and form a minority government. we'll back you on a vote of no confidence. before all of that take place, grdon brown stays at prime minister. he might try and cobble a coalition together. looks like we'll be locked in discussions over the weekend, unless nick clegg comes out
firmly one way or the other in the next 45 minutes. what we don't want is this uncertainty to continue into next week. i feel gilt and overall investors would punish more indecision. >> ross, thank you so much for that. james, what do you think it will mean for the uk economy that we don't see a clear majority in parliament? >> well, hung parliaments aren't always a bad thing. i know the uk experience hasn't been particularly successful, but it's not necessarily -- >> people think 74? >> yeah, exactly. and you have another election down the track. that would be a disturbing scenario. there is a bank of england meeting going on right at the moment. on monday, we'll get the decision. one of the key inputs into the
may projections is an uncertain fiscal position. we don't know what that looks like. what is going to be put into place. okay. . >> sorry pup likes like you wanted me to stop. >> well, i do because we need to take a short break. after "worldwide exchange," a historic market move, a sovereign debt crisis, an official hung parliament in the uk and an upcome employment report. markets have a lot to listen after this morning.
we've seen it before and we'll see it again. this, too, will pass. >> as we saw a couple of years ago when the market took a serious hit, those that stayed in wab it l come back. >> there's not much you can do unless you want to pull out your money and put it into your mattress. sometimes you have to ride it out. >> sometimes you have to run to the fire in order to catch it. >> welcome back. that was reaction from the man on the street. this is how we're expecting markets to open. we're higher across the board. things have been wild just this morning.
dow futures are up about 30 above fair value right now. dow futures up slightly about had and s&p 500 up about three. i want to remind you after yesterday's wild ride where some stocks lost 100% of their value temporarily, accenture, boston beer, we are looking ahead to goldman sachs's shareholder meeting in the morning. we get aig reporting before the bell and berkshire hathaway reporting after the close. >> and the big jobs report. >> there's so much going on. >> i know, i know. and even if the jobs report is better than expected, well, then markets could react negatively, too. then you think, well, maybe rates have to ed up sooner versus later. we could still see a sell-off. anyway, let's look at the european markets. we're lower across the board. banks waivering between positive and negative territory. in terms of the best performing stocks out there, hsbc is among
the 50 blue chip stocks to perform the best this morning and a number of the italian banks gaining back some of the losses from yesterday. let's talk to saijal patel for a look at the markets we're watching in asia now. hi, louisa. we did see a lot of damage in asia, as well. even if we had this trading error that we've been talking about in the u.s., the key fact remains that a lot of investors on this side of the world are very concerned and getting jittery. so in short, we saw this flight to safety moving into bonds like jgbs and as well as safe haven currencies like the yen. in fact, the yen surging to a 14-month high against the euro at one point. and that seemed to help markets recover from session lows. the nikkei 225 closing pretty low, down 3.1%. big sell off in the exporters and the financials. greater china was interesting, as well.
the hang seng index looking lower, as well. still below that key psychological level. so sentiment is still very bearish. china also shanghai composite down 1.9%. saw short covering there, as well. that seems to help the markets recover a little bit. what a lot of analysts are saying, even though what's going on in europe with, they don't think that it will impact corporate earnings or the economy over in asia kra. the key thing is they're saying this could affect fund flows and you need funds and money to push these markets higher. again, a very weak picture today for a third straight session. on that note, over to anna in london. >> so in terms of the london equity market, we're factoring in this globe picture from the
u.s. that we didn't have time to get into our day at the end of trading yesterday. so that is why we had to catch up from. that said, we are off our lows. we bounce a little bit here this morning. part of that due to the mining sector, actually, that's been recovering nicely. we've now got rio tinto trading in positive territory. we have a strong sector showing from the banking sector. hsbc up by just shy of 4%. the company saying that the fourth quarter had reduced impairment for more than two years. and their u.s. business, they bought households two years ago, it's back in profit. that has gone well with investors. the down side of the ftse 100, it's a real mixed bag. so the selling continues to be across the board. we've got lamb's development companies in there, development companies, ledger companies, technology companies, it's a real mixed picture. let's get to annette with the
latest for us in frankfurt. >> yeah. i can only say, as well, it's a mixed picture here in the german trading session. commerzbank is the biggest gainer in today's session on better than expected results from yesterday and as well, the hopes of traders and investors that commerzbank will hike its guidance by the middle of this year. we have deutsche bank still hovering around, now currently trading down by 0.6%. what i want to mention is an m&a story which is still in the rumor stage. but fc deutschland is reporting that basf has approved the bids in their supervisory board for a especiallity chemicalmaker and they are apparently willing to pay ruffle roughly $3 billion euro for this company. that's a reason why basf is among the biggest losers. now over to singapore.
