Skip to main content

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

4:00 am
welcome to worldwide exchange this morning. i'm kelly evans. >> and i'm karen. these are your headlines from around the world. >> ecb president mario draghi takes the spotlight. >> nokia shares continue to descend losing more than 15% in two days as investors turn their back on the phone's new hand set. >> it was the night of star power at the democratic convention. president bill clinton made a rousing talk about president obama's record. >> we speak to ford as they are
4:01 am
trying to get sales moving in europe again. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. okay. ross westgate is taking a well-deserved break. karen cho is here for a jam packed show. >> it's certainly a big day as we wait it out for the ecb. we've been waiting to see what mario draghi's going to be saying since late july. this is the big day markets are waiting. >> speculation increasing over the last 24 hours. we're also waiting on the bank of england decision. we've got another product launch today with amazon, perhaps another kindle fire coming. and then there's president obama's speech in new york -- or in charlotte tonight that everyone's going to watch for. he hints about economic policy as well. >> coming up on today's show we head out to south korea to a country that's economy grew at a
4:02 am
slower pace than initially estimated you we'll also get a reaction in sweden. we're live in charlotte, north carolina, ahead of president obama's big speech at the democratic national convention. >> we'll head out to a.m.ster dan with the ceo of ford motors. that's at 5:45 a.m. eastern time. mario draghi is set to outline the details of his bond purchase program later today. speculation is ripe as to whether the ecb president will deliver on his promise to save the euro while acting within the central bank's mandate. we're joined from frankfurt just outside of the evb building. sylv sylvia, there's been so much speculation. do you expect draghi has the majority behind him to move forward with the rumored plan we've been hearing about? >> reporter: i think he will have the majority behind him. i don't necessarily think it will go entirely without opposition. we heard from him last time, the
4:03 am
famous, as i say, infamous, unanimous minus one, minus one meaning president yenman. but by the same token majority would be enough. and the key words now are a conditionality and unlimited. mario draghi said, much quoted, we will do everything to safeguard the euro within our mandate. now we hear unlimited bond purchases possible. that's what's been leaked out as a framework, but sterilized. and only on conditionality that there is something like a bailout program or at least a memorandum of understanding for a bailout program. so there seem to be a lot of ifs and buts and little back stops in there. also we don't know which part of the yield club will be included. we are relatively sure the ecb
4:04 am
will buy itself but how far does that go? two years, three years, five years? so far they've really only attacked the really short end of the curve. that has its problems in itself because of course it means that the short end will come down drastically, but the long end might actually blow up. so very interesting to hear what mario draghi has to tell us about the details of the plan and another addendum to that is if they, indeed, go for widespread bond purchases, by the same token, they have to do something about collateral, especially for spanish banks, but that means they have to do it for all of them because a great deal of the bonds that they could be buying is already lying in collateral with the ecb. that would have to be freed up again. it's not an easy task and that might be the understatement of the day. >> that's for sure. silvia, thanks very much. we'll be back, of course, with sylvia. now we're joined by derek
4:05 am
halpony at bank of tokyo-mitsubishi usj. derek, welcome. what is the more important phrase of this rumored ecb plan for you? is it the unlimited or is it the sterilization? >> well, you know, they say it's going to be unlimited. i'm not sure president draghi's going to use that word when he speaks this afternoon. you know, for me, the crux of what the market's angst and concern is is the fact that, you know, we still have very evidenced opposition from what is the most crucial central bank within the ecb. >> but all the ecb needs is a simple majority. the germans can oppose it, but if enough of the rest fall in line it doesn't matter. >> sure. it's clear they have the majority. you know, we've been given the signal for the last couple of days. we're going to get a plan today
4:06 am
for sure, but i think going forward the important point to make is are the markets always going to be fully convinced that the ecb will be there aggressively and with a willingness to purchase in unlimited quantities. i'm just not could be vinnvince. let's be realistic here, this is by far the most important. >> again, perhaps one reason you said, one reason, karen, why we didn't see more of a strong, sustained positive reaction to the leaks of the news. >> there's been a whole bunch of politics playing out in the back drop. the reports that came to bear last week said he might have been considered resigning, the head of the bundes bank. the ecb has been getting its chiefs lined up. they managed to conquer some of the bundes bank opposition. do you think there is some opposition where he can arrive where he's not financing
4:07 am
