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tv   Worldwide Exchange  CNBC  August 16, 2012 4:00am-6:00am EDT

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hello and welcome to today's edition of worldwide exchange." i'm ross westgate. >> i'm kelly evans. these are your headlines from around the world. >> foreign direct investment into china slow more in july which could jeopardize the 10% annual trade target. >> cisco reports better than expected earnings. the ceo is more upbeat about u.s. and asia but cautious on europe. >> samsung ratchets up its tech wars. u.s. judge calls for peace in the bitter patent dispute between the korean tech giant and apple. and brazil unveils a $66 billion stimulus plan seeking investment in its highways, railways and other areas of
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infrastructure in hopes to revive its flagging economy. okay. welcome to today's program. u.s. -- u.s. -- >> america. >> is this a head fake with this economic data? >> better tone. i'll tell you what to watch. jobless claims, 8:30 a.m. this morning. they have been holding in there, showing the market is holding up. if they flag that's when we get nervous. >> big thing. we look at gold and what the dollar is doing. >> look at what's happening with the treasury market. it's remarkable. >> exactly. >> yeah. >> remarkable in the context of where --
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>> context of 1.4%. >> coming up also today's show, rising china gives a boost. >> samsung unveils its latest tablet. what sets it apart? we'll get the run down. >> australia, we'll be joined by the ceo. >> walmart earnings are due before the bell in the u.s. we'll give you and early preview what wall street can expect at 11:30 central european time. >> china fears it may miss its target. the eu is china's biggest overseas market. the trade outlook is worsening after the latest fti figure marked the longest streak of falls. fti from europe fell while investment from u.s. rose. >> china's central bank pumped $12 billion into the money market this week in a bid to step up growth. it was the largest weekly
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liquidity injection in six weeks and moves suggest the central bank may be more flexible in how it loosens monetary policy. there's growing room for monetary policy as price pressures ease. >> shanghai stock exchange is doing its part. the board has come up with new ways to enlist firms to ramp up dividends. companies whose pay outs fall below a certain level have to publicly disclose the information. those that hike their yield will be given priority for refinancing or restructuring aid. joining us is managing partner at armstrong investment. good to see you. what are you doing with your china plays at the moment? do you have any? >> we don't have any direct position within china. we have companies geared towards emerging market consumer, asian market consumer. companies that are domestically
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domiciled but a big proportion of their earning growth is driven by this. >> what happens to chinese trade data, growth numbers. the margins does that impact those companies or not? >> not so much. the trade data is more about its exports. i'm focusing more on what the domestic consumer is doing. that's going to be the transition in the economy. we think there will be a rebalancing away from fix capital formation towards domestic consumption and the chinese policymakers understand that's necessary and that's why we're convinced. >> it's necessary. almost happened as you would have wanted it to happen except the economy appears to be slowing more than anticipated as this transition happens. does that worry you? how much near term weakness can the economy handle in order for this longer term play to still work >> still in line with what the five year plan is. it will grow at 7.5%. a lot of people are hoping for 8%. it's not slowed meaningfully. there's some weak numbers out in terms of trade in particular. but, the economy is still
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growing quite rapidly. >> what do you do then with the releverage china play, the basic resource stocks. bhp comes out and says jobs may go because they are facing a deteriorating market. >> you have to worry about those more. infrastructure spending is falling. chinese economy deteriorate a little bit more, those companies are geared towards it. we're not very worried about it. but globally you're getting stagnation growth at best in the west. you're getting growth from emerging markets. >> you don't have any exposure to that sector. let's keep it up. the u. the brazilian government announced a $66 billion stimulus
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for infrastructure. what do you make of that story? >> brazil has been an economy that has disappointed. it's not growing this year. it has incredible demographics working for it. it's got a current account that has shifted but you are going to see infrastructure spending. brazil is incredibly powerful position. it didn't have to bail out its banks. commodity rich. if you're looking at the economy very well positioned. equities, the government is in control. >> what's interest is we had the chair of the rio, someone involved in the rio olympics effort on the program. >> basically invested in rio. we asked him about the infrastructure and what rio might do, we asked him about public transit, they are using buses to move people back and
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forth. not even necessarily doing a huge infrastructure push. is that a mistake or indicative at all? >> brazil is still an emerging market. you want growth in emerging markets. infrastructure, fixed capital. that should be the focus of any emerging economy. you got to build the infrastructure that will facilitate the future growth that the economy will need build the growth of the middle class. >> long term they are doing themselves harm to their productivity? >> that's the long term thing. that's where the focus should be, focus on infrastructure is very important. >> just from my experience when i was in rio the other month, i could have compared to the quality of rebuilding you get in say london or new york, i could have just ripped half the buildings down. and put new ones up straightaway because just the age of the infrastructure. >> just hasn't been investment.
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>> absolutely. >> we'll see. maybe it will turn around. still flagging. moving on cisco's fourth quarter profits rose 56% and revenues by 4% topping forecasts. the network equipment maker is boosting its dividend by 75% and it did just start paying that dividend last year. the ceo said u.s. orders picked up at the end of the quarter and big companies are buying again but still cautions europe is weak and could remain that way for some time. >> i think it's going to get a little bit tougher before it gets better. we have a great team in europe. we see steady declining numbers in europe. we saw the reverse in asia and beginning to balance out in the u.s. >> cisco shares up more than 4% in after hours trade, continuing that move into frankfurt where we see 5% this morning. investors drove up shares of chinese pc maker lenovo on solid
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earnings result thanks to rising shipments to emerging markets. it was up 30% beating expectations. sales grew more than a third from a year earlier. lenovo has been stealing shares from rivals. the global slow down is challenging the industry. you can see shares responding positively to the news. joining us now is vincent chen, head of greater china research. investors seem to be rewarding the news out of lenovo, what's your own view on where shares head from here? >> okay. thanks. lenovo will have a positive view because we think the current system in china and the pc industry is short term. next year when china has new leader and the government has been sort of restructured there
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can be new economy stimulus programs that will help the overall demand and help the pc demand there and also for lenovo i think we should also look at new focus, the smartphone outside of pc because it has become the number three smartphone brand in china in the last quarter and this is new focus for the company, which is making profit. turn around it can help earnings outlook for the company. also i think another thing that's very important in this quarter we expect lenovo to overtake hewlett-packard largest pc vendor in the world. increase the scale at lenovo, sustain their margin level and market share shifts especially if lenovo can really become number one pc maker.
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i think investor will continue to reward stock. >> that's remarkable. i wonder speaking of the margin issue there as they shift from pc to mobile does that negatively impact them on that front or are there any other risks involved, perhaps involving its cost base as we've been talking about as china consumers earn more? >> yes, indeed. they are growing the consumer business which is relatively low margin versus commercial business. and the company is increasing and becoming the largest pc maker, can be the best among all pc vendors. that should help them sustain the operating margin. we tend to feel comfortable about that. >> it's interesting because obviously this massive expansion
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they've had, vincent, it's come at the expense of margin. will the strategy change globally or not? >> i think it's not. the company now, their business is 16% of revenue. microsoft operating window is coming in september, early october. it's an operating system that will help consumer pc demand more than the commercial demand. all the pc vendors need to step out on that. lenovo are choose the right test. they prove they are on the consumer base. >> vincent thanks. staying in china the world's biggest, china's mobile is feeling the heat from competition in the mainland.