christine. >> let's get final thoughts now from our guest host, james shugg. james, we talked about contagion here. what do we need to see from europe to get some stability back into the market? >> well, i think the ecb probably needs to take more aggressive action. i mean, you can argue that part of yesterday's bill sell-off in markets and increasing concern about the health of the european banking sector was because the ecb didn't really do anything. you know, they said, we even discussed perhaps buying bonds off the banks, issuing ecb reserves to do that like the bank of england has been doing. so i think the ecb does have a bigger role to play in all this. certainly, to me, yesterday, it looks to some extent like the ecb had its head in its sand. the other banks, yeah, inflation is very important to them, but inflation is a problem that you can deal with. central banks have been doing that for decades.
don't worry so much that the aggressive policies that you put in place to avert what could be financial armageddon, they can deal with that if that happens down the track. >> jane, do you agree? do you think the ecb needs to rethink the role that they play? >> one of the problems with europe, of course, is it's a model of sovereign states. europe does not govern of a federal system. you get this problem, really, when you have them being at risk if you allow the central bank to, you know, get involved in fiscal issues. and, you know, that is difficult. again, it highlights another store within the whole concept of the emu. so now, if the ecb is not going to get involved, you know, they're throwing it back at governments and governments, i think, have got to dmid admit that at some point greece is probably going to default. the sooner they reside that and deal with it, the better. >> and adrian, people are talking about default about contagion here. from where you sit in asia, do
you worry about how much exposure asia has to the debt crisis in europe or do you think asia is fairly isolated here? >> the direct exposure to european debt is very low in asia and, you know, we've got exposure to the economy but the economy is actually reasonably good in europe, particularly core europe. i would make a point on the ecb. the ecb does have repo facilities in place for buying bonds off the banks when they need the cash. i think the ecb is more a presentation rather than a substance issue and i agree that the comment that was made yesterday did ignore the situation. they already came out and said, listen, this is why we're doing this and this is why the markets should calm down. >> james shugg, we appreciate your time at this hour. a riyadh mowette, thank you so much to all of our guests and
our guest hosts for the last hour. we are expecting markets to open here in the united states. "worldwide exchange" is only going to be an hour, though, today. we are going to be followed by a special edition of "squawk box" on the market turmoil that follows this hour. so that's going to do it for today's show. i'm nicole lapin in the united states. >> and in europe, i'm louisa bojesen. a reminder, a hung parliament is now confirmed in the uk on the back of these general elections. >> and here in asia, christine tan. have a safe today in the markets today. thanks for watching "worldwide exchange."
good morning. a spine-chilling slide. the dow drops nearly 1,000 points in its biggest intraday decline ever. what happened and why? yesterday's mass panic leading to calls for a crookdown on computer driven high frequency trading. and don't forget about greece. debt contagions here still front and center in the global market trade today. and oh, yeah, it's jobs friday. your alarm is not broken. it's 5:00 a.m. on the east coast and a special extended "squawk box" begins right now.
good morning, everybody. welcome to cnbc. market drops were heard around the world and there are still more questions than answers about what happens on wall street yesterday. here we are an hour earlier than usual with this special edition of "squawk box." good morning, everybody. i'm becky quick along with joe kernen. carl quintanilla is reporting live from athens again today. and in case you went to bed wondering what's going on, let us get the story as we know it right now. the dow dropped nearly 700 points yesterday. many people say that this may have been triggered by a selling error. now, the major stock indices eventually came back from 9%
drops to close to down to just over 3%. let me tell you if you were watching this, this was chaos, this was confoous fougz. during the sell-off, the proctor & gamble shares plummeted by 37%. the company started looking in trying to investigate whether any erroneous trades had occurred. but again, this is a dow component. it's knocked down to about 40. >> $30. yeah, from above $60 where it had been trading. this is the stock pick for accenture. so these were quick and vicious moves. it hasn't pretty instantaneously. vicious market sell-offs like this can be exacerbated when shares get sold at any price
available and i just figured out what that music movie was at the top. it was terminated three, rise of the machine. >> that makes sense. just to put it into perspective, if the depth of the financial crisis, proctor & gamble, after a long slide from the high 70s, it traded down to the low to mid 40s. so yesterday, with nothing happening -- >> but it happened in ten minutes. >> right. and it went to 137. so you have one of the most table companies and stable stom stocks, something happened which put that thing from 61 down to $39 where it hasn't traded since -- it looks like you have to go back to about '03 or '04 to get to where it was. so in the depth of the financial crisis when it dow was 6,000, it did not trade at 39. >> these charts are mistake it look much better because it's the off xharts. charts.
