tv Worldwide Exchange CNBC April 17, 2012 4:00am-6:00am EDT
well can welcome to "worldwide exchange." india central bank/slashes interest rates by 50 points, first cut in three years as it looks to boost growth. repsol shares, after argentina takes control of the ipf. also in will spain, the governments test the water by setting up to 3 billion euros in t-bills ahead of a longer dated bond auction on thursday. >> and in the u.s., a trio of top names report first quarter results before the opening bell. coca-cola, johnson & johnson, goldman sachs. >> you're watching "worldwide exchange." is the eu at risk? george soros says the crisis is worsening, not getting better. we look ahead to the results of spain's latest debt auction. and what about the hair index? we'll speak to the ceo of paul mitchell hair products. and find out why ikea is calling an electrician. stay with us through those stories. >> i don't know whether will the rips to the salon will be any
sharp gauge of how the economy will do, but we'll leave that discussion for later. i'm sure we have plenty to talk about. of course we're focusing on india, looking at a policy rate, 50 basis points to 8%, first cut in three years. the bank says doesn't expect any additional cuts despite its aim to boost weak economic growth. live more from mumbai. >> embarked on a reversal of the qualities down peerly after three years, now, this is cop rather to our report which indicated that at least 15% of the market expected 50 basis points cut, the remaining expected a 25 basis points cut. they reacted positively. shot up 200 points after the
announcement. central panning says the draw has fallen below its strike and that's given them the comfort to go ahead with this rate cut. they also say this is the slowing growth is one of the reasons why inflation has moderated. but they believe that inflationary pressures and concerns and the room for cutting going forward could be minimal. will they've also kept 7.3% inflation at around 6.5%, but this could be mine because more crude prices could be expected. so pro growth and dovish instance from the reserve bank today. >> thank you very much for that we'll get more analysis later on on in the show with our india panel. our guest believes will's still more room for the rbi to cut, but some big asterisks attached. meantime let's show you how
asian markets are stacking up. mostly lower finish across the board. concerns about the eurozone continue to dominate sentiment and stopping any risk appetite. shanghai market down 0.9%. sapping investors appetite, worried about how that will impact the slowing domestic economy. hang seng down 0.3%. earnings weighing on on sentiment. nikkei 225 after falling sharply yesterday, some stability creeping back. but still managing not to hold on on to gains, ending to the down side. down five points. kospi also lower. australian market down. sensex big story today as we've just been talking about, the indian central bank cutting interest rates by 50 basis points. it that is lifting this particular market up 0.5%. investors are thinking that will help boost growth in particular country.
becky, how is your heat map looking like? >> let's talk about the european markets. we do have some stand out decliners, but overall markets are higher 0.6% up for the stoxx 600. and breaking that down to the individual in-sanzs, the ftse is moving higher by half a percent. second day of gains for many of these major european markets. but burberry is one of the stand out decliners. sock down by over 4%. particularly under pinned by growth in the emerging markets, also a pretty strong time in the north american business and the retail has outweighed the relative slowness in wholesale. the numbers are pretty much in line today, but some of the analysts coming out and saying this represent ares something of a slow down, particular goldman sachs, which is also very influential. they believe that fourth quarter numbers missed this retail and in wholesale. certainly the stock is dropping
today. one of the biggest decliners not just on the ftse, one of the biggest decliners on the stoxx 600, as well. of course in germany, the dax is moving higher by 0.6%. and in spain, renewed attention on the equity markets today and we have a big movement in repsol. ibex up by 0.7% chairman high school said he's seeking international arbitration and a quick resolution to this, obviously a great deal of condemnation coming are from various reporters. the government in spain already started to react saying they are banning imports of soybean oil.
but we'll get to more on this story in a few moments. it's really a hot topic at the moment. anyway, that's the equity markets. elsewhere, where we're looking at euro rates, as well, now, yesterday, we saw euro dollar dipping briefly below 130. it's been trading in this band in the low 130s for some time now. but currently 1.3133. looks around 1.30, we are seeing some support for this. sterling at 1.5919. just edging up against the dollar. on the bond markets, we have had some big moves really. the spanish yields where much of the attention has been because they've been rising, but also
declines for yields in germany, the ten year in germany is at 1.74, so low yields there. in spain we had levels over 6.1% earlier in week, but during below that now, just shy of 5.98. we have had elevated yields and not long ago, it italian yield standing above, so some concerns for investors around the spanish markets, as well. so borrowing costs expected to rise when we have that auction of 12 and 18 month chlt bills. ahead of this this crucial longer term auction on hurst which we're keenly awaiting. but we do have a sneak peek now at today's session and what we soo expect further out. julia chatterly has traveled out
to madrid keeping track of what's going on on the spanish markets. so what are we expecting today? >> well, it's actually quite important that you separate what we're seeing today in the t-bill auction versus what we're expecting on thursday, which is that longer erm auction. but obviously the moves came and decision that we get today, the market response today will will be responsible ahead of what we get on thursday. spanish 18 month yields have more than doubled since the beginning of parch, so you could argue there's plenty of premium already in the price. most analysts not really expecting any surprises, but a bit of pressure given sentiment surrounding spain and of course the data that we got on friday showing the bank drawly liquidity. as you mentioned, yesterday ten year yields significantly above 6%. cds making record wides. it's key to watch that spread rather than just the out right.
spain's already widened. it's at 420 basis points. so that's the thing to watch. it has raised lots of questions about whether the ecb will look to restart their bond buying program. jpmorgan said if we see yields above 6.5%, maybe it's likely they get back involved. mario draghi has bar moret rett more% reticent. the economy minister has reit eighted that he wants ecb intervention. we know the economy minister himself is meeting with draghi today. the ecb won't confirm the topic of conversation, but i'll give you one guess. back to you. >> thanks very much for that. so the eurozone crisis is
worsening. that stock warning comes from george soros speaking in denmark. he's being a cuing european lawmakers having misunderstood the problem because they're treating it as a miss cal crisis despite the fact it began as the banking crisis in the u.s. plenty to talk about came. why don't we start with those comments from soros. is he right that the problem for the eurozone has been misdiagnosed? >> the response to the crisis is really more important. to say that it was tied to the housing market, i would say i would not agree with. what i would agree is that we have substantial competitive divergence in europe and this competitive divergence has created huge imbalances in current accounts and as the
preeft sector was no longer a willing to fund that or the public sector was not step manage sufficiently to close that gap, so what is really left here is a central bank which needs to act to close that funding gap. and i guess that's currently happening. so all this talk about the central bank to come into buy those bonds, we have a funding gap and we need to close it in one or the other way. and of course fiscal authorities are not willing to do that. it is down to the military authority to act and it looks like that we are getting within the next few weeks a decision closer to that direction. >> is it possible on come to a long term solution for those imbalances that you talk about without a full fiscal union for the eurozone? >> we immediate on get to a fiscal union. the question is how much time are we going to use for that.
