Skip to main content

tv   Worldwide Exchange  CNBC  May 11, 2012 4:00am-6:00am EDT

4:00 am
headlines from around the globe, jpmorgan shocks investors with a $2 billion loss and a rare black mark for the reputation of the bank and its ceo. barclays biggest losers and dragging equities as well lower across the board. >> and adding to sentiment, china's april economic indicators disappoint, sparking renewed talk of a hard landing. and the spanish government may
4:01 am
force lenders to set aside an extra 35 billion euros when it unveils a plan to clean up the banking system today. >> lots to get through, but we start off from news from the iea which says oil prices are likely to stay high because of geopolitical riskitic despite a rise in world supply. they say global oil supply rose 600,000 barrels a day to 91 million a day in april. 90% of the increase coming from opec. we know that saudi arabia is well over 10 million barrels a day, but the iea says that uncertainty remains and last year they released oil stocks,
4:02 am
would be ready to act again if necessary. brent as you can see has been declining over the last few week. we'll have more analysis of that. first, though, let's get back to the big story over the last 24 hours. jpmorgan announces a $2 billion loss in its own portfolio, the losses which occurred in the past six weeks stem from bad bets and credit default swaps made by the chief investment office which is designed to hedge the company's own risks. that decision is now expected to post a second quarter loss of at least $800 million. jamie dimon says there were many error, sloppiness and bad judgment. >> in hipd side, their strategy, that execution, obviously the
4:03 am
environment, these are mark to market positions. i don't want to make excuses. >> jpmorgan down 7% in after hours. in frankfurt, similar losses. down 7.8%. these are all frankfurt quotes. goldman sachs down 4.3% sloonk with citi off 3%. keep your eyes on the investment banking units of these banks. likes of barclays down this morning, as well. maybe we don't have that board. but i can tell you barclays is off, as well. >> on a day like this when we're worried about what's happening in the eurozone and the jpmorgan news that you mentioned really gave investors another excuse to stay away from the markets. take a look at some of the
4:04 am
charts. japanese banks hit the most. kb financial down more than 1%. and over in us a 2r5i8 i canaus losses as far as financials are concerned. the jpmorgan here in the region has been perceived with a company with very good risk management. so people are asking questions what happened. and this is also needing people to question whether other banks might be facing similar risks, as well. >> barclays down 3%, socgen down
4:05 am
2%. steve has been following the story here in europe for us. a number of questions here remain. it's pretty clear -- he didn't get into details whether b. winding down the position, but losses could get bigger. >> it's impossible for the bank to turn away around and say the loss is crystallized as that if you still have an open position and there is a veracious counterparty out there, the hedge funds, whose vested interests is pushing the position more than jpmorgan's of course. so this is a battle of wills. we'll get to some of those big questions in a moment. we caught up with gregory zuckerman, the "wall street journal" reporter who highlighted the story. not in week or last week, it was the 10th of april.
4:06 am
now, this was around about three days before jp information began came to market with their numbers. >> people were aware of the trades and when i did the original reporting for the story and they were dismissive of our story saying that there's no way they could have big losses, but they were pretty clear saying personnel all the way up to jamie dimon, they were aware of the trades. but now the argument they're saying is that they were vaguely aware of the trades, they were aware of them generally but didn't have the details and once they learned the details, they p put hair fotheir foot down. >> he said i'm not going to be judge and jury, the investors will do that but there are a lot of serious questions that come
4:07 am
to mind on the back of this sorry. c mbs.com, i stuck out a few questions including your question, the size of the open position, have any of these losses been crystallized. when did the risk department, the cfo, the treasurer, jamie dimon, when did they become aware of will this position, and what was the process that they realized the hedge wasn't working. was there actually a hedge. and i brought in a delta. if you have an efficient hedging strategy in the derivatives market, you play what's called a delta which negates the absolute move in the underlying product and creates a neutral position. you can actually buy into weakness and sell in to strength. questions like that. what about the mark to market. we know in a a lot of institutions are low to mark to market on positionings of assets on a daily and weekly basis, but if you're an investment bank with a live and aggressively moving position, i'm pretty sure even if you calculate for
4:08 am
finance purposes your mark to market on a longer term basis, you have a mark to market on this position on a daily basis. i would be amazed if a sophisticated risk department didn't have an up-to-date mark to market on this position. questions like this. and i have another question which i haven't stuck on my list, if this gentleman and this team were only hedging, their only job, they are not proactive in any way shape or form, why did this gentleman get paid $100 million a year. sounds a lot for someone who is just -- >> yeah, supposed to be hedging the macro risks of the company. >> it would seem if you have a risk model, you're not going to be paid that kind of money if you're purely a hedger. christine, lots of questions. >> lots of questions indeed. steve will answer some of them hopefully with our guest host. good to have you with us. does jpmorgan simply bolster the
4:09 am
volcker rule? >> yeah, i think the simple answer is yes. this is perfect fodder for anyone who argues that the financial system needs to be regulated. but that's the obvious answer. on a broader picture, it's nothing new in that sense. it's another episode that confirms broader expectations that we're moving away from the free years ordinaries a world in which banks are increasingly viewed by -- increasing number of people that say they should be operating with much less grace especially if there is any behind of public money involved. that's the theme we're seeing greek voters obviously played to a large degree and it won't go away in the u.s. election campaign either, the fact that you need to regulate these things. >> when you look at proprietary
4:10 am
trading of big banks, should there be more rules and regulations in place to safe guard the banking system? what's happening behind will the scenes? >> this is not my field of sxermt teas sxr sxrpt tease. and it didn't really matter what i or anyone else thinks. we need to realize there will be more regulation one form or another, it will probably be a two step forward, one step back kind of progress, but the very fact that you can make losses, very big one, because mistakes can happen, is enough where you you are essentially in a bear market for banking stock, you can't do that. it's socially and politically something that is very difficult
4:11 am
to justify and that's what matters. but on the other happened, if you look at the financial sector as a whole it might be in a bottoming phase. so while the news is bad, i'm not talking about the jpmorgan stock or as a company individually, but while this is bad news for the secretary or, it's also to a degree at least priced in because it's part of this process of we need banks to become more like utilities, less than the money making machines we were used to in the '90s. >> one of the reasons losses got worse, they were slightly betting on an economic recovery and prices moved against them. seems to be one of the explanations. just on that idea of betting on the economic recovery, where are
4:12 am
we on that idea in trade? >> well, again, i really cannot say what the people at jpmorgan were betting on. >> what i meant was the economic recovery story. that's what i want you to focus on. >> our base case is not exactly a recovery, but we do have our own be nine economic scenario for the short term meaning the next couple of quarters or so because we actually do -- have seen and that has not been negated so par that the economy as a whole is not deteriorating to the degree that is not balanced by other factors. the next couple of quarters, the situation is not as bad as the market volatility would suggest in our view. if you want to call it a recovery, i think that's not really worth being called a
4:13 am
recovery, but it's a bumpy phase in a process of stumblization. >> and just because we're stupid, jamie dimon said, it doesn't mean everyone else is. >> i don't know how much of a mea culpa that is from jamie dimon. are they trying to say to people we mucked up ahead. i don't believe, and this is my opinion, i don't believe they had a failure in their hedging strategy, i think this was a proprietary position which just went wrong. >>ed it will never ever be called a proprietary position. >> it was a long position that just went wrong. jpmorgan is stunningly smart. they want an efficient hedge on this cdf position, they could actually just got into the market and closed the position out from their own point of view. >> i suppose the other question from that is who else is -- the potential for others getting it