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it missed expectations. china mobile the only chinese carrier that doesn't have a deal with apple to sell its iphones. shares down on the session almost, well more than 5%. >> u.s. judge wants apple and samsung to make at least one more effort to settle their bitter dispute ahead of next week's verdict. they have been locked in a battle. they are fighting for dominance of the tablet and smartphone market. in a move to take on apple's ipad, samsung has unveiled its new ga lacksy 10.1 in u.s., uk and korea simultaneously. we have more from seoul. the name is clunky but sound like the new device is pretty impressive. >> reporter: yep, kelly. samsung is betting that galaxy 10.1 can be the game changer that leads into apple's dominance. to put things into perspective a
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16 gigabyte model offers what the ipad doesn't. a stylus s-pen. this product comes three months after the second version of samsung as galaxy 10.1 and in the coming months samsung is expected to release a new tablet running on microsoft's new window os. while apple has a single 9.7 tablet lined up samsung is offering a wider range of products in various sizes. remember it's stild a tablet category a hybrid between a phone and tablet. sold more than 10 million units since its debut. samsung has a lot of catching up to do. samsung's market share in the tablet world sits at a mere 10%,
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compared to apple's huge chunk of 65%. back to you. okay. thanks for that. let's now remind you where we stand here as far as european stocks are concerned right now. we're just over an hour into trading day. slightly weighted to the upside in terms of advances. not a big difference. nearly five to five. yesterday we were about half a percent for the ftse and dax, the cac was flat. ftse 500 is flat. the cac is flat. ibex up .22%. volumes are light. bond markets are of great interest. u.s. treasury ten year, 1.8259%. remember the record low july 25th, 1.238%. we've come up a long way. industrial output, house building five year high.
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all of not strong data taking away thoughts we might get some qe yields high. folks on the uk, retail sales coming out in 20 minutes. 15 minutes. 1.67%. ten year spanish yields, 1.67%. ten year bund yields, 1.558%. currently 79.22 as high as 79. is the dollar making a head fake. aussie/dollar back below 1.0483. euro/dollar just over here behind me 1.2271. that's where we stand right now. in european trade what about what happened in asia? we have more on that. >> asian boards ended mixed. a lot of downward pressure on the chinese economy on the back
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of those fdi numbers. but there's room for policy easing are still in focus. the shanghai closed .32%. it was countered by weakness in banks. producers lost ground as there was worry on missed earnings. hang sang turned tail to finish lower down by half of a percent. china mobile was major drop, lower by 5% on down beat earnings. but lenovo clocked strong gains after reporting 30% rise in their quarterly profits. the nikkei finished higher but 1.9%. exporters gained on the weaker yen. the cost being back from its national holiday following reports the country's unemployment rate fell to its lowest level in eight months. the aussie market gained 1.1% led by resources in consumer
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staples. india's sensex trading lower. back to you. >> thanks very much for that. good to see you today. is it time to bring back the three martini lunch? job interviewees are like try to be seen less intelligent if they have a glass of wine in the u.s. but recent studies suing guest drink could make employees for creative and more productive. a piece on this in the economist making the rounds this week fueling the debate. what's your view on the lunch time glass of wine or three. if you want to join the conversation here on "worldwide exchange," you know how, get in touch with us at world world. tweet us on we'll have plenty more on a particular variety of wine coming up later on in the program. >> finally get to talk about that. on that note i would say creative yes, productive probably not a lunch time drink.
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shares in australian has hit an 18 month high. we'll find out what's boosting profits.
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australia's wesfarmers has delivered electronic gains in the face of daunting challenges in the retail space. they reported a better than expected 11% jump in full year earnings. strong gains in its coal supermarket business has helped. the firm's stock is up at an 18 month high almost 4% at the close of trade today in sidney. joining us is for more is the ceo managing director at wesfarmers. thank you for joining us. we appreciate it. look, your numbers are very good. what's the environment like that you're trading in? >> well, thanks. nice to be with you. i mean i think in relative terms the australian company is in pretty good shape although it's more subdued than we've been used to for a while but compared to other countries around the world australia is still a growth economy and has been for sometime. within that environment consumers have been relatively cautious but our business has been either at the low end of
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target or came out higher. we have businesses that have products that are attractive to consumers and we're in food and coal. we're in the right market segments and i think providing an offer for our customers. >> you mentioned food. i'm sort of interested. you got much margin pressure on that? >> there has been great margin pressure. one of the advantages we got with coal this is a business we took out nearly five years ago. significant opportunities to take out costs in the business. as we've been able to do that we've been able to pass some benefits back to our customers in prices and also increase the earnings of the business. so, it's not like the uk, it's compared that there's some growth as well. in that environment i think we've done a reasonable job.
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>> richard, i just wonder if you can give us some perspective on how the australian economy is doing. you spoke a little bit about the consumer. we're at a time when there's been a lot of speculation as to how vulnerable the nights be to slow down particularly coming out of china. what kind of on the ground view are you getting? >> well, firstly, you know, i think the fundamentals are pretty good here. employment is strong. we've had growth now for well over 15 years. interest rates still relatively high so there's a fear of room to move for the reserve bank. the government is forecasting a budget surplus that may be hard to achieve in the current environment. i think for a lot of reasons the economy here is in pretty good shape. we are subject to a slow down in
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china particularly in other countries where our products are exported. but, i remain pretty optimistic about the long term. >> are you hiring? >> yes, we are. we employed another 2,200 people in the last 12 months. we saw a couple of businesses and we expect to employ more people this year. >> what's happening with just australian households. they had pay out from the government to offset carbon taxes. they are still getting higher energy bills. they have spare cash. they saving it, spending it, paying down mortgages? >> there was initially spending of the government compensation for the carbon tax in may and june. but, you know, i think australian consumers are behaving very rationally. they spend what they need to but they are saving as well and
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we're seeing consumers be fairly cautious and certainly discerning about what they buy but we've got more numbers in our stores, buying more products than we had 12 months ago. >> on that note we'll leave it. thanks very much for joining us, richard. i hope you have a good evening there. seven major investment banks have now received subpoenas from u.s. prosecutors investigating the alleged rigging of libor. jpmorgan, chase and deutsche have been subpoenas. rbs and hsbc were sent for demands for documents. citigroup and ubs disclosed they were being investigated. and still to come on the program, the latest retail data is due out of the uk. did the olympics keep shoppers
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away? we'll break down those numbers next.
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and these are the headlines from around the world. china slowed further in july which could jeopardize their 10% annual growth target.
