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

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welcome, you are watching "worldwide exchange." >> these are your headlines this morning from around the world. >> equities have been sellingoff across the globe with european indices extending the 2% plus losses. >> this as reports suggest policymakers are working on a new master plan for the european union. george soros warns authorities have three months to save the euro. >> glimmer of hope for spain. the spanish jobless rate falling in may, but on an annual basis, the figure is up still by more than 12%. >> and china central bank chief says they'll continue to invest in europe so long as the block pushes on with reforms to resolve its debt crisis.
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yes, you are watching "worldwide exchange." and just kicking off on a session where we're seeing slightly lighter volumes than usual because of the uk bank holiday taking place. a little bit further red on our market maps. so this is the xetra dax you're looking at. the vast majority of our equities in germany are trading in negative airer to. the same goes for the vast majority of the european markets. i was looking at spain and portugal and they're raiding in positive territory. cac 40 off by a smidgeon. ibex 35 seeing gains on the back of a very dire week. i was doing the late show on friday and we closed off the week on the ibex 35 seeing
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losses in the region of 7% on a weekly basis. but we're seeing buying into the banks in this morning's trade, spanish banks, smi also lower by just around half a percentage point or so. currency are markets, we're all talking about the euro-dollar move last week. we're currently a little higher than 1.24. still slightly lower against the dollar. euro-yen also flat to a little lower. a completely flat cable rate at the moment everybody looking at the bank of england and the ecb this week. a lot of the press becoming a little bit more bearish with regards to the economy and whether or not we could potentially be looking at indications of a cut to come already this week. most people, though, think not. this the bond chart that we have, ten year bund yielding 1.19 coming up a bit. remember we saw it flirting with the 1.14 level last week. the ten year spanish yield down
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a bit, remember this is inverse relationship, so the price of the bond is going up, yield coming down a bit, 6.5%, still a very high level. and the italian yield right around 5.8%. u.s. treasury still being seen by and large as one of the main safe haven trades alongside with gilts and that bund. commodities, huge losses in oil. crude around $82 per barrel now. and we broke through the $100 mark on friday's trade. currently trading at $97 per barrel on brent. so again, lower by right around 1.5%. asian markets, also quite a bit of red coming across our screens. tracey chang joining us out of
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sync singapore. hefty losses. investors dumped equity after the can disappointing u.s. jobs data on the back of a slowing chinese economy and deepening eurozone debt crisis. with the exception of the shanghai comcomposite, many wip out gains for 2012. hang seng index slipped more than 2%. nikkei its worst performance in two decades. and iconic sony stock fell below 1,000 yen pot first time since 1984. four day losing streak by hitting a 2 1/2 week low. australian market broke through the sin psychologically 4,000 mark.
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and as investors fled the equity market, the prices of safer assets reached their highest level in years. take a look at how the jgb is trading right now. government bonds extended dwaynes pushing the five year and ten year benchmark yields to a nine year low. back to you. >> again want to welcome louisa here in for ross. he's on holiday this week. >> i think he saw jubilee weekend as being a p fantastic opportunity to wander off. >> i didn't watch it on the river, but i did watch a lot of it on tv. >> were you you surprised at the amount of people wearing scarves and handbags? terrible weather, too. i feel so bad. all the people who put in so much time and effort and then it rains. >> but everyone in the uk has today off, tomorrow off, the markets here will be closed. but we will continue to bring
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people the latest on the unfolding european sovereign debt crisis. and we're joined for the next hour by our guest host, vice president of wealth management singapore, and patrick, first on you, we've been looking at just these moves in bond yields over the weekend. how much are markets now pushing or pricing for global central bank action here? >> i think after the recent development we see yield declining very sharply on the back of worries about a lot of investors and also probably rising expectation that both the echl cb a bc ecb and federal reserve, as well, will deliver further. >> but if they were to do that -- >> it's already priced in. >> but about if they were to do that, would they do in terms of like a coordinated move rates or
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loosening soft line? >> i think we can expect qe-3 after the twist operation is over at the end of june. when it comes to the ecb, we are more now favoring a rate cut which could be diverted in july. we expect the ecb will go downward and this will clearly open the door for a rate cut. so both central bank will act, but probably in different manners. >> i think central banks will take a wait and see approach. my view, they'll probably wait for the outcome of the elections. why fire bullets now when they don't know what's going to happen on june 17th and the consequences. so i think they will signal the
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markets that held act if need be, but i think the signature moves that you have from the central bank will probably be in the later part of june. in the case of the federal reserve, they're meeting next? june so if things go out of way, it's an opportunity for them to do something at that stage. but i doubt they will do anything too aggressive. they will watch and wait and see how the situation in europe unfolds. and i think not a big bang approach, but something significant nevertheless. >> part of me wants to say that it's pot about the greek elections any more, it's about how the market is reacting with regards to the fear of the contagion risk and the fear of the spanish banking system, as well. and that would be the argument to make sure that the ecb acts in the short term as being the door stop in the short term. >> definitely you're right. greece is one of the factors in play right now.