4:14 am
wrong big time. >> how many european banks do we want to name, as well. time and time again the risk management department of these banks has been sidelined because they don't say what the senior traders in the front desk want to hear. >> steve, come back. the sorry will rumble. and the global insurance market has take a hit over the past few years. but lloyds of london is still positive and unveiling its 2025 outlook. joining us on discuss more is john nelson, chairman of the lloyds of london insurance market. thanks for joining us. what is vision 2025 about? >> it sets out the strategy and department that we as a market, we're not an insurance company, we're a market, has for the long term. basically what we're trying onset is a strategy which ensures the lloyds market
4:15 am
captures the business opportunity that's been provided in the emerging growth territories. and as you well know as well as anybody else, that is where the growth in specialist insurance that we do, specialist insurance and reinsurance, will come from over the next 10 to 15 years. >> how will you capture those growth markets is this does that mean you've got to have -- seems lloyds of london is a market based in london. how do you intend your reach internationally? >> two basic ways. first of all, presence. we've been pushing lloyds out into those markets the last few years. we now have a big hub in singapore which covers southeast asia. we have recently opened a hub in shanghai. but equally importantly, what we are also aiming to do is to attract quality into those territories with capital, franchise and very importantly
4:16 am
with people. and there was a very good example of that a few months ago when china re announced that they were coming into the lloyds market, they'll be arriving later this year, coming in alongside one of our managing agents. >> john, just picking up on that in terms of people, there's been a lot of criticism about the visa regulations in the uk. this desire to bring in foreign nationals, are you running up against any are problems some good pot at the moment, but we're very conscious of it and we are in touch with the government to make sure that they will allow the market to development. because it is fundamental to a service industry like that will we attract the best people into the london market and another case in point is the world's
4:17 am
largest insurance broker,en one of our biggest customers, have announced they're moving their head office to london in part to be closer to the the lloyds market. so they need to do that wut too much visa difficulty. >> this is christine here in asia. obviously coming up with new vision to really capture the vision, the opportunities. but the jpmorgan case really highlights the kind of risks that are out there in the markets. what are you doing about risk management? >> it's a very good question. risk management as you will appreciate in the insurance industry is at the heart of what we do. if you take a line off 2011, which was one of the worst catastrophe years ever, and lloyds is obviously front and center in the catastrophe insurance market, we emerged last year not unscathed, we made
4:18 am
a lot, but our capital remained intact and our rating remains at a plus. and the collective expertise for underwriting this specialist risk and also the supervision that the corporation of lloyds provides on the underwriting process because we self regulate our underwriters. >> we'll see how you get on with the new vision. thanks for joining us this morning. spain today set to approve a raft of measures to stabilize its banking system following the part nationalization of bank here. government expected to tell banks to said i'd another 35. and unlikely to develop plans to deposit togsic assets. stefane is in madrid. if they have to set aside 35 billion, then puts in to question mark whether they can then hit will the capital requirement targets of the eba,
4:19 am
which suggests that they would have to raise more money. are they in a position to do so? >> no, that's the problem and likely the government will have to help some of the banks. the announcement of this new set of measures will come in less happen three hours. the first announcement is the creation of a bad bank, each lender in spain will have to set up a separate structure to put all the problematic assets. and this could be quite significant because the spanish banks have an exposure of nearly 300 billion euros to the real estate sector and more than half, 184 billion, is considered problematic. the second announcement is this new requirement, this new provision, 35 billion euros probably on top of the 54 billion that the banks are already provisioning againsts. needless to say some banks won't be able to reach this target, in that case the government will have to inject public money.
4:20 am
>> this is how the picture is looking as far as asia is concerned. risk aversion across the screens. deepening crisis in the ne, weak china data and the trading loss seems to be weighing on sentiment. nikk nikkei 225 down 0.6%. financials getting hult as a result of jpmorgan. focus is key data coming out of china. industrial output weaker than expected. but we had inflation data coming in more in line with expectations dashing any hopes of easing. hang seng off 1.3%, developers as well as the banks, lenders were down on the weak cli made data. elsewhere the financials were hit down 1.4%, australian market down 0.2%. and sensex trading to the down side, as well, 0.3%, so not a pretty picture for a bring. what does your heat map say? >> slim gains yesterday. we're way down this morning.cli.
4:21 am
ftse mib down 1%. stars yields are concerned, bank he haven gland bond be extending quantitative easing for now. italian yields slightly up. spanish ten year debt still over 6%. and ten year bund yields just a little bit higher than the record lows we hit earlier in the week. euro-dollar has been down to the 129 level this morning, as well. still to come on the program, the iea has warned there's no room for com com play senplacen oil markets.
4:22 am
of how a shipping giant can befriend a forest may seem like the stuff of fairy tales. but if you take away the faces on the trees... take away the pixie dust. take away the singing animals, and the storybook narrator... [ man ] you're left with more electric trucks. more recycled shipping materials... and a growing number of lower emissions planes... which still makes for a pretty enchanted tale. ♪ la la la [ man ] whoops, forgot one... [ male announcer ] sustainable solutions. fedex. solutions that matter. ♪ i can do anything ♪ i can do anything today
4:23 am
♪ i can go anywhere ♪ i can go anywhere today ♪ la la la la la la la [ male announcer ] dow solutions help millions of people by helping to make gluten free bread that doesn't taste gluten free. together, the elements of science and the human element can solve anything. solutionism. the new optimism.
4:24 am
91 million barrels a day in april according to the latest report from the international energy agency. it says global demand growth will gradually accelerate, as well, throughout the year, although it's warned there is no room for complacency. geopolitical risks will likely continue to keep prices high. head of commodity market
4:25 am
strategy at bnp paribas joins us now. harry, nice to see you. >> good morning. >> everybody is pumping an awful lot of oil, prices are down off their highs, but still highly elevated. how long is that going to continue? >> i think the recent correction in oil prices really is more in the risk off mode in a we've been have manage markets especially in relation on concerns over greece and we've seen the reflection of the risk off correction in lower treasury yields, a firmer u.s. dollar and firmer yen. so i think in terms of oil, there's no room for complacency. their figures are showing that opec capacity continues to decline and we see that decline as being unavoidable in the future. especially as more iranian oil comes under embargo over the course of 2012. >> it seems extraordinary to say that saudi arabia is pumping well over 10 million barrels a day and here we are with oil prices that the level. >> certainly saudi may be pumping 10 million barrels a
4:26 am
day, but it holds 80 million barrelses of storage. that means some of that oil hasn't made to market so the question is how and in what quantities saudi will release oil from its storage. we can see them releasing during the summer, but that will be be met with increased crude demand by refiners. at the same time we were talking about china earlier on the show, we're a little bit more optimistic than the iea in terms of demand prospects. there is more room now for policy stimulus. so we figure that xhi made will be accelerating much faster in the second half of the year and therefore consuming more oil than what is currently posted in the iae numbers. >> i'm glad you brought up china and you're hope pog more policy stimulus to bolster demand. what happens if we don't get the policy stimulus? because inflation which came out today was pretty much in line with expect aces. >> certainly inflation was in line with expectations and the important thing you see the producer price index softened.