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>> ceo john chambers more upbeat about u.s. and asia. >> samsung ratchets up its tablet war. u.s. judge calls for peace in the bitter patent dispute between korean tech rival giant and apple. >> brazil unveiling $66 billion stimulus plan seeking investment in its highways, railways and other areas of infrastructure in hopes of reviving its flagging economy. and here we go the much audiotape waited uk retail sales report is out and it is showing a flat read for july compared with expectations for decline of .1%. sterling looks like it's rising a bit on the news. early signs suggest the olympics had no impact on retail sales. i'm sorry uk retail sales were up .3% on the month they were expected to be flat or
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depending. up .3% on the month. much stronger than expected, up 2.8% on the year. >> the retail sales deflator running plus .2%. it was .3% in june. that's the lowest since october 2009. it might suggest retail sales stronger and prices a little bit weaker. i think the olympics having no impact is interesting statement on that because there's been a lot of diverging opinions on that. auto sales as well. >> it looks like car production in july was up 22%, 15% year-to-date, 22% in july, i'm assuming those are year to year figures. >> uk up 22%, 119,000.
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>> 119,882 units. >> we'll talk about what's going with car production in a few moments. could be a bright spot in the auto sector as opposed to continental europe. let's pick up, those on the retail sector. retail sales here in the uk, a little bit stronger, olympics having no impact. this is july. olympics got going in august. what's your own view of actually what's happened? because, you know, westfield and stratford are saying 10% of our traffic and west end saying it's been absolutely dead. >> i think that's the story. westfield did great because you had to get through westfield to go to the olympics so they picked up some traffic there. if you look at the west end the first weekend, the opening ceremony they were talking about traffic down double digits. people were scared out of town
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and clearly that hit retail. as you went through the olympics the second weekend traffic wasn't as bad, it was probably down low single digits and picked up as people came back into town. we'll still see in august. >> august should be stronger than july. >> it should. and the other thing to think about is the weather. i mean we had two months it's been raining, umbrella sales were up 200% in the last couple of months. so if you think about that, the weather should certainly help clear out those clearance items that we've seen. >> let's keep an eye on what's happening in gilts and sterling. we had upward revisions to the last couple of months to june at least. so there seems to be some degree of strength to perhaps the uk consumer that maybe jives with the unemployment data if not the overall growth figures? >> think so. i also would think about the level of promotions that we saw in june and july. they were very high.
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i mean if you weren't 50% off the month of june you western in the -- you weren't in the game. i think it's promotionally driven. >> did we get a lot of -- i was looking at inflation numbers earlier this week. inflation may have bounced back. retailers discounted earlier on. >> i think the hope was that inventories would clear out in time for the olympic. fall items would be able to sell full price. in the end the sales have just been stretched out. >> the retail sector, what do you think, patrick? >> if you look at the consensus number you're getting 10% earnings growth which looks quite good but a big chunk is coming from margin expansion and that's contradictory to what you were pointing out. if you have to slash prices to move goods you can't have the margin improvement to move stock
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price. >> we've got -- we've had h and m looking at sales as well, another clothing retailer. what's happening with them? >> so h and m are the fast fashion group has been doing really well. they have been the outlier. h and m comp same store sales were up 2%. extra impressive concerning germany is their largest european market and the data there was down 3% for the month. so it's all about value. low price points and newness. these fast fashion retailers continue to bring in new items so every time you go in there's something fresh to buy and that's really hurting the rest of retail. >> and you've got other retailers with exposure, abercrombie & fitch. >> abercrombie & fitch has been a disaster. the london flagship store is huge here and you've seen sort of a declining trend. same store sales were down 26%
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internationally this quarter. part of the issue is not only do they not have a lot of newness they didn't promote. they do not put items on sale here which is a mistake when everybody else is 50% off you have to get in the game. you can't maintain full prices. >> is that just a global policy for them? >> that's a uk stance. in the states they promote. >> that's interesting, isn't it. i went to one of their stores. so dark i couldn't see my way around. >> that's the point. they don't want the parents to know what the kids are buying. >> make it very hard to see. thanks for that. walmart reports second quarter results at 7:00 a.m. eastern speaking ref tail. the world's largest retailer is forecast to earn $1.17 a share on revenues.
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walmart sales are expected to be driven by price cuts as we were discussing and wider variety of merchandise which could boost growth. >> meanwhile uk car production jumped 22% in july brings the year-to-date increase to 15%. according to the motor manufacturers and traders. it comes as continental european automakers are struggling, they cut jobs, closed the factory in france and renault reported weaker earnings because of the downturn in jump. how much is the ukking a bright spot. for the first time since 1976 britain now exports more cars than it exports. joining us for more is auto analyst at ubs. thank you for joining us. extraordinary success story. in the early '80s there was no auto manufacturing sector in the uk.
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what's changed? it's all foreign automakers. the japanese manufacturers. i guess bmw with mini. >> what's interesting is manufacturing has disappeared in the uk in the '80s so the industry virtually disappeared. no one wanted to invest. but engineers have been strong in development and brands. jaguar and so on. it's phenomenal. >> is there a lesson here for what's happening in the uk for what maybe needs to happen in continental europe? >> first thing it is a brand business in the end. clearly we've seen, your don't create brands in autos. you have them our don't. you saw with china brands matter a lot. so if you have a brand and able to revive it, it's fine. if you don't have a brand it's an uphill battle. >> you have to have quality. >> cars are good every where. you don't find lemons any more.
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your brands are different. also your competitive business. the mix of cars in uk are high. gm workers have made a deal with gm to make their plant attractive. there's flexibility here. >> is that the point? is that -- why are so many foreign manufacturers basing their european production -- asian manufacturers basing their production in britain and not anywhere else. >> you have cost scale and labor flexibility and you have reasonably competitive labor costs as well and currency is less of an issue because if you're bmw your purse is in euros you don't have a currency risk. >> if there's a big discussion here about whether, what britain does with its relationship with the rest of the eu. if they decide to loosen that
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up, would manufacturers reconsider their investment in this country? >> cracking the eu definitely but before we question free trade within the eu we have a long way to go. that's not too much of an issue. >> with baulgd brand with quality quite consistent across the whole industry, engineering, technologies very similar around different countries what's the competitive advantage that the uk does bring to creating a brand if that's until perithe i value? >> there's winners and losers. brands people aspire to. you don't aspire to renault in a way you aspire to a mini. you don't aspire to a ford. that's very difficult because we've seen a few times to create brands and they have no -- reviving a brand succeed the rolls royce, mini, creating brand is smart.