and i guess everybody would not agree that a miss cal union is the ultimate outcome. but what i think is that there's a process towards a fiscal union is relatively slow. there are a lot of legal hurdles around which is slowing down. for example, if you wanted to transfer from germany into brussels, you may have to talk about a change of the german constitution. a meaningful change of the german constitution, which of course does remember a public vote. if you were to ask for a public vote of this issue in germany, understood on a vote on italian debt or on spanish debt to be paid by german taxpayers? i guess it might be and therefore the german government might be reluctant to go into this direction rapidly. so we're in a very slow process here.
>> when you look at the euro and where it is today, how weak does the euro need to be to drive growth in the eurozone? >> when you look in the various countries, there's a huge difference in the necessary for the environment to cope with. exchange rate is at about 165. you look at the italian euro, it is certainly way below 1.20. but the question here is do we need an exchange rate which is servicing the weakest link in europe and guess that's the case and therefore we stay convinced that the euro has to decline from here. and about it does not decline from here, you have unnecessary monetary tightness in the peripheral. we are in a process of deleveraging. and when you deleverage, then
you have to consider that this is our process which is reducing growth which is reducing inflationary pressures. but on the other hand, you naed to have acting against this inflationary process. and monetary policy should probably do that. but in europe, unfortunately, we have a cyclical monetary response simply because bond yields are rising, equity markets are declining, so that response can't be helpful. >> hans, interesting to note. we'll come back to you in just a bit. coming up next on on "worldwide exchange," we'll continue to look at india with inflation still hovering near 7%. india central bank too hasty in slashing interest rates as much as it did? we'll get a couple opinions. [ male announcer ] this is corporate caterers, miami, florida.
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widespread expectation was 25 basis points cut over caution of rising inflationary pressures, but the central bank says that limited scope for more cuts ahead. let's get more discussion generating on this particular topic. joining us now, managing director and head of asia pacific investment. raul, do you think the rba was too hasty cutting rates with such a big amount? >> we were clearly surprised. most people were expecting 25. and it faces the challenge that expafrnding is stekky, but they're having a balance. so they realize that for the next couple of months, they have
a benign inflation and they want to make full use of this. . >> how much of a boost will this have on sagging growth in india? >> i think we can expect the certain impacts on the investment. the fact of the matter is that investment growth has been very, very weak. actually negative for the first half year or so. so i think that the certainly there is an impact. but given the pact that further reduce is quite limited, i think this investment cannot be so robust going forward. >> do you see the rbe cutting rates and about how much more? >> we believe that given the current rate of inflation, we
need -- india needs a further this is the course i think they should be doing for will this year. >> hans, does it seem hasty to you? >> i'd say will this is quite a positive development. what we have seen in the region is significant slowdown. i would like to remind you when you look at global exports, since the region is heavy export, went down to zero growth rate in general. so therefore any type of reflationary policy in the region is very important. and you have to take it in the global context. because if we see inflationner
policies elsewhere, and we look at the european problem which is lack of economic growth, we need to import growth if there is reflationary policy,s actually positive for euro and we need to understand that aggressive inflation matter policies is far away from containing the european crisis is actually a contribution from the emerging market side to help us here in europe. it is a small contribution, but it is as well one which is pointing in to the right direction. >> raul, on this point about the external factors, from your perspective, how much of a problem is the eurozone when you look at the factors influencing the indian economy rate now and its growth rates?
>> i think what's impacted the last couple of years is essentially qe pushes commodities up. it's reflected in the huge trade deficit and inflation issue. and i'll take that again. they've been fairly at a steady pace, but i think other all out from the crisis is capital flows to emerging markets. current account dep sit needs capital flows to sustain growth. so capital flows get impacted and be see equity markets correcting. >> i'm ghad you brought up crude prices because the question is of course the government we know in india has been unwilling to pass on higher oil costs to customers, but with growing
fiscal deficit pressure, could they be forced to do so at some stage and in other werds add to the inflation matter problems? >> well, we believe that they have on do it at some point. but economy still very weak, so i don't think they would want to do it very soon. but on the other hand, i think raul raised a good point that the balance of payment as recorded deficit in the fourth quarter last year, that was the figure just announced yesterday. and i think that's quite important. downward pressure on rupee which will generate pressures. and we also have to watch the currency development. >> and how much of the rate cut will help interest rates sensitive sectors like
properties and real he is say the? is there annen vement opportunity? >> honestly, we're not increasing our exposure to rates. we would look it at the key drivers of inflation, global commoditie commodities, the balance of situation to get more positive on right sensitives. despite the cut, the statement was fairly hawkish. if you see it is one of the few countries which let's say from 2008 has down nearly 10%. most countries in the region have resulted 30%. so you need to see global commodities before one gets more positive. >> okay. thank you very much, gentlemen, for your thoughts today. such a pleasure to have you on as a.
panel to the show. >> repsol shares have plummeted this morning as tensions rise. the point of contention is the fate of the yunt he units of thh oil company. it's unveiled plans to boost production and reduce the country's energy bills. spain has prepared a minuisteril order. we'll have plenty more analysis on this story with an analyst who has downgraded repsol stock to sell.