4:27 am
so basic live upstream inflationary pressures are calming down in china and that will allow them for more selective easing. basically comply in a will have to depend more oin investment because you can't rely on its exports given weakness in key markets such as europe and we figure that fixed asset investment in china will accelerate as a result of these stimulus measures opening the credit taps, if you will, and as a result of that, we'll see higher demand growth in xhi made by the end of the year. but i think it's unavoidable for them to implement more stimulus. in the end, they can't live with sub 7% growth. >> harry, good to see you. have a good weekend whenever starts. >> hang you. still to come, the banking world's been left rattled by jpmorgan's $2 billion loss. jamie dime mondon blaming slopp. >> it was complex, fully reviewed, fully executed and fully monitored. the portfolio has proven to be riskier, more volatile than we
4:28 am
thought. a living, breathing intelligence teaching data how to do more for business. [ beeping ] in here, data knows what to do. because the network finds it and tailors it across all the right points, automating all the right actions, to bring all the right results. [ whirring and beeping ] it's the at&t network -- doing more with data to help business do more for customers. ♪
4:29 am
4:30 am
headlines, jpmorgan shocks investors with a $2 billion losses from bad bets and a rare black mark about for the reputation of the bank and its ceo, jamie dimon.
4:31 am
that news weighing on bank stocks here in europe. equities lower across the board, as well. >> the spanish government may force lenders to set aside an extra 35 billion euros when it unveils a plan to clean up the banking system today. and nissan posting profit on record sales. the yen is still a risk, but should weaken in the future. >> the latest on the uk april producer output prices. first of all, let's get those to you. annual run 3.3%. that's stronger than we might have expected looking for around 2.9%. core producer output prices 2.3%, again, stronger than consensus. input you producer prices contracted 1.5% on the month.
4:32 am
1.2% weaker. construction output in the first quarter minus 4.8% vers the fourth quarter of 2011. downward revision of uk% q1 construction output will knock another 0.1% off the q1 gdp growth. so rather than than that flash number being reviseded up, we how believe the first quarter growth pig is actually even going to be worse than we out because of a downward revision of construction output. simon hayes is chief economist at barclays capital, joins us with his reaction to that. so probably a downward revision now gdp growth on construction data. >> actually pot the that surprising. people were worried about the construction data before the
4:33 am
preliminary estimates. but an actual fact, they've done a lot to raise the estimate of construction output and it looks like may have done a bit too much there. over the past few quarters actually the ims has had the tendency to revise down initial estimates. so i'm afraid that that number was going to be revised up and we may not be in technical recession. >> why is it such a big difference between the oms data and the survey data? >> that's very difficult to say. one possibility is that the o.n.s. estimates have two benefits really over the surveys. one is a lot more comprehensive, they cover a lot more firms. and so if you have a large number of small firms in an industry as is true with construction then, the business surveys may be slightly skewed, the other factor is that the business surveys tent to be
4:34 am
qualitative, what they don't tell you is that how much worse things have got. and so the o.n.s. data may well be telling us that quantitatively, those firms that are suffering are suffering quite badly. >> there was no extension of qe yesterday from the the bank of england. gilt yields back up as a result. i'm just wondering as the data gets revised down and we have weaker survey data in april, what's the chance of the bank at some point coming back in the year and extending it once again? >> i think the bank of england will make it clear in the inflation report next week, although it's halted qe, it hasn't drawn a line under it and persistent weak growth is one thing that could lead them to do more later in the year. of course the other factor is what's going on in europe and any intensification of the crisis there could lead to the further qe extension. so i think this could well prove to be a pause in qe rather than an actual full start.
4:35 am
>> all right. simon, thanks for that. have a good day. christine. >> an uneven growth for the second largest economy. >> that's right, china's consumer price level in april moderated to 3.4% despite strong rise in food prices. but a tempered inflation rate and renewed hopes for immediate easing actions from the central bank actually failed to cheer markets. instead the lackluster economic indicators are reigniting talk of an economic hard landing. continued difficulty in access to loans has led to a softening in fixed asset investment, while retail sales also underperformed the market. china's factory output rose by 9.3% in april compared with march 11.9%, sharply underperforming expectations as cooling demand at home as well as abroad was a drag on growth. analysts say this is
4:36 am
particularly concerning given the disappointing trade data we got yesterday. >> thank you very much for that. well, over in india, same picture as well, industrial output figures slipped unexpectedly in april. more live from mumbai. >> the ife figures for march lowered sentiment, coming at a contraction of 3.5% versus a growth of 9.4% on a year on year basis. that's one of the reasons which are cited with regards to the contraction that we've seen this time around. and month to month basis, as well, it has come in at minus 3.5% versus a plus 4.1% in pen. the key concern with regard it is to the pigs this time around is the gap goods index, that has fallen 21% on a year on year basis. and remember that will is versus a 10.8% growth which was seen last quarter. capital goods has been volatile in terms of an index throughout the ife, but this time around
4:37 am
21% fall was unprecedented. in terms of the entire growth, it's come in at 2.8% versus 8.2 will in the previous fiscal. it did have a ripple effect on the equity markets. we did retrace quite a bit. and there is still concern whether the rbi would stick to its stand in terms of possible rate cuts. inflation numbers come out on monday and that will be key in determining what the future moves by the richltbi would be. back to you. >> thank you very much. we've been looking at china and india inflation struggles and the sark differences in this report. >> two huge economies and both have been fighting inflation in the past two year as you can see here in in graph. india's inflation hit a peak of 10% last september. china's inflation peaked last july at 6.5%.
4:38 am
and this year, it's been running below the target of 4%. april cpi just came in at 3.4% this morning. main drivers for both countries are food and fuels. both large amounts of crude. for china, over 50%. india, about 75%. food is another driver. it's about onions and vegetables in india and pork in china. another difference is the declining chinese wages underscores higher prices in that country, while in india, the higher fiscal deficit helps to push up inflation. the two countries have had different approaches in controlling ib tlags. china relies heavily on rrr adjustments. analysts aren't expecting rate cuts. the pboc if in its latest policy doesn't mention rates at all because most of the chinese economy isn't rate sensitive. and of course the shadow banking system determines its own rates, whereas india is very rate sensitive. so that's why we have more than a dozen rate hikes do during the most stubborn inflation period
4:39 am
and the rbi hayes cut 50 points last month to produce growth. more imported inflation and the indian's government's latest move means requiring its exporters to sell half their porn currency in their accounts. in china, the yuan currency helps to ease inflation. p so now both countries trying to sustain growth. on the earnings front, me is an's january to march profit beat estimates by more than double, just $60 million shy of a billion. sales have surged at japan's second largest automaker despite supply disruptions from last year's tsunami and the floods in thailand. nissan erode ahead includes even bigger growth projections. it expects net profit to jump 17% to $5 billion for the current fiscal year through march.
4:40 am
the yen remains a risk, but should weaken in the future. let's talk everything nissan now. joining us, asia pacific vice president automotive and transportation at frost and sullivan. good to have you with us about first of all, what do you make of nissan's number, how much of a recovery will they go through this year? >> nissan has actually been hurt the last in all the disasters. both toyota and honda had a lot to overcome. so what numbers that you see for nissan is because they didn't suffer as much as their counterparts in japan. so to say they will grow strength to strength and they will basically pick the numbers -- >> when you look at the strategy, he's always targeted emerging markets and electric cars. how far will it get him this year?