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we talk about so much clearly spain has come to the forefront the spanish banking crisis is clearly quite serious. spanish economy is the fourth largest in europe. you could see a flight money out of spain to other parts of europe. on top of that you have the global economy slowing down. u.s. a slowing down. so a whole host of factors. not just greece. central banks know this saga has dragged on for would years and why fire all bullets when they may have to do something even more significant. so i think they'll wait and watch. >> we want to do a quick check of headline. european union in an dem with the ecb is purportedly preparing a road map on the path to most closer integration. german newspaper claims
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authorities are working on a four pillar plan. the about publications suggest proposals include a banking union, greater role for the european parliament and common structural reforms. officials are still divided over the issues, germany saying it's necessary to reach an agreement on fiscal union first before considering a banking up. >> european leaders have just three months to save the euro. george soros said the crisis in europe was likely to reach it climax this autumn giving officials there a matter of months to, quote, correct their mistakes. >> spanish media reporting that madrid is in talks with other eu nations over how to stabilize the banking sector without a formal bailout. spain has denied reports that berlin has been pressuring the
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government to attack the bank liquidity. how many times have we seen this play out where a country denies that it will receive such assistance, but germany wants to and they ultimately receive it. whether it solves anything is another matter entirely. >> that's the real question. the data keeps coming through, as well, slight will i mixed because the jobless rate in spain has cropped on a monthly basis by 0.63% in may to be exact. but the number of people looking for work now stands at 4.7 million. the unemployment rate 24.4% in the first quarter. that's massive. while the youth unemployment rate stands at about 50%. >> what's really amazing is that we've seen the spanish stog index this morning turn around to now up about a percent. >> banks being bought up after being sold off so massively. >> you can't imagine anyone was looking at that unemployment. >> reporter: and taking a lot of
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encouragement from it. >> we want it on go back to our guests. what role can china play and how concerned should we be that this slowdown continues as we get data overnight showing that its service sector activity was down again last month? >> i think china is a large investors especially increased over the last couple of years. its assets if euro. so the support coming from china is just its more on the financial side. as china is slowing, to some extent slow also european export
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to china. but i don't think this is a very significant part of what china can continue to do for the eurozone. i think this is more on the financial side and to clearly say that china would invest in european assets. >> patrick, i'd be interested in your thoughts on the safe haven trades that we've seen. the yields last week, they're lower. scratch my eyes again, they're even lower. and that kept going. are we going to continue to see this safe haven buying in to the bund, the gilt, the u.s. treasury, into jgbs? >> well, if you're asking me this this question one month ago, i would have said probably 150 on the bund would be a floor and now we broke 125. so probably 1% could be at least a floor. but once again as flows are only
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driven by bid for safety, there is almost no at least in the near term. at some stage it can be a trade. and when you look at the level of yield in japan for many, many years, then the absolute limit on the down side for yields is unknown. we are in unchartered territory at the moment and at least in the near term given the up certainties around and especially greek election as well as what could be the next monday it taker policies, a lot of uncertainties and in this context, yields can continue to -- >> and how much further can this move go, how low can bond yields go here? >> well, i mean, the bond markets, as you mentioned in the u.s., in germany, in the uk, have rallied very sharply. even in japan, will at the rallied very harply because of
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the safe haven play. the yields are at record levels. i don't see them going much, much lower unless we have an armageddon kind of scenario out of europe. but otherwise they look fairly richly priced and i'll be careful. i think the selloff in the markets will probably offer an opportunity more in the riskier assets for those who got the appetite of risk and medium term horizon. >> and patrick, who do you think will see yields go below 1% first besides from japan who is already there? >> if i see yields declining below 1% in europe? >> is that your baseline view that that's your base across europe, that the ten year in germany goes below 1%. >> i think there will be in the
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coming weeks some key decision and this should prevent it from declining very sharply further. but in the very near term given the lot of uncertainty, we could see temporary decline. the move we had over the last week proved that we could have 25, 30 in a couple of days. so at current level, where he not that far from this 1%. >> all right. patrick, thank you for joining us. >> the portuguese government has announced that it's injecting over 6.5 billion euros in to the country's banks. 3.5 billion to bcp and 1.65 into the savings bank. but bpi has also said it will receive 1.3 billion euros in aid from the state and will launch a
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200 million capital mc. shares have been climbing higher by 2.5%, but they're not worst a whole lot in euro terms either. coming up, we'll be live in athens as reports swirl that the mediterranean. and replacing five ministers in a major cabinet resufhufflreshu. we'll get either latest from tokyo. >> and live in d.c. as obama and romney are gearing up for major fund raising events later on today. and also we'll be taking the pulse of the retail sector with dollar general results due. we'll be bringing you an early preview live from new york at 5:30 a.m. eastern time. >> and if you want to join the conversation here on "worldwide exchange," worldwide@cnbc.com. do you think the outcome of the
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eurozone debt crisis will be a united states of europe? let us know what you think. @cnbcwex, @kelly_evans, or at louisa bojesen. >> always lovely to hear from you out there. but after the credit, we'll be hearing from a credit insurer about the decision to halt all new cover on exports to greece.
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halted credit to yees oig among concerns the country may be pushed out of the eurozone. earl why he we spoke to grant williams, risk underwriting director and asked him what prompted the decision. >> if you cross your mind back, the greece economy had its first bailout in may 2010. a lot of things we do, we're constantly monitoring all markets. we noticed in autumn of 2011 was an increase in payment notifications, slow downs, incidents to our customers in it to the greek economy and that
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essentially felt take we needed to advise thats of improperly dealing with this market and so it's not an overdramatic stop as reported. it's been and ongoing review. >> are you seeing the same deterioration in standards in spain as you saw in greece last fall? >> there are clearly a number of markets where we're seeing challenges in terms of for our exporters and in some cases, yes, slow downs in payments being received. >> and at what point will you decide to stop providing trade credit insurance for spain? >> it's and ongoing view. well look at the data, the experience and each case is very often dirt in ternlgs of where it's coming from at that moment in time. >> and i would imagine that for people who still need or want
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insurance for these trade purposes that it will be much more costly how much more expensive is it for you now than a year or two ago? >> it's difficult to be specific on that because of the structure of the product, the particular credit terms that may be used and indeed the end customer affected. so i wouldn't say there is a standard price. and put the decision with regards to greece in context. is will this precedented to stop providing insurance for one of these countries all together? >> we're santaly reviewing and at this time we still have cover running to certain companies in the greek market.
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>> the governor of cypress has warned that the country should be forced to ask for a bailout. says the country is facing an important crunch time and that it had failed to find 1.8 billion euros to recapitalize it second largest lender. julia is in athens. one more headache for europe. what are the chances of asking for aid? >> it's interesting. they're looking at a problem here of 1.8 billion euro which is gets the bank up to a core tier one percent of nine. but it's part of a bigger systemic issue. the banks have exposure to the greek banks of over 140% of gdp. if you look at the financing situation, growth expected to fall more than 1.2%.