>> india central bank slashes by 50 basis points, its first cut in three years as it looks to boost growth. and in the u.s., trio of top names report first quarter results before the opening bell. coca-cola, john stop sand johnsjoh john so that and johnston an goldman sachs. so just getting some of the inflation figures out here in the uk. office of fashion of national s. march cpi, up by 3.5% year on year. if you look on the month on month figures, that is up by 0.3%. office of national statistics saying the biggest upward pressure on cpi is coming from food, clothing, recreation and culture apparently. the core cpe pig for march, an
increase of 0.4% on the month, core cpi on the year up by 2.5%, that core cpi figure rising for the first time since october 2011. broadcast was for 2.3% rise. that number came in at 2.5% on the year. let's get a look at sterling. sterling taken upwards versus the dollar, 0.2% right how. 1.5923 where sterling currently trading. hans is still with us. how is it the inflationary environment look to you based on those mums and what we've seen in past months? >> inflation has come down from from levels seen a year ago and that is more or less in line of what the bank of england wanted to see. but we have as well to consider that there are first signs that inflation is going to create a
longer term problem in the uk. we have seen asking prices for real he is say the is reaching pre-crisis levels. and that came on the back of only a slight improvement in the labor markets. so only so much liquidity flirting around which is looking for an asset. so asset price inflation has come back on the agenda here and i think that once base effects have run out you will have to live with higher inflation down the road. we have a slight inflation against the eurozone and i think the -- >> just a few more of these figures, as well, for
completeness figures for the month of march from the office of national statistics while we're at it. the march rpi up by 3.6% on the year. r perform i lower since december of 2009. so pretty much if line with expectations that food, clothing prices both feeding in to this. this picture of expectations that they won't go for more qe the next month hoping the inflation pressures start to ease. let's pass things back if now to christine. >> well, here in asia, markets mostly lower, once again concerns about the eurozone debt crisis there weighing on sentiment, taking away some of the risk appetite. shanghai market down 0.9%. slowing domestic growth.
so clearly that could impact the growth in the domestic economy. hang seng off 0.2%. here earnings concerns, nikkei pretty interesting, yesterday it lost more than 1%. yesterday some stability creeping back if to the japanese equity markets, but failed to hold on to gains down five points ending flat to the the down side. kospi off 0.4%, and the sensex one of the few markets trading to the up side, gowith good reason, helping to lift the currency, the rupee. >> ftse up by half of 1%. dax by 1.7%. a particular gain there, but bear in mind we do have some interesting news on the individual moves and gainers there.
cac up by 0.9%. banks moving higher by over 3% ahead of that spanish debt auction a little later on. we see big declines coming through for repsol after we had the news arrest again sgentina d plans to seize repsol. but look at shares of sky deutsche land, they have soared after the report that they're likely to keep the rights to forecast the football games. patricia has the details. >> just glancing over there, up about 26% as we speak over the level of two euros on the speculation that this report is shrine, that sky managed to keep yet again the broadcasting right
for tv for 2013 and 2014. we will know the exact outcome in about 2 1/2 hours time in a press conference. deutsche telecom was trying to get into that part of the business. they already have the rights to broadcast iptv and they wanted to branch out a little bit more. the reason also being deutsche it telecom trying to reinvent themselves, getting more and more into the other business, but might be some legal issues there. but we don't know yet the actual outcome. take would be terribly good news because losing the deal would be potentially lethal for the company in the first. >> patricia, thank you very much for that. looking at chinese company, they're testing appetites for new listings and guess what, they are hungry $1.8 billion
hong kong offering would be the biggest in asia so far this year after it pulled its ipo last december. the online portal is tripling its fund-raising target in an ipo in shanghai. and while chinese companies look to the china markets to raise more dough, let's get more details now from tracey. >> didn't deter investors. the fdi in fact fell for a fifth straight month in marches as the european debt crisis and weakening properties continue to
cool the economy and also investments from the eu plummeted by more than 31%. investments in the real estate sector also dropped sharply as beijing keeps a tight grip on the property space. a commerce ministry spokesman says rising labor costs and competition from other emerging markets also drove away foreign investment in the first quarter. still, there's a silver lining to the data. the merely $30 billion in first quarter in-flows actually keep china on course to beat the record total last year and most analysts still expect the trade situation to improve in q2, but some market watchers are concerned about the recent widening of the yuan trading ban and some companies may be reluctant to make long term orders. back to you. >> let's get more discussion now, frederick, good to have you with us. to what expect will this impact
the growth in china? >> at the margin obviously it's not very helpful. fdi had been a big driver of economic growth for many years. there's been a secular decline. and these numbers just show that to some extent foreign companies are taking a second look here, china evaluating their options. some of the investment is actually flowing in to southeast asia and therefore is a reduced in-flow in to china. i don't think it will prevent a recovery. we're looking for strong growth second quarter, but certainly a bit of a headwind. >> we have a whole slew of numbers coming in. with sentiment pretty weak, is there enough investor appetite to pick up the huge o. slew of ipos coming on line? >> one of the key things is how much liquidity is there in the financial markets.
authorities have continuously cut rrr. we're expecting another rrr cut that should again release liquidity into the market. valuations are relatively cheap. where he have a number of reforms coming through. so the broad climate is actually improving. >> a question concerning the credit numbers. we are seeing quite strong boost ever credit supply. we all know the transfer mechanism in china is in the developed road. how long would you think it is going to take before this stronger credit numbers are
putting growth into a stronger up side path? >> well, as you rightly say, it was quite quickly in china. you see strong credit growth. so by april, may, you might sea an uptick in the data. in fact march data wasn't too bad. we saw retail sales coming in reasonably strong. so in the second quarter, we think that we see already evidence of a peck up of economic activity and it goes very fast in china. and march strong mums should lead to a quick turn around in economic data. >> i want to bring you breaking news. we are getting results through of the spanish debt auction.