4:41 am
>> they will have to do it, there is absolutely no choice. but the electric car is a bit risky short term, but in long term, will is the future. this is what they have bet heavily on to. >> to what september is this good or apparently good result from nissan represented about what's going on in japanese manufacturing or auto manufacturing specifically and manufacturing in general? from what i know, there is some earnings momentum there in the market because generally basically they never had a chance to recover from the crisis, just as they got hit. so maybe there is the potential for a rebound. and even if it's just their aversion to the mean, who you do you see that? >> the reserves that we see happening in japan, there are a
4:42 am
lot of other factories. majority of the production from nissan would be happening in the other regions, as well. and there is also this impact of the yen. currently trading at around 80, which is comfortable, but if it goes anything below 80, that's when all the japanese players will start losing heavily. >> does it make accepts for nissan to continue manufacturing in japan? >> automotive industry is not a mobile have i. have i. so unless something drastically happens to a sustained period of time, it is unlikely that anybody will move out. >> which do you prefer, toyota, honda, and of course -- >> of course all three for different reasons. but, yeah, of course toyota will strike back in a big way. honda will come back.
4:43 am
>> is the industry rather positive or negative? >> in 2012, the outlook is very positive. u.s. markets are recovering. and emerging markets are likely to do better. so 2012 is likely to be a good year. >> fingers crossed. thank you very much for your views. good to have you with us. ross. we'll take a short break. still to come, we haven't talked about today, but we're going back to greece and indeed to athens where the socialist leader is in talks with other parties to form a coalition government.
4:44 am
4:45 am
4:46 am
polls outcome a good barometer for what's likely to happen in federal elections and could make grim reading for angela merkel. silvia has been taking the pulse and joins us for more. hi, silvia. >> my home country, so to speak. really first of all, no surprise in a angela merkel will get a bit of a slapping there because will is traditional spd country, social democrat country, the old industrial heartland is where you used to have the mining industry which is of course
4:47 am
virtually nonexistent now, steel maker, automaker, engineer, heavy industry. this is like to speak in allied forces terms of the second world war dam buster country. this is where they thought they had to break the industrial heart of determine any and it's still there and as you quite rightfully said, often when we get, when we see a change in tone, a change in political wind so to speak, it often happens there. and one of the big things happening in regional and economic germany, new parties come on board and they call themselves the pirates. north quite the caribbean, but the apartheid and they're eating in to the chunk of the popular parties. so mar kell's party likely to set for a defeat, it's also that the popular parties are kind of losing ground in terms of the overall share of the votes they're getting and that of
4:48 am
course makes governing germany more and more difficult. but here we are on the campaign trail trying to find out how they are trying to drum up support. >> drumming up support for any elections seems to be getting more and more difficult for germany's established parties. state elections like here in we west, the socialist democrat attempt to mobilize their vote and voter absenteeism has become the biggest problem in german elections. >> it's difficult to stop the withering away of voters. the increase of nonvoters. i think will is no way besides making a more, well, interesting parties, but that's not really what we should want.
4:49 am
>> the cdo has traditionally been less popular here and has been spd country. to make matters worse, the cdu candidate for the top job declared that he would go back to berlin if he were to lose here. but that statement alone knocked on of a few percentage points for him in the polls. so the cdu is looking for the short defeat. to add to merkel's woes, the liberals are likely not to even make back in to the parliament because they won't get the 5% needed to get it. the pirates on the other hand protest movement for new democracy turned political party are set to sail in to the state parliament with yet another whopping victory. germany's political landscape or so it seems is becoming more and more complicated. >>le it be much more difficult to form coalitions with more and
4:50 am
more parties in parliament and pirates are one of the parties that won't go for the time being into a formal coalition. they might back perhaps the government that this will be very unsecured. so it might lead to more and more three party coalitions and they're not as table as let's say the traditional coalitions of one strong partner and one weaker partner. >> grand coalition usually means reform stand still, the two parties supposedly together in government can agree on very little. multiparty coalition is a sure road to instability. politically unpredictable germany, more troubles for europe? >> that's absolutely not good news because germany is the leading country, not only the
4:51 am
eurozone, but our event u. and if we become unstable, this means that all of europe will become much less stable and then it might mean a crash of the euro, real tensions within the european union. >> sylvia, the key thing is that angela merkel's party and the main opposition have shared the same views on the europe. if you get the rise in other party, whether they force that angela merkel and the same feeling sort of won't take a walk down the plank if you can use that pun. >> not quite yet, but what is happening of course is that we need more imponderables. the spd, the social democrats have always been on board. the greens have been on board for all the rescue packages. but what we've seen with the
4:52 am
changing wind also in france with hollande coming on board into the eu leaders sort of circuit, we see that the social democrats are pushing much more for growth compact at least inside the fiscal pact. they don't want to open up the whole treaty idea again, but they want more growth com pankt inside the fiscal pablgt. and that's something that's likely to happen. >> thanks very much indeed. and of course the first test that will come for the german political scene is what's going on in greece. socialist leader is optimistic about proposals for an all party government from the democratic left. does optimism translate in to actually getting sustainable action? carolyn has the latest for us in athe athens.
4:53 am
>> as he said, he's optimistic that a coalition government can be formed. but it really all comes down to whatever this coalition government looks like, and regardless of whether it's coming out of sunday's elections or new elections in june, this new government will be pressing very hard to renegotiate the bailout term and there's still a gap between what the greeks are hoping for and what the eu is hoping for. repeat lid eu officials have said there is no room for renegotiation. >> let's get a final thought from our guest host. so much bearish news from it's coming from the eurozone, jpmorgan, china slowdown. is there anything to be optimistic about going into the second half? >> paradoxically, i think the
4:54 am
very fact that we have quite bad news and the consensus is again shifting towards a risk offside is an indication that we're still what we call in this transition phase from a longer term picture where we're still possibly in an early phase within one market. because you don't have a clear consensus that we are, a in, a bear market or, b, in a bull market. >> so what do we need for clarity? >> by the time we get that, we should be thinking good getting out of it. so you should be patient. i don't think it's something that will change over the next quarter or six months. >> so trading strategy? >> right now we're hugging the benchmark. this is our basic position. and we're more inclined about there is another extreme dip beyond the buying side of this, because actually the basic condition in the global situation hasn't really changed.
4:55 am
>> continue to be a safe haven as far as gold is concerned or inflation hedge maybe? >> for the time being, we are looking at gold because looks like it's breaking down on several of the charts. weakness is good for the u.s. dollar and we're looking into buying other risk assets, as well. so that's not really a bad market signaling despite the volatility that we've seen. >> thank you very much for your insights. great talking to you as always. thank you very much for coming in today. ross, i'd like to talk about our relationship before i go. >> yeah, we just saw final thoughts is what that -- will
4:56 am
it's time -- you are moving on. you're not leaving the family, but you're leaving this program. nearly seven years, christine. you're not going to be here with us on monday. what will you be doing from now on? >> i'll be focussing pull time on managing asia. it's going to be 15 years. a lot of work to do there. so i'm going to have my hands full. i won't be drinking wine elsewhere in the caribbean. but i'll be back with breaking news and interviews. >> come see us regularly. we're changing the format of the show slightly here. we'll have more to say about that, as well, because you're going. so you forced our hand. i just want to say over the last 6 1/2 years, we've had some amazing stories and times and i've really appreciated working with you and i'm looking forward to the fact that you'll still drop in occasionally. so it's not a complete good-bye. >> yeah, we've had a blast. some key breaking news and we've had this really great long distance relationship, as well. >> the ultimate long distance dating.