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one brand hasn't caught on in germany. >> it's hard. >> exactly. >> to what extent financing is playing a role here? the availability of auto financing is one bright spot and almost globally to the point in which people are talking about subprime auto loans. what's your view of that? how much is that helping support auto sales? >> free money is a big driver. >> no kidding. >> we've had years of it. the problem is of course it's not done any more. loits. that's probably to support car demand. so that's an issue. when rates go up if they do go up we'll see negative indications. >> a big recall of chinese cars in australia because it's been found -- >> speaking of london. >> will the chinese ever manufacture a car that's going to be able to compete on the global export market in a big way? will americans and europeans be
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buying large chinese produced cars? >> it took the japanese 20 plus years to become globally competitive. the koreans did it in ten years. the chinese are players. the difference in china is a lot of industry and successful part of the industry is partly foreign owned. the ingrown car industry is still very weak and looking to be successful with exports. the technical gap we see around the world between the better cars and the less good cars is very narrow. >> the internal market, maybe if you crack that. thanks so much for that. just a reminder about our trade link series. every week we look at how the financial crisis is affecting global trade and the impact on how you do business. it airs on mondays at 10:50 central european time. and you can go to
4:43 am >> in japan we're seeing a shift in investment strategies for young and old. we have this story live from tokyo. >> reporter: hi. several japanese companies such as hitachi, toyota motor are shifting their assets from equities to bonds. on the back of the country's ageing population corporate fund assets are falling short of future payouts. therefore they are moving to safer investments. hitachi increasing investments in public bonds in the past year lowering its stock assets to 7% from 9% within its 1.3 trillion yen pension fund. ntt which unanimous nags some $25 billion in pension assets hiked its government bond assets as well. a lacking future pension money is also driving young information diversify their
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assets. one popular choice is gold. apparently as a hedge against fluctuations and other risks. according to a major seller of precious metals, customers who buy gold for their savings are in their 20s and 30s. back to you. >> picking up on that. talking about the shift increasingly out of next to bonds for japanese pension funds. how much of that is a play globally in terms of the low yields we've been seeing. >> that's a big driver of regulations, pension funds forges them into bonds. liability driving investing. and i don't think pension fund a locators view these bonds as good value. >> the regulator making them as bad investments. >> they are encouraging them to. they are not forced to.
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they are on the line to be forced to buy these. bonds with sub inflation yields will be destroying the value of these pensions. >> still to come -- >> bordeaux. >> we'll find out how the wine producing company is faring amongst the current economic conditions. >> we'll be right back. ♪ ♪ ♪ ♪ [ male announcer ] at&t. the nation's largest 4g network. covering 2,000 more 4g cities and towns than verizon.
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rethink possible.
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we continue this week's indian series. worsening economic conditions have made many global investors wary of india but there are some signs of optimism. the country's new finance minister said he's working on a series of steps to boost confidence. stocks have gained ground since his appointment two weeks ago. data showing net buyers for every single session this month. the interim ceo has been speaking to cnbc and said it's undergoing a period of reinvention. >> gone down in the last eight
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years. and one of the primary reasons was that they did not handle this market. only in the last three 0 four months the derivative markets have now reached a level of 35% or 40% of the global market share in india so you can see that the bse has a huge environment and once it was started so while we think that -- it will continue what we call ourselves and sort of experience, so for us we are kind of reinventing ourselves and we think we have a good set of products, technology is up to
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attract a lot going through bse. >> will there be a new ipo or new listing from you guys soon. >> bse is considering ipo. when bse came from a broker own to broker run entity to a corporate entity in 2005. it was part of the scheme. it was approved it lists. now that regulations are in place bse is looking to list itself. >> what kind of a time frame are you looking at? >> we started working on the ipo and it should basically, depending on various formalities that need to be completed eight to 12 months time we should -- we hope to list ourselves. >> you've had some pretty high-profile investors coming in to the bse, george soros is one of them. how has that changed the culture
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here at the bse in terms of transparency? has hit an impact at all? >> basically puts us in the same category as any other listed companies. we do have investors on a regular basis after each significant announcements. we do have small investors, large investors we're putting in place. so, in fact, the way -- over the last three years since new management has come in we've basically ensured that slowly and steadily we forecast the company and the strictest standards of accounting or corporate governance.
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all right. more to come tomorrow in that series. right now it's going to go talk france with its climate. it's no surprise that bordeaux is one of the world's leading wine producers. has it benefitted from the popular alternative investments. we take a look. >> reporter: it's the most famous wine grown region in all of france, and there are 14,000 wine producers with 14.5 billion euros in annual revenues and one in six people work in the business. we're in bordeaux, the fine wine capital of the world, boasting internation internationally recognized names. for the longest time buyers from all over the world were ready to pay top prices in thousands of euros but recently they no
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longer sell at premium prices. >> the market is today showing all signs of extreme stress. the bid off ratio in the market is at loss. spread at historic highs. and returns on wine investment over the last five years are near historic loss. >> this year's harvest isn't helping. >> the quality of the vintage will be nice, will not be great. i'm not sure the price will be skyrocketing like in '09 or '10, you know, because the world is not doing so well. >> reporter: compounding the hang over for growers is a slow down in chinese demand. in 2011, bordeaux exported 58 million bottles of wine worth 300 million jours to china. that's a growth of 100% and unlikely to be matched. china and hong kong now make up
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bordeaux's biggest export market with 35% share and if buying bottles isn't enough all the chinese have recently even bought entire wineries and wine trading firms. they benefit from the thirst for their fine wines from the far east but what demand pattern has changed. >> the chinese are not buying the same. i think they are very clever. they have a fashion for bottled wines and in the beginning they bought anything, small bottle, not very good and the big names. >> reporter: so even if the chinese buy less expensive bottles the owner of this winery still believes that the glass is half full. >> now we understand there's life behind this so it's great
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with courteur in food and beverage. for us it's pretty good. >> reporter: the chinese middle class is evolving too. >> the consumption develops. people buy wine, learn to drink it, under it and they move up the price, price scale ultimately benefiting the very top end. >> reporter: luckily it doesn't all depend on chinese demand. because after all the weather always has the last say. >> and there are worst places to be than this time of year than in bordeaux. caroline joins us now. caroline what will happen with production this year? we heard there on the report prices, you know, it's an okay season but nothing special. >> reporter: yeah. it's a mediocre harvest season they would say. picking doesn't start until next month or so and then it wraps up sometime early october. so this year's harvest will be
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so-so, not great but then yesterday it rained but they are a little more optimistic because over the seven days they expect nice weather. that's great for the grapes. you realize i know a thing or do about bordeaux wines. they are more hopeful now but the question is, is now the time to invest in wine, in fine wines from bordeaux and some analysts told us look maybe the market hasn't found the bottom yet especially because of uncertainty about the global economy, because of the buying, the change in the buying behavior by the chinese but also by the americans. back over to you. >> caroline, thanks for that. if there's one region you want to get to know is bordeaux. >> maybe this could help support buying the early ervin tags. i know nothing about wine. >> what should be the key plan for investors from here? >> what we're doing right now is all of our equities have performed very well. our themes are working very well.
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we're not inclined to sell our position. what we're doing is shorting indices that are at risk. >> russell 2000 even though it out performed. >> it's trading at 20 times. large caps is trading. 15 times future earnings for next year's earnings which sounds okay. that's based on 25% earnings growth. no way that will be achieved. >> if you're right that's a cautionary sign for the market broadly. >> that's our worry basically. we think the market will not deliver spectacular returns. got stagnant growth in the west and we're looking for companies that will participate in the global rote. >> patrick, thanks for that. we'll take a short break. still to come, plenty more to woman on "worldwide exchange".