this is ahead of the crucial ten year on thursday. the 12 month bid to cover ratio, it 2.9 versus 2.1 at the previous auction. so an increase this. and 3.8 versus 3.9. so strong bid to cover ratios on both fronts compared to last time around. they have managed to get away 1.09 billion euros on the 18 month auction, which was versus 2.09 billion you're ross on the 12 month. and just to update you on the yield here, the amp yield on the 12 month was 2.62%, up from last time around. so the average yield on the 12 month t-bill on the spanish debt auction, 2.62%. the average yield on the 18
month t-bill auction, 3.11% versus 1.71%. so while we've seen bid to cover looking strong, the yields have moved higher and there will be a great deal of attention focused on the the ten year which takes place later this week p we're well above 6.1% right now looks like the yield is moving a little lower since getting the results. the euro seems to be moving a little higher. maybe just a quick check of what's going on with the euro, 00. trading in a narrow band just over 1.30. support seems to be coming through that level. 1.3149. what do you make of those
numbers? >> recall, this is a very successful auction and it will set the tone for hurst. but thursday is the decisive auction simply because longer term maturities will be auctioned on thursday. so what i think is that it is a bit of a relief, but it does not suggest that the debt crisis is over by any means. i think that the outlook for spanish debt will be determined pretty much by the growth outlook of the country and of euro land and the gross outlook still looks very bleak. when you look at our own economic projections, we're expecting a gdp can decline of about 2% and that actually means it's a theme of widening spreads is going to stay with us unless the central bank, ecb, is going to take action against it. >> frederick, christine here. with so many concerns about the
eurozone, what's happening in spain, all eyes are on growth in asia and whether asia can pick up some of of the slack. what's your outlook on domestic consumption considering that some of these governments are trying to rebound in the economies given riks to inflate and the slow down in the first quarter sf. >> we think domestic demand will be the driver. and hopefully help to offset some of the weakness we're seeing coming out of europe. but remember that even asia is not immune. some of he's financial jitters, we might have slightly better sentiment. but the tone is one of trepidation and it has impact on the sentiment in asia. further down the road, inflation
is again something we water about a in asia. europe, yes, short term, that's a bit of a risk, but we really worry about inflation coming back at some point in asia in the next 12 months. >> frederick, thank you so much for your insights today. >> so moody's denies it will cut. decision likely to come on may 12 of the after moody's placed france on negative watch back in february. socialist candidate has called it his main foe and has pledged to rein in france's banks. joining us is stefane clearly keeping a tap on all of this. and that sounds pretty aggressive on the part of hole
hand o hollande toward the sector. >> and moody's playing down all the speculation. should hollande win the election, butt sentiment is it that france could be the target of speculators in case the social list candidate would win the election, the major concern is about the reform of the pension system. remember sarkozy put it in place almost three years ago and hollande has promised to revert that reform. he would like to bring back the legal age to retirement to 60, that would cost the company a lot of money and could jeopardize the french credit rating. so it is widely seen as the main risk for the french economy. the backing sector very much in focus. all candidates are becam blamin banks for the could i sis. hollande says he would implement a reform of the banking system
by 2013. at the beginning of the campaign, he wanted to split retail and investment activities. the bankers argues that it might not be the right solution. >> it's absolutely legitimate to say we don't want the taxpayers to be in risk with the banking system. that's fair. but we don't think the right solution is to separate in different entities or whatever the market activities and the financing activities. >> say french bank would not be broken up because they were important for the french economy, but still they're manning to reform the banking system as i said by the summer 2013. back to you in london. >> so banking stocks you may have noticed are moving higher.
particularly french banks, under a possible new president. but here we go. up by 4.5% for credit agricole. joining us now is banking editor at the wall street journal. i did ask you discreetly off air, and apparently more buyers than sellers. >> i think it's that simple. >> why are there who are buyers today than this time last week? >> it's hard to say. obviously there is some marginal improvement if sentiment. if you look at the 12 month or three month chart of these stock, it's incredibly volatile and i'd wager that they're still down on the year or at least down since the ltro was announced. probably a little more optimism
right now. there is some feeling that they are beginning to make progress. >> so if we see a decent auction on the spanish t-bills today and banks rise, what happens i guess on the plip side, we get a ten year on thursday which is a little disappointing -- >> right back down we go. but a lot of these banks are completely interwoven. so if the eurozone sentiment is improving, if there's good auction, that's likely to help them. >> can we distinguish between european banks then on the basis of the fundamentals, clearly the macro factor talking about 23 u influencing all the bank, but there might be a way to distinguish between them on the long term basis. >> you see all the french banks doing very well today, but within the french banks, there's a large agree of variation.
and a bank like bnp paribas has done a lot of work to reduce its balance, improve its funding mix. and then credit agricole still has a massive greek business that even if there isn't greek sovereign problems, that will be saddled with massive losses. a huge business in portugal that increased its stake. so you can -- it's a little surprising to me to see those banks moving in lock step the way that they are because there really are very major significant differences in their financial situations. >> i'm afraid we have to leave there. rather squeezed for your interview, which i apologize for. but good to have you on the show and i have just found you on twitter. i'm hoping it's the real you. and i've just put a link to david's page on my twitter page, as well. so although we didn't have much time for him today, you can follow what he's doing i'm sure, speak to him vie at means of
twitter, as well. and beccy meehan is where you'll find me. a picture of me roaring with laughter at steve sedgwick's hilarious jokes will, as well. >> beccy with two cs, as always. coming up next, ikea eyes the consumer electronic space. but would be able to assemble a radio or tv on your own? details coming up.
let's get into the correlation between the dollar and the strength of the u.s. y data. >> i think the u.s. dollar is going to develop proceed cyclical behavior in future. so what has happened in the past, when you have weak u.s. day take, could we get to the situation where the u.s. dollar would rise on strong u.s. data and i guess it could happen under circumstances where the u.s. economy would develop surprisingly strong growth. each time we're getting if to a market sentiment where people would assume that might be happening, we have already seen
that type of behavior. >> well, thank you very much for being so con sus. we have to leave it at this poicht point. but ikea may be asking consumers to pick more plugs in to sockets. the retailer is getting ready to burst in to consumer electronics. ikea wants to launch a new furnish occur line witure line electron electronics. mike says i'm not sure i rust myself to put together a home cinema center with that allen key tool they give you. and chris, can't wait to see the in- i in-instruction manuals. jackie is with us, as well.
>> i think it sounds brilliant. i do have some ikea furnish which furniture. but we'll see how goes. still to come, of course we're talking apple. the stock falling for a fifth day in a row. we'll discuss the outlook and implications. [ male announcer ] this is the at&t network. a living, breathing intelligence helping business, do more business. in here, opportunities are created and protected. gonna need more wool! demand is instantly recognized and securely acted on across the company. around the world.
headlines from around the globe, well received auction of short term debt gives some relief to spain with yields edging lower and the and you are row rising. following stronger than expected bond taup. and repsol shares get tank goed. analysts downgrade, stockpiles up after arrest again gen up after arrest again getina res to take control of the energy gay giant.