this was so stunning and so unbelievable. steve liesman was reporting earlier, he sent us information about what the treasury secretary geithner was doing at that point. i guess on his blackberry, it shows the dow down about 250 or 300 points and all of a sudden, down 900. he had, that can't be right. >> you have to see it during that 10-minute period because i got an alert on the blackberry that said dow down 900. and within a couple of minutes, i checked on the blackberry, you can get -- you know, i can get the dow quote and it said down 300 and i almost sent something to the guys saying, you know, you really ought to be careful before you send something. >> i happened to be listening to sirius radio. and i was on the air with cramer at that point. then they started reporting from
the floor. you start thinking if you're listening, this is war of the worlds or something. this is not something that could possibly be happening. >> and poor citigroup. >> citigroup is looking through, they can't find any evidence. other firms have gotten blamed, too. we don't know much more today than we did yesterday at this point. >> they looked through the entire s&p book on citigroup. >> and the nyse was saying the same thing. >> that doesn't inspire a lot of confidence in the system at this point. it didn't each seem like -- it wasn't one of those days that the volume and the exchanges were swamped. and the greece thing is important, but it's 2% of the economy. >> but you wonder if this is the type of stress test, as these programs have gotten more and more rapid trading and they've
become more prolific, you wonder if this is the type of situation where you can't slow things down again. >> but then again, if proctor & gamble were to sell at 39, you can see how quickly -- >> well, cramer wab on the air right now and he said, this is crazy. buy it right now. he said on air, this is ridiculous. buy it right now. >> at what price? >> in the 40s and 30s. >> boy, he went out on a limb. >> it was only down like that for a few seconds and people quickly jumped in and brought it right back up. although all of those trades are going to cancel. >> that was a no-brainer. >> we are, of course, preparing for the always important monthly jobs report. the government release is due out at 8:30 eastern time. the dow jones survey is
predicting that its economy added 180,000 jobs last month. and the u.s. equity futures at this hour, after all of the chaos from yesterday, were indicating higher. right now, you're talking about down by about 20 points below fair value to the dow futures. we are going to see quite a bit of movement this morning as things continue to shake out on the overseas markets. japan's nikkei, it fell by more than 4%. stocks recovered a little bit towards the close, as well. but remember, japan seeing some of the steepest drops. it was down by about 3%. it had a little catching up to do, as well. some of the companies postponing stock and bond offering, figuring they'll wait for a better time. in the meantime. asian government bond yields jumping into markets with high
form expectations and the european stocks at this hour are weaker, as well. the ftse off by 1.5%. the cac 40 is down by 2.6% and the dax in germany down by 1. %. we'll get the latest from carl in greece in a moment. but let's take a look at some of the other board, as well. oil is up 25 cents to $77.36. recovering from a 4% slide yesterday, the dollar was one of the strengths yesterday as the market plunged. right now, you see 91.96 for the yen and the euro is trading at 1.27. as we got into the chaos, the 10-year note has been another arena of safety. the yield is only 3.429%. right now, up to $1,198.60 an
ounce. >> at one point, it's above there. we had that long talk with chanos yesterday and a lot of the other people that we had on that it's the contagion word that spreads to all currencies and what is the last remaining guy standing? and it was gold. and why isn't supply a lot higher? of course, you've got bricker on saying it will be ten times higher. let's got to the overseas markets. christine tan is standing by in singapore. what does it look like today, christine? nervous trading. >> panic is more like it, joe. the bank of japan, the boj, pumped in 2 trillion yen into the short-term money markets today. the last time they did it was in december 2008. but it cut its policy interest rate target to 1.9%. the nikkei fell as much as 2% before being clawed back. exporters in japan came under pressure. another big loser, south korean
market down 279 peshs selling banks, blue chips lower, lowest close in early march this year. shares in hong kong managing to close the day's lows. europe's largest lender, hsbc, biggest rank on the hong kong markets. the shanghai composite fell by 1.9%. and australian shares posted its worst week in the year since november 2008 as the height of the global financial crisis, the s&p/asx 200 fell by 2%. back to you. >> let's get to louisa in europe. 1.5%, while significant on most of these bourses, louisa, you koovent have expected that to happen. >> no, you probably couldn't. the early calls this morning, we were looking at our european markets being called down somewhere in the region of 135