government, he just targets the short end of the curve? >> again, that's all being told. i do struggle with why three years? we can purchase bonds up to three years. >> it's because if you target the short end of the curve you're still keeping governments on the hook. if they don't get the performance in place in time then the bond markets will move against them in long term, particularly on the ten year. this isn't just the point. >> they obviously don't want to come in and purchase up and be willing to purchase along with the entire yield curve. the point i wanted to make is they're saying state financing only takes place after three years. to me, why three years? why not four, why not five? i'm not sure the markets really buy that. i think going forward there is still going to be the bundes bank influence. what i think is important is ascertaining how this plan becomes successful or not, there will be a constant toing and
4:08 am
froing from the willingness of the ecb and the perception of the market of how a country is sticking to the conditions as they are set out. that's going to be the focus of the markets, to become convinced whether or not the ecb is there in unlimited amounts of purchasing. as i said, i just think the influence of the bundes bank is being downplayed by the markets. they're saying it's only one central bank. it's by far the most important. the plan is i think potentially going to disappoint market expectations. >> other things that may disappoint because it's not just the bond buying plan we're going to hear about today are potential rate cuts, deposit rate, refi rate. what's your view? are we going to get a 25 basis point cut today? do we have to north to support risk in the market? >> of course, the whole reasoning behind the bond buying plan is that the monetary policy
4:09 am
mechanism has broken down and we heard a month ago that the timing was not correct for a rate cut. very interesting. it wasn't about the conditions that were warranting it, it was simply the timing wasn't correct. i think the timing today is correct and we will get the updated forecast. so from a fundamental monetary policy perspective i think there's strong justification for cutting interest rates. the markets are sensitive that there probably won't be a move today. i think that could get in the way of the bond buying program. that's the logic of the market. but simply from a fundamental perspective given the forecasts will be updated today and given the contracting private sector credit, i think there are strong reasons for cutting interest rates. >> we'll see if they do. derek will stay with us for the rest of the hour or at least a half an hour. let's move onto the other side of the world. over in japan, they say they remain vulnerable to china's
4:10 am
slow down but the bij governor left no room. he cautioned expecting too much from the banks. the governor did weigh in on the issue of bond buying foreign bonds. he said the move is similar to a 4 x intervention and it will force the government not the central bank. they nixed rates on the 18th and 19th. elsewhere, south korea's central bank is under be more pressure to ease. we'll explain live from seoul. >> hey there, karen. the country was in fact a dumb whammy today. second quarter gdp growth from the earlier projection of 0.4%. goldman sachs slashed the country's outlook assigning weak exports as well as private
4:11 am
consumption and speaking of domestic demand, korea's department store sales fell for a third straight month in august with discount store sales falling for a fourth month in a row. the bank of korea says a recovery is unlikely in korea and a slow in chinese demand. goldman sachs is also of the view that exports will remain weak. a lot of new stimulus won't bump up the economy. all of this has built a case for the central bank to slash rates by an expected 25 basis points next thursday. it will be its second cut in just three months. back to you. >> rhi, thank you very much for that. wanted to bring you a couple of slashes. the posturing continues. we're hearing from eu officials speaking about the broader concern about social arrest and the need for structural reforms saying it's important to protect the social model.
4:12 am
ec president is saying musn't conflate the crisis with a need to have reform. all of these statements are indicating the need for ecb action. barnier says eu banks should be capable of supporting eu economies. we'll keep you posted as we approach the starting of that meeting today. >> the anticipation is building. derek, i want to bring you back in here because there's been a lot of talk leading up to today's events that we might see coordinated action by central banks. it doesn't look as though the boj will be moving off the sidelines. >> he says the economy is in recovery mode. i think we're getting to the stage where that description is a bit of a stretch. we've had some poor industrial figures from japan and quite clearly the economy is losing momentum. my concern from that perspective is that the yen could be about
4:13 am
to embark on another phase of appreciati appreciation. we're in the midst of a wave of central bank easing, ecb, fed, bank of korea next week, we think the pbsc will cut rates as well in september. you can see this kind of coordinated action being taken, but i think the boj is being too cautious. >> the big word today is about conditionality and how you keep countries into account. if you look from the bank of japan, it's interested that they're talking about getting their fiscal house in order. japan is seen as somewhat of a safe haven despite the amount of debt that exists in the japanese system. so how soon do you think the boj or is this a change in language, do you think, by the central bank about trying to target the massive debt that japan has accumulated? >> that's an issue. we're going into another what looks like period of gridlock in terms of japanese politics.
