tv Worldwide Exchange CNBC May 31, 2012 4:00am-6:00am EDT
welcome to worldwide exchange. >> these are your headlines from around the world. >> markets end the month in dramatic fashion, record downward moves. ibex the biggest loser. >> ecb president calls on our pea an policymakers to he reform the banking sector to restostor credibility. >> adjustment by banks as well as within the financial system more broadly is crucial. >> and growth in india slumps way more than expected to a nine year low.
spelling economic trouble. so welcome to today's world wide exchange. extraordinary moves in it asset classes in the last 24 hours. >> and as we saw overnight, things moved even lower. asia continued that risk off mentality. i don't think anyone if you had asked back during the 2008 financial crisis, if we would ever see yields at those levels again, people would have said not in my lifetime. fast forward four years and we're at fresh record lows. >> there's a good article where somebody wrote that it was quite feasible to see yields go a lot lower. >> oh, yeah, a very wise sage. >> we've had german unemployment data out, as well. season hely adjusted jobless
rate 6.7 versus 6.8% in april. euro-dollar just back over that 1.24 level. we've been down to 1.236. so at the lowest levels for about two years. >> we're getting pigs out that plant ordered were down 11%. we know last april was a much stronger period, but clear they're the not totally out of the woods just yet. >> still to come, we'll be in athens as the latest opinion poll suggests the new conservative poll has begin background to syriza. >> and the europe's most profitable league. and how to play the declining indian rupee. >> and we'll cross to washington where an adviser to the greek
government will tell us why the u.s. should play no part in propping up the eurozone. >> and markets going after tomorrow's jobs report will assess if fed is missing the mark in its handling of the u.s. economy. world leaders are meeting in thailand's capital. we have the event highlights. what's been concerning the most? >> the external picture unfolding where you are, in the broader eurozone, and how vulnerable is this region of southeast asia. 600 million people here represents about 2 trillion in terms of gdp. so the big question is about rebalancing the economies to make them more sustainable and insulate them against 9 very volatile external picture that
we are seeing continue to unfold out of the and you are row zone. we'll find out indonesia's peripherpe perspective after the break. >> all right. meanwhile, ecb president mario draghi is urging lawmakers to o come up with what he calls a credible bank fundamentalism. he stressed a resolution needs to be implemented at a european a level and voiced concerns about a shift in financing. we till to get headlines from draghi at he testifies. the question is what happens to to the rest of the greek banking sector and spanish. >> level of uncertainty is not the same as in november.
>> i hope what he means is it's a heck of a lot greater. >> obviously most of is when they introduced the ltro program. he's saying if take you that at face value, we're not about to step in with any big action. >> and you couple that with james bullard saying he doesn't see the immediate for more quantitative easing, so trying to push poll city makers into some dramatic action are not getting the headlines that they weren't. >> talks after a day of discussions between madrid economics minister and german counter part on the pressures facing the spanish market. spokesman for the european commission has said spain must tell brussels how it plans on restructure bankia. according to a report in the spanish financial data, the lender may receive staggered
injections of cash from the government depending on its financial needs. madrid under pressure and the fact two of the directors received 20 million euros in severance pay. so let's get an investment view on this. it seems the last few days what we've seen here is a lot of liquidation of positions. how much further has this got to go? >> i loath to come on this show and be yet another person imparting a bearish view. but i think it's got further to go. flows is all about capital preservation here.
if the only asset to own which is ten year treasuries is earning you 1.6% in yields, then so be it. capital preservation is definitely at the forefront of investors minds and practically impossible to see a scenario where this whole outcome around europe or certainly asset prices in europe don't get worse over the next couple of week. >> it would seem policymakers will act. how much further do you think the move in equities whether go before they do that? a lot of people think they could be higher by year end. >> the key phrase is worse before it gets better. we know european policymakers in particular did drag their heels. they're certainly less pro active than the federal reserve in the u.s. and i think in europe you're
need a near death experience before you get some concerted policy action. and i might assist that policy action has to be something pretty special to have the di desired effect. it's either coordinated central bank easing or, and i think this is more likely, the ecb in some shape or form finally cave in and become the lender of last resort. >> what does a near death experience look like in terms of asset prices? >> the most obvious is 7% on ten year spain. we could get there in the next couple of days and that will coincide with italy i'm sure becoming a much better focus.
history is littered with these examples of how -- lehman brothers 2008, dot combust in 2001. these things are get out of hand very quickly. so i think the first level you you need to look at is 7% on ten year spain. >> all right, we'll leave it there for the moment. greece's largest lender has reported a 570 million euro loss in the first quarter. provisions for bad loans rose 47% year on year. they used a deferred tax asset. provisions for bad loans there climbed by 78%. so latest opinion polls
meanwhile suggesting the conservative new democracy party currently tied with syriza ahead of the june 17th election. as you can see there. julia chatterley is in athens following all of this for us. we've seen how the leadership change between new democracy and syriza can effect risk on risk off sentiment. should investors expect new democracy to nose it out, to come out ahead here? >> one minute it's one way and one minute the other. and the point is it's quite interesting if you look at who commissions these polls. they do tend to lean toward the newspaper doing the commissioning. but bear that in mind. but i can't reiterate enough in a there's barely any margin between the two and people say they do ultimately want a coalition and the consistent
point is when looking at company a lilt of between zirks and seven parties, one of the questions was which would be the best prime minister for this country. just over 30% of the people that polled said none of the ones available. and actually new democracy and pasok leaders all voted quuldly and i think that underlines this election is wide open. people don't know who the best option is. we just have to hope the best part i wins that will allow greece to remain in the eurozone. >> are you saying the poll is from a more con seven difference publication so we shouldn't take it at face value? >> it was actually the one yesterday that came out that put s syriza at 3 portion.