point for some of the main european markets. initially we saw a red open. we're still in negative territory across the board. we had hsbc numbers out of the uk, better than anticipated. that's helped turned around some of the banking shares in general. there is one important thing that we have to touch on. that is now that we have won firmation of the hung parliament in the uk. that means that the general election in the uk results, which have been trickling in today, show that no main party is running away with the lead majority. sterling is taking a hit against the dollar today, lower by 1.2% on the session. now to 1.4601. retesting the earlier lows that we saw today. the same is happening against the euro, too, because it means uncertainty for the uk. what type of an environment are we now going to see if you have the main parties that have to agree on how to get us out of
this debt crisis that we're in. i want to show you over here what's happening with the euro against the dollar. we're continuing to watch greece, we're continuing to watch how the sovereign debt issues happens here, too been a 127/1.28. the yield pressed continue to widen significantly. out of greece, 20% is what we're looking at now on the bond yield. bhek kwi. >> louisa, thank you very much. in the meantime, the g-7 finance ministers are meeting today. and germany's parliament is set to vote on the bailout later today. fed officials have expressed concern about contagions. and the white house says president obama is watching developments closely. let's get back to carl with the
latest development in athens. yesterday, this turmoil kicked off as we were watching pictures of some of the chaos there. >> yeah. in fact, i can't -- i mean, i think people even here were mortified even at the suggestion that they were partly responsible for that 1,000 point drop. but we're not expecting any more today. that's partly good news. you mentioned already it's going to be a very busy friday. we're going to get an announcement from angela merkel probably at about 6:30 a.m. your time, new york. a lot of the greek spreads now are just as wide as they were before, that it was even announced about the eu and the imf. you talked about the conference call. that may lend some support to the euro, but already some of
the japanese finance ministers are saying don't expect us to any kind of joint intervention with this conference call. we talked about the white house being involved, the president being briefed. joe, it has taken that no matter what happens, eventually greece is probably going to default, in his view, and that that is going to be accompanied or followed by some kind of departure from the euro. because workers here apparently are not going to take more cuts. the ecb appears to be unwilling to do any kind of inflationary easing. and it's hard to imagine that any other euro zone neighbors will want to pony up more cash for greece. so does this turn in argentina? we're getting to the point that we're talking about very big, bad case scenarios. we'll see what merkel says at
6:30 eastern. >> we've always learned more about sovereign default in the past. i didn't realize it was so common. but you look around the world, there have been some countries that have defaulted three and four times. with what we know about the way numbers greece has been putting up, you might as well make them up, half of them. they never really were in the eu. >> there two serious problems with that. one is the idea of unraveling the euro and what that creates for all kinds of trades that have been set up on this euro standard. and the second is the idea that it's a lot of that greek debt that is owned by all the other european banks and what does that mean for -- >> it might not just be greece. it might be the euro itself. >> let me jump in and ask, in germany, the debate is largely
about whether or not they can keep a german bank to keep their credit lines open to greece in this case, right, or at least get them to hang on to the greek bonds for the three years of this balout. deutsche ackerman, look, we have to make sure greece doesn't fail. the taxpayers and the media were saying, look, these banks aren't taking on a lot of risk because it will be backed by the german government. so basically these polar opposites on how they view money is coming to a head. >> i think the way they got out from under the military rule in '74 was the same kind of thing. i'm surprised they expressed some chagrin about the 1,000 points. the pregnant lady in the banks seems more serious. i mean, we rebounded, you know,
at this point. there's a lot of things that -- and crudeman, you mentioned crudeman. did he mention be careful what you wish for? i hope he -- you know, he looks at what's happening over there and maybe revised some of the things he thinks should happen here. >> you'd have to ask him. >> no. >> we've talked about nationalizing a lot of banks back home. >> exactly. thank you. i like that shot, carl. that's great. amazing and great work. coming up, we are turning the clock from yesterday's free fall to today's jobs report. we'll get ready for the opening bell when "squawk box" returns.
all right. book to the markets. joining us this morning, lynn blumm. and from capstone markets, tim freeman. gentlemen, thank you for coming in this morning. we were just talking in the commercial break. what the heck happened? we still don't know, do we? we don't know exactly what happened, but it looks like a trade error and we are treating it like a trade error and i think the market needs to digest that and ultimately what happened with that trade error. >> hold up.