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two rated as junk. they otook a loan from russia last year to meet financing payments. but we're looking at a deadline at the end of june. so i'd have to argue that the the likelihood of them getting cash that isn't from the eu looks pretty slim and the ultimate question from there is what kind of concessions does the eu require from sigh dress. is it about the banks or on a bigger scale. >> we talked to a guest who said we need to wait until the greek elections to figure out what europe's next step is and i was arguing it doesn't feel like greece is stealing the headlines as much as spain is. has anything changed in the mood
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where you are? >> we have a poll blackout, so we have nothing to go on. but the point about other issues is quite interesting because in an article over the weekend, a point was made that it's not just greece that is a problem for the eurozone. he said look at spain and italy. the people here are sick of being lied to by the politicians and the one thing that syriza has on its side is they've not been proven in the past. but we just have to keep watching the headlines. >> julia, thank you very much. >> a blue mood by the way. >> i know, everybody is blue. blue sky in athens. fantastic. >> a great shot. beijing is calling on its top thinkers at key agencies to come up with strategy plans in the event of, yes, a greek exit.
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the blueprint may include measures to stabilize the yuan. the agencies involved reportedly include ndrc, central bank and the country's banking regulator. still to come, china says it will keep supporting europe and contribute more to imf coffers. but of course there are conditions. [ 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. ♪
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welcome back. equities in europe extending asia's losses. but peripheral bond yields staying steady. >> and the ibex has turned positive, jobless rate has dropped a bit in may and investors are intowing back into banking stocks. reports suggest policymakers working on a master plan for a new european union. george soros warning authorities they have three months. >> and portugal is propping up its troubled lenders to strengthen the sector.
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>> friday we saw a blood bath. no other way of putting it. across the european debt markets especially, we saw yieldins pushing to record lows. ibex is quaning back a little bit in this morning's trade. banks being the only sector to hold up. so still a little bit of willingness to buy. >> and take a look at what's happening across the sector. bund now 1.19%. gilt at 1.54, both of those yields are back up a bit. in spain and italy, we're seeing always about the of relief across the periphery.
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italy is below six at 5.77%. >> last week we saw some important levels hit for the euro-dollar trade. back above 1.24. the yen interesting moves, too. off its earlier high. there is chatter about intervention but liquidity relatively thin because of the bank holiday taking place today and tomorrow. but speaking of the volatile markets, one expert saying there are investment opportunities out there. >> in the coming months that will be possibly one of the best investment opportunity available among the asian markets.
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currency is cheaper and if it comes down, you'll have easing coming from the monetary policy. >> joining us now is the chief market analyst. and our guest host is here, as well p. peter, let's start with you with regarding to the currency markets and what we're seeing. the euro-dollar, we're a little bit higher than 1.24. will we head towards 1.20? >> i think we're seeing a reaction to nonfarm payrolls on friday in asia. a the lot of the red is the spill overeffect. we've been relatively good movements in europe in regards to this idea that sovereignty is
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up for sale. spain is willing to trade regulations for cash. germany able to put up its exchange rate for it bonds. if they can come closer, i think things will continue to improve in the euro drar. >> how important was that jobs report in terms of shifting sentiment? because on this program for the last couple of weeks, we've heard over and over how the u.s. is the large attractive market, still holding in there. are people changing that perception? >> i think the jobs numbers did change the perception significantly. the 69,000 jobs created came in significantly below what the the markets were expecting. and to make things worse, i think the numbers for march and april taken down by 49% collectively.
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not sure whether the loss is from fr internal forces or exterp al forces as obama would like to believe. he's blamed the dismal job market on what's happening out of europe. so i think investors are optimistic, but it looks like the u.s. economy is also starting to lose steam. >> and if that's the case, if the u.s. economy really does lose steam, where is the the trade, where is the currency trade at the moment? >> clearly the currency trade if they continue in the direction that it's going is to start selling the u.s. dollar. we know the position is unite longest specially against the euro-dollar. and if bernanke puts forward quantitative easing is back on the table i think it's a trigger for the euro-dollar to strengthen. >> we want to mention in
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portug portugal, we're getting more comments out about that country's own bailout prospects. people seem to have forgotten that this will was one of the first on go the path that greece and spain are now flirting with. he says weaves passed the review and met all the targets and the eu and imf, he's hoping they will release a 4 billion tranche of lending. >> it's super important because portugal and ireland are of course the two other countries in addition to greece that have received imf/eu bailouts. so it's super important that they rhee meet these targets. and that was the whole issue with greece. >> and nevertheless, we're seeing-will-given that we're still at 12% levels in portugal, what's your impression here? are they going down the right path or does still a lot more
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action need to be taken? >> still high compared to what you have out of spain. but nevertheless we are not in dire straits as perhaps greece. so i think probably portugal is a monday issue for now. yes, they have some problems as you highlighted being but not in the limelight. i think eyes are trained on what's happening in spain and to some accident degrees, as well. >> i'm looking at some of the yen levels. do you think we'll see intervention coming through from the japanese?
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>> i think so. the japanese economy can't get hit any further with the extended strong yen. and more importantly, there's credibility at stake. i think at this point we're at those levels. >> all right. peter, thanks. china central bank chief says his country will kick in more money, but there are calf caveats. >> the the china business news reports that the central bank governor is saying the country won't be absent from contributing to the international monetary fund emergency cash pool. but he emphasized it isn't necessary to commit to an exact
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amount now. and he also called for quota reforms to give economies a greater say in the fund's operations. the governor also says china will support the eurozone via the esfs and investing in hard hit countries that promise to deliver reforms. but he adds the eurozone's recovery ultimately depends on regaining competitiveness through restructuring. and meantime reuters sources say beijing is asking key agencies, including the pboc and the banking regulate are tore, to draw up risk con continue defense city plans for a greek exit from the eurozone. plans could include tax on cross border capital flows along with moves to keep the economy stable. back to you. >> and picking up on the china topic, do you think we'll see the reserve ratios being lower from china, is that going to happen again? >> well, i suspect so.
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china has reduced its reserve requirement ratio twice in the last six months. first time in november of last year and then twice again this year. taken down 150 basis points. our view is that china is likely to bring its requirement ratio down further in the next couple months. and maybe even more than that by another 50 basis points if things don't improve. also likely china will physically stimulate its economy. the difference between china and what you have out of europe and the rest of the world is that china has lots of reserves and i think the government has the means to implementing more means if necessary. >> they make it clear they're not looking to do anything like what we saw in 2008 and in fact the world probably needs that if not more than some of the heavily developed countries.