4:57 am
>> that's right. people should learn from us. so not to say good-bye, but let's say good-bye to our asian viewer this is friday and of course elsewhere "worldwide exchange" with ross and jackie. have a great weekend, everyone. >> christine, i'll miss you. thank you so much. still to come, what excuses could there possibly be for a $2 billion trading loss? jamie dimon says there are none, but he's managed to come up with a few. >> in behihindsight, bad execut obviously the environment, these are mark to market positions. i don't want to make excuses and start talking about market and dislocation and stuff like that because that's just an excuse.
4:58 am
♪ why do you whisper, green grass? ♪ [ all ] shh! ♪ why tell the trees what ain't so? ♪ [ male announcer ] dow solutions use vibration reduction technology to help reduce track noise so trains move quieter through urban areas all over the world. together, the elements of science and the human element can solve anything. [ all ] shh! [ male announcer ] solutionism. the new optimism. in here, great food demands a great presentation. so at&t showed corporate caterers how to better collaborate by using a mobile solution, in a whole new way. using real-time photo sharing abilities, they can create and maintain high standards, from kitchen to table. this technology allows us to collaborate with our drivers
4:59 am
to make a better experience for our customers. [ male announcer ] it's a network of possibilities -- helping you do what you do... even better.
5:00 am
headlines from around the globe, here in the united states, jpmorgan shocking investors with a $2 billion loss from bad bets in a rare black mark for the reputation of the bank and krcht eo jamie dimon. >> and news weighs on bank stocks. dragging equities lower across the board. elsewhere the spanish government may force lenders to set aside an extra 35 billion euros in that p country when unveils a plan to clean up the banking system. >> and china's april economic indicators disappointment sparking renewed talk of a hard
5:01 am
landing. good morning, you're watching "worldwide exchange" about ross westgate, i'm jackie deangelis. let's a look at the u.s. futures. we were looking lower earlier in the morning. seems like we're rebounding a little bit. the dow could be down now by 37 points, the nasdaq slightly higher over the flat line and s&p down by about 3 and change after we saw stocks closing mixed on thursday. investors still cautious over the eurozone, the dow manage to go break a six day losing streak closing up nearly 20 points higher, but of course we got the news out from jpmorgan after the close, focusing on this will during the show. how is it in europe? >> rest of the european stocks after slim gains yesterday, nice to see you by the way, ftse 100 flat, ex-extra dax two-thirds,
5:02 am
as we wait for more measures in terms of capital raising for the spanish government. just had the latest gdp growth, forecasting flat this this year. eurozone gdp growth as a whole will contract 0.3% in 2012, so contraction over the whole year and then growth at 1% in 2013. so initial signs of recovery next year, although risks remain from the sovereign debt crises plus a global hike in oil prices. and they say low growth will remain without further efforts by go. unemployment for the block of 11%. so that's 11% across the entire eu. budget deficits 3.3% of gdp in
5:03 am
2013. jackie. >> meantime jpmorgan surprising investors announcing a $2 billion loss on its own portfolio. they were made by the chief investment office designed to hedge will the company's own risk. that division expected to post a second quarter loss of at least $800 million. it could provide more fuel to supporters of the volcker rule. jam jamie dimon says there were many error, sloppiness and bad judgment. >> in hindsight, strategy, bad execution, obviously the environment, because these are o market positions. i don't want to make excuses and start talking about market and dislocation and stuff like that because that's just an excuse. >> jpmorgan fell 7% in the u.s. in the after hours session. checking on some of the shares of the other u.s. banks, as
5:04 am
well, which could see some rescissors you'll impact, the steepest of the decline, goldman sachs down 4.3%. joining us on the phone is chris wheeler to discuss this more. he's a bank analyst and jim mccann is our guest host, 1800 flowers.com. thanks so much for calling in. i want to start with the jpmorgan story. looking at a lot of issues here with the company, but starting with one of the first points, this loss is not final. >> that's correct, it could get better, but it also could get worse. obviously what they have managed to do in the last few weeks is to take about a billion of gains on other financial instruments which is mitigating what they're currently forecasting is a $2 billion loss down to something like a billion.
5:05 am
>> it's and ongoing issue and she have to manage it, so they're looking at staffing changes. what kind of position does this put jamie dimon in in terms of choosing a new satisew staff to what's happening? >> first of all the shocking thing is will didn't happen in the investment bank. the bank was quizzed on this business at the first quarter call and unfortunately jamie said all the noise around it was the tellest in a teapot. so it's a fine bank, but there will have to be management changes i would suspect and i guess there would be more calls because this is putting jamie dimon in a slightly awkward position given he has both roles. >> it's amazing that you can
5:06 am
company from a statement, the bank very comfortable with its positions, to a month later saying as dimon suggested that we were flawed, there was sloppiness, mistakes were made p about and just seems have a ordinary you can go from one to the other within a few weeks. and it's probably more worrying that this core function of the bank was poorly monitored. that's far more worrying to me than having a rogue trader. >> was fully monitored, i'm not sure. obviously this is the gossip. big top down from the management view as well as obviously on the ground looking i was in the states talking to all the banks. jamie said no excuses about markets, but it was a terrible
5:07 am
month and are betting against the cds we believe and obviously that news quite markedly if they take off the billion that includes these gains, so not derailed, about you obviously there will be a lot of issues and a lot of reputation and sentiment issues for the next few weeks. >> it's supposed to be a hedging operation. >> i think one of the problems we have is we forget what an enormous bank this is and it's often making bets and the question is how big is it in line with what it does day to day because it has an incredibly powerful franchise. and i think the other concern clearly which we're seeing to y
5:08 am
today, of course we'll have a backlash on regulation now and that's why we're seeing investment banks in london slowed down on the view that there will be no lightening up in regulation after this because it is just so surprising. >> dimon made the point just because we're stupid, doesn't mean everybody else is. but we assumed jpmorgan was one of the best. >> the u.s. has learned a his on that maybe everybody's in the same boat but as i said, backlash particularly for banks in the u.s. and the good news is somebody must be on the other side and that's the other thing we're trying to find out. >> you mentioned the size of jpmorgan.
5:09 am
understanding they have a couple of trillion dollars on their balance sheet, earning $20 billion or so a year, how important are things like brand reputation, jamie's brand, the brand of jpmorgan chase, how important is culture here in terms of people's confidence that tell's make the appropriate changes and get on with it? >> you're right. again, a discussion on the desk this morning a shocking piece of news, but this is a very big diversified business. i think he's been seen as one of the leaders and now it's embarrassing to have to deal with this. i hate talking about making
5:10 am
management changes, because i jokingly said they didn't say fire the sergeant who was killed, cus custer was held to . and i think it's like that. i think there has to be an oversight issue at more senior levels of management will, you're slightly right. >> i don't think we can lose sight of the fact that risk is part of every day business. >> and you're a ceo itself. so when you're looking at something like this, how are you evalue agt what's happened in terms of jpmorgan right now, little impact to dimon's reputation? >> i think these are the moments when reputations are really born and enhanced or destroyed. i think in this case my expectation is that the way
5:11 am
jamie's tonality last night on that conference call gives me an indication of how he'll deal with it, he'll be fort right, he'll be direct. he'll fix it. some people will be dealt if with if about appropriate and new processes will be put in place. these things are very complex. processes are not always perfect, but i think the expectation will be it will be dealt with quickly and it will be a footnote. >> we have to leave it there. but chris, thanks for joining us. ross, over to you. >> so much more to talk about with that story. and we will get to it as well during the rest of this hour. meanwhile, banking stocks very much in focus in spain, as well today. set to approve a raft of measures to try to stabilize the banking system further.