>> how tall are you? >> about 6'5". >> and how much -- oh, yeah, i'm not going to ask you about age. but you're a big dude and you have fat fingers. and you're here the, so -- exactly. so i can rest easy. it was not me, thank god. i would be in a bar in new york city some place drinking that one off. >> it is possible that if you meant 16 million and you meant 16 billion. but there's a paper trail, isn't it? >> there is. we should hear about that later on today, i would expect. >> but $1 trillion? we need to tighten something up somewhere, don't we? >> something has to be tightened up. if this is, in fact, the cause of the problems, you would think the institution where the trader worked would have some kind of computer track for trader errors. and there's a policy and
procedure problem at that institution. >> but not just as that institution. we're probably talking about a broader, systemic problem where you have so much high frequently trading, so many decisions that were made without a human checking off on any of this. some people were saying this is rise in the machines, where the machines take over. >> you've got a lot of, you know, things weighing on people's minds. for example, in the united states, is the rally sustainable? is it a question of economic stimulus from the obama administration and the inventory cycle or do we have the exit velocity to get out of the recession? and all of those things are weighing on everyone's minds. the market was down 400 or 500 points before we had problems with trading issues. so you put all those things together and you have somewhat of a perfect storm for a drop like that. >> perfect storm, but not completely unexpected. tim, headed into this, we were
down several hundred points. there were all these concerns about greece ahead of time. but to go from down % to down 9%, that is -- >> so we have two issues. we have a market structure issue which we can talk about that at add naus yumm. but effectively, people want speed and this is going to happen as the market searches for more and more speed 234 terms of trading. then we have a systemic problem globally. what i will like to focus on is what happened in the market prior to this. trichet's comments and how the ecb is going to react really were very impactful in my mind. we went out on the note that this was the major diversion from the policies that the market was expecting. and the market has been pricing very much for perfection. great economic numbers out of the u.s., great earnings out of the u.s. which we've been getting and ultimately, a resolution from the eu with respect to greece and maybe
others. >> volatility, that was a good call. the vix skyrocketed after this. >> it was absolutely insane trading yesterday. but again, when we focus on trichet and those comments, we're seeing changes right now how people want to deal with greece. and that is absolutely going to put more volatility in the marketplace right now as we move forward. >> there's all kinds of weird trades and the exchanges are saying they'll get rid of any trade that were more than a 60% deviation from the price before that. but we just saw the vix. that was a 30 plus percent deviation. there's all kinds of money that changed hands yesterday that was based in part on a mistake. how do you correct that or fix that? >> i don't think so you're going to be able to. i think a lot of people made lost money yesterday. there are clearly some easy to identify error trades like accenture, proctor & gamble where you saw stocks go to zero.
that's obviously a mistake. but people picked up stocks down 25% and that's just money changed hands and money was made or lost. >> the vik was up 25%. right. so it was up above 40 for a while. >> there's talk that they're going to knock out all trades above 35. and with the i don't know the ruling on that this morning yet. but they're talking about knocking out fixed trades. >> so they probably know except for the real error in trades. >> but the error in trades is where the money is made and lost. trading debts across the globe right now will spend of the most morning to figure out what their risk is. they'll be work to see what trades are canceled, what trades were not canceled. >> boston is near fine. et went down to single digits, but proctor & gamble? >> that is like kelloggs going
down. >> it's not even one of the biggest blue chippes and one of the most stable business wes b even in a financial crisis we think of proctor & gamble almost as the gold standard. stop showing that sglrvelgs it doesn't show it. it went to 37. that shows 56. it's useless. >> that's the nyse trade. it didn't go below that on the nyse. anyway, tim, lynn, gentlemen, thank you for coming in today. >> still to come, a look at headlines light ug up the news wire. plus, the uk elections are still to be resolved. barclay's puts it inperspective, still ahead. hi, ellen! hi, ellen! hi, ellen! hi, ellen! we're going on a field trip to china! wow. [ chuckles ] when i was a kid, we -- we would just go to the -- the farm. [ cow moos ] [ laughter ]
welcome back, everybody. futures at this point are still at fair value. trying to figure out where things stand right now. the markets are standing pat as we await a lot of additional news to come this morning. don't forget, we also get the jobs report coming out at 8:30 eastern. shaking out what happened yesterday, that's going to be the key focus. president barack obama will make a statement at about 1:00 eastern this morning about april jobs data.