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>> i think china as this juncture is looking at a growth rate of 8.5%. it creates political problems between the region and i think going forward, the run congress meeting actually highlighted that the government want to see more sustainable pace of growth and probably 7.5, # pft is what they felt is sustainable. so of course not as significantly as impact in 2008, but i think they will do something quite significant and sizable and they have the means to do it and the railway and nuclear energy projects and alls those things. >> greece has nice infrastructure and they're not out of the woods.
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back to you in a second. headlines from fitch, in the wake of ireland voting to pass the fiscal compact for the eu, it is a slight positive for the sovereign. it does not though putup ward pressure on the rating. i think we'll need more than marginals positives at this point. let's go to nikkei for the story from toek i don't. tokyo. >> thank you, kelly. five of the 18 ministers were replaced to win support of the main opposition al liberal democratic party for a bill that would double the sales tax by 2015.al liberal democratic party for a bill that would double the sales tax by 2015.
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the scab net reshuffle comes after the prime minister failed to secure backing from the tax bill. from the largest faction within the ruling democratic party of japan. he had to turn it to the ldp. politics led him to choose a tv commen commentator to become the first nondefense chief. >> thanks for that. and we want to get final thoughts from our guest host. wer we were going back and forth on what china can do. what does seem clear is that there is concern about slowing more than the authorities potentially would have liked this year. and in anecdotal reports about commodities piling up at import stations and what not. can we at least admit at this
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point that the slowing has been more perhaps than the chinese authorities would have liked? >> yes rk, to some extent you'r right. it came in below market expectations and probably below the chinese government expectations, as well. and i think in the second quarter of this year, we're forecasting that the chinese economy will grow between 7.8% and 8% which is below our previous 8.2%. but we're a bit more optimistic in the second half of the year. they will allow the chinese currency to weaken. down almost 1% against the u.s. dollar. and that will help push up exports. all that put together, the chinese economy should grow at 8.3% this year. >> and we'll see if that's enough to keep the rest of the
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world on track. appreciate all your time and thoughts morning. and here is your asia agenda for tomorrow. investors will be waiting on the rba's policy announcement out in australia at about 6:30 central european time. that country wills also release first quarter current account figures at 3:30 central european time. and global experts will be gathering at the world gas conference. cnbc will have live coverage. >> and now from that coverage over to a different type of coverage. namely queen elizabeth ii who celebrated 60 years on the thrown, 1,000 boats. the queen was joined by the other members of the royal family. crowds of thousands and thousands of spectators lined the banks despite the very damp weather. i have to say i was out yesterday and i got absolutely drenched. >> i think we could call it a downpour. >> very sad to see all these small children all wet.
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but the celebrations continue today with a pop concert to be held outside buckingham palace followed by fireworks display. >> i was by buckingham palace last week when they were setting up for it. it's a huge operation. i think they had to bring in architects to help build this thing, not just set designers. >> i wouldn't be surprised. the queen herself has been super busy. traveled more than 30,000 miles by air. >> does she have a special plane like the president? >> i don't know. >> she must. >> no, they can't afford it. it would be a nice ride, but i imagine in these times, a bit of a white he will pant. so how is the uk economy holding up compared to when the queen first took throne? it's a special report from someone who you may recognize.
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>> it's monday, june 3rd, 1952. this is the news. after a core nation, her imagine jesse is spending the day it at thele palace with prince philipy it at thele palace with prince philip. thick fog has once again descended on london. and a new figure suggests the british government is staggering four fold accounting for inflation. an economics editor steven sedgwick has more details. >> yes, thank you very much indeed. this is most most interesting. this year the economic size of great britain and more than ireland excluding the commonwealth is at 377 billion pounds sterling. new forecasts project that by 2012, it will grow four times to a staggering 1.56 drill i don't know pounds sterling.
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at the same time, average income will this year of 7.5 thousand pounds. all these figures are inflation adjusted. should be around 24,700 pounsds. should she survive the throne for 60 years. so average income will increase by 229%. staggers mr. west gate. >> yes, staggering. but tell me, mr. sedgwick, what will the great british pound? >> this is interesting. by 2012, one great british pound would be worth 24 pounds and 34 great british pence. >> incredible. >> yes. incredible. in fact more enough to keep you in dibdab for quite a while. >> and what about the break down of government spend something. >> here in 1952, we still mention the war, which means
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that 25% of government spending is still on defense. by 2012, it's fallen away by 60% and the government spending will rides by 50% and on health, it will double. frightful. >> yes, frightful. . case, i better have another cigarette. may i bother for you a light? >> allow me. >> we'll leave that without comment. ross, we miss you. come back, ross. all right. >> trade links is up next. we'll be hearing from the head of the international finance corporations as the group steps up its trade finance programs in response to the crisis. stay tuned for that and much more.
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ross westgate spoke to the ifc executive vice president and ceo and started by asking him
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how the crisis is affecting the ipc's operations. >> obviously with the crisis going on right now, will are a lot of effects around the world especially for the poorer countries. and you see these can be through trade, its remittances. so all kinds of different ways that this is now cutting through the whole world effectively in different ways. so what we try to do is work counter cyclical, trying to help the countries, find means of mitigating some of the effects. for example on trade, we are stepping up our trade finance progra programs. we're doing a lot of that, we're trying to given whats has happened also with food prices and commodity prices, we're trying to step up and start
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commodity financing programs. but also trying to work with the subsidiaries of west european backs out in the developing world and make them stronger. now we also seeing some of the western banks and insurance companies actually selling off some of their operations. so we've helped create reenm re consortiums. >> so are we getting to the future just a lot quicker than we might have planned that will be replaced bay new financial institutions from emerging
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marke markets? >> i think we're seeing shortage of capital in many places and can't replace it. but obviously we're seeing banks in asia, whether it's chinese banks or korean banks, they're seeing opportunity of actually stepping in and replacing for example the french banks strong in around the world. we're seeing some of them now buying banks in. but in the meantime trade is going down. it came back a little bit last year, but now it's coming down quite rapidly as the effects on the european crisis is spreading across the ommodity prices. we've seen a rise of food
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security being a big issue for many producing countries. how do we make sure that that doesn't keep spilling over into protectionism that doesn't just make the situation worse? >> we're trying to find ways of financing and improving the whole food supply chain and of the higher food prices, one good new, it's now good business to actually get engaged. so you're seeing everything from the bigger companies to the small farmers actually investing in the increased production. because one of the problems we is have is 40% about of the food produced perishes along the way. so food processing is a great business opportunity and we're seeing more and more people getting into that business.