5:12 am
also likely to unveil plans to put toxic assets in a bad bank. stefane, the cabinet is meeting this morning to approve these details. they've had discussions all week. two questions really. one is if they have to set aside more money, will the banks have to be recapitalized and by who, and the second question, does this actually still go far enough? >> they were already in trouble to raise 54 billion euros in total, that was the first plan. according to this new plan, they will have to raise another 35 billion euros, so it's quite obvious that some of the spanish banks won't be able to do so and the risk is to use public money to inject cash into the banking system. the second question, is it the
5:13 am
last plan. that's the wish from the is annish government according to the people around the prime minister this time it will be the last plan, they hope it will be the final clean up for the banking system in spain. but obviously the exposure to the real estate market is huge. # 00 billion euros in total. 180 billion considered problematic. so perhaps it's a last try, but it will be very, very difficult to implement this new plan. so as you said, announcement due at lunchtime. >> all right, stefane, we'll wait for that. thank you. jim, the eurozone debt crisis, banking crisis, whatever happens with greece and everything else, it will still be weighing on us for some time. what's your own thoughts about how it's impacting now this latest downward investment decisions and the way business leaders are acting.
5:14 am
>> last week i was in uk and ireland and speaking with smaller business people, speaking with consumers, it's my impression that there's a feeling particularly in ireland that they did the tough things from an austerity point of view and are quite proud of the fact that they were early to do those thing. about but there is a real concern that there is a lack of credit available and when you have the big banks all trying to remanage their balance sheets, eliminate risk, shrink their balance sheets, that will have a spillover effect that credit isn't available. i spoke with a fellow who operates a car service and he wanted to buy a new mercedes for his fleet and he was prepared to put 50% down and was not able to get financing for the other 50% of the car. he's in business, he's doing well, trying to grow his business. and when you hear those anecdotal evidence of the impact of the banking system particularly in the eurozone on credit for small businesses, it makes me wonder why there aren't
5:15 am
new bank formations, why new capital isn't being attractioned from other parts of the world to form new credit granting banking or credit agencies to free up the flow of business. so in the u.s., the good news is there's plenty of capital available for the largest businesses. some available for mid-sized businesses, but still con trant stra constraintses on tsmall busines side. and the economy seems to be bumping along. so i turn it back to you in terms of how does credit get back to the system to stimulate the smaller businesses and the consumer. >> all right. plenty more to come from you. also you still have time to buy something nice for your deer old mom. we'll shine the light on the the retail sector and consumer
5:16 am
spending. jim will talk us through that.
5:17 am
5:18 am
welcome back. if you're just joining us, let's take a look at u.s. futures. looking at a lower open, but we have regained a little bit of ground since the news about
5:19 am
jpmorgan came out. slilower by 40, nasdaq slightly over the flat line, and the s&p 500 lower by 3.8 points. but of course the financials will be in focus as well as jpmorgan stock. >> 3 and 12 month t-bill auctions, yields have gonl the right way in terms of they've fallen. 3 month t-bill average yield, 12 month t-bill average yield, it was 2.8% back in april. bid to cover 2.49, that's again higher on bid to cover and the 12 month. so good new on the 12 month t-bills, yields up, but bid to cover up. so a little bit of good news. talking about yields, that means yields are lower any way across
5:20 am
the board. italy down below 5.75. spain just below the 6% mark this morning as we wait for who are detailses from the spanish government on its banking recapitalization plans. ten year gilt, bank of england won't be extending qe, just back down this morning and german bund yields still not far off those record lows, as well. i was wondering, why notice -- did i show the the bourses? sorry, jackie. there we go. slight weaker across the board. something far more important obviously for all of us coming up on sunday. >> well, that's right, ross. and it's mother's day on sunday in fact and spending for the
5:21 am
holiday, expected to bloom this year, no pun intended. the national retail federation expecting consumers to spend $18.6 billion on gifts for mom, an average of $152 a person. about two thirds of us will buy mom some flowers and half will also take their mother out to blunch or dinner. consumer electronics like tablets, digital cameras, also quite high on the list. with us new to talk a little bit more about the holiday is jim mccam mcmahon, founder of 100 flowers.com. obviously the average, people spending $152 to honor mom this weekend. talk to me how that's translating in to flower sales. >> if you look he numbers, you break down a little further, you see women are expecting to spend around $117, $120. men are spending $160 on $170 range. it's up 00 few dollars m last year. so is consumer confidence. and they're tied together.
5:22 am
so we're feeling good as an execution about the fact that two-thirds of adults this will year will be buying flowers for the moms in their lives. so it's good for us. we're getting back on trend. so i've been at this now for 36 years. and every year we grew and were more profitable and then we had two years weren't so good. but that obviously had an impact on us. how we have two years of growth again. so i think the fact that it doesn't seem to be hanging over our head in north america anymore and consumer confidence is creeping back, unemployment is creeping down. it gives the consumer that confidence to go back and connect with those important people in their lives. >> and we've seen it all with also holidays, easter, fantastic sales there, as well. but it wasn't just flowers, it was food and gift baskets. you also provide these, as well. do you expect to see the same growth in that segment? >> we're seeing growth across the board.
5:23 am
we reported our earnings last week and we reported 13% top line growth and more than almost 2 1/2 times bottom line growth. so we're very please that had we were able to do that, but it's otherwise a tough quarter. food business is impacted because easter was early in the fourth quarter, so it really spilled in to the second quarter, our fiscal fourth quarter. so it moved our business forward a little bit. and the food business in particular benefitted from that because our chocolate business, our gift basket business, our bakery gift business all benefits from that easter move. so we're feeling good across the board. >> most popular flower on mother's day? >> it's spring mix. a combination of lillies and daze city daisies. roseses are still popular, but the mixed colors, pink and lavender roses are extremely popular. >> we'll have to leave it there. i know i'll be sending my mom roses. s ross, i hope you will be, as
5:24 am
well. >> i was just looking for clues. meantime, investor demand for facebook's ipo very high. the offering oversubscribed. more on that coming up next. ♪ i can do anything ♪ i can do anything today ♪ i can go anywhere ♪ i can go anywhere today
5:25 am
♪ la la la la la la la [ male announcer ] dow solutions help millions of people by helping to make gluten free bread that doesn't taste gluten free. together, the elements of science and the human element can solve anything. solutionism. the new optimism.