30%. the one that had an impact on the markets coming from someone that you have to be a little bit cautious. >> 7:3 advancers outpacing decliners. cac down 2.25. today up a third. the ibex after hitting fresh nine year lows up. it's really the bond marketing driving will. to recap where we is an, ten year bund yelled 1.289%. ten year gilts 1.68%. ten year treasures just higher.
and spain 6.61%, again, just remind you where we went to. we got to around 5.67 -- sorry, 6.67 as far as that. but the spread. currently markets quick reminder. euro-dollar getting down to 1.2330 somewhere in the last 12 hours. aussie dollar hit a fresh record low. sterling-dollar pretty steady at 1.25. we've had the biggest selloff in nymex in a month. right now bouncing off the low. brent biggest for two years. 1.0394. big falls, wasn't so long ago we were at 125.
spot gold, as well. that's where we stand on those markets. what about the asian session? tracey is with us from singapore. >> this has been the worst performing month for many markets in the region. note that the hong kong market has lost nearly 12% of its value this month alone. closing out worst monthly fall in over two years. and south korea's kospi finished just below the break even point as investors keep a nervous eye on the banking system. the 200 moved about half a% lower, the index down nearly 8% in may and marking the worst
monthly performance in two years, as well. and fourth quarter not a pretty picture overall, but we should breathe a sigh of relief as the month of may is finally over. >> if you want to join conversation here on "worldwide exchange," how low do you think the u.s. ten year can go? firstname.lastname@example.org, @cnbcwex, @ kelly_evans, or @rosswestgate. >> still to come, the world has its eyes on east asia, but does the region have what it takes to help stabilize slowing global growth? more from bangkok. rom bangkok.
details of course will tell us more about what's driving that. at the same time that we're looking at spain, though, ten year bond yields in france have now hit new record lows. will this according to trade web. so note let up yet in the flight to safety move. >> the the world economic forum in east asia kicks off bangkok today. government leaders will get their say on topics from investment opportunities to global competition. sri is on the ground with more. >> yes, one of the big themes here at this world economic forum summit is rebalancing the southeast asian economies towards more sustainable it domestic demand. that will make growth overall more robust and these economies therefore will be less dependent
on the very sub uhe gated to the crisis. indonesia is well on the way towards that transition and to talk more about that, the minister for tourism and the greater economy is here with me. thank you very much for joining us. first of all, tourism, how is your entry holding up given the headwinds and fewer arrivals coming from the eurozone? >> it's been resilient. still grows 2% to 4%. and on top of that, what's happening is that tourism inbound from asia like china, korea, they're growing at 20% to 30%. so that's offset any slow down. so it first quarter of this year, tourism is 11%. which is double the gleeb al growth at 5%.
>> that's interesting. so china's arrivals are holding up fairly solidly. >> yeah, it's growing like 30% in our case. and it's generally like that elsewhere. >> what does the future hold for in-dough need i can'tnd at broader region? delegates are debating a single visa scheme. if about it is adopted, how much of a shot in the arm could that give not only your country, but the broader tourism industry? >> will this was proposed last year at the summit. a and we'd like 20 to a study. hopefully that will made as see
as see ann much more attractive and give a boost to tourism. >> let's talk about the creative economy. what does indonesia have to offer and in terms of concrete deliverables, to what degree could the creative economy help grow the broader economy. >> creative economy, we estimate contributes about 7.6% to gdp and it employs young people. and also they're the ones demanding the film, the music, as well as the fashion, the handy crafts. so we think will this is a next wave of competitive advantage for indonesia. and whether it's in film or music or fashion, we'll try to
develop a domestic genre which will be a big hit and brand it and hopefully take it globally. >> it's a difficult balancing act, though, is it not. in order to have a vibrant creative economy, you need freedom of expression. now, i'm not a lady gaga fan. let me put that on the record. but banning her from performing if you can call it that in indonesia does not set the right tone if you want to develop a creative economy if n. your economy, does it? >> first of all, we didn't ban her from performing. i just want to emphasize that we believe in the freedom of cultural expression. but all performing artists including lady gaga and any other foreign or domestic, there are procedures to follow and we always request that they look at
the local culture and make sure it's not inconsistent. so we will continue to allow freedom of expression so creativity will be unleashed. we believe this is the wave of competitive advantage that will grow the next level. >> i think i've just upset legions of lady gaga fans across the world by calling into question her performance isn't a performance. anyway, we'll leave that by the by. thank you very much indeed for joining us. ross, i hope you're not a lady gaga fan. >> actually, sri, unlike you, i have been quite interested in some of her concerts. >> i'm a fan. >> aah. then i will go into the dog house then. >> no, no, that's the whole -- we have the freedom, sri, to
disagree and like different things. i think that's okay. >> agree to disagree. >> that's a good thing. thanks, we'll catch you you later. plenty more to come from bangkok. >> james gordon has told employee that the investment bank acted 100% within the rules. he admitted the decline in facebook stock was disappoint g disappointing, but said judge over 12 months. stay tuned because maria will have the first interview with james gorman sense the facebook float. that's at 22. chlt 50 cet. or for you, kelly, 4:00 p.m. eastern time. >> that's right, i still set my watch to eastern time. i don't actually wear a watch, but i do still think that way. it's let confusing to me than the 16:50, military time over here. i'm always in the wrong place at
the wrong time. kayak.com is delaying it ipo. reports say the travel web side didn't begin it road show as planned this week. a review of facebook's ipo hasn't found evidence any rules were violated and the botched offering was the result of a technical failure at the naz tack. james gorman as mentioned will be on u.s. closing bell at 4:00 p.m. eastern with maria. >> just gives you -- just in case you didn't hear that. watch it. >> risk aversion is causing a growing list of companies to rethink their ipo ambitions in asia. let's get back to tracey. >> london based graph oig day monds has pulled its ipo just
one day before it was slated to price the deal. market watchers saw it as a high profile test. it's become the largest ipo to be withdrawn so far this year. but if day nonds are failing on attract investment, what about palm oil? the world's third largest palm plantation operator is looking to price its $3 billion offering in malaysia. reportedly begun taking share orders today and will decide on the final pricing on june the 13th. if successful, the ipo will be this year's second biggest worldwide trailing only facebook's massive $16 billion debut. back over to you. >> want to get a quick shot from our guest host.