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>> also spoke about developments in about trade. managing agricultural resources and the outlook for the african economy. for more on that, go to trade link links.cnbc.com. >> and portugal finance minister saying it's passed the fourth bailout review saying they have chi achieve their did he eveficit t. [ male announcer ] this... is the at&t network. 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
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equities extend asian losses. xetra dax down nearly 1.5% in early trade. >> ibex turning positive as the jobless rate in spain has dropped moderately. >> reports suggest policymakers are working on a master plan for a new european union. george soros warns authorities have three months to save the euro. >> portugal propping up troubled lenders as the country now passes the latest review from its bailout lenders.
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>> a quick check of the u.s. futures. the dow would be opening down about 60 points that the point. nasdaq pointed down by 6 or 7. the s&p 500 also slightly lower for the morning. you can see the tone from our fo foot city. xetra dax down 1.2%. cac 40 up 0.2%. ibex 35 up almost 2%.
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swiss market down about 0.8%. >> the euro dollar a little bit red. flat to slightly lower. 1.24 will at the moment as we've been saying, we broke through 1.25 last week, we broke through 1 at the present ti 1.24. some chatter whether the japanese could intervene in the market. aussie dollar a little bit lower, as well, against the greenback and sterling relatively flat. meeting to decide on rates and most economists anticipate that neither will move away from their historic lows. i have to say the press reports over the weekend have become
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more speculative with regards to whether we could be surprised by one or both of the central banks. safe haven buying. bund just being sold from the earlier highs we were looking at at the end of last week, yielding 1.18. ten year just shy of 6.5%. commoditie commodities, we saw a huge spike up in gold. crude lower than more than 2%. brent also lower by more than 2%. again, another big move, too. spot gold coming off a little bit from the earlier highs last week. 1616. >> with friday's drop, the nasdaq com positive it has slipped in to correction
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territory. typically defined as a fall of 10% or more on the index. the russell down 3.2%. after friday's close, the s&p 500 meanwhile is just one point shy from slipping in to the same correction territory.dow a little better, about 170 points shy. although we could be giving back some of that already this morning. we turn to tony fratto for more on this. how much was friday's jobs report a game changer in terms of sentiment the around the u.s. some. >> it sent shockwaves through
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both the economic and political worlds here in the united states. a lot of people commenting on what the future is from here. looking at the past through months, the economic picture has darkened in the united states most clearly expressed by the jobs numbers. it wasn't just the report for may. revisions of the previous months really knocked down the numbers significantly. and so there's a real fear that we're if a more pronounced slowdown than anyone expected. political environment of course is pouncing on that. >> 40u67 of a game changer is it fors fed?
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>> we'll learn more about that. there's a lot of speculation that the fed will have to come in and do more sooner rather than later. we'll see chairman bernanke testifying before congress later this week. i think it will be very slowly watched to see if there is any situation from chairman bernanke whether the ped has any attention of doing more. we've heard reluctant to do more harks they haven't seen enough of a change in the economy. we cannot take the fed action out of the political environment in washington, though. and so i recommend people keep an eye on when the fed has a window to act. if we get closer to election day, deeper into the political environment, i really believe, you know, all of us say the fed will act when it sees conditions change and it feels like it
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needs to act. but we can't forget about that political environment and the credibility of the fed acts in the midst of a hot political environment. >> how frustrated are u.s. policymakers with their european counter parts right now? >> they are in the administration. we know treasury and the white house would really like to see action coming out of europe more quickly. they've been harping on their european counterparts to take action for a very long time now. and i think they're getting frustrated by and you saw comments from president obama last week and treasury is talking to their european counterparts. but this is a complex enormous problem for the europeans to deal with. we went from the articles of confederation to creating the united states over a summer. we had a master plan.
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we locked a bunch of guys in it a room and they got done. you can't get that done in a summer in europe. europe is too big, too complicated. huge problems to deal with. and even that, even if the master plan succeeds, it's not going to save europe from this economic recession that we'll have for a while. >> tony, stick around. we want do a quick check of headlines. because speaking of the master plan, the eu is preparing a road map. claims authorities are working on a four pillar plan including a banking union, who are mannize the fiscal policy, greater role for the parliament and common structural reforms. officials are still divided over the issues with spain pushing for a centralized authority on banks and germany saying it's
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mess to reach agreement on fiscal union before even going down the banking union road. and louisa, here is a comment from ubs this morning that pretty well sums things up. they say if it's to be presented in a couple week, probably not much of a master plan. >> feel like we've been there before. of course also the european leaders have just three months to save the euro according to george soros. he said the crisis in europe was likely to reach its climax this autumn. how do you know you you only have three months? we've just spent four years and now suddenly we only have three months. >> spain has denied reports that
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berlin has been pressuring the government to tap the esfs. >> and the jobless rate in spain has dropped on a monthly basis. number of people looking for work is 4.7 million. spain's unemployment rate the highest in the you're ro he zone at 24.4% while the youth unemployment rate stands at about 50%. let's get back to to tone any. i'm looking at these latest comments. mr. closer taken grace could lead to more confidence. do you think a fiscal union could work here? >> i don't, i don't think that's what any of them would contemplate at least not in the near term.
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they have a long time before they would get to something that resembles the united states of america and the way go our fiscal budgeting and the relationship between economic fiscal about policy making on taxes and spending. europe is probably a long way from that and they would need a number of big steps to get there. but i think closer more unified sense fiscal policy to bureaucrats in brussels is never something that made the germans happy about the european project, however committed they are to it. so that would be a huge step for them but there are interim step takes they could take.