5:26 am
5:27 am
welcome back to "worldwide exchange". jpmorgan announcing a $2 billion loss in its own portfolio. the lots which occurred in the past six weeks stemming from bad bets on credit default swaps and were made by the bank's chief investment office which is designed to hedge the company's own risk. that decision is now expected to post a second quarter loss of at least $800 million. the news could provide more fuel to supporters of the volcker rule which would ban prop trading by banks. jamie dimon says there were error, sloppiness and bad judgment. >> bad execution, obviously the environment, these are mark to market positions. i don't want to make excuses and start talking about market and dislocation because that's just an excuse. >> jpmorgan falling 7% in the
5:28 am
after hours session in the united states. in frankfurt, down 7.5% at 29.30. also checking some of the shares of the other u.s. banks impacted, lower in europe with goldman sachs taking the biggest hit down 4.3%. ross. >> earlier on the program, on cnbcs, we caught up with the reporter who highlighted the story back in april and he described the bank's initial reaction to his story then. >> people senior within the bank were aware of these trades and when i did my original reporting about a month ago, the banks scoffed and they were dismissive of our story saying that will is no way they could have big losses, these are hedges, et cetera. but back then, her pret they we clear saying personnel all the way up to jamie dimon were aware of the trades. now the argument is they were vaguely aware of the trades, but they didn't have the details.
5:29 am
and once they learned the details, they put their foot down. >> analysts telling the financial times banks are constantly moving in and out of new products and regulators may not be able to keep up with them. in february moody's put 17 banks on review for a possible downgrade citing structure all vulnerabilities. take review expected to be completed next month. and investor demand for facebook's ipo reportedly so high that the offering is already oversubscribed. facebook seeking on sell 337 million shares at the $28 to $35 each and expected to price the ipo on may 17th. the ipo road show heading to palo alto, california today for a meeting at 3:00 p.m. eastern time. ross. >> and the yahoo! ceo reportedly told top executives he never gave incorrect information about his background to the company. yahoo! admitted thompson doesn't have a computer science degree
5:30 am
even though it's listed on his official company bio. reports suggest thompson blames the mistake on an unidentified search firm. that firm didn't present thompson as a candidate. yahoo! frankfurt trade pretty flat. jackie. >> and coming up, the banking worlded's left rattled by jpmorgan's $2 billion loss with jamie dimon blaming error, sloppiness and bad judgment. >> in hindsight, the new strategy was flawed, complex, fully reviewed, fully executed and pulley monitored. the portfolio has proven to be riskier, more volatile and economic edge than we thought.
5:31 am
5:32 am
5:33 am
headlines from around the globe, jpmorgan shocking investors with a $2 billion loss from bad bets in a rare black mark for the reputation a of the bank and c echlceo. >> barclays and equities lower. and the spanish government could force lenders in that country to set aside an extra 35 billion euros when it unveils plans to
5:34 am
clean up the banking system just a little bit later. >> and china's april economic indicators can disappointing sparking renewed talk of a hard landing. nice to have you here. if you're just joining us, let's 00 take a look at the u.s. futures and see how we're setting up for trade on wall street. looking at a lower open. dow by 55, nasdaq by 4 and the s&p 500 by 6. this after we saw stocks closing mixed on hurst. investors still cautious over the eurozone. but the news about jpmorgan and the financial system going to be driving the headlines today. >> banking sector is one of the weakest here in europe. cac 40 down off 1%, ibex 1.5%.
5:35 am
waiting for the spanish government to tell us how much they want branks to raise in terms of extra provisions. could be around 35 billion euros. many will have to raise extra capital which they may not be able on come. too do. so it may be a hit. >> jpmorgan surprising investors announcing a $2 billion loss in its own portfolio. the loss which is occurred in the past six weeks stemming from bad bets on credit default swaps made by the bank's chief investment office which is designed to hedge the company's own risk. joining us to talk more about it is ben liechtenstein and jim mccann is still with us. ben, great to have you with us. we'll kick it off with you. looking at the jpmorgan story, futures are down, although not as much as they were.
5:36 am
your take on how this will impact the markets today and how investors will absorb the news. >> i think it could have a huge weight on the market. as you see, futures are trading lower. that's partially due to the information out of china. but i feel like it's been the banks that have helped the market into the levels that we've seen. i think that investors really look for the banks to see kind of that follow through, to see energy and conviction on behalf of the market and right now with the bank starting to really come off of it, i think that that again is just weighing on the market and jpmorgan's one of those staple type names, one of those psychological type levels, if you will, on the market where investors just look for that and again, about about we start to see negativity there, it's just going to spill off in to the market as we're seeing in the overnight session. >> and of course as you mentioned, jpmorgan a bellwether in terms of the sector. jamie dimon seen as the king of
5:37 am
wall street. and as you also mentioned, the financials have been doing quite well especially this year. so if we do see an impact and see the sector trail off more long term, will we see a real correction here? >> there's a potential for that. the markets are poised and set at some really critical levels and i'm talking about multiple major markets across the word. and it goes without saying for reasons why. enormous amount of uncertainty in the euro sector. and the dollar is seeing a lot of strength attributable to that. one of my clients yesterday, a good friend of mine actually made reference to the dollar in a bad neighborhood, one of the nicest houses if you will. the nicest house in a bad neighborhood. and again, while we're seeing the dollar work its way above 80, that's also playing on the stocks, as well.
5:38 am
but the dow below 13,000, that's one of those psychological levels that traders look for in terms of a psychological type pivot, if you will. and it's weighing on the market. we're seeing chopped trade in the s&ps around the 1350 level. this is below areas of value where we'd like to see it way off of those upper extreme levels around 1425. and most notable was the pact this year of that most recent high that we saw the dow post and there was very littleful through, conviction and in fact there was not participation on behalf of the other major stock indices futures products across the board talking about the russell, the nasdaq and s&ps. just not willing to join in. so it's that divergence that is weighing on the market, weighing on the energy. and again here we are chopping it out right around 1350 in the s&ps. >> if we get to early mid next week and a sense of confidence resumes in the sense that this is seen as a $2 billion loss,
5:39 am
not more, not systemic, and we've seen weak trade back as a result, do you have a sense that we'll be back on a path that this could be a buying opportunity as the emotions overwhelm the market for a day or two? >> absolutely no question. this has the potential for that. the market likes to inflict as much pain as possible on those that are participating. and right now for the most part, the longs are under enormous amount of pressure. again, these markets, it's not necessarily a guarantee that we're going lower. anybody will stand up here and tell you that it is it absolutely lying to you. but the fact of the matter, the markets are poised for a big move one way or the other. we're not in the middle of the balance area and chopping it up sideways type action. we've come offer of some upper extreme levels with high energy right how. we are again forming a bit of a balance on the daily, but for the most part, we're basically in and elevator shaft, if you will, and it has the potential again to move with conviction to the down side or as you just mentioned, this could be a great
5:40 am
buy opportunity. i can't tell you that right now unfortunately. otherwise i wouldn't be standing here. but it certainly has the environment right now for a big move one way or the other and if you look across the board, mull tunnel major markets in a similar situation. the euro currency having now breach haded that 130 level is . >> ben, as a trader, i don't want you to talk about the structured credit market, but if you're trading in the pits and you know there's a big player has got caught in an open position that they have to get out of, what would the other people on the other side of t t trade do? >> you can think of it this way. basically, i mean, it's -- the environment here is essentially one large bluff. basically you don't want to he
5:41 am
will what your hand is, about full. and so once that gets out, again the participant is trying to inflict as much pains as possible about that so we see it playing out all the time, we see people stuck in positions and i like to reference the donkey kick, if you will. and this type of energy or this type of-will-the same thing that you as a trader at home feel. >> so them's try to makes a much money out of it and try and cause the losses to be bigger, right? >> no question. >> okay. that's what i was angling at. >> that's what speculators are there for, that's what day traders are there for for the most part and the speculate tore plays a little different role in that, but, yes, if somebody sees the hurt going on, then they're not going to try to help that or try to provide remedy for that. they'll try and capitalize on
5:42 am
it. >> ben will be back with us later in the show, and so of course is ross and some of his feistiness. our next guest saying a perfect storm is brewing in the corporate credit markets. arkets. are you still sleeping? just wanted to check and make sure that we were on schedule. the first technology of its kind... mom and dad, i have great news. is now providing answers families need. siemens. answers.