he will be joined by treasury secretary tim geithner and christina romer. again, the government's employment report, 8:30 eastern time. the dow jones survey of economists is predict that the economy added 180,000 jobs last month. unemployment is expected to hold steady. of those jobs added, about as many as half of them are expected to come from the census. the senate is expected too to vote on a proposal to challenge the fed's createsy until income weekend. the fed says it's very important to hold on to how they move interest rates. >> once you make a amount of money, don't you think that's enough? i just think that the dow has gone up enough.
>> too much? >> well, once you make it -- why do you keep trying to make money once you've made enough money? it's in keeping with some of those prior comments. about, you know, the greed and -- i think 10,000 is a good level for the dow for the next three years. >> now you're the saudis. anyway within coming up, the latest from greece. parliament is approving cuts as it continues to spread.
check out the futures this morning. down about 9 points. and we're dealing with the flatness that we usually see before a jobs number, which has -- i wouldn't say it's taken a back seat at this point, but suddenly, the employment picture in the u.s., given, you know, the way we recovered from the last financial crisis, we know how we rofd from the last financial crisis and things were going pretty good. >> i would say it's taken a back
seat in terms of trading today. >> i guess what's ahead of us? >> does this rival what we saw in september? >> yeah, but we can deal with the private debt defaults, but like ruboubini pointed out, a private crisis is followed by a public debt crisis. and then you see how many dominos fall there. >> it's the same thing el-erian has been saying, too. >> who bails out the people ta do the bailout? >> a constant cycle of we bail you out and then you bail us out then you bail you out. >> i used to feel bad for how
many the germans dealt with this. but this is the exact same thing happening. idea, traders were running. joining us from the cme, ben lichtenstein. we also have ed riley. let me see your fingers, licken stein. i can't see it. oh, he's not showing. >> thumbs up here, joe. >> you've got fat fingers, riley. you weren't doing anything yesterday, were you? is that thumbs up that you feel better? >> no, i don't feel better. i can't believe there are any idiots out there that would follow after a thumbing like that was yesterday. >> ben, as a guy that is in there working with -- i guess
you have some algorithms and equity trading. >> what i'm hearing is a citi fat finger. i think the details have yet to be reveal. as you guys mentioned, i think that the unemployment number will take a back seat considering the magnitude of the money we saw yesterday. the markets, though, after the big party last night, the question is, how hung over are we going to see today in terms of the energy be saw in this market. sdwroe, we talked on monday about this avenue the key reversal that we saw yesterday and then came off the day's pretty day's trading session. again, the activity that we saw yesterday afternoon nobody could have ever predicted. >> we had two guys calling for corrections. we had the guy from s&p, remember him, and we had lekovich. >> and one thing we talked about
again, as well, is now seeing the vix increase above 15, 16 were 17 and just stuck in the mud there, getting it up above 20, 22, 23, that is where the heightened concern com comes into place. and then it goes kout saying, the activity we saw yesterday would magnify that by a degree. i can tell you right now we're going to focus on a couple of key levels, fwat for the news here and continue to trade. >> we had heard yesterday citi desk hasn't had the fat finger and on this point, how it got out of the control and dropped
to that level is amazing. >> that was by far the craziest day i've ever seen here. it was already headed down that path, though, where the bottom just basically fell out. but we were already in high energy trade as we have been all week. so there was something that happened. and again, i have firsthand knowledge that this was a citi desk fat finger error and but we'll never really know for sure and it takes a couple of weeks and everybody forgets about it and moves on. i'm not sure how long that's going to take in this instance. but it will happen. we will move on. but really, below the radar read now. we have gold which skyrocketed yet yesterday and the problems
we've had with the currency over the last several daers. >> some on that may be warranted given the fears in europe right now, ned, and where it stops. once there is blood in the water, it just doesn't usually end with a, oh, gosh, we got the eu and the imf and everything is fine. it doesn't end that way normally, does it? >> well, joe, no, it doesn't. yesterday was a bigger highlight because of the move in the market. to be candid, i've been in this business so long. i can't believe what price the market closed at yesterday. if you're talking about a market that dropped 998 points, you know what i feel sorry for, joe? i feel sorry for the poor slobs that got sucked into the short