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hello and welcome to today's edition of worldwide exchange." i'm kelly evans. >> i'm ross westgate. these are your headlines from around the world. inflows into china slowed further in july might jeopardize china's 10% trade target. >> cisco reported better than expected earns. john chambers more upbeat about asia. >> world's biggest retailer reports second quarter earnings two hours from now. analysts expect walmart to benefit again from low prices. >> samsung ratchets up its tablet war launching its galaxy in three continents as a judge
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calls for peace. time to check in on how u.s. futures are trading as we gear up for the u.s. open. a green picture for the most part but the moves aren't very large. dow jones industrial average implied to open higher by eight points. nasdaq adding four or five points. s&p 500, 1404 is the level for the s&p. people are watching for their buy and sell sign. let's look at the mood across the globe as we turn now to the ftse global 300 just barely negative down 0.01%. we gave up gains all morning but a slow melt to the down side. european markets giving you a sense of what's happening across the continent. ftse 100 shedding .11%. retail sales data much stronger
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than expected, stronger last month as well in june. xetra dax down. cac down. ibex 35 bucking the trend, adding a third of a percent. >> bond markets are our focus. we got yields steady in spain but, 6.7%. we've been looking at the u.s. ten year. currently trading 1.819%. we got up to 1.8572. stronger tone across u.s. data, the industrial output, home building sentiment at its best for five years. keep our eyes on that. uk retail is better than expected. olympics had no impact. this is for the move july. most of the olympics was in august. interesting statement, many thought it would have a negative impact and better some where else. gilt yields as a result were also lower. 1.68%.
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certainly gilt futures sold off as well. as far as currency markets are concerned, dollar is up one month highs against the yen. the question is whether the dollar strength is a head fake or not. euro/dollar pretty steady at 1.2274, sterling has been boosted this morning. kelly. >> that euro/dollar not seeing too much of a move as we get the latest reed of coroner pi akroz the eurozone for july. that came in with a drop of half a percent. it was foirkd. up for headline 2.42%. the core fell 0.8% on the month. it's up just 1.7% from a year earlier. again a huge move there given that that was largely as forecast. let's take a look now on what's the agenda in the u.s. weakly jobless claims are out at 8:30 a.m.
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also we get the july housing start. expected to slip by half of a percent. building permits are expected to gain. then the philly fed survey. it was this time last year in august the philly fed survey showed that sharply negative reading really concerned a lot of people about the growth outlook. >> we got it earlier this year, the negative growth outlook. so now we're wondering, have we done the fear and now are things getting -- we feeling better about u.s. growth? >> goldman sachs walking back its expectations. now in the uk with this latest retail sales data same thing could happen. >> if we don't get any more qe is that good or bad? >> exactly. >> i don't know. you know -- >> we're back to can the market stand on its own. this debate we've had how many times? >> enough. everything goes around. china fears it may miss its 10% trade growth.
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more concerns about china's growth slow down has stirred up more talk about loosening monetary there. >> the slow down on investment inflows into china continues as breaking wages have taken their toll. analysts say it will add more pressure to the country's monetary base. there's no interest rate cuts from the central bank in recent weeks despite soft data. while mainland banks were facing tighter liquidity constraints, the people's bank of china injected $12 billion into the market this week, via short term reverse repos. this came as the chairman spoke about more room for easing. these market operations are loosening but others still expect another triple cut down the road. back to you. >> thanks very much for that.
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global head of g 10 forex at citi and joins now. given the weaker bout of data in china what currencies still look vulnerable? >> well, you know, i would think that it's, the euro is still vulnerable. even though the world is not growing really rapidly, what you've seen is, you know, the currencies are correlated with risk depending to do well. some smaller current circumstance some em. euro is not out of the world. there's a question mark on china. and commodities that are linked with chinese demand. and the markets debating whether there's any room to put a dollar long in there except versus the euro, against the yen perhaps. on the back of some of the stronger numbers that have come out of the u.s. >> we'll come to that in just a second. before that aussie/dollar is the
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best proxy for a china play on the currency markets. what your supposed to do? the australian dynamics have turned around. then you got worries about the china slow down. what do people do? >> well, i think they are buying. we're long the aussie. the idea is this that one you look across the g 4, u.s., japan, europe, uk, none of those economies are really attractive over the medium term. they have tremendous structural headwinds. australian numbers have held up nicely largely because a lot of the investment projects in australia are very long term. the fact that the world hit a soft spot middle of this year hasn't hurt it very much. they still, the rates argument is not what it was before but it's not as if anybody else's rates are that much higher. there's a sense that central banks looking around with their portfolio, top heavy in euros and dollars are trying to
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diversify into currencies that they have more confidence over the longer term. >> shrugging off, the aussie/dollar will shrug off that china proxy which it's had for quite a while. >> well, it won't shrug it off in case there's a complete collapse, if we go into a global worldwide slow down, australian dollar will fall very sharply just as it did in 2008 and as it's done once or twice since in the brief periods of confidence loss that we've experienced. i think in this world where, you know, market sees a little bit of growth, they see central banks, the fed maybe won't do as much quantitative easing on the schedule as expect ad month ago but very much oriented towards growth. there's lots of liquidity and stimulus and more clear that central banks want to see growth out there and that helps support currencies like aussie.
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>> policy easing isn't the solution for the u.s. and stimulus won't boost jobs. in an interview the well-known inflation hog put the onus on lawmakers and congress to end fiscal uncertainty. >> i'm indifferent as to who the president of the united states is. what i care about is whom ever is in the executive branch works with those that control the purse strings which is the congress of the united states and we finally get a grip on things. we haven't had a budget in the congress for this country for over four years. something has to be done. this can't go on. i blame both republicans and democrats so we need to change and reboot this process and i hope that whom ever wins the presidential election will get the congress to finally act. >> steven, what's your baseline view for fed policy action and how much has it changed at all in view of some of the better data flow we've seen? >> well, the dilemma we're facing whether or not to
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introduce quantitative easing, qe3 balance sheet balancing, the relative strong data has made it less imperative for them to do that. we've seen clearly ten year yields are back up to where they were at the beginning of may, a lot of sort of the froth in the market about how quickly stimulus would come has gone out. what the market hasn't loss and i think this is the reason that the equity markets are doing reasonably well, you know, they still feel that the fed is the big brother, you know, in the playground that's standing behind them in case anything slows down, they are not trying to tighten, all they are doing is saying you don't need our help yet so we are not giving it. >> steven, stay with us. >> video call on that dollar yen. >> cisco's revenues up. network equipment maker is boosting its dividend by 75%. just started paying a dividend
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last year. the ceo said u.s. orders picked up at the end of the quarter and big companies are buying but cautions europe is weak and might remain that want way for some time. >> i think it's going to get toifr before it get better. we have a great team in europe. our team will get everything that's available. we've seen stead gentlemen declining numbers in europe. we saw the reverse in asia and beginning to balance out in the u.s. >> after hours cisco stock up over 5% in frankfurt. >> if you want to boost the global economy it's time to bring back the three martini lunch. the economist making the rounds points out people can actually perhaps boost creativity and productivity at work. a drink may make employees more creative this despite the fact that most people are perceived negatively if they order a glass of wine on a job interview. what do you think? if you want to join the conversation get in touch with us by e-mail at
5:12 am tweet us at and as you just heard, we've been talking about bordeaux all morning and what's happening in that wine producing region, ross, and unfortunately we don't have any here on set for us to take part in. >> yeah. i think creativity might work. productivity at lunch time, wine probably dropped. imagine in l.a. saying i want wine and bread at lunch time. markets have been tracking positive sentiment in bond markets. which currency is the happiest of the lot. we'll get more into that when we come back.