you're a forex guy, but just as a -- you've likened it back to 2008 levels and things could move lower. >> absolutely. and if you look at many risk bellwethers, the broad based dollar index being one example about, euro-yen and currency space, that's another risk bellwether. we are at extreme level, but you have to use the previous years of crises going back to when britain got kicked out of the erm. these are extreme times. so traditional indicators really aren't a what to go by right now. i feel sorry for the companies
floating because it coopera ini at the worst time. still to come, european football market 15 billion pounds. so who is making all the money? we'll find out. l find out. [ male announcer ] this is genco services -- mcallen, texas. in here, heavy rental equipment in the middle of nowhere, is always headed somewhere. to give it a sense of direction, at&t created a mobile asset solution to protect and track everything. so every piece of equipment knows where it is, how it's doing or where it goes next. ♪ this is the bell on the cat. [ male announcer ] it's a network of possibilities -- helping you do what you do... even better. ♪
markets he said the month in dramatic fashion with record dow moves across asset classes. >> mario draghi says the ecb will deeply liquidity lines for solvent banks and calls for centralized regulation of the financial industry to restore credibility. >> close monitoring and systemic assessment of the nature of the adjustment by badges as well as within the financial system more broadly is crucial. >> and more evidence of a two speed europe. jobs rate in germany falls in may. there are signs that growth in ht job market is losing steam. sdl plus i said i can't's gdp growth slumps more than expected to a nine year low. policy u turns and sagging currency spelling economic trouble.
let's take a quick check on the markets. we've got green arrows across the board after a sharp down ward move yesterday. the ftse 100 about 0.8% of a%. ibex bouncing back. c 40 up about 0.6%. >> just bounced off record lows. ten year bund 1.28%. it was down below 1.27. ten year spanish yields higher, but they got even higher than that. just worth pointing out the dutch yield, though, is falling down to a record low of 1.67%. people putting money in core yields and dutch yields
benefitting at the moment. >> euro-dollar of course in focus again. there we see a green arrow, back above 1.24 to 1.2412. euro sterling hovering right at the that 80 mark. dollar-yen 78.84. and aussie dollar is a little bit firmer this morning, too. >> meanwhile the number of people looking for work in france has risen to the highest level in over 13 years. registered hit 2.89 million in april. labor ministry has warned that unemployment could increase further. >> and in stark one con traes to the rest of europe, the unemployment rate has fallen in may. however, the labor ministry warns that there are signs in the job market is losing steam. patricia has more. what are the signs? >> the dynamics of the german labor market is starting to slow
down quite substantially. so we have a jobless rate much better than expected at 6.7 and that is an improvement month on month, but if you look at the jobless number expect will be the fall in about 5,000. that number came in level. there are some details picked up saying that we have actually seen the lisaest improvement in may since 2002, pointing also of the recruitment plans in germany have been scaled back and turn the negative for the first time since 2010. and these are all indications that, yes, they are still strong. we have more and more domestic demand. retail sale as bit of a mixed picture. everybody talking about it better than expected yes on a
month to month basis. however on a uto basis, the number says we're actually down 8% worse than expected and then put that into context of it being a very volatile number and sentiment trading lower as of late. >> patricia, thanks. and speaking of retail sales, hong kong figures not typically a huge market mover, but you you know when people are looking for an excuse to sale, something like seeing those sales come in at 11% year on year versus expectation is going to create a few more jitters. >> mario monty and eu president currently speaking in brussels. we'll keep our eyes on any comments coming out of that.
>> also getting comments from ecb saying he e. favors as redetermine shop fund. this is one to watch, this idea of a redemption fund. a step towards common europe bond. but european central bank members speaking in support. outgoing policy maker reinforced that any exit by the eurozone member would have devastating consequences both for the uk and for the u.s. >> and the bank of england officials also told cnbc that further qe may not boost growth. spencer dow says it's important to look at more than just the demand side of the equation. >> when we see the weakness of growth,ic we will need to ask ourselves what does that reflect. is it purely weakness in demand or supply, as well.
is there more qe if we were to see the growth come out a lot weaker than expected. may be part of the answer, but only part. when you look at the weakness of growth in the round and 2340d immediately as a demand problem that can be solved by doing more quantitative easing. >> stewart, if a major policy maker says i don't think qe will do anything which downgrades the risk obviously for more qe, you would expect a pounce back in sterling. i wonder whether we're at a stage where talk of qe is having far less impact than it might otherwise have. >> quite possibly. i think one question mark for me is people in the uk always talk about the problems that europe and how it will affect uk growth. the uk has always been a small
beneficiary of some ways in the problems in europe. it is able to fund itself with record low yields. the uk treasury can borrow money very cheaply for ten years because of the safe haven fly into uk assets. you've got 3% inflation. if you get a run on the currency, that inflation problem gets a lot worse. at the moment, sterling seen as a safe haven currency, so i'm wondering if the staff at the bank of england will be worried if you you attitudely get a spike in gilt yields or sharp move weaker in sterling. >> the dollar index back to levels since september 2010. how much further account dollar go. >> like i said before, the only
real benchmark is 2008. before that, 2001. these are the last times where we really did have severe crisis in the market. and the dollar index was this overbought in the september time 2008. and is still rallied after that. so i think you could easily see another 3% to 5% rally in the month of june. >> you you like your football, don't you, stewart? >> absolutely. big hampton fan. >> stick around, you might want to ask a question of our next guest before the european football market sx bands expand the economic turmoil across the region. many clubs still have some ways to go to achieve a sustainable balance between revenues and
costs. thanks for joining us. how do the revenues at the premier league compare to other leagues? >> if you look at the premier league, not only as you say talked about growth, revenues grew 12% in the year that we looked at 2010/11. about 40% bigger than its nearest competitor which is the league in germany. so to give you that scale, it generates revenue a lot better than -- >> but how much of that revenue has gone on wages. >> wages went up by about 14%. >> just unsustainable. >> absolutely. we're seeing a shrink in operating margins.