>> an coca-cola, j and j report before the bell. >> and a slash of 50 basis points, the first cut in this three years takes it looks to boost growth. >> current conditions index beating expectations and rising from last time around on both fronts, 40.7 is the reading on the current conditions index. economic expectations 23.4. now, we are seeing positive impact on the euro as a result of this having already seen a bump up for the euro versus the dollar, for instance, after we had that well received spanish auction. so currently up about a quarter of a percent for the euro versus
the dollar. fresh day highs index beats expectations. saying that experts generally predict further positive developments of the german economy over the next since months or so. although economic optimism suffers from considerable down side risks including a slowdown with trading partners, as well. so while the economic situation generally expected to improve, there are still down side risks out will. but still positive impacts on the euro and the currency markets. let's see how the european bourses have faired, as well. consolidating the position, particularly in germany. ftse up, too, by 0.8% plus. in paris, the cac aheading 1.3%. we've seen strong performance in the banking stocks. of course in spain as well, the
ibex 1.4% higher, particularly positive impacts clearly from the spanish debt auction while the smi is trading up by just about half of 1%. jackie. >> thanks for that. meantime the futures here also shaping up higher right now pointing to a higher open on wall street at this early hour. if you can take a look there, you'd see the dow could open higher by 41, the nasdaq by 7 1/2, s&p 500 higher by nearly six. at this time, of course, we saw stocks ending mixed on monday's session with the dow edging back towards 13,000. a key psychological level obviously. the s&p 500 holding at 1370, a key technical level. we saw the utilities and financials performing well yesterday, but of course we were dragged down by tech, apple and google a very large part of that, so it will be interesting today to see especially with some of the earnings on the docket how tech fairs. >> so the spanish debt auction well received.
this was a 12 month and 18 month t-bill auction. the average yield did rise, we expected that to be the case. the fact was that the bid to cover ratio was strong and that is having a positive impact particularly on the ten year, which is trading at 5.9%, just over that level, 5.91%. and that all comes ahead, julia, of the ten year auction later in the week. julia is out in madrid for us and looking through these numbers. tell us what you make of them. >> i absolutely agree, it is successful auction. the bid to cover looks good. but obviously they paid for it. as you mentioned, the 18 month yield at 3.1% versus 1.7% last time. the 12 month at 2.6 versus 1.4% last time. so it is in line with what we were seeing in the secondary market, so there aren't any surprises. buts more costly. now, though, it's down to thursday and twot year and ten
year that we're expecting. ten year spreads are tighter, so it is positive for sentiment and as you were just looking at the equity markets, it is positive will. and the bank stocks higher by about around 1 to 2 percentage points each. it's interesting the data also shows that banks hold around 230 billion you're rows of sovereign debt. that was at the end of february. so the question is, where is this incremental demand going to come from? there has been plenty of speculation if we in-to see yields push higher than that, 6% watershed level. whether we see the s&p, the ecb purchase program kick back in, the conditions are very different. we're not seeing widespread risk aversion. funding conditions are a lot better than her given the ltro. so satisfy the obvious problems with moral hazard given spain is trying to get hair deficit down
and trying to get the economy back on rack, the conditions don't look set yet for the ecb to come in and bring yields down. so for now we sit and wait. yields are tighter today. and it's all about hurst. >> well, it certainly is. thanks very much for that. we're looking ahead to thursday of course. so fixed income strategist joining us. zane, a couple pieces of crucial pore. we've had that spanish debt auction that got away successfully, but at a price. i know you believe that a trillion dollars isn't enough, referring of course to the three year ltro. so if that isn't enough and yet we are still finding some tentative signs that things are moving along okay in the eurozone, where does that leave investors? >> i'm not sure that they're
moving along okay. i think i'd characterize it as plodding along okay. as you point out, the spanish auction was successful at least in terms of be able to raise some money, but as you also pointed out, it was a substantial cost. yields were substantially higher than what they were the last time around whenever they auctioned off 12 and 18 month bills. and they raised substantially less. instead of a billion four, they raced closer to a billion one. and substantially higher price. i'm for the sure i'd character it as the glowing success that may be initially received at. as you point out, thursday is really going to be the day that people will watch and find out what happens to the ten year. that's much more a benchmark. >> so what's the problem for spain and other countries that find themselves in the cross hairs in the eurozone some is it that there's not enough austerity or that there's too much austerity and not enough
focus on growth? >> i think there's know focus on growth and it's all about austerity and it's difficult for many global investors to understand how eventually that will succeed. the g. one good bit of news that we have about spain, first, well, two bits of good news, one is the disraks in argentina. so for a temporary period of time, we may have a different focus. but longer term and more important than that, spain is at least are willing to address the regional governments who are responsible for 50% of the spending and say if you are pno reducing the amount of spending, we may take over. but something having to do with growth would certainly encourage investors to take more risk and put more money towards spain and the rest of southern europe. >> it's interesting because when we look at the eurozone can debt crisis, we've seen the yields creeping up and that's
reigniting some of the concern back here in the states. and the whole issue comes back to contagion. the crisis and how it could affect our banks here. are you still worried about contagion as an issue? >> not merely as much as we were when greece was in this situation. and the reason for that -- actually, we should be more concerned because of how much larger an impact spain might have. but we lived through greece. we've lived through greece going into default, triggering credit default swaps and we found there's pot contagion in u.s. financial institutions. so i think people are a little bit more comfortable, which is why we had the ten year just under 2% rather than 1.7 to 1.8 when we went through a similar situation with greece. so contagion is not off the table, but certainly less of a concern. >> okay. we'll have to leave it there for the moment, but we'll come back to you. he'll be giving us more of his opinions and insight throughout
report. let's take a look at the u.s. futures. see how we're setting up for trade. seems like some of the positive sentiment in europe is trickling over here in the united states. the dow would be higher by 40, the nasdaq by 8, and the s&p 500 by nearly 6. this after we saw a little bit of a mixed session yesterday. we saw the dow higher, but yet declines on the nasdaq and the s&p. early in the morning, we saw those retail sales figures out helping a little bit with the sentiment to the positive side and a little bit of a pull back after we got those home builder numbers out bringing the home builder stocks down and bringing some of the markets a little lower. of course tech had a rough day with apple and google, but we did see strong performance from the financials after the citi earnings came out and of course goldman sachs will be reporting today, so all eyes will be on that. >> banks are putting a ating a showing on the european markets.