4:14 am
of course the lgp, the opposition party wants and will pass the deficit financing bill in the upper house. essentially there's an inability of the government to issue jgb. that needs to be rectified or else the government will run out of money. it looks like after the leadership elections of the dgp and ljp, which takes place later this month, then prime minister noda will continue. what they're hoping is that it will be the end of the gridlock and progress. >> and it's going back to the currency if the euro is the new funding currency. that puts more pressure on the end. we'll get into more of that in a minute, derek. thanks. this is the tone of sentiment as we count down to the ecb. you can see there's green right across this. only a little patch of red. the stocks are 600 looking
4:15 am
fairly solid. a balance of .9%. many of the core markets have been tracking pretty firm as well. take a look at what's playing out in the u.k. the strongest gains we're seeing. the dax in germany, 1.4% on the boards. closely tracking behind the french market. the cac. the ibex in spain getting a run along. we have a balance of 1.8% early on in the session. in terms of what's playing out elsewhere, let's move on in terms of the financials. this stays in focus as it eyes what the ecb can be doing on the bond buying front. when looking for data from mario draghi as he's going to do whatever it takes to save the eurozone. the likes of the spanish bank, you can see we're seeing a bit of a return. bba up about 3/4 of a percent. some of these names getting an even stronger lift today from the likes of uni credit.
4:16 am
across the continent, deutsch bank is up almost 2%. we have gains through the likes of credit agricol. let's take a look at what we're seeing on bond markets. let's just look at some of these key levels because this is one of the points that energized the ecb to start talking about saving the eurozone, in particular the ten year, 6.29%. you can see we're still a long way away from the 7% mark that many out there had been eyeing. the italian market was up around 6% handle. it's now below 5.5%. gilt, 1 point. >> petros: 66%. i want to show you the two year spanish in particular, 3.08%. this started the session at around the 2.93%. the euro is creeping a little bit higher. there is a move out of the gate. the germans are sitting out pretty much on the flat line.
4:17 am
the italian 2.64%. as we started out the day, we were at 2.9%. there is movement at the short end. let's check on some of the asian activity and how they've been setting up for the ecb decision. asian market gained ground on hope that the bond buying program would deliver. the shanghai concept climbed 0.7%. the real transport sector in general rallied after making a proved 25 inner city rail projects. that could be worth $110 billion. the hang seng followed suit to end in the green helped by blue chip names. the nikkei held steady after five consecutive sessions of losses to end flat.
4:18 am
sharp shares retreated over 4%. moodies cut its short-term debt rating to junk. the kospi is up by .4%. this is after rising customer demand for phones. resources and banks in australia helped to post the asx 200 higher by .8%. linex shares rose. sensex is higher by .5%. >> want to bring you some news now on the commodities front. the fao out with its food price index. despite large moves, its index is unchanged in august at an average of 213. now that's still, of course, a high level. it did warn that world cereal stocks are set to decline
4:19 am
sharply. at the end of next year it's 503 million tons. that's a drop of 6%. it will support a tight market but one where headline food prices haven't surged beyond their already high level. >> we're going to go for a break. coming up, it hasn't started yet but there are disagreements in the lead up to the apec summit this weekend. is this a sign of what's to come? we'll be back in just a bit. at merrill lynch, we understand the importance of your goals. today, our financial advisors lead from a new position of strength. together with bank of america, they have access to more resources than ever before. a steadfast commitment to help you achieve your financial goals in life. that's the power of the right advisor. that's merrill lynch.