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welcome back to "worldwide exchange". these are your headlines. walmart expected to benefit from low price when it reports second quarter earnings just two hours from now. >> cisco reports better than expected earnings and hikes its dividend. >> china says it may miss its trade growth target after fdi inflow slows in july. despair in the currency markets. that happens. steven england is still with us. steven, we were just talking about the u.s. for a second. dollar yen today is up at a one month high. quick question.
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is the dollar strength a head fake or substantive ahead of this economic better data we got, is it going to be supportive of better dollar move? >> i wouldn't say it's going to be supportive of a better dollar move across the board. against the yen tremendously interest rate sensitive so you expect dollar/yen to run up. and in the past it's been interest rapist sensitive whether interest rates go up for positive or negative reasons it doesn't matter. you know, against other currencies the dollar is actually not a currency that you buy when the world is getting better or when you're getting more optimistic about the world. >> i was thinking -- >> you buy other currencies. >> i was thinking particularly of dollar/yen, steven when i said that. >> the yen is the only currency that is more risk negative than the dollar. so, yes dollar/yen goes up particularly when it has support from interest rates. >> you call the yen the currency of despair and the canadian
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dollar the currency of happiness. does that mean you're long canadian and short yen? >> basically, yeah. what we've seen is that canada has done very well off the better economic data because a lot of it spills across the border. we talk about the better fundamentals. there's a little bit of rate support there. some expectations certainly the bank of canada looks much more likely to tighten ahead of the fed. you know, whereas japan has tremendous negatives and in fact one of the pieces we did recently suggested there was a brain drain out of japan because of the weak long term economic prospects. so, you know, whenever the world or global asset markets seem to be on the move i think the yen is not the currency opportunity in and canada is sensitive to "the cycle". >> all right. thanks for that, steve. steven england from citi. >> just like summer temperatures
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the heat is rising in politics. ryan faces voters in the swing state of ohio. cnbc eamon javers has been trailing the congressman as he crisscrosses the country. >> reporter: another grueling day on the campaign trail. we traveled with him. such a crucial battleground state going into november. both campaigns are going to be spending a lot of time here in ohio. one day after the battle is over, joe biden's remarks about people being put in chains and all the rhetoric that is your rounded that today we're seeing an increased amount of rhetoric around the question of medicare, who is trying to stroit and who is trying to save it, both campaigns battling right now to make sure that they can claim credit for saving medicare. why? it's so important in these battleground states like ohio and florida. senior citizen vote.
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paul ryan's budget plan has become a flash point for democrats to attack this republican ticket. he's here in thoi rebut those efforts. back to you. >> still to cobble the program we'll get a check on africa's financial sector. the standard bank joins us from eskimo hansburg coming up after the break.
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. standard bank has reported a 9% rise in first half profit this morning but shares slumped more than 3% after africa's largest bank warns over the year ahead. joining us now first on cnbc is ceo of standard bank. thanks very much for your time this morning. why do you say a lean year, lean second half the year? >> well, i think if you just look at what's going on with banks globally and we're exposed to many countries, it's clear that, you know, we're going through fairly difficult times, and so we definitely see that our revenue growth which was very strong in the first half, 15% revenue growth is likely to be substantially lower in the second half particularly in relation to the big cross border deals and so forth that we try
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to do in the areas of natural resources, commodities, infrastructure and so forth. >> what's happening on the cost side? because i see full year costs are rising. >> yes. we have continued to spend. i think we would love to have contained our costs to a lower level, but we are continuing to invest for our growth platform across the african continent. we've been hurt a little bit by hard currency versus soft currency issues which happens in a bank like ours, but the cross growth in the second half will be much lower but if it's the balance of containing costs but continuing to invest in your platform, standard bank is an investor and grower rather than a cost cutter. >> you talk about, you know, africa being such a big resource area. how much as what's going on there being impacted by big user of resources china?
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>> well, china is obviously critical to africa and we standard bank have a very strong link, in fact, a share holding link with industrial and commercial bank of china's the biggest bank there. there's a lot of chinese activity on the continent and we are tapping into that. we have chinese relationship managers in all our banks dealing with the smaller chinese traders and so forth dealing with the mega projects as well and we hooked up our systems to hook up with systems to make it easy for the big chinese corporate. so i think, you know, it's clear that china is a growing force in africa. generally a force for good. >> if we now see weaker trade data, weaker foreign investment into china your seeing that filtered back through then into the businesses in africa? >> only marginally. i think we all have to remember that china might be slowing down but the absolute numbers are
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still very, very big. having said that i think china sees africa particularly strategically, they've done so many things that puts africa sort of at the forefront of their international agenda. so we don't really worry too much about that. clearly significant declines in commodity prices, if that were to occur might hurt a number of the key countries for us significantly. >> what opportunities do you see in this market either in terms of value, acquisitions, lines of business where others have been impacted by a lot of these global headwinds you're referencing? >> well, we would not be interested in acquiring or doing transactions in europe. we very much focused on our core strength which is africa and links into africa from the brit countries. so we have found that there are certain lines of business where
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perhaps some of the big european banks were competing in the past that they are no longer doing so. so we're picking up business in that way. but always on the look out for acquisitions, but at the moment, you know, our focus primarily organic and capitalizing on our strong position while a few others have their eye on the ball. >> can you find turns, briefly, that are in africa that are shielded from the rest of the global economy. how much can you find investments that are divorced? >> well, everything is involved with the global economy ultimately. but i think because africa's banking opportunities and even many of the african economies are still fairly basic, it's basic banking, it's not complex banking, much of the international trade is fairly straightforward, export, minerals and commodities. you're not as directly linked to
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what's going on in the developed markets of the world. there's a slight insulation. in the long term you do find that the growth rates of the african countries will be slightly lower. but africa is growing, second fastest growing region in the world after asia at the moment. >> good talking with you today. thanks for joining us. sticking with financial sector, seven major investment banks have now received subpoenas from u.s. state prosecutors investigating the alleged rigging of libor. jpmorgan, deutsche bank and barclays are among the banks most recently subpoenaed in a int investigation by attorneys general in new york and connecticut. rbs and hsbc were sent request for documents. citigroup and ubs previously disclosed they were being investigated. >> still to come u.s. retailers deep into the key, back to school shopping season. are consumers willing to dig into their wallets and spend. we'll bring in an analyst to
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talk about the health of the sector in just a few moments. >
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hello and welcome to today's edition of worldwide exchange." . i'm kelly evans. >> i'm ross westgate. these are your headlines from around the world. . >> second largest retailer expected to announce revenues. >> cisco report better than
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expected revenue. still pretty cautious on europe. >> samsung ratchets up the tablet war launching its new galaxy note on three continents. judge calls for peace between korean tech giant and apple. >> china may gentlemen paradise the -- jeopardize their 10% annual trade target. let's check in on u.s. markets this morning as we gear up for topping. green arrows across the board. not huge moves. dow jones industrials average implied to open higher by ten points. nasdaq looking to add six. s&p 500 trying to add a couple of points, 1404, the level on the s&p. added everything from 1395 level to the down side to 1407 level to the upside. people will be watching trade.