about 3%. >> so that indicates where the uk inflation is coming from, it's all football. >> it's all soccer. >> thank you. can i ask actually, as soccer becomes more popular in the u.s. and as football becomes more popular among americans who love the european teams, is there going to be a clash of names, is is it ultimately going to have to be one or 9 the other? >> it's always going to be football. >> what are the potential revenue streams we know how clubs are doing an awful lot in asia. but if we get the ground root support, how are and you are pea an clubs tapping in to that? >> you're seeing in terms of if you take the growth in the premier league revenues has been fueled by overseas broadcasting contracts which has taken the premier league to new markets.
i think in terms of then the fan base if you like, a lot more clubs are now looking at taking their teams over to the states on things like preseason tours. and that's not only english clubs, but also mainland europe, as well. >> will you take a question from a south hampton fan? >> absolutely. >> stewart. >> how vulnerable do you think the english premier league is to another league, let's say the spanish league, surely they're looking at the success of the premier league in terms of it revenues thanks to its slick marketing saying i'd like a piece of that and try to outdo them. >> yeah, in terms of if you look at things like if you take a match day, for instance, where again english premier league clubs are 50% bigger than their european counter parts, i think
what you're seeing is that those european leagues are looking at infrastructure investment to try to make ground on their english competitors. but there's such a competent i have advantage in terms of revenue generation at the moment that there's a long way to go for those european leagues to catch up. >> financial father play comes in, does that have an edge pact on the chelseas, the rich owned -- >> the objectives of financial fair play is to balance out revenues and costs. first season is this financial year now. so we hopefully will see clubs reducing that expenditure side of the equation. still to come, he said i can't's growth slips in the fourth quarter. can the third largest economy turn itself around? that next.
email@example.com, @cnbcwex, @ kelly_evans or @rosswestgate. a record low benchmark rate 8.75%. the unanimous move to cut the key rate by half a percentage point was in line with expectations and is the seventh cut since august 2011. brazil's president has made cutting rate as priority of her administration's first term. we want to get thoughts from stewart on that. your comments this morning have definitely indicated you see parallels between now and 2008. your view is we're going through a similar kind of event? >> i think we're on the
precipice. when you start losing confidence in sovereign's abilities to fund themselves, things can deteriorate very quickly. and i see a lot of parallels between now and 2008 absolutely. the market needs policymakers to be decisive and effective and i think that won't happen up the market deteriorates further, whether that's spanish borrowing costs being above 7% or whatever the near death experience may be. i think june is a month where you you sea assets traed lower. >> are we going to get intervention on dollar-yen if it goes a lot lower? >> there were funny comments this is week from officials in japan saying we're not going to get anymore monetary stimulus and dollar-yen trading almost back to the level where we first had the announcement of the inflation goal back in february.
in this kind of environment, you cannot bed against the yesh and it's my guess the dollar kren will make fresh lows in the coming weeks. >> stewart, appreciate your time. >> and india's annual economic growth has contracted to a nine year low. a slowdown in industrial output and contributed to the loweren expected growth in the fourth quarter. joining us for more, head of markets at citigroup. thanks very much in-keyed for joining us. not only have we got that growth number, but the rupee hitting a fresh record low, as well. what policy pounce will they come up with in india? >> well, the policymakers are in a bit of a tough spot because growth has slowed down and they feel they have limited room to
cut rates because inflation is still high. but growth is still something they need to emphasize. the rupee is also a victim of slow down in in-flows as well as slow down in growth. we need to make sure growth is strong. they were concerned about inflation last year and did a series of hikes. they'll probably need to get back on the cutting front. i know inflation hawks think that this will only stir up inflation further, but the issue in independent kra is of a different variety. a lot of supply led issues and none of knows will respond to the domestic repo rate. also a lot of important inflation because of global
prices. so i think we're in a spot where we need to get back to growth that will bring the equity markets a little more excited and more enflows. which will also help the rupee. a bit of a gamble, but we have to take some sort of a gamble. >> your view is despite the concerns, the sensex will end the year at somewhere in the range of 18,400. that's something like a 13% up side from these levels. is that still your view? >> that is our house strategist view, yes, that's correct. >> so square that with some of the structural challenges you mentioned. >> that's based on the view that valuations are getting a lot more attractive, sentiment is very bad right now, but this is how some of these developments happen here.
policy mak policymakers have that are back sides against the wall. so they're concerned and doing a step of measures to control the rupee. they will probably get back on the rate cutting front again and on the fiscal side, they have made commitments to capping subsidies to 2% of gdp. they have led petrol prices higher. they will probably do something on diesel. so i think some collective actions are taking place and valuations are not bad at about 12% to 12.5% in forward pe. so our strategists believe these fundamentals will come to the fore. and we might get back to 18,400. >> how much is the indian government shot itself in the foot with different and controversial policy mistakes?
>> frankly to a large extent. we can only blame greece so much. a lot of our problems in a sense of our own make and i think a lot of sections of the government also recognize that now. so we're in a operatiplace wher lack of political leadership as well as the tax as well as no phase-in period stunned the global investor community. they don't have a full majority, so they have to play to the coalition. but we had a cabinet minister speak at our conference yesterday and he recognized these facts. so i think there's no question a lot of the problems are of our
own making. but one has to stay optimistic and say that the policymakers are realizing hair mistakes and will create them. >> all right. thanks for your thoughts on i said i can't. we want to quickly give and you check now of the agenda in asia tomorrow. china releases its official pm chlt data. may's numbers widely expected to ease and prompt further calls for stimulus. japan and china will directly trade their currencies and more coverage from the world economic forum on east asia in bangkok. monti sees his country hugely threatened and he's far from com place apt about italy's progress. nearly 1 oors before investors approved their pay package for top execs.