most news sending markets higher still. so the tax 600 is how pushing up to fresh day highs. ftse 100 coming off the highs of a little earlier in the session. but back over the 5700 level. dax up by over 1%. figures beat expectations helping the market in particular and a few individual stories helping individual stocks. but the mac row picture one of optimism so if a dar. cac up by 1% 4%, a strong showing from the french banks. and also gains coming through for the spanish markets, as well. t-bill auction got away well. we'll can back to that in a month. repsol trading down, off the
lows of the the session. it this after we heard argentina has plans to seize control of a repsol unit. and that has caused a great deal of concern on the picture in argentina, rather increasing the isolation of that country, as well. so back to what and he going on on the other asset classes. and is this how the euro rate is shaping up. we had the spanish debt auction which was successful, we have the data better than expected, each adding to a more positive performance for the euro. dollar against the yen is moving higher. and risk owe voeraversion seepia
little. sterling up by 0.3% against the u.s. dollar. so back to the bond markets. and this is where so much tension has been. in spain in particular. in italy, as well. the bund right now in germany is at 1.75. but check out what's happening in spain. this time yesterday, we were talking about levels of over 6.1% on the ten year spanish debt. since then coming a little more under roll. 12 month and 18 month t-bills in pain got away at a price i should point out. yields on that debt have shot up, but now looking ahead to thursday, we have the longer term auction are will be crucial. so big moves in many of these different asset classes today.
>> risk appetite is down. shanghai composite is down 0.9% and worries piling in making people question whether that will impact the chinese economy. hang seng earnings, as well as the eurozone crisis, continue to impact sentiment. nikkei stabilizing a little bit, but failed to hold on to gains. kospi 0.4%. australian market down 0.3%. sensex india is where the big story is catoday. cuts rates by 50 basis points all in an effort to boost growth in the domestic economy. rupee getting a lift as a result. that's it for me. i'll be back tomorrow with news
moving markets here in asia. >> thanks so much for that, christine. we'll see you tomorrow. meantime goldman sachs reports first quarter reports al 8:00, forecast to earn $3.55 a share on nearly $9.5 billion in revenue. investors may be a little wary after jpmorgan reported a fall of 29%. as the u.s. continues to write the final version of the volcker rule. let's get vuls from our guest host, zane brown. i know you can't comment on gold man specifically to really get into the details of the numbers, but you can generally talk about some of its exposure to europe. are you worried about how that will impact the bank today? >> not only its exposure to europe and its involvement in credit default swap, but many will be skeptical of how well will they can in-continue to bu
profits when a lot of their proprietary trading is pulled away by the volcker rule. they need to line both sides up, and that's not where they've excelled. they've excelled at putting their money at risk, taking good bets and winning at those bets. and with volcker, already they seem to have pulled back somewhat as other investment banks have. you pointed out earlier some other financial institutions that aren't doing quite as well and i think the fear is that that will impact goldman's profits going forward. >> so looking at some of the competitors, are any taking less risks and are therefore more sound investments? >> outside goldman sachs, you have many that are benefiting by loan growth. finally starting to lend money in this country and that's at very wide margins.
goldman doesn't do nearly as much as some of the other top bankers and investment bankers. >> that's a really good point of course when we're looking at some of the long term strategies of the bank and the health of the financial sector. because a lot of investors have been saying that they're worried about the run up that we've seen that potentially it was just because the sector was oversold and you have investors getting back in, but we're not really seeing those fundamentals are will. so you think generally speaking that we are. >> yes, we are seeing bank lend willing, commercial and industrial loans are up 13%. and we just haven't seen that in the past. so it's starting to gain some momentum. and i think that will benefit those you institutions that have lending as a larger part of their profit. >> certainly would be piece of the picture when we look at the rof recovery here in the united states. z achl zane will stay with us. and johnson & johnson is set to
7:45 a.m. they're forecast to earn $1.35 a share on nearly $16.3 billion in revenue. new ceo takes the helm next week. en investors will be listening for sales data on new drugs. they'll also be interested in comments about ongoing quality recalls and quality control issues, as well. joining us to talk more about it is matthew dodds. great to have you with us. let's start with j and j. looking at the street expectation versus yours, the street is a little muted. you see room for up said here. >> that's correct. i think that they can do a little bit better in both sales and earnings. the bar is set pretty low for the quarter. j and j's mums will get better as we move through the year. so this is the bottom, but i do think there's room to beat on both the top later today. >> expected guidance or indication from the country that it will be a strong 2012 will
help stock sentiment and momentum, but what you're expecting for 20 twef2012? >> her they're the bellwether in health care. i think tell's raise the pull year numbers. they always start the year low and come up. so it's not unique. but i think some of the performance you'll see is going to happen back after the year is based on new products. so the ramp we'll see this quarter should give an indication of where they'll be at the end of the year. >> and it's an interesting point. we were talking about this during the break and you mentioned in health care the bar particularly set a little low in the first quarter. and then raised as we go on and on. this was a discussion last earnings season, as well. we set the bar low just so that we could beat. >> generally that would be the hope of many companies to exceed expectations. and if will they can manage expectations lower, that would be great. but we started out will season with alcoa of course baeting expectations. and then we had a couple major financial institutions also
doing better than expected. so it could be investor sentiment might work against this management of expectations. so i don't think we're in quite the same situation. but it out to be interesting. in terms of looking forward, i know if j and j is kind of bellwether, health care institution, what impact does the supreme court decision, how will that impact j and j's earnings going forward? >> j and j is a few different pieces. for medical technology, the one thing we're looking for is the medical technology tax which hits in the beginning of 2013. so if the entire law was overturned, the tax wouldn't hit. for the pharmaceutical companies, it's a little more mixed. they like the new patients, but at the same time, they've been hit with charges or rebates so's embedded taxes have already started. so overall, a lot of the health care industry from my side would
view a loss of that pretty favorably. but it wouldn't be a home run for a johnson & johnson. >> okay. and last but not least, you raise your price target by $1.76 and a 50/50 split. >> i try to do some of the parts because it's got about 40% of the profit coming from far in a oig. and consumer aenks probably 15%, maybe less. so i try to look at that and it peer group. the other sectors have actually worked pretty well while j and j has not. so through attrition almost, j and j's arrest get is looking better win i use a peer multiple, so i think there is a catch upcoming with j and j just because the peer groups have moved ahead of them. >>le it be interesting to see how it shapes up today. thank you so much. >> thank you. >> meantime, coming up on the show, after a mixed day on the
headlines this morning, here in the united states, a trio of top names report first quarter results before the opening bell. coca-cola, johnson & johnson and goldman sachs. >> spain t-bill giving relief and the euro rising following a stronger than expected bond take up. >> and repsol shares fall as analysts down grades pile up after argentina unveils plans to take control of ypf currentry owned by the spanish energy giant.ly owned by the spanish energy giant. nice to have you here on "worldwide exchange." if you're just joining us, let's take a look at the u.s. futures and see how we're setting up for trade on wall street. it looks like it will be a higher open with the dow higher by nearly 36 points. nasdaq by just about seven and the s&p 500 higher by about 4 1/2. this after a mixed session on
monday. of course we saw the dtrend dow trending a bit higher. retail sales numbers were positive. but at the same time, that home builder sentiment dragged us down just a little bit. but it looks like some of the data coming out of euro this morning is actually what's giving us the boost here. how does it look over by you? >> as you'd expect, we are seeing gains going through for the european markets, as well. better than expected figures in germany helping to send the dax up. though off the highs of earlier in the session. we also had a pretty well received spanish debt auction, too, 12 and 18 month t-bills. bid to cover was pretty strong, although yields did surge from last time around. though we had expected that to some september. in spain, the equity markets are positive, nearly 1.2% higher. ftse up by just over 0.8% and gains coming through right across the board.