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ftse global 300. we've seen now down .0.02%. european markets a little bit of a mixed picture. uk ftse 100 down .15%. xetra dax barely negative 6945. ibex 35 continues to add to its gains this morning, the out performer and that should make you cautious today. >> we'll see how we go. how are you supposed to make money in these fairly flat low volume markets. here's what's the experts have been telling us today. >> i do think that those yields will be maintained at very low levels because of the safe-haven concerns. there are other risk concerns, eurozone crisis, risk of china hard landing and period of uncertain ty, u.s. assets in
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clu including equities. >> don't have any direct position within china. we've got companies that are geared towards emerging market consumer, towards the asian consumer. so louie vitton, coca-cola, companies that are domestically domiciled. >> the economy looks okay, better than average. politics looks better than average. and that's causing a lot of investors, americans and non-americans to wish to buy the dollar. well we're in the dog days of august and that means u.s. kids will be heading back to school soon and it also means stores should be a bit more crowded as parents stock up on clothes and supplies. the national retail federation predicting back to school sales will rise 14%. just yesterday target boosted its full year outlook noting a
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positive outlook for back to school supplies. joining us more from new york is ceo and chief research overseas. dana, good morning. 14% figure from the national retail federation is one of the stronger ones we've seen. news are quite mixed going in the back to school season. what are we learning? we're in the midst of our back to school shopping and what we're learning is it continues to happen closer to the time that the school in the region starts. and then when we get in that region, like what we saw just the other day in chicago, you'll begin to see a little bit more promotion. the key item that's being promoted is definitely denim. but overall there's enough newness for back to school that the month of august should be a little bit better than what we saw in the month of july. >> what your looking for? what's your forecast at this point for a season as a whole and what sectors in particular stand to benefit? >> my overall forecast for the back to school season is for a total sales gain of up to 4%.
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i think on same store sales it will be low single digits anywhere from 2%, 2.5%, something within that range. the winners for this back to school season will be american eagle outfitters. it will be the off pricers like t.j. maxx and ross stores. some department stores will be winners like macy's and we'll see some other teen retailers or other back to school retailers like limited with the pink department being quite big and old navy is a destination for back to school. >> we've seen some of the teen retailers like abercrombie & fitch not doing well. at the same time i guess it comes down a question of which companies are executing well versus which parts of the marke looks more vulnerable. last year women's apparel was a bright spot. any notable outperformers this year? >> on the women's apparel side,
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ann taylor and chicos are outperforming. the women's retail secretary jortor is how do you make your weekend wardrobe and work wardrobe combine. those should outpace other women retailers. >> how are stores managing their inventory at the moment? >> i've never heard more retailers talk about reduce, retrench. i think they are going into the back half the year, getting inventory levels even leaner than they would have thought three months or so ago. the pause that we had in may, june time period made all the retailers plan more careful lly for holiday 2012. >> that mean that there are more sell outs of merchandise but also could be giving up some sales. inventory a tricky story.
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but dana will be staying with us. still to come on the program, samsung launches latest challenger to apple's ipad. will the new galaxy lure consumers? we'll get a view on that next.
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. okay. one of the questions been asking today is it time to bring back the three martini lunch or the
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three gin and on theic lunch. job interviewees are less intelligent if they have a glass of wine at a lunch interview but recent studies suggest a brink makes employees more creative. we've been asking do you agree or not. join the conversation here on "worldwide exchange" and get in touch with us at or go to @kelly_evans or @rosswestgate. creativity would work but productivity takes a big dive. >> people pine for the old days the way they used to have things. perhaps it's time to bring it back. you and i can try that out next week. a warning here from the bond market as well. the ten year treasury yield, 1.81%. it wasn't so long ago we were down at 1.4%. it's not so much a warning
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unless you were short that move but in any case it doe underscore the turn in expectations. 30 year, this morning we have the prices rising and coming off a little bit. talking more about the move we've seen over the last couple of days. we're still 2.9% on the 30 year. well shy of the highs the year. it was almost 4% back in mar. the only place where we're seeing yields move higher is in the three year. shorter term sector up to 0.42%. ross? >> just a remind terrify headlines today, walmart is expected to benefit from low price when it reports second quarter earnings just two hours from now. cisco also reported better than expected earnings and hiked its dividends. >> china says it may miss its trade growth target after fdi if flow slows in july.
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u.s. judge wants apple and samsung to make at least one more effort to settle their bitter dispute ahead of next week's ruling. the two tech giants have been locked into a patent battle taking them to courts all over the world. in a move to take on apple's ipad samsung is unveiling its new galaxy 10.1 note in the u.s., europe and korea simultaneously. this simultaneous unveiling tells us quite a lot about the effort samsung is making to strike back at apple. >> that's right, kelly. samsung obviously is betting big that the galaxy note 10.1 could be the game changer that eats in to apple's dominance into the tablet market. to put things into perspective a 16 gigabyte wi-fi model costs $199 but offers what the ipad doesn't pap stylus s-pen to let
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users write and sketch and you can run two applications on the same screen divided in half. this product comes three months after the second version of samsung's galaxy 10.1 and in the coming months samsung is expected to release a new tablet running on mcht's new window os. while apple has a 7 inch ipad lined up samsung is offering a wide range of products in various sizes. it's a hybrid between a phone and tablet was the 5.3 inch screen so more than 10 million units sold since its debut in october. samsung has a lot of catching up to do. their market share in the tablet world sits at a mere 10% compared to apple's huge chunk of 65%. just want to get a quick thought from dana. consumer electronics being such a strong kind of emerging sector for the u.s. consumer here over the last decade or two, what
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difference is that making to the way that other retail purchases are happening? even this year back to school season is buying the next ipad, taking a bite out of people buying school supplies or clothes. >> overall consumer electronics are definitely having the key items in technology that students are using for back to school and what we're seeing overall that high ticket nature of that purchase impacts the amount that they spend on other items. so whether the growth rate of consumer electronics may not be as high this year as it may have been in years past there's enough new items with all the new ipads, all the new smart phones that it's part of everyone's budget. >> it does get people into the mall. so many people go in to look at the apple store. maybe they stick around and do some shopping. >> absolutely. dana, stick around for a little bit more. she's still with us.