the chairman also asked to be allowed to continue in his job without interference. the bank 8 #% owned by the taxpayer has vowed to resume dividend payments as soon as possible. >> jpmorgan spinning off a special investments group. the move is part of an effort to restructure the unit that has cost the bank at least $2 billion in tradings losses. it's being moved to the bank's corporate division. in frankfurt trading overnight, jpmorgan up about half a%. kind 1/2 line with the broader market this morning. >> u.s. airways may team up on a bid for amr. amr filed for bankruptcy in november. reports say the partnership could allow to pay some of amr's
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well come to "worldwide exchange." headlines from around the world. markets end the month in dramatic fashion with record downward moves across asset classes. >> u.s. investors can't wait for the calendar to turn over to june. stocks set for the worst may since 2010. >> and the ecb will deeply liquidity lines and calls for centralization to restore credibility. >> close monitoring and systemic assessment of the visibility and nature of the adjustment by banks as well as within the financial system more broadly is crucial.
>> plus the jobless rate in germany fall in may, but the labor ministry warns there are signs the job market is losing steam. retail sales in greece down 16% after revised 12.9% drop in february. this is the inflation number. cpi estimate at 2.4%. not a huge number. no one's really concerned about inflation. many of the peripheral countries are in a deflationary track. let's bring you up to speed on the markets. >> take a quick look at u.s. futures if you're just joining us this morning. we do have green across the board. we are capable of having a rebound somewhere. dow jones would be opening up
about 20, 30 points higher. nasdaq by 4 or 5, s&p 500 a couple points higher. take a look across the world. global 300 has been slowly adding to the gains throughout the morning, but still not a huge move. only up about 0.1%. and this follows some real weakness in asia and across the globe frankly. closer look at what's happening across europe, in paris, cac 40 up about 0.6%. and in spain we're seeing here a bit of a buns back. up 0.8%. the question of course is whether this can persist. we've seen it start and then fade out so many times. >> of course much driven by what's going on with the bond markets. we've hit fresh record lows across a number of bond yields
yesterday. the ten year bond yield at the moment, 1.28%. we hit zero on that ten year gilt yields at the moment 1.67, but we got down to around 1.63. ten year treasuries 1.6458. during the u.s. session, we actually went below 1.62%. and then what drives those is what happens to these. spanish ten year debt also in the last 24 hours we hit 6.67%, at the moment just below that at 6.57. spreads between bunds and spanish debt again blowing out to fresh record wides. we hit 543 basis points. in the same way we're seeing pressure on yields, same on the currency markets. dollar index hit it best levels since 2010. euro dollar just bouncing back
to over 1.24 after hitting yesterday, we hit, what, 1.2358. dollar-yen 78.87. aussie dollar bounced off six month lows. sterling-dollar bouncing back to above 1.53. we've seen a lot of position liquidation. worst month for brent in two years and the worst month for the nymex since 2008. right now trading slightly higher just back onn an 88 handle. >> so how do you make money? good question. here's what some of our experts have been telling us this morning. >> i personally don't position that it will fall as far as 85. in fact i think there's a reasonable chance and that they won't cut interest rates next week. if that happens, it could
bounce. >> operations are largely around the world, but it's a leader in the food ingredients space. and share price up about 60%. market's down 40. its grown profits by 30% over that period. >> it's about capital preservation. if the only asset to own is earning you 1.6% in yield, then so be it. capital preservation i think now is definitely at the forefront of investors' minds. >> stewart wasn't the most bullish person in the world, but perhaps a dose of realism here. >> talking about we're not xwogs to get any action up we get a heightened sense of fear.
so joining us now is head of investment strategy at brooks mb doned ald. nice to see you. we've highlighted where we've been with asset prices. give us your take of how much more position liquidation are we going to have and what's going to be the cross of that. >> and the focus is on spain at the moment. the focus is working capital. a lack of working capital could cause a catastrophe because they're talking about banks having to raise about 30 built i don't know you'billion euros, a we saw depositors withdraw 30 in the month along. as mervyn king once said, it may not be rational to start a run on banks, buts it is practical to actually participate in one.
>> and when you look and hear some of the comments from our guests this morning saying at this point the ten year u.s. treasury is the only place you want to be, do you agree? >> i guess it depends on your i'm horizon. i would warn against knee jerk reactions. for example our house view is actually we're getting out of gilts because the inflation building up means there's only risk to the down side. and instead we're saying use pull backs to buy and maintain exposure into holdings that you feel comfortable with over the longer term. >> you think uk inflation is picking up, because waef had others say we'll see uk inflation roll over. >> may roll over in a shorter term, but water looking longer term time horizon.
>> and just coming back to sort of the eurozone crisis because it is driving everything at the moment particularly with spain, what base case scenario -- no one really knows, but what base case scenario are you investing on? >> it's kind of a wait and se. a looking for reform, looking for consolidation. consolidation is the key and also support for the banks. for example, people are talking about euro bonds, but you need fiscal integration first. you knee to share your budgets to be able to share those debt burdens. >> monti says they're far from
complace complacent, but italy is still threatened by the huge poenlts of contagion, that sooner or later, there will be a backlash against fiscal discipline. i think we're seeing that already. germany must act quickly monti says the eu should consider a deposit guarantee and a bank recap plan through the efsf. speaking of base views, do you expect there to be these kind of continued half measures towards fiscal integration? >> and what do they mean by growth. there is a swing from austerity to growth, but france's opinion on what growth is vastly different from what germany perceives which is focus on reform. so again, we're hearing a lot of rhetoric, but we need to focus on how do we practically position ourselves. >> let's get a quick check of the other top stories. french april jobless claims at their highest since september
1999, but the jobless rate in germany fall in may. >> more evidence of two speed europe. >> and i wonder if germany benefitting from a really weak currency, low borrowing costs. >> vw putting up wages by 4%. brazil cut its benchmark interest rate to a record low of 8.5%. >> only in brazil is that a record low. but it does suggest there is weakness across emerging markets. while it may improve ratings, you have to wonder where it leaves the company down the road. >> also worried about the argentinean assets, as well. if there's another sequestration, you'll worry that it might be theirs. and graff diamonds pulled the plug on its ipo, the fourth to
be canceled this week. >> it has been a very weak period for asian ipos this year and they're supposed to be the hot market. the retail consumer there just isn't buying. >> all right. let's move on to other stories. general motors is choosing football over football. the automaker signed a five year deal to make chevrolet the official sponsor car. they say it's unrelated to pulling its ads from facebook. as far as gm's stock was concerned, that was up in frankfurt. if they become the sponsor, does that mean the football players have to drive chevrolets a opposed to mferraris or anythin else. >> if you want to join the
conversation, firstname.lastname@example.org, @cnbcwex, at kelly underscore evans or @rosswestgate. you can follow us of cour course @rosswestgate. and let's remind you what's on the agenda in the united states. the may adp unemployment report out. forecast to call for an increase of 150,000 in private sector payrolls. weekly jobless claims due at 8:30 a.m., expected to remain unchanged. also growth expected to be revised down from 2.2 to 1.9%. at 10:00, the may chicago pmi is out. cleveland fed president speaks at an nab conference 8:00 a.m. eastern. and u.s. retailers reporting may same store sales despite any boost for more's day. total sales forecast to rise just 2%.