text of all this short telling? a fat thing just lost you $6,000 pucks in the markets. i've got a problem with this one and a real big problem. this one ain't going away. i lived through 1987, program insurance and program trading. when they don't me, hey, boy, this didn't work, i didn't smile away from that one for a long time. people have to pay for this one. >> and we need to knowly what happened. there there was a fashion finger, we need to know where eats exacerbated. >> we don't ee know if some of
us start these -- >> can't you follow the money and see where the money was made yesterday? >> duh, can't we find out where the mistake was made 12, 24 hours later? we should be on it by now. this is a high frequency trading market where it takes milliseconds to trade these things and now it's taking microhours to figure out how the mistake happened. i bet you they know but they're trying to find out to mitigate the damage from the public. if i'm the public, i like the market, don't get me wrong, but i get scared to hell when someone comes on and say, oh, i glitch made this market drop 1,000 points. >> you think who knows, the government and they're holding out? no. but somebody has a pretty good idea, because you sur maid that someone put $1. instead of $1 billion down as a
trng, something really things and y like it. >> tune from from 6:00 to d 06x million ever. and he may give you some reasons not to get angry at the glitch, but maybe the entire globe is in over its head in terms of leverage and this is a premonition of things to come. >> gentlemen, in due respect, i think you're one of the smartest guys on the street and it could be. but i've heard this before. we've recognized greece, portugal, spain and ireland at times. >> it's like the eu you've got there. the great left line i tau yesterday, they said nothing is
happening over here yet. but it's hike a family of fraerry dogs prosecute re-r all come up at the same time and look through the hole and we're ware of what's happening out there. >> and i agree with you, joe. the potential could be big for this issue. but when you think about it, that ,000 point drop yesterday cost us more than the total understanding debt of greece, portugal. we lost $1 trillion of market value in the u.s. alone. >> and ben, we're hearing some of the markets over in europe, they're not working that well, some of the credit markets again, tinner bank lending and there's things starting to get dumbed up. i mean, there are some signs other than just a glitch that
you know, maybe there's -- and then you've got the mayan calendar on top of everything else. >> i don't disgetaway, joe. you've already got aishan, swimming and leaves. and you want to widen the spreads twenl the bonding and go ahead and do it. your going toid it this sells off 1,000 points. >> well, we don't know yet. we're at 10,500 at this point. that was an obviously an ugly spike down. but at this point, you still have time. if something is on the horizon, you can still go to cash. >> no. and a correct is a correction. i will point out to a lot of people, americans are very
unusual. if there's a sale on at maysy's, they'll charge through the door to buy it. but if there's a sale on praul street this be they won't touch it because they're afraid it's going to drop another 35% to 20. . >> we've got to go. we have a fouf-however show but we're going to region out of time. still ahead, we have comments from exxon mobil's eo, rex ellerton from gulf. "squawk box" will be right back.
welcome back to "squawk box," everyone. right now, the futures are just above fair value. the dow futures higher by about 10 points. a containment dome built to cap the gulf oil leak is being lowered into place. this is expected to be in place and operational by early next week, if everything goes as planned. it has never been tested at this level, though. so it's the level of depth in the ocean. rex tillerson commented on the spill during an interview with erin burnett. >> this is a rare and unique incident and it's obviously one that we all want to understand so if there are procedural
changes or things we need to be doing different we need to undertake those. let's deal with the incident, let's have an investigation and let's look at the industry's practices and standards and learn from this incident and take the steps to prevent this from happening in the future again. >> oil prices are rebounding slightly this morning, up about 1% after dropping yesterday and seeing major drops earlier in the week. at this point, crude oil trading at $77.87. >> next, british elections that are yet to be determined and the aftermath of that nearly 1,000 point plunge in the dow, that's up next on "squawk box."