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>> the central bank governor of cypress has warned they could be forced to ask for a bailout at the end of this month. the country facing an important crunch time at it had failed to find 1.8 billion euros to recapitalize the second largest lender. julia joins us out of athens and we heard from you last hour whether or not this is a viable thing that could happen, whether cypress could be going to the european leaders and asking for money. >> absolutely. the care man of this bank said he wasn't sure where the money was going to come from if it didn't come from the eu, but it is part of a systemic problem in the greek financial sector. their exposure to greek banks is over 22 billion euros. that equates to over 140% of their gdp. and about if you lookity financials of greece, they have private sector debt to gdp of
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over 300%, growth expected to paul 1.fall 1.2%. access to the the financial markets is negligible. ten year debt trading 14%. we have to argue in terms of the ability to raise capital, but also they've said that they'll try to extend the deadline until august. we're talking about 10% of gdp. trying to lower hair deficit ni deficit. so the question is are they going to be able to raise the conditions next in order to get that cash. deja vu. back to you. >> julia, thank you very much. >> so a united states of europe, is that where this is headed? if you want to join the
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conversation, get in touch with us. worldwide@cnbc.com, @cnbcwex. >> coming up, facebook is opening up its pages to new markets. find out why demographic social networking site which one it is that they're targeting now. [ male announcer ] this is the at&t network. a living, breathing intelligence helping business, do more business. in here, opportunities are created and protected. gonna need more wool! demand is instantly recognized and securely acted on across the company. around the world. turning a new trend, into a global phenomenon. it's the at&t network -- securing a world of new opportunities. ♪
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welcome back. these are your headlines. >> the ibex turns positive as the latest data out of spain shows tjobless rate has dropped moderately in may. >> a report suggesting european policymakers are working on a master plan for a new european union. good and portugal government plans a capital injection of over 6.5 pill i don't know euros. >> and congress is putting jpmorgan's regulators under the microscope. sherrod brown sent a letter asking for supervision of the bank's trading operations. lawmakers want to know among other things if the occ knew that the bank has switched to a
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new risk model. in frankfurt trading, jpmorgan shares are down about 2% there, but that's only slightly underperforming what's an ugly day for the ibex. >> they're be checking models and who was in charge of operations. they have to. >> unfortunate that it comes right at a time when they're revising rules. >> more red tape in certain areas and then the next problem tends to happen in the areas that you haven't been focusing on. >> a constant game of whack a mole. do you have that arcade game? >> yes, exactly.
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a quick check of the other top stories, facebook set to officially open its pages to children up under 13 without about parental supervision. they of course see a huge opportunity in this. >> it must be massive opportunity. there must be loads of kids on their with their parents. >> whether it's a good thing is another matter. >> report suggesting that bp's russian partners may block the oil giant's attempt to sell its stake, however bp believes that they're not in a position to do so. >> and yet there's talk that about if they got rid of the stake, will they themselves could be a buyout target. china's central bank chief remains confident on europe and will continue to support the eurozone so long as the block pushes ahead with reforms. tells you about how things have
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changed. >> doctor wouldn't you want to come in and take a look at some of the assets. >> and japan's prime minister is set to reshuffle its cabinet in an effort to win the support of the main opposition party. >> we know in the market we've seen the nikkei now at 28 year lows. ten year ket in japan back below 0.8% for the first time since 2003. >> and always interesting because you you do tend to see market reaction initially. >> we'll see if people aren't so grated this time. still to come on the show, friday's disappointing u.s. jobs report sparks a war of words between obama and romney. can the president weather the economic storm or will it give an edge to his rival?
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a quick check of u.s. futures. we have red across the board as has been so often the case. s&p 500 pointed down about eight. dow jones 68 or sond at nasdaq would be opening about 10. just days after friday's weak jobs report, advisers of
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president obama and romney's presidential campaigns scared off over job creation and were quick to take blame for the dismal payroll numbers. >> what was striking about what happened on friday is how quick leaders of congress were out will wringing their hands. these are the architects of obstruction and now they're complaining about the pace of the recovery. >> the problem is this administration and this president policies ares hostile to job creators. and that's why frankly it adds a sense of urgency in terms of this year's election to be able to turn things around because the only thing that will change it are changing the policies and that means changing the person in the white house. >> tony fratto is still with us. tony, people were pointing out you can watch president obama's re-election odds drop in tandem with the s&p 500. how much pressure is the administration putting on europe to sort this out knowing that thir own election could be on the line? >> huge pressure, but you have to remember it's not all europe
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in the case of the united states. we've been looking at u.s. numbers for a while that are really not connected to what's happening in europe. europe is creating a lot of pressure, china and a lot of the external economies. but a lot of it is internal, also. and we've seen, you know, a lot of indicators come off their rate of increase in recent months and we have a sense that things were slowing down. we saw it coming out in terms of weekly jobless claims reversed. instead of declining, were increasing. so we started worrying about where things were going. so it is a huge political problem here for the president to be in this environment. we thought with the second half of the year that it was going to be tough to keep know then item in the economy and that momentum has sloan down a lot earlier and him pact the election. >> let's face it, it will be
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hard to boost the u.s. economy before the election. you would assume that the time is running out and that it's up to the next term whoever wins the next term to really put things will place. is job creation really at the top of theed agenda for congres at the moment some. >> not for congress. you're right, not much congress can do at this point, if anything, any big policy coming out of either congress or the administration that could change the job picture. but that cake is baked and that's the cake that we'll be eating for the next six or seven months or so until we get into the post election environment where we're dealing with some of the lame duck issues, the big fiscal and tax issues that we'll be forced on deal with after the election. both parties essentially pushed those issues beyond election day. so there is no big economic policy change that will change
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the economic picture for the time going. that's why all eyes will be really on what the fed may or may not do. and i think we'll be disappointed that the fed won't do very much. >> we all know central banks are happy to step up to the fore. tony fratto, managing director hammel ton place straenlgs. coming up, are discount retailers cashing in on trade down customers? higher end consumers seeking bargains now. we'll preview earnings from the giant dollar store chain.
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this is "worldwide exchange." i'm kelly evans. >> i'm louisa bojesen. a volatile session in europe with germany selling off, but peripheral markets recovering from last week's lows. all will this while bond yields hold roughly steady. ibex trading higher by more than 2% as latest data showing spain's jobless rate dropped moderately in may. >> and reports suggest policymakers are working on a master plan for a new european union. george soros warns authorities have three months to save the euro. >> portugal also propping up troubled lenders. planning a capital injection of over 6.5 billion euros as the
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company is passing the latest review from its bailout lenders. >> good morning to our u.s. viewers joining us. take a look at how we're trading. we still have red across the board. s&p would be opening lower pie just a couple of points. nasdaq pointsed down. dow could open lower in the range of 50 to 60 points. partly because of the moon we've gotten from across the globe. the uk is closed still in honor of the jubilee holiday, but elsewhere we've seen trading a bit weaker. this as people continue to digest that disappointing u.s. jobs report from friday. ftse global 300 down about 0.2% on the morning. and that masks what some divergents across the eurozone.