so a strong showing in the equity markets in europe. >> consumer staples and financials are the sectors to watch today as investors brace for earnings from coca-cola, johnson & johnson and goldman sachs. yesterday saw the dow up, s&p down and the nasdaq really dragged lower by apple and google. joining us to talk strategy is managing director of the strid wealth management group and of course zane is still with us. eric, let's kick it off with you. we look at the market yesterday, it was largely taken lower by technology. but when you break that down, not all tech stocks were lower. it was really just apple and google because of their weight. and their proportion. so right now when you're looking at tech, what's the best strategy, how do you play it? >> well, it's true apple does concern that it's looking like it's beginning to falter.
so i think there's caution. >> also looking at the markets generally speaking, we're seeing interesting levels. the s&p hanging out at that 1370 technical level, seeing the dow approach 13,000. again, a key psychological mark. seems like a lot of sideways trading these days. we gain some and then lose it right away. do you expect that trend to continue? >> i think the market's at a decision point. there's so much talk of sell. the last two years we've had moments of distress heading into the summer after strong runs. europe seems to be coming back to the forefront as it did last may and the may before. so i think the market's trying to decide, are we going to have another major distress event as a lot more of the european debt rolls overheading into the first part of the summer. >> and are we going to have another stress event around that europe issue?>> and are we goin another stress event around that europe issue?
>> certainly hope not, but i think that's the issue. it seems to me that the calendar of rae financing in the nations does tend to be heavier right around now and the question becomes how these bond auctions go. i think the spanish auction went okay today. nothing to be terribly excited about. but i think the market will be on pins and needles in trying to decide do we need to sell. >> at what point do you get back involved in europe? where do you get involved in say spanish debt or more exposure to europe assuming that maybe the worst is behind will them? >> i don't know, you know, to answer the question about getting involved in european debt. i certainly don't have a taste for that at the moment. on the equity market side, certainly international and europe has been a good place to be ever since around thanksgiving after when they
announced the currency swaps and ltro facility, we've had this risk trade coming back on in europe. and think there's still some more legs to that phenomenon and that the equity markets in europe are an okay place to be right now. >> we've seen financial institutions do really well this morning, so maybe there is support among other investors for that. >> we'll have to leave it there. thank you so much to eric strid. he's going to come back with us later for a little bit more analysis. zane will stay with us, as well. coming up on the show, we've all heard the hem line index and the lipstick indicator, but what does the hair salon say about the economy? we'll ask the man behind paul mitchell empire. today is gonna be an important day for us.
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of course it is earth week here in the united states. who better to talk to than john paul. and i want to start off with some of the new initiatives that you're working on and you're looking to be more yeeco-friend. while that is all admirable, the question that i really have is how economically sound is it especially during these challenging times. are people willing to pay a bit of a premium to have that sustainable product or do they just go for the cheaper alt alternative that may not be socially responsible? >> we look at it differently. we do it not to make or raise our prices, we do it because it's the right thing. we went carbon neutral several years ago without raising the price. we took a little bit of money it took to do that because we thought it was the right thing to do and condition pass it on. there are many indications where you must up the price because the ingredients are so
expensive, leak our new mitch men's line, we're sulfate free and paraffin free. that is very expensive. but the public wanted it. so we created some products with these very expensive ingredients. the end result was even though they cost more, the public wanted them. they were two of the most successful launches that we've ever done at john paul mitchell systems. >> so that is good business. and certainly when we're looking at some of these products, and people's expenditure on personal care and going to the hair salon, they're sort of the hair index out there that gives us a sense of the health of the economy. will people willing to spend on this personal maintenance or are they cutsiting back? >> people still go salons, however, the frequency is a little bit longer. instead of every five weeks, maybe every six or seven weeks. when the economy starts turning around, they come back floor to that same pattern. but something just as
interesting is the world's ultra premium tequila. last year we became the world's number one tequila company. at retail. retail sales. even though we only sell high end. that's an indication that during tough times or good times, especially tough times, people want to treat themselves. so every year petrone has froen just like palm mitchell, people treating themselves. at petrone, it's made out of recycr recycled glass. we make it the old fashioned way. but we don't necessarily pass the cost on. we keep it ourselves until we have to pass a cost on. why? because we're independent, we don't have shareholders. just ourselves to answer to. and more important, it's the thing to do. the consumer likes that, they like companies that feel this way and know that if we were to have a price increase, it's because we pushed it to the limit where we've been absorbing
it and an orki insoshing it. >> it is about public perception and the consumer likes that, they like to feel that they're investing in a brand that is taking good care and making sure we're sustainable, but zane, how much of it do you think a lot of times businesses who do have shareholders to answer, to they may be altruistic in setting some of these operations in to play, but they also may feel they have to do this as part of their marketing strategy. >> well, certainly in many instances it does help with their strategy, but i think with paul mitchell and petrone, you have high quality products to begin with and the tilt to green augments the brand and he especially if you were able to do things where you don't have to pass on the price, i think that really resonates with consumers at this part of the recovery. >> and just makes the kimm cons feel better about using the
products. these products are so personal to us when you talk about personal care and what we're ingesting in our bodies. great to have you on the program. we really do appreciate it. talking about earthquake 2012. and coming up next on the show, soft drink sales are looking flat, but can coca-cola add fizz to its products? we'll discuss earnings out look for them. [ male announcer ] this is the at&t network...