the greek debt crisis. joining us now, julian callow from barclay's capital. julian, one of the things that really strikes us over here is that once you had a much bigger bailout in place and it looks like it was going to happen, that's when things really unraveled. can you explain why sthapd? >> i think it's one of those
things that the more you learn about it, the more you realize how severely problematic it is. for example, if you look at the actually agreement that's been struck here with the imf and the european bodies, you find greece is going to have to tighten its fiscal policy by about 16% of gdp. now, we have going through the examples of modern history of a country attempting that kind of fiscal consolidation. fikly, greece cannot devalue the currency and it cannot cut interest rates. it's starting off with a debt gdp ratio of 15%. but the program seems to signal that that number will be revised up to 122% for last year. and then the government to debt gdp ratio will be hitting 149% by 2013. okay. now, with all the fiscal tightening in place for this year, which is worth about 8% of gdp, gdp in real terms this year is expected to be contracting
4%. but that could be optimistic. the contraction in gdp could be worse than that. so even with all the plan in place, with all the restructuring on the fiscal side here, even on the best scenario, you still get the public debt to gdp ratio for greece hitting about 150%. of course, an extremely large number. markets tend to be quite sensitive at this ratio is really above 90% or above 80%. and so what you're talking about is greece will have a huge amount of debt servicing to be doing, even in five years time. >> they can't -- what is the likelihood, in your view, of a default eventually? >> i think it's really hard to put any precise numbers on because i think there's going to be a lot of political resistance to try to stop that happening. so i suspect perhaps more likely is we'll get another package, really, when this one runs out.
we've not had the experience of sovereign difficulties in western europe. and so it's in everyone's interest to try to make this one work. particularly when you remember that about 70% of the greek debt, the outstanding greek debt is near to 300 billion euros at the moment and nearly three quarters of that is held to other countries in europe. so obviously, if there were to be some form of default, there would be very important knock on consequences for other financial institutions. and that is really why everyone has been coming together to try to avoid that. >> if you compare apples to apples with those numbers, 120% that you were giving, what is portugal and spain? it's nearly as bad, isn't it? >> the portuguese government debt gdp ratio is currently, for last year, at 75%. spain was at 53%. so much, much lower.
>> but if you add everything in to get to those higher numbers, private and public, don't you get well over 100? >> well, it's about 300%. 290% if you add in house holds, not financial funds and governments. you get to about 290% at the end of the last year's gdp of debt for spain. 320% for portugal. around 290% for the republic of ireland here. in fact, these ratios are higher than they are for greece because there's more private leverage for greece in these economies. >> you're going to be busy and we'll need to check in with you once in a while, julian. thanks for your time. appreciate it. coming up, we are heading to greece where carl is get ago firsthand look at the debt threat ripping through that nation. and heading to the set right now, nouriel ruboubinroubini.
good morning. markets in turmoil. ten minutes and the dow dropping nearly 1,000 points yesterday in its biggest decline ever. what happens? should something be done to prevent it from occurring again? plus, global fears about greece and if that wasn't enough, a u.s. jobs report. the second hour of an extended friday version of "squawk box" begins right now. ♪ ooh, baby, baby it's a wild one ♪ ♪ it's hard to get by
just upon a smile ♪ >> hi, everybody. welcome back to cnbc. i'm becky quick along with joe kernen. and carl quintanilla is reporting live from athens today. our guest host for the next three hours is nouriel roubini. he is the chairman of rgemonitor.com and he has a new book out. right now, you're going to see that the equity futures are slightly above fair value. sth a number that's been bouncing around thigh the course of this morning. you can understand after yesterday's chaos that there is hesitation to get too active ahead of it. you have the jobs numbers coming out about two hours from now. it's moving. >> for those of you just waking up, let's bring you up to speed on what we know about yesterday's sell-off. in one ten-minute stretch, the dow dropped nearly 700 points. many people say it might have been triggered by a trading
error. the sell-off at one point had marked capitalization. the major stock indexes eventually came back from 9% drop to close down about 3%. during the sell-off, a stock like proctor & gamble, one of the most stable blue chips around plummeted nearly 37% to levels that it didn't even see during the financial crisis when the dow was in the 6,000 area. the company began to investigate whether any erroneous trades occurred. consultancy firm accenture saw its shares sink from around 41 to just a penny at one point. a vicious market sell-off can be axer as baited when plunging prices turn stop loss orders into market orders. at that point, shares get sold at any price available. >> the nasdaq at this point is announcing the names of hundreds of stocks for which it's going to be