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xetra dax off the lows we've seen so far this morning. cac 40 meanwhile up about a quarter of a percent. the ibex 35 as we mentioned, the outperformer across the region. now up more than 2%. combination of the better jobs report again relatively speaking and people looking back at some of the spanish banks. and swiss market down about 0.8%. >> banks still holding up relatively well. but how do you make money, though, in these markets? here is what some of the experts have been telling us this morning. >> opportunity still for same opportunity costs buying two or ten year high quality government bonds.
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>> we are overweight u.s. over europe. that's a standing recommend decision and we still think that continues to be the bet to make. >> look richly priced and i think the selloff of the markets will probably offer opportunity more in the riskier assets for those who got the appetite for risk and medium term horizon. >> what is not the trade of the day is being long oil. if you look at what's happening with nymex, flirting down with that $80 a fwarl mark thbarrel . and you wonder if thep for consumers comes it too late. >> and if we're looking at more pressure on the price of oil based on the iaea and iran announcing they'll be meeting in vienna on the 8th of june over the nuclear program. whether that's adding to more selling there.
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and one of the comments that really stuck with me was one of my guests who said that just because something is undervalued, doesn't mean you have to buy. you hear everything is cheap, but it doesn't mean you have to buy. >> and we're learning that lesson the hard way lately. in the u.s., same store sales rose a better than expected 4% in may. stores got a boost from better weather, mother's day and memorial day weekend promotions, but people are still worried the slowing economy could push consumers to cut back. a fresh snapshot on retailers this afternoon when general dollar reports numbers. and joining us for more on that is joe feldman. what are expectations for the report? >> i think the expectation is that they'll have a solid result. we're looking for mid single digit same store sales results
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like 5.5% mark and we think that they'll be able to hit it. we've seen good trend in the dollar store delivery. >> but these shares are also highly valued at a time when so much of the rest of the market is cheap. we've seen double digit gains for so long now. isn't there a risk that they miss at least relative to what we're used to hearing from them? >> that is true. the expectations are quite high and there's always that risk with these guyses. but the dollar stores space and the value customer continues to shop in this channel. and the value that they offer is so strong, we do think that they'll have pretty good results and be able to hit the numbers. the expectations are high and if you don't necessarily hit expectation, stock could come in a little bit. with the market we've seen lately, we might see that today. >> so with dollar general, is this a case in point of trying to increase market share but
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maybe taking a little bit of a hit on margins simultaneously? >> the way they operate is pretty clever. they sort of engineer hair costs such that they can maintain their margin that they need to hit. now of course they do have that flexibility on pricing that some of the other dollar stores don't have. but they are able to purchase correctly and smartly and maintain that good margin spread. >> is it your feeling that the economy in the u.s. is shifting, we're kind of trying to pig if out whether something decisive happened at the end of last week with that terrible nonfarm payroll figure and whether in reality we maybe have been reading the u.s. economy wrongly, that it's not as strong as what we anticipated. >> definitely seems like we've had a bit of a slowdown. the labor numbers have slowly, you know, decreased a little bit and it does put into question the state of the economy right
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now. and we're a little more concerned than we have been certainly a month or so ago. consumer spending really does rely on labor, reducing the people in their jobs still are comfortable and have their jobs and have the ability to spend, but it's really just not getting that recovery a little stronger that we'd like to see to drive better retail sales. >> and just to be clear, people think about dollar general as the raid down play, but they still do better when people are spending and they have discretionary income to spend and i'm not sure that the u.s. consumer has that right now. >> that's right. it is sort of that basic every day need and fills that need, but discretionary spending does help a significant amount. and if the economy was doing a little bit better, that low income customer would have a little bit more cash in their pocket and be able to spend. but don't it forget, dollar general is still a growth retailer. they're growing their stores at about a mid single digit square
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footage rate which is a lot better than the majority of retailers here in the u.s. >> certainly aren't many continuing to expand. joe feldman, thanks. and just a reminder as we take a look at portugal's bond yields there, 12% still over that key level before want to go back to the market next year. finance minister says he thinks that can happen as the country has now met what is required to get its next disbursement of funds from the troica. its fourth program. while they believe the economy will shrink by 3%, they think they can hit some of the longer run targets. but you look at those public debt levels, 118% of gdp. >> and the spanish market,
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seeing some buying. after the break, george soros saying europe only has three months how left to save the euro. find out why. [ creaking ] [ male announcer ] trophies and awards lift you up. but they can also hold you back. unless you ask, what's next? [ zapping ]
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figure out if the master plan for europe and do it in less than 140 characters. david tweets united states of europe means central budget with ecb printing press and individual countries have budgets that must stay balanced. that sounds like what we're dealing with now fp . you can join in the conversation. e-mail us or tweet us. >> and jessica asks did we get the blue memo and apparently we did. >> we're bummed out by the market this morning. that's what's happening. we've been talking about the market moves. a ton of moves taking place in some of the underlying commodities, as well. and just wanting to draw your attention to the priest of oil. brent lower by around 2.5% at the moment, so continuing its very heavy leg down at the end of last week. currently trading at 96ed per barrel. we've could off very quickly, lower by more than 20% over the
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month of may alone. brent going through $100 a barrel on friday. nymex again big moves. we know iranians apparently will be meeting with the iaea on june 7th in vienna. so that's one thing to keep your eye on. the other hinge is also gold. we saw a spike up in gold last week after we had that much worse than expected nonfarm payroll data on friday. spiked higher. currently trading 1619. year to date, higher by around 3.5% for the price of gold. but the question is whether or not we'll see a reversal and whether this will become a safe haven. copper lower by 1.5% almost trading lower year to date by somewhere in the region of 5.5% or so. >> if you're just tuning in this morning, let's remind you of the headlines. ibex in spain turns positive as the country's jobless rate did
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inch a little lower in may. report meanwhile suggests european policymakers are working on a master plan for a new european union and portugal plan as capital injection of over 6.5 billion euros. authorities are working on a four pillar plan. proposals include a bank union, harmanized fiscal policy, a grart role for the parliament and common structural reforms. at the same time, european leaders have just three months to save the euro according to george soros. speaking at an economics gathering in northern italy, the billionaire investor said the crisis in europe was likely to reach its climax this autumn
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giving officials a matter of months to correct their mistakes. i would like to see a cli plax this autumn. because it would be done. that would be great. >> if you're a pro european policy maker, this crisis brought fort the time line for a lot of things they would like to ultimately do. >> if you know the worst is behind will you, then you can work on making it better. but if you don't know that it will continue to get worse, it's hard to figure out what type of steps to take. >> and i can just mention, because the george soros speech is online if people want to look that up. what i love is he talks about how this is a failure of economics here and he says how the failure is more profound than generally recognized. goes back to the found dayses of economic theory and he says wil the great mathematician had axioms that at least closely resembled reality, the theory of rational expectations, the
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market hypotheses, these are far removed. . so interesting read manage terms of where the place for economics has become. >> i love all that economics history and theory. i have to admit. something differently different. queen elizabeth ii has celebrated 60 years on the throne. she was queened by other members of the royal family. celebrationses continue today with a pop concert followed by a fireworks display. i'm sure she'll enjoy it outside her bedroom window. >> yeah, not so sure. how is the u.s./uk economy holding up compared to when the queen first took throne?