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unveiled to nationalize the stake in a bid to boost production and reduce the country's energy bills. the company faces nationalization. let's got out to julia chatterly who conveniently is already in madrid talking about the economic situation there. turned her attention to this story, as well. >> well, as soon as we got this announcement yesterday, the spanish government said they would protect their interests. we'd expect them, too, to get support from the european commission. and that should at least give argentina some pause for thought given that europe is their second biggest export partner. however they've put to congress and that could be expected to pass in as soon as four weeks. there's no indication yet on what price they would pay for ypf. that will be sdecided by
tribunal. they said they would secretary international arbitration. reuters reporting that amount could be up to $18 billion. repsol said the takeover won't impact their growth prospects outside of argentina. a number of analysts said they'll be cutting their price targets. we've got city taking their price target down to 20 1/2 euros. bank of america, merrill lynch, taking it down to 2380. all significantly lower it seems than where the market is trading right now. so arguably will could be value in the stock, but what is clear is that repsol will be involved in legal wrangling for the considerable future and that's not good for one of spain's largest companies and arguably not good for spain. >> thanks very much for that. we're joined by stewart joiner. so you cut your target on the stock by nine euros this morning. where does that leave your target compared to where we are now some is there an opportunity still around this company? >> i think there's still down
side risks. people talk worst case scenario being the complete write down. could be worse than that. one of the things that people are maybe missing is that ypf has been a net cash contributor to repsol over the last few years. because the government's capped returns in terms of investment into the oil and gas industries. a lot of free cash flow coming out. so this there are implications -- >> so you cut your price on it further if we do get that worse case scenario how low? >> the company having a conference call at 12 noon, it seems like there's a 30 daytime table. so from that perspective, it will take a while i think to know the exact details of what's happening, whether there's any compensation. but because the company's already the most indebted of the european majors, net debt to
equities about 50% on a pro forma basis, they can't afford to lose that free cash flow and it could put at risk investment in other parts of the world. so factor that into the 1560, yes, it could be lower. >> when you're looking at some of the other companies in the sector, as well, and doing business in arrest again's in a generally, with a sort is the strategic reason that you think the government made the move to nationalize here some because i would imagine it would deter a lot of investment in argentina. >> absolutely. on the face of it, it seems like an illogical move. the government's position seems to that be ipf has been investing insufficiently. there has been an inability for the company to invest at a rate that geologically or whatever it would want to. but that has been primarily down to the government's own price controls for oil and gas both
commodities, there are quite sub sta substantive price controls in place. and we've seen arregentina beco a net importer of both commodities when it has abundant natural resources. and one of the trangic elements is that repsol had been making great strides in terms of pushing the company and the country forward in terms of its energy supply. >> and also there is chinese media reports that sinopec is interesting in ypf despite the fact of this potential of the nationalization. why would that be? >> well, who knows. i think it would be illogical for someone to come in and buy into this news flow without seeing the situation fully resolved. when you're an investor or a
corporate acquirer. certainly sinopec has had a long stated ambition of expanding overseas. it's obviously done other deals including one with repsol in latin america already. so it's a strategic area of focus. why they would want to get involved in this situation being as uncertain as it is at the current time, i don't know. i certainly think on a prunts bas prudent basis the value is zero and possibly neck i have in tga of its impact on the rest of the group. >> all right. thank you for your insights. sticking with the energy sector, u.s. regulators have given the green light to the plan to build a liquified natural gas plant in louisiana. it would be the first l and g plant built in the u.s. in nearly 50 years. they would export nearly 2.2 billion cubic feet of natural gas per day.
we're looking at it higher by 6.83% at the moment. meantime, march housing starts are out here in the states at 8:30 a.m. forecast at 9:15, we'll get marchville production. in addition to coke, j and j and goldman sachs, we also get results before the bell from state street and u.s. bancorp. after the close, we'll hear from a trio of tech names, ibm, intel and yahoo!. of course still with us is eric strid. and we also have zane brown still with us. eric, when we look at the u.s. economy, we had negative sentiment in the housing sector today, expecting to get more data. is that the biggest headwind in the economy in your opinion? >> it is certainly a big one. the housing industry is very important to the the economy.
i think today's number will be important. there was talk yesterday about whether yesterday's number was kind of one off, just a pause in what seems to be an improving picture for housing. so i think they'll pay attention to the starts came. >> and a lot of these tech companies, ibm, yahoo! the bellwether companies for tech after the drag that we saw yesterday, what are your thoughts globally for technology in performance. >> certainly there will be a focus. those numbers come out after the bell, so not likely to have an adverse or positive influence on markets today. but certainly people will be looking for corroboration of what they saw yesterday in apple or maybe something to unwind the fears that may be associated with tech falling back a bit. >> and eric, yesterday we had the vote in the senate regarding the butch buffett rule. didn't make to the floor for a conversation.
your take on that. >> i think in p terms it's a bit of a diversion. the impact on tax revenues about it were to be approved, if you were to have some kind of a tax surcharge on the wealthy, i think there's such a political football and my personal opinion is it kind of plays into the keep onization of the wealthy that's going on in this country. i think it's nonproductive. >> and that brings us to a larger point when we're looking at the elections and the impact on wall street. when we come to the most of elections, your take on whether or not it's possible that we might really see a changing of the guard this year or in fact if we might see much more of the same because wall street wants to stick with what it knows? >> certainly there is so much consternation about the lack of progress in washington, i think will could be a significant changing of the guard. unfortunately, you then end up with a lame duck congress and
you have the mifiscal cliff we' talked about. unfortunately, all that will heed to is a postponement of progress with taxes and progress with sequestration. and so unfortunately, at the turn of the year, a lot of that will get pushed back and won't give a good tone right to the start of the year. >> an excellent point. all right, we'll have to leave there. thank you so much for joining us. a pleasure to have you on the program. >> and just want to clarify some comments that came out earlier through reuters headline. implied that the spanish government had withdrawn and in a way broken off diplomatic relations over this ypp story. that's not quite accurate. spain has recalled its ambassador or summoned its him bass door back from argentina to discuss the ypf issue. they haven't withdrawn diplomatic relations.
earnings season in full swing. two dow components on the agenda before the bell. plus thes always closely followed goldman sachs. today is tuesday, april 17th, 2012. it's a twitter world. "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. welcome back. >> thank you. i go away and this guy g