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>> drag fwi cahi calls for a cl vision in the eurozone. >> and yields remain comfortably high. >> world economic forum is under way. leaders from around the world are weighing in on investment opportunities. scht ri, while they talk about those issue, i wonder how much have they been put off by developments over here. >> very cognizant of that situation and that's why there's a big drive to try to rebalance the as seconomies in southeast n and wean them away from export reliance. yesterday was a highlight because on the corporate side, we caught up with simon henry of
shell, europe's biggest energy firm of course. so i started by asking him during that interview how shell was coping given the continued crisis in the eurozone. and he said something very interesting about credit conditions, that he was watching very carefully amongst their customers and also suppliers. he also commented to a certain degree on the energy bit. >> there are clearly hurdles to all our investments. and while it would be important is only about 1% of our market cap. it would be very significant, it's a big project, and any buyer is going to have to follow on with more investment. but i really can't say anymore what our position would be. >> you said you're concerned about the lack of credit amongst your customers. have there been any cases of
default? >> in terms of our customers, we've been doing pretty well in terms of managing that particular exposure. so we work closely, a lot of our customers are long term customers, airline, shipping company, trucking companies. and so far we've not seen any major default p. suppliers is more difficult to test because we don't have that payment record that you have with customers. >> so the supply side, how challenging are the economics and geology behind extracting resources? >> it's a question we're it in the middle of trying to answer. some of the estimates of shale gas china are a little premature. there are clearly geological opportunities. we've been working with partners in china, primarily petrhokoukr
china. and it takes 12 to 18 months in each prospect to understand just how economic the production is going to be. so it is in-keydeed a lot of ga. so we need to drill and complete the wells, the fracking activity, and we need to produce. >> can we turn to the geopolitics of oil and gas. some commentators have said the middle east issues involving iran and its threat to block and i had the strait of hormuz could worsen to the point where they're comparable to the tanker wars we saw in the early '80s. >> the question then would be for how long would that situation maintain. as of today, there's no shortage of supply. the world's stop levels globally are at their highest level for five years. so no shortage of supply.
the natural supply would bring prices down today if anything. >> the chief financial officer of shell. so a lot of developments, a lot of challenges and news coming out of shell with regards to gas and shale gas formations, continuing to do a lot of work there in north africa. but also trying to gauge prospect in china. we are hearing reserves could be larger than that of the u.s., but still trying to get the real understanding of how big those actual reserves are. a lot of -- already sunk about $4 billion into developing the arctic alaska region offshore. a lot of exciting developments. >> sri, good stuff. thank you. >> and we want to bring in a
quick comment from jemma. we've seen a drop in prices. does that in your view ultimately help support any particular asset classes here? >> our view is they'll remain volatility. we see greater up side potential as spot prices have rallied more strongly. but we're concerned about inflation hitting the bottom lean and squeezing margins. so we remain quite selective. >> and so that leaves who looking better, who looking worse here? >> just means within the sector, there are certain companies that will it v. a bit more protection and others who won't. and it's important to focus on that because with greater inflation -- they have better pricing power, et cetera. >> okay. more to come from you. also still to come, things not looking good for the ipo market. graff shelved plans for a billion dollar listing in hong kong.
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>> kayak.com is delaying it flotation. they didn't begin their road show as planned. the first big deal since facebook. could have been a big test to the ipo market. morgan stanley also the lead underwriter. and a review facebook's ipo hasn't found any evidence that rules were violated the botched offering was a result of a technical failure at nasdaq. james gorman will be on cnbc at 4:00 p.m. eastern. and graff reportedly received orders for just half it half get. the largest ipo to be pulled this year. hong kong has seen its deal
value shrink 85% so far this year. for more, we turn to jemm. . she's been with us this hour. >> it tells you a lot about demand. demand is being driven by fear. so fear of missing out and fear of the cli pot. so because of fear, ip chlt ons are starting to be pulled. >> hong kong in particular has been a weak spot. you'd think that it was taking over the world in tirms of t ipo world. >> the focus is on decoupling. whenever anybody talks about opportunities in the far east, they look at it on an isolated basis. but the economy hasn't yet
decoupled, but still relies very much on europe. sentiment is crucial going forward. >> mario monti said the ecb should consider within its mandate euro era financial stability and k3 expanded would only provide alibi not to exceed growth policies. but clearly saying they should do more within their mandate of financial stability. we're in a game of chicken and standoff. who blinks first? >> and also their mandate originally you have to remember was for price stability. bringing down and maintaining a certain level of inflation. so the concern is that that will restrict them and the amount of leapting that they do goes directly against this.