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>> it's monday, june 3rd, 1952. this is the news. after a coronation, her majesty is spending the day at the palace with prince philip. thick fog has once again descended on london. and a new figure suggests the british government is staggering four fold accounting for inflation. an economics editor steven sedgwick has more details. >> yes, thank you very much indeed. this is most most interesting. this year the economic size of great britain and modern ireland excluding the commonwealth is at 377 billion pounds sterling. new forecasts project that by
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2012, it will grow four times to a staggering 1.56 trilllion pounds sterling. at the same time, average income this year of 7.5 thousand pounds. all these figures are inflation adjusted. should be around 24,700 pounds. should she survive the throne for 60 years. so average income will increase by 229%. staggering mr. westgate. >> yes, staggering. but tell me, mr. sedgwick, what about the great british pound? >> this is interesting. by 2012, one great british pound would be worth 24 pounds and 34 great british pence. >> incredible. >> yes. incredible. in fact more enough to keep you in dibdab for quite a while. >> and what about the breakdown
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of government spending. >> here in 1952, we still mention the war, which means that 25% of government spending is still on defense. by 2012, it's fallen away by 60% and the government spending will rise by 50% and on health, it will double. frightful. >> yes, frightful. in that case, i better have another cigarette. may i bother you for a light? >> allow me.
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quick check on u.s. futures. we've got red behind me. the dow jones opening lower by about 50 points or so. the nasdaq two or three, as
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well. same for the s&p. this a little bit better than the tone we saw earlier in the most of the when the steep losses were weighing heavily. services pmi revised lower. but if we look across europe, a mixed picture. ftse 100 which isn't open today down on friday. in paris, cac 40 is up. ibex now up 2.66% as some banks in peculiar are rarticular are higher. swiss market down by 0.8%. dax one of the weaker performers. down at one point about 2%. >> absolutely. big banks definitely being pout up this morning. in the bond market, it's a
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slightly different story. seeing a little bit of breathing off the back of a very eventful week last week. seeing the ten rear spanish yield 6 about..5% ten year trea down just a bit. >> let's go to the cme. jack, good morning. and i'd like to off the the bat know how much that weak u.s. jobs report friday was a game changer. >> wasn't that as much as believe it or not the news out of china. that's something that people just aren't paying attention to. there was a contraction in china that was not expected. let's keep an eye on that. that seems to be one of the things that portfolio managers were talking about, but it didn't seem to be a big headline. but one hinge to keep in mind is
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the fact that the deceleration is obviously very contagious. we're seeing what's happening in europe. one of the reasons i put out a piece saying this is not seller walk away. monetize some of that production right here, add to some of the positions. something you said before the break and that is that they have backed europe up against the wall. we're one or two headlines away from seeing the dow up 500 or 600 points. there's one solution and that is quantitative easing. everybody knows it. it's a question of when or if they're going to swallow that bitter pill. >> i'm not so sure quantitative easing at least in terms of the federal reserve's role is the answer because there is still a huge -- >> new york we're talking about the ecb. we're talking about the europeans getting together, printing up money, doing what's
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mess to guarantee deposits, that's absolutely necessary right now. it's one of the missing ingredients and one of big political problems that they have to work through. >> i hear what you're saying, but i kind of think deja vu because we've been here before in europe. we've seen exactly this happening from the ecp and people were arguing spain is too big to bail. >> one of the problems is that you needed to get the political situation stabilized. with europe backed up against the wall, failure is not an option. you can get on armageddon all you want. i've never found that to be a profitable investment strategy. if anything, i think you're still looking at a situation
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where this is a time to be more than likely try to ignore some of that noise. >> so where would you then position yourself, what would you be buying? >> you have to buy gold, i think that you can buy very, very good quality u.s. stocks. a valuation level of about 11, 11.5 on a multiple. this is a gem of opportunity within all this will can dysfunction. anybody that puts money to work at this point will be happy in another six months or a year from now p. it's trying to ignore some of the noise around us. >> we'll see how much pain jack had to put up in the meantime before that potentially pays off. jack, thank you so much. louisa, it's been a joy. she'll be back tomorrow. >> as will you. thanks for watching. see you tomorrow.
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good morning. time to buckle your seatbelts and hold on to your hats. we look to be in for a rough start to the week after a rough friday. global stocks heading lower as slowdown fears are growing. weak economic data out of united states and china adding to worries we already had about in the eurozone. it's monday, june 4th, 2012, "squawk box" begins right now. >> welcome to "squawk box." i'm becky quick along with joe kernen and andrew ross sorkin. let's get you you up to speech. officials in brussels frankfurt and berlin are working on a master plan. under the ppo

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