4:20 am
4:21 am
4:22 am
>> announcer: you're watching "worldwide exchange." welcome back to the program. well, delegates to the democratic national convention were up pretty late last night officially nominating president obama to a second term just after midnight. the roll call came after former president bill clinton gave a stirring primetime speech appealing to americans to stick with obama. clinton acknowledged many struggling people don't yet feel things are improving, but he proclaims we're coming back from the worst economic situation in generations. >> when we vote in this election we'll be deciding what kind of country we want to live in. if you want a winner take all, you're on your own society, you should support the republican ticket. but if you want a country of shared opportunities and be shared responsibility, we're all
4:23 am
in this together society, you should vote for barack obama and joe biden. >> president obama walked on stage as clinton finished his speech and the two men who haven't always gotten along embraced. obama will give his acceptance speech tonight but mother nature has dealt them a small set back. thunderstorms in the charlotte area have forced them to move their venue from the carolina panthers football stadium which holds some 65,000 people back to the time warner cable arena that only seats about 20,000. meantime, on the other side of the world there are already disagreements ahead of the start of apec meeting. lack of consent is around environmental tariff. they say they don't have high hopes at the summit. joining me to describe why is. >> mike: call son. you may have a point about the little progress being made. it seems the discussions have
4:24 am
stumbled at the first hurdle when it comes to the environmental tariffs. there is bickering over whether there should be inclusion. >> sure. this is what often happens. they get down to details. this is supposed to happen at the pre-meetings where they talk in great detail about some of these issues, but sometimes when you get to the very top you stumble. i mean, apec functions mainly as a venue to discuss issues rather than to solve problems, i think. >> so, mark, what could possibly come out of this meeting that could be market moving? >> i would think not -- not very much. it's unlikely it will be market moving. i mean, some of the goals are to strengthen trade and investment, to improve regional integration. they're talking about food security, innovation. those are all admirable objectives but you aren't going to get very far. what might make the headlines, of course, are things like
4:25 am
territorial disputes in the south and east china sea. i'm sure there will be some talk about that, but any resolution is pretty unlikely. >> mark, how difficult are the south china sea disputes which seem to be creating the same level of uncertainty across the nation prevending the trade relationships these are supposed to be fostering. >> they don't really prevent it. these are historical animosities. of course, they become quite emotional. of course, combined with the belief that there's a fair amount of energy resources around some of those rocks that also obviously attract a lot of countries to make claims on south china sea, but at the same time the trade and investment relationships, apart from apec, are so close now especially within the region and they're so dependent on each other with china in the middle of it, i think most governments will think twice about going too far. there's always the danger that
4:26 am
the emotions could get the best of them, but i hope not and i don't think so. >> i wonder, too, what the significance of this being in russia is. when you think of asia pacific, you don't think of russia. is this an attempt by russia to draw attention more broadly to its trade efforts throughout the region as it joins the wto or is there significance here that it's looking more eastward? >> well, russia is looking more eastward. what they have to offer now is pretty limited. obviously energy resources, but it still has a long way to go, including the development of the russian far east itself. however, as you probably know, president putin has set up a special bureau that looks at the far east and that's the objective. so this is probably a little bit early in their attempts to move forward in that area, but at least it sets an example for going forward as much as the olympics or another event does for many countries in the past.
4:27 am
>> thank you very much for joining us, mark michael son, vice chairman at apco asia. interesting to hear the comments from putin as he's sitting up for this apec meeting. he's talking about that they regulate the reoccurrences and protectionism and veiled trade rules instead of lifting barriers. kind of rich coming from russia, isn't it? >> yes. absolutely. that's i think one of the issues that needs to be tackled globally in terms of this crisis that we're in the midst of and it's probably going to last for a number of more years. ultimately global trade is a crucial part of the puzzle in terms of getting sustained global growth going again. from an asian perspective i think what's really, really important is this change in economic models that really, really need to take place across the region. china, there's a realization that its economic model hasn't served them so well over the last 10 to 15 years is no longer viable. we really need to see that shift
4:28 am
take place between export, investment driven growth, more towards internal domestic demand growth. that, of course, has consequences for the entire region in terms of how the inter linkages in trade between asia and china will go forward. >> they wouldn't mind chinese consumers driving more activity throughout the region especially as the developed world consumer stays somewhat on the sidelines. derek is head of global currency research at bank of tokyo mitsubishi. thanks for your thoughts. >> tune into asia's "squawk box" from the apec summit. we'll be speaking with the greek president of caterpillar and an hour later than that we'll speak with oleg deripaska. >> coming up later on this show, we'll speak to the ceo of ford as the auto giant unveils the growth plan for europe and some new models. that's all coming up at 5:45.
4:29 am
that's in about two hours' time. stay tuned.