5:43 am
5:44 am
5:45 am
the press ethics inquiry giving on, giving evidence about the relationship between british politicians and the media. andrew neal saying she's finally accept that had on all the big issues, the sun newspaper reflected murdoch's views. so plenty more coming out on that. meanwhile, a $46 trillion perfect storm may be brewing in corporate credit markets as the funding needs intensify. this the warning from standard & poor's that says monday financial firms will need to cash in in order to spur growth.
5:46 am
thanks for joining us. sort of a -- sort of intriguing that jp more dwan happened to lose their money on offering cds protection on a baskets of corporate indices. a sideline here. i was under the impression that for big global companies, raising money was pretty easy. they were rich in cash and seen as a much better bet than sovereigns. >> that's true. it's improved over the last couple of year, but what this report is really looking sat at is sizing up the total financing requirements in the next five years in the major regions of the world. and it breaks down looking at the refinancing story and also the new money requirement which is a key part of this story. >> and the new money requirement section is concerning? how concerning?
5:47 am
>> we think there hasn't been as much focus on the new money requirement that's actually essential to help support growth if we're going to get back to trend levels of growth over the next five years. and we have real concerns that credit rationing from banks will actually restrict that availability of new money to be provided to corporates. >> i suppose the difference is where you get your funding from, right? so who's in a better position if banks aren't going to give you a new money, who is in a better position to get it elsewhere? >> that's the issue and it's a particular issue in europe where we see a weak economic environment, the question about sustainability of debt at the sovereign level, we're seeing banks that are more highly leveraged than the u.s., and that all leads in to -- for us, that points very clearly to the fact that since corporates are so dependent on banks in europe, 85% of the debt financing
5:48 am
traditionally has come from banks, we think banks will ration credit much more likely to corporates in europe. which pushes the largest corporates that can toward debt capital markets. >> this is jim. i have a quick question here. i wonder how has the behavior of the large multinationals changed in the period since we've had the big financial crisis? they were caught short in terms of not realizing how dependent they were in turning commercial paper. has their behavior changed, if they become sovereigns unto themselves. >> it's a good point. we've seen larger corporates have built liquidity on the balance sheets. they've become much more defensive in terms of financial policy. so that's clear hey bly a big c and keeps them defensive. >> people talk about the large cash balances on corporates, but
5:49 am
is that actually now going to be a long term feature? >> precautionary cash balances is the prime driver. but let's remember that a significant part of this cash is held on balance sheets for a relatively small number of corporate clients. so we're talking oil majors in europe, the auto producer, auto manufacturers and it's 30% up in the last three years. which is basically 1 1/2 years of cap ex. so you're right, we should expect to see this remain the case. >> thanks very much for that, paul. gr to sgood to see you. according to the "journal," financial services authority which is the regulator of financial services in the uk is talking with jpmorgan about trading losses and jpmorgan is providing information to owing regul other regulator respect as well. so they are in discussion with
5:50 am
the regulators as you probably would discuss them to be. elsewhere china's slew of economic data uneven growth. and tracey chang has more. how much worse was this than expectations? >> it's a lot worse as a matter of fact china's consumer price level moderated to 3.4% in april. that despite a strong rise in food prices. but the tempered inflation rate and renewed hopes for immediate easing actions from the central bank actually failed to cheer markets. reigniting talks of a possible hard landing for china and continued difficulty in access to loans has led to a softening in fixed asset investment, as well, while retain sales also underperformed market expectations. factory output rose by 9.3% in april compared with march 11.9% sharply under performing expectations as cooling demand
5:51 am
at home and abroad was a drag on growth. analysts say this is particularly concerning given the disappointing trade data we got yesterday. crack jackie, over to you. >> and coming up next, we'll get a fresh snapshot on the u.s. economy with data on inflation and the consumer. plus a top fed official weighs in on the thorny you issue of too big to fail. ♪
5:52 am
♪ why do you whisper, green grass? ♪ [ all ] shh! ♪ why tell the trees what ain't so? ♪ [ male announcer ] dow solutions use vibration reduction technology to help reduce track noise so trains move quieter through urban areas all over the world.
5:53 am
together, the elements of science and the human element can solve anything. [ all ] shh! [ male announcer ] solutionism. the new optimism. a living breathing intelligence bringing people together to bring new ideas to life. look. it's so simple. [ male announcer ] in here, the right minds from inside and outside the company come together to work on an idea. adding to it from the road, improving it in the cloud all in real time. good idea. ♪ it's the at&t network -- providing new ways to work together, so business works better. ♪ >> the april ppi is out at 8:30 achl. producer prices forecast to drop
5:54 am
0.1%, but 0.2% when you exchewed food and energy. economists looking for a reading 76. and richard fisher speaking at 9:00 a.m. about too big to fail. ben, a lot of data coming out -- not a lot of data, but data points coming out today and the numbers out of china. so balance for me how both of those factors will impact the markets today. >> i don't anticipate the economic data to be a major market mover for the most part barring any unforeseen number that's way away from what's expected. if anything information l weight on the market will come from china.
5:55 am
the market has potential for major down side activity. whether or not the jp story has enough to be the catalyst, i'm not sure. investors certainly could see this is a buying opportunity and the town side activity could be limited, but if it builds energy, the down side, we will see momentum today. again, i don't really see the u.s. economic data as a major market mucher here today. possibly consumer sentiment later on in the afternoon, but we're really looking here at a technical perspective and focus on the dollar is major at this point.
5:56 am
>> and your take as a ceo how something like this could have occurred. >> we need to put it in scale. we need to understand the scale and i think we'll get that sense quickly. i believe maybe a week from now, this will be a blip, we're seeing a well run, big institution. i think it will be a buying opportunity. >> all right. my thanks to jim and also ben for joining us on the program today and for ross, for allowing me to be on the program with him so long from the united states, i'm jackie deangelis. >> we better explain that. you are giving up your responsibilities at "worldwide exchange." it's been great to work with you. i will be back on monday with a new partner here in london. we'll slain more then.
5:57 am
have a great weekend. but jackie, thank you. thank you. you do a lot of no.aking? look i'm going through the rapids. okay... i'll take it. sync your card with facebook, foursquare and twitter for savings. that's the membership effect of american express.
5:58 am
5:59 am
today's top stories. jpmorgan has been hailed as being absolutely excellent in risk management. you know jamie dimon's rep. until how. the bank unveiling an egregious trading loss of at least $2 billion. the social offering of a generation. facebook's ipo is reportedly already over subscribed and what is happening at yahoo!? scott thompson telling his top executives he never provided the company with a resume or incorrect information about his past. i don't know. who did? it's friday, may 11th, 2012. "squawk box" begins right now.

152 Views

info Stream Only

Uploaded by TV Archive on