they were targeting smaller companies and a lot of the smaller banks did take up the loans. what we've seen is lending still continuing to contract. >> i know you look longer term three to five years, but about you had to position with all the uncertainty, how do you do? >> we're holding on to our positions. we're not looking to add any equity. cash holdings which are doing nothing to alternatives to be able to hedge some of the inflation risk we see over the longer term. but we're backs opportunistically. p. >> may help explain why you have london property managers talking about its real estate benefitting from a flight to safety move as people look for a safer place to staff their money. thanks for joining us. still to come, cgi and
markets end the month in dramatic fashion with record downward moves and ibex is the biggest loser. u.s. investors can't wait for the calendar to turn over to june. stocks set for the worst may since 2010. >> mario draghi says the ecb will deeply liquidity lines for solvent banks and calls for centralized regulation of the financial industry to restore credibility. >> close monitoring and systemic assessment of the visibility and nature of the adjustment by banks as well as within the financial system more broadly is crucial. we're still positioned to open to the up side in the green, the dow would be up in the range of 25 points, nasdaq by 3, s&p 500 again about 3 or 4
points this morning. let's take a look at the tone from global markets. ftse global 300 was trading up about 0.1%. and as you can see, the ftse 100 up 0.7%. cac 40 0.6%. a little bit of a give back after an ugly session overnight. >> the latest opinion polls from greece suggest conservative new democracy party currently side with syriza ahead of the june 17th election. this also spain deputy prime minister traveling to washington today to hold talks with timothy geithner and christine lagarde. this follows a day of discussions between madrid's economics minister and his better man german counterpart on the pressures facing the spanish market. >> against that backdrop, we're joined now from washington by
professor of economics at the nyu stern school of business. he says it would be a disaster for greece to leave the euro. nick, it also seems a disaster for spain to leave, but at this point, we have to talk about beyond greece, account you'can to exist in its form? >> we need to create the right institutions in europe and then there will be state. without institutions, it's very hard and everything falls on to the ecb which is practically speaking the only existing institution that still functions there. >> you've worked with some of these countries, ireland, portugal. it's one thing to advise a country. how do you advise a region to create institutions that can try and stem a crisis like this and what if you were in charge right now, what would you be doing? >> first of all, they need the
unification of the banks. i think they realize that into years later, they really do need it. they also need more centralized system, a centralized system of taxation, a way to have tighter budgets across the region. and the way frankly to be able to transfer money. in the united states, there are reeblg o regions of the country that couldn't have survived without help from richer regionses of the country. so something similar needs to happen in europe for unification. but right now, the local politicians in every country are playing to the voters and they don't want to spend a penny more than they need to. >> they never had a referendum on whether they want to join the euro. but this point about they can't agree, it appears the european
commission complaint especialan. yesterday a report says we can envision a bailout fund to bail out banks directly. that was the european commission report. and then comes out that's not an available option. i don't hold much hope for politicians agreeing if even the commissioners can't agree. >> well, you have to keep in mind this is the first major crisis of the european union. they don't have institutions like the fed which have dealt with a number of crisis before. so they are trying to set up institutions at the same time as they're in the middle of the very big crisis and at the same time i do not see politicians of great stature here. i see people who are just catering to the various local interests. left party is advocating a disastrous course, but in the seam way, in many european
countries, the politicians are not looking out for the interests of the whole of the european union. >> politicians may be pandering as per usual, but i worry if in the absence of them being taken seriously or steer their countries, if we're seeing more economists running countries or just coming to the fore speaking of what should be done in the short term to stem financial market, as ross mentioned, this question of a euro monitoring union was never put to voters in the first place. should we be considered that democracy is getting short drift here? >> i think we're in the other extreme. politicians are carrying only for very, very short interests of the parties and the nations instead of the whole union. so i think we're going in the wrong direction. at least politicians would look -- i'm sorry, at least
economists would look in the longer run and would try to find solutions that would be for the best interests of the whole union rather than the politicians. >> doesn't the question boil down to whether europeans want to be in effectively a political union in which they are greek or german second and european first and isn't the that a question that can ultimately really only be put to people to decide? >> well, i think that if the question was put today to the european people in different nations, we would get an overwhelming majority for more centralization. but this question has pefr benen put to the people and the politicians do not agree among themselves. and when it comes down to strengthening institutions there have been attempts to strengthen institutions. just at the same time with specific policies attached. and that doesn't really make
sense. like the financial compact that was pushed last year by germany, instead of being a general construct, it had a specific austerity policy attached to it. it doesn't make accepts to have a constitution together with a policy attached. they need to go through more general rules over constitutional nature and start with that. p. >> nick, former adviser to countries going through these issues. appreciate your thoughts this morning. shares in logica have jumped. shareholders would receive 105 pence per share. a 54% jump on the share price from yesterday. we're joined by michael roche. thanks for joining us.
is this opportunistic? >> i don't think so. we had the right acquisition, right price, right time. we think logica fits all three. an excellent bid fors us. 95% of our revenue in is in north america. our customers are going global. we need to follow them and this will gives us that platform. >> what will your revenue break down owing look like after the acquisition? >> about 40% in north america, 60% in europe. and right now as i mentioned, we're essentially 95% coming from north america. >> what's interesting is that investors are saying to people you want to invest in companies with no exposure to anything but the u.s., so why are you going from being one of those companies to one with more exposure to europe? >> if you look at the european market, it's 30% of the world's technology spent represents 2 billion euros a year. we believe governments and business can do very little without information technology. so they'll it continue to invest. information technology is part of the solution, not part of the
problem. and so we think it's a great time to enter europe. >> it looks like a good price. are you prepared for someone else to come in and make a counteroff counteroffer. >> sure we're ready. we're very competitive entrepreneurial company. we've done 70 acquisitions over 25 years. we're well positioned to address any other offers that may come on the table. >> this is an agreed deal. just needs to be put to shareholders. what's the time frame? >> we think that the board will probably hold a shareholder meeting in the july time frame and the transaction will wind up in september. >> among other things, they make key pads and mouses. what's the key bit about their business, though? those are things that you might
get made less and less of. >> you're acquiring very talented people here who know both business and information technology. they have long term relateses with blue chip customers. and they have proximity to the clients. those are the attributes that we look for. over time we like to evolve those relationships in to recurring revenue. we have a backlog on a $4 billion company. we have a signed backlog of $13 billion. we'd like to expand that type of backlog in recurring revenue to the combined company. >> all right. thank you so much for joining us this morning. >> it's a pleasure. if people see the right price and they have the cash, doesn't matter what the market is doing. >> that's right. coming up, our next guest says the euro short trade is way too crowded at the moment.