4:30 am
4:31 am
>> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. welcome back to the program this morning. these are your headlines. ecb president mario draghi takes the spotlight as markets wait for details on a controversial
4:32 am
bond buying plan. rumors spreading of unlimited purchases. nokia shares continue their decent after losing money in the past few days. it was the night of star power at the democratic national convention as former president bill clinton made a rousing defense of president obama's economic record. and we speak first to the ceo of ford as the auto giant sets out its plan to get sales moving in europe again. let's take a look at how markets are shaping up as we get some help from mario draghi's key speech today. the ftse has put in some gains. the strongest gains across equity markets playing out on the german market. more than .3%. the cac in france and the ibex in spain putting a decent run ahead of more than 1.6%. indeed, we'll take a look at
4:33 am
how that's tracking across the bond market. no surprise, the ten year bund is seeing it move significantly higher, 1.49%. spain, italy moving in. 6.26%. 5.41% as people bid up ahead of the auction -- the spanish auction we're waiting for later this morning. ecb's key meeting. ten year gilt's yielding 1.67%. that's moving up this morning. >> if you take a look at forex markets this morning, euro dollar inching ahead to 1.2626. that's up .2%. the dollar is holding to the japanese yen, 78.41 on the charts. the australian dollar getting a bounce. this is due to local employment. you can see also great positioning ahead of the ecb. the bank of england looks to
4:34 am
hold back on any further qe ahead of its policy meeting later today. this has been the first for the replacements on the council. joining us is a uk economist at ing. this is an interesting perspective of what's going to take place not necessarily around any announcement. what are you looking for? >> yes. it's a bit of a nonevent since they're only halfway through the gilt purchases that they announced back in july. they're awaiting the fed. the dynamic within the bank of england is changing. perhaps it will be slightly less, but we have to wait to see the minutes of the meeting to see how that dye nnamic hashes all. >> they were talking about perhaps they should have done more to help out, there should have been more stimulus and he
4:35 am
should have pushed his argument for that when he was on the board. we have a new rate setter, ian mccafferty. we know recently that particular body has been calling for more economic stimulus. what position do you think he's likely to take? >> more of a mutual camp. certainly i would think he would be in the same sort of position as other people looking for more stimulus if the uk economy continues to suffer. >> there's been talk about export growth in the uk which seems to be one of the ways the economy can revive. is it your view that sterling's strength is a factor at all? are there any other reasons why export growth hasn't been so strong. giving the outlook for europe, brita britain's biggest trading partner, it will weigh going forward. >> it is a big issue. half of the exports do go to the u.s.a. they're looking pretty poor right now. even the core members are
4:36 am
clearly slowing. you have the u.s. economy suffering and asia is seeing slower growth as well. the export story is becoming more negative. with sterling having strengthened as well, that's really compounding the problem. so the whole idea the u.k. could export its way out of the recession is looking misplaced. it will have to be much more of a domestic story. in that regard, i guess it's a confidence issue. can we get business confidence up because that's where the money is? that's where 750 billion pounds of cash, if they can become more confide confident, more willing to spend that's the way the u.k. can start to see improvements. >> james, it's been difficult to get a read. we've had extremely bad weather. we had the queen's jubilee and the olympics. how is the market going to look at the qe down the track when they don't know how strong it is? >> it's not consistent either.
4:37 am
if you look at the gdp numbers, gdp levels and the growth, it's very similar to spain. yet if you look at what's happened to the spanish market, employment is down 3 million. in the u.k. it's down 96,000. so the numbers just don't tally. the u.k. pmi is is it far, far stronger than what the gdp suggests and far far stronger than the eurozone. that is an issue. it's an issue for bank of england as well. looking at what they've been saying, it's much more of a credit issue. if credit growth starts to improve and bank borrowing costs start to come down, then that reduces the prospect of stimulus. appreciate your time and thanks for getting us out to the boe. kelly. well, our next guest says the u.k. government must focus more on helping small businesses in order to get growth moving again arguing that small businesses and startups account for most of the economic growth and new jobs in britain. we're joined by doug richards
4:38 am
which helps small businesses get off the ground in our studio. doug, thank you for joining us. >> good morning. >> so tell us why you think it's so important that britain perhaps invest more in startups and what you're in particular trying to do about it. >> i think the economic case is pretty clear. if you look at the data over the last 30 years, almost all the net new jobs in western economies have come from young companies, startups. therefore, our growth as an economy largely depends on the productivity gains from new employment. a focus on anything but that is essentially not acknowledging the data to grow the economy. >> is there a problem? here's what i worry about a little bit, which is entrepreneur ship is a very sort of organic process. it's people identifying opportunities, want being to get out there, start things, have a great idea, etc. if governments in britain and the u.s. across the world start to channel resources, specifically into creating or to