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bordeaux is one of the world's biggest wine producing regions. how is the city benefiting from one of the most alternative investments. caroline has been taking a look. >> reporter: very important to this region the wine industry employs one out of six people here. also there are some 14,000 wine producers around bordeaux and they have annual revenues of more than 14 billion euros. hong kong and china has a share of 35%. over the last year there's been a huge slump in prices for the so-called first gross or premier and china is one part of the explanation because they are becoming more sophisticated in their buying and selective. there's the slow down in the global economy and for the u.s. markets it may also be politics. take a listen. >> we've got americans, in '09
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would have bought my crop. in '11 they bought but very sloslo slowly and small quantity. 2012 not very good because they have other things in mind and the drink the seller not the new vintages, i think. >> reporter: but i should point out that one of the biggest price determinants is the weather. this year it's mediocre. the weather was bad yesterday. but the weather forecast suggest as strong finish to a mixed year. >> caroline, i'm not worried about the investment side. i know i should be. but as long as it's good now drink, can you put a few cases in, you know, you going to drive back to london? >> no. oil bring you a couple. only the best one, course. >> that's very nice if they are the best ones. it's all pretty good down there.
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what a great place to be. >> i would take any of it. still to come, walmart weighs in on the health of the u.s. economy and consumer. i want reports second quarter earnings in just about an hour's time and we'll preview those numbers next.
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the king may be dead or is he? his memory still lives on. thousands of people showed up last night at graceland for a candle light vigil to mark the 35th anniversary of elvis presley's death. the vigil became an annual event at the start of 1980. elvis died on this day in 1977 at the age of 42. but his empire continues to grow. he's ranked second on the forbes list of top earning dead celebrities last year just behind his former son in law
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michael jackson. speaking of earnings, cisco's fourth quarter profits rose 56% and revenues by 4% which topped forecast. the network equipment maker is boosting its dividend by 75% and it just started paying a dividend last year. ceo john chambers says u.s. orders picked up at the end of the quarter and big companies are buying again but causetions europe is weak and could remain that want way for some time. >> i think it will get tougher before it gets better. we have a great team in europe. we still see steady declining numbers in europe. >> cisco shares up more than 5% in after hours trade adding 4.6% this morning in frankfurt. >> i'm sure i saw elvis at the closing ceremonies in the olympics. applied materials fell. results were still in line with forecasts but analysts see an
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even deeper slow down lowering its fourth quarter outlook. customers are really holding off making investments in new factory capacity until they really get a sense of what the buying pattern will be into the holiday buying season here. but in talking to our customers, we're quite confident that we'll see a rebound in rq1 which starts in november. >> down nearly 4% for applied materials in after hours. only down just under 2%. >> let's turn our attention to trading agenda. weekly jobless claims are out at 8:30. at 8:00 we also get july housing starts. they are expected to fall half a percent but building permits are seen higher. at 10:00 a.m. august philly fed survey. that one falling quite sharply in august a year ago. >> you are serious about jobless
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claims being your favorite? >> i'm quite serious. >> you think that's -- >> it's not a bad one to have. >> take a piece of economic data with you, take jobless claims. >> walmart is also pretty good economic indicator. reports second quarter results at 7:00 a.m. eastern. walmart sales are expected to be driven by price cuts in a wider variety of merchandise could boost growth during the critical back to school shopping season. dana is still with us. walmart struggles were well documented almost two years, maybe more than two years of same store sales declines. is it turning the ship here? >> reporter: they had very good same store sales in the first quarter up around 2.6%. feels like this quarter, walmart stores alone should account for 2% with sam's club being out there with over 4, potentially 4.5%. question will be what was that
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sales trend and like you mentioned earlier, price has been important. the gross margin could be pressured by around 25 basis points as they invest in price. that $1.17 is so upper end of their price range of 1.18 to 1.19. how long can they keep sales growing? >> reporter: overall you can still take the hit on margins as long as you get the traffic in the stores. the combination that they have of some of the initiatives in place on the merchandising side is helping walmart, helping them balance out the discretionary mix and the ability for traffic to improve being the key. >> dana, are they going to go back -- they seem to change their strategy. they used to be every lay do price. they changed that. are they reversing that. >> reporter: feels like overall they are tweaking it, trying to
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find the right balance in order to keep the traffic going because i certainly see what you're saying, it seems like different seasons the pricing message can be different. what we're seeing right now is they are willing to be competitive in order to get the same store sales. >> also, we talked about back to school earlier. how important is walmart going to be today in giving us that sense of this season? >> reporter: i think we'll get somewhat of a sense. certainly more merchandise of general nature. but the health of their consumer during back to school and what they say about seasonal products will be watched very carefully. it's a bellwether for the back to school season. >> there's been focus of walmart being under more pressure than those shopping at higher end stores. are we seeing a return there. are you seeing a consistent read from others in retail as to whether conditions are improving or whether they remain quite difficult? >> we certainly have been
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seeing, whether it's target or the off prices like t.j. maxx and ross. we've been seeing a steady state of comps as long as theirs innovative mix in the product. as long as that's value in messaging we haven't seen a significant fall off. >> there's focus on the extent to which walmart was being erode by the dollar stores on one hand and big box guys on the other. are they effectively fighting back here. is this time to rotate out of those two competitors and back into a walmart? >> yes, we've been hearing about the dollar stores and the strength that they've had but so far whether it's five below which also just went public, it seems to be that this type of shopping, the dollar stores and walmart, they can co-exist. the new initiatives with increase on consumables is
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allowing them to have their slice of pie. we expect solid things. walmart is first up and their ability to show traffic gains from what they showed in the first quarter is a key to have a good day today. >> thanks for your time this morning. and as she mentioned what to watch for let's look at u.s. futures see how they are gearing up for the day. pointed higher by 12 points. s&p 500 just between those lechls that people are looking for stronger signals to sell. >> pretty flat session in europe today and that continues. ibex having the best up about a percent. >> that's for today's show. thanks for tuning in. i'm kelly evans. >> i'm ross westgate. coming up next, "squawk box". >> i'm not back until monday. >> put up with me.
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good morning. cisco beats the street and hikes its dividend, giving its stock a big boost. >> apple's next frontier, the company reportedly talking to cable operators about a set top box. and the market braces for more data on the labor market. we have those jobless claims numbers out at 8:30 a.m. eastern time. it's thursday, august 16, 2012. it's the 35th anniversary of the king's passing. "squawk box" begins right now. ♪ happy thursday and good morning and welcome to "squawk box" here on cnbc. i'm andrew ss


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