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open an account today at optionsxpress.com. 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. people already reacting with their thoughts after our chat with the professor about what would happen if a vote about a united estates s
would happen if a vote about a united estates tates of europe put to the people. do you agree, disagree. @kelly_evans or @rosswestgate. >> june starts tomorrow and there will be a lot of people looking forward to june. bear in mind some of the asset price moves that we've seen in this month, let's recap what's going on, first of all, all the focus has on the ibex. we know we've been down at nine year lows. this is the performance so far on the month. down 12%. and of course the ibex has been actually up a little bit today. but it's had seven consecutive months as well of negative declines. back to levels we vice president se haven't seen since the end of the did dot combust. will lower energy prices actually help consumers out.
nymex down merely 16% over the month of may. and with all of those declines of course has been big spike up in volatility. the vix up 47%. no wonder investors deciding return on cash is more important. >> and it goes back a week or so ago where he said only if the vix moves decidedly below 20 will he get more optimistic on equities. these are your headlines this morning. markets end the month in dramatic fashion with record downward moves across asset classes. ecb president mario draghi calls for a clearer vision for the eurozone and centralized regulation for bank. and talks with gitdneithner and lagarde as yields in spain
remain high. and a warning unseen risks would be hard to insulate the economy if there's a disorganized failure in europe. he still doesn't see the possibility of further fed easing. they're both fmoc voters next year. and let's recap where we stand with u.s. t-bills. the yield right now 1.65%. we did actually get to 1.61 handle on that during the asian session. the dollar index is at two year highs.
>> everybody has their playbook out where you want to buy dollars and sell everything else. everything is staring to the abyss again and preparing for that. and that's why the german two year is yielding zero and we're seeing this flight from every single risk asset which tellsche many we won't end up seeing that '08 event. >> what's interesting is we have been highly critical of the federal reserve, with you over here in europe, it looks as though the fed, bank of especially fwland, some of the other central banks that have been able to move have supported their economies better than the european central bank. why do you think the ted has still got it wrong? >> well, the fed has decided to
print money. and you can throw money at the problem and at least in the short term temporarily cure it, but unfortunately from a political standpoint, what should be done is not going to be what is done. what should be done is debt write down to the restructurings and we'll see more money printing in europe and possibly in the u.s. and likely more in japan and the uk. >> that would seem to be a view more people have around here which is that they expect some sort of a fudge as ross likes to put it, that policymakers will come up with some sort of a solution to keep this thing going, to keep it together. that may support risk as you're saying in the short term, but this could reemerge as a problem in, what, two year, three years
time? >> money printing is not a solution, just a temporary fix. at shall point the underlying problem of too much debt and too little growth has to be dealt with. but again, politically printing money is the easier decision for these politicians because no one wants to break a promise to their could constituency. >> honestly about what is possible and what's affordable. stick around. we'll get to some of your investment thoughts, as well. and look ahead to the u.s. trading day in a few moments time. 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...
dow jones would open up about 30 points higher, nasdaq by 5, s&p 500 by about 3. this means we're finishing potentially on an okay note to what has been a grim month. the dow jones industrial average has lost 6% on the month. that erases about half gains we saw in the first quarter. nasdaq down to 6.8%. again, if you're facebook, that's not helping the performances of that for the month. s&p 500 also down about 6%. very telling. >> be careful of that particular thumb. how does that compare with how european stocks have done? ftse 100 down nearly 7% for the month. xetra dax up half a percent but now down 6%, so similar performance as. just remind you the ibex down 12% for the month. almost double the losses in spain. accept months we've seen losses
there. and in france, actually france a relative outperformer. 6s across the board for the u.s. indices in the uk and germany, currently down 5.33%. let's get back with peter. what is your strategy bearing what we've seen in may? >> again based on my theme that i know we'll get more money printing from the ecb and bank of japan and likely back of england and the fed, you have to take advantage of this pull back in commodities. precious metals, energy, agriculture, because those will be the things that pop the most. and maybe yesterday's reverse on gold is a sign that investors are beginning on believe that we have no choice but to go down that path again from a political standpoint. so to me those asset classes are a gift here again with central banks likely driving the butt from here on out.
>> we've had a quieter overnight session in europe for once. what events could take the focus off the markets? >> well, we have obviously the debt crisis is that we're dealing with, but then we're also dealing with the company latle ral damage on the global economy. and at least in the u.s., we're going to get important jobs data today and tomorrow. and then we can in a sense quantity guy the impact that the slowdown in asia and what's going on in europe is having on very fragile u.s. economy. >> the impetus is on the just to improve growth. the best house on an increasingly bad block. >> right. relatively speaking about but there's no way that the u.s. will be immune from what's going on overseas. again, because it's not leak the u.s. economy is on firm footing. >> peter, thank you sir for that this morning. >> that's it for "worldwide exchange." "squawk box" is coming up next.
so long, may. you didn't fair so well. dow first losing month since september. and europe certainly not helping matters. worries about spain and greece continue to blag iplaying inves. today's u.s. test, jobs and the consumer. the adp report, jobless claims, gdp, and same store sales. it's thursday, may 31st, 2012. "squawk box" begins right now. welcome to "squawk box." i'm becky quick along with joe kernen and andrew ross sorkin and let's set today's agenda. the bulls will try to end may on a high note, but go