4:39 am
giving money to startups, there does risk being an over allocation of catch to companies. you know how high the failure rate is. >> so the failure rate is high, and i don't think anything's going to change in that regard. that's because it's an inherently risky process, but i don't think we have to deal with an over allocation of capital so much as an under allocation of resource and a removal of obstacles. we have right now a record low number of companies being started. there actually in the united states has been a dip in new starts. usually there's an upswing in new starts in the recession. we have a very unusual recession going on here. i think it's largely driven by the origins of the recession, that it was a finance-based recession. this has rippled through in terms of credit into the economy and it's changing the nature of available capital resources for startups. although your concern is logical, i don't think it's what's happening right now. >> the number one concern people have about the u.k. is the proximity to europe. this seems to be the number one
4:40 am
issue. you can't do anything about the back drop. the government has pinned its hopes on programs like the funding for lending scheme. do you think this does anything to encourage small businesses? >> there's a couple of points in there. i completely agree that we have a challenge that our largest trading partner is the e.u. there's little to be done about that per se. but funding -- the lending for business scheme is a challenge in the startup context in a number of levels. first of all, that doesn't impact on the number of new starts or the capital for them. banks largely are irrelevant to the startup community and quite rightly banks shouldn't be lending to young, high risk companies thus making that capital available may help mature small businesses but it won't help young, new volatile businesses. it's the latter group that are driving the economy forward. it's irrelevant to the question at hand whether it's successful or not. >> what is the main thing you do with school for startup? >> that's a social enterprise that started four years ago. its primary task is to teach
4:41 am
people how to start a business and to then help them start the business because as you rightly pointed out, most businesses fail in their first year. >> that's interesting. you were on the popular british television show. isn't it true you're the only guy who didn't invest any money in one of these startups? that would almost indicate that even though there's a desire to help fund startups, you have to be careful you don't give capital to those who merit it. >> that would be evident by what i didn't do. in the second series i did not make any investments whatsoever. >> right. >> and i didn't make them because i actually viewed it as are they worthy of investment, and they weren't. yes, you can't give capital to people who aren't in a position to do it. this is hopefully something of an ante dote to it. most of the reasons i don't give capital is because they're not prepared for it. prepare them for it. >> it's a boot camp. >> it's boot camp.
4:42 am
>> doug richards is the founder of school for startups. we'll hear more about entrepreneurship in britain. thank you for coming by. all of next week we'll be focusing on the entrepreneurships and startups. staying in the u.k., prime minister david cameron has been speaking this morning on television in the past two hours. this, two days after reshuffling his cabinet ensuring the economy is still his number one priority. >> when you have to deal with 300 mps, huge challenges, it's important to bring new people on and new people in. you have to let some people go. i think it demonstrates that the government absolutely means business. i've told all of them the economy is the priority, whatever your job, whether you're in health, education, the foreign office, there's something you can do to help to grow and boost our economy linking up to the fastest growing parts of the world, turning out graduates that will make great employees. we're all part of one vital mission, which is get the debt down and get the economy moving.
4:43 am
this came under late trading. they might consider having a lower level on the frank. let's get out to carolin for more on this story. the swiss national bank. this is the anniversary of the 120th law. >> yes. definitely. today is september 6th. that means it's the one year anniversary for paying the 1.20. the swiss franc has stayed up just below that 1.20 level. i want to talk about yesterday's move because that was an unusually large move for the swiss franc. it fell .3%. the euro swiss is trading at 1.2051. the swiss franc falling by .1%. for the better part of this year they were trading below 1.2020. so that was quite a significant move. as for the reasons for this move. there he is a lot of speculation
4:44 am
as to whether, as you pointed out, the s&p may be raising the cap. that may be speculation that traders believe that the ecb's new bond buying program will finally be the effective one to calm the market and that would slow the safe haven flows into the swiss. whatever the reason is, we're certainly going to be watching the euro swiss here when mario draghi takes the stage today, karen. thank you so much, carolin. onto the airlines space. new alliance between two major carriers may trigger an industry rethink. matthew turner has this report. >> it's been rumored for months but today emirates reached a ten year agreement that will coordinate their plans. qantas will move to dubai. they'll fly through to the european destinations.
4:45 am
qantas will be between sing ga for and frankfurt and end its agreement with british airways. they've been looking for an alliance for some time. >> for at least a decade now qantas has been trying to do a big deal with a major hub carrier. this is the biggest deal we've ever done. this is going to be the biggest deal we'll ever do and it's with the best carrier that we could have done the deal with. >> neither qantas or emirate will take an equity stake in one another. they ruled this out even down the track. >> this is a very robust commercial arrangement. on a stand alone basis it doesn't require anything from either carrier. and, you know, we're looking forward to a ten-year relationship which will grow the business for both carriers, improve the bottom line for both carriers and continue to organize the game without
4:46 am
equity. >> qantas hopes the alliance will end some of the bleeding in its international operations which contributed to last year's first ever loss since privatization. qantas shares in sydney rallied on the news. back over to you. this story tells us something big about the fortunes taking place in the airline business. qantas one of the most profitable airlines for a long, long time. they would argue at press conferences back in australia that it just couldn't survive because of the amount of intervention that was taking place. they said it wasn't fair and the alliance today is basically getting into bed with the enemy. for a long time they saw emirates as the one to threaten them. >> if you couldn't beat them, join them. >> we'll keep an eye on their shares. matt talked about the reaction. i want to bring you some news on the hurricane front. we have now the first category 3 storm of the year. it is hurricane michael which poses no immediate threat.
4:47 am
it is nowhere near land. nevertheless, hurricane michael has become the first category 3 hurricane of the year. let's take a look now at what's on the agenda in asia tomorrow. live from russia. a day before the official start of the apec summit this weekend. cnbc is talking with richard lavin. we'll get data from asia and malaysia as you can see august sales figures. we'll break away from this to bring you the results of the spanish auction which we have been waiting for all morning. spain was looking to auction up to $3.5 billion of shorter term debt. we've seen a significant rally across the short end of the curve there. the results so far doesn't look like the yield has come through, but spain has sold about 700 million euros of 2013 bond with a two bid to cover. 1.5 billion euros that was larger than the last auction and
4:48 am
1.4 billion our rows bigger than the last auction. higher on the low tenor and before we get reaction from madrid, i would like to mention we are getting the yield levels through now. it looks as though spain for the shorter term, april 2014 bond is paying maximum yield of 2.946%. that compares with 4.8% on june 21st. what are your thoughts, stefan? >> well, the yields are declining. that's widely expected because we have the ecb meeting later today and that's the reason why we've seen in the last couple of days some tension easing from the spanish market. that being said, it's still a high level and it's still a problem for the spanish government in the long term. the spanish government will have also to face significant reduction in the next coming weeks. in the last ten days of october it will refinance 27.5 billion
4:49 am
euros, significant redemption. that's the reason why the yield -- high yield needs to be addressed before this significant redemption. the other story out of spain today, of course it's this meeting between the prime minister and the german chancellor, angela merkel. they'll seek german backing for the spanish economy. this is to make sure that they've got the full support from the german chancellor before asking for anything at the european level because it would be the worst case scenario if spain requests a bailout and germany blocks it, it would add the political crisis to the debt crisis in europe. we're not far anywhere from the political clash because so far spain has been a fight -- has been receiving pressure from france and germany. france would like the spanish government to request a full bailout to avoid the crisis of spreading, deepening, but germany is not ready to put more money on the table without
4:50 am
additional conditions and according to report this morning in a newspaper, the government doesn't want to accept any additional conditions for potential bailout, including, for instance, the intention. >> thank you for that. even as the game of political brinksmanship continues, i'll show you what's happening across the curve and the wake of the auction which did see yields come down significantly. the spanish ten year is now continuing to rally. the yield has fallen to 6.267%. the german bun which was selling off quite a bit this morning, that move continuing now. the yield up towards 1.5% level. we're going to go for break. still to come on the show, a surprise rate cut as the bank tries to avert the impact of the crisis on the economy. we'll have all the details next. ddd#1
4:51 am
4:52 am
4:53 am
>> announcer: you're watching "worldwide exchange." welcome back to the program. take a look at the dollar swedish krona. it has hit a seven-week low after they decided to cut interest rates by 25 basis points. joining us is pair magness son.
4:54 am
>> this was expected. >> yes, it wasn't really expacted by the market. the market was sort of fit to go into the meeting today after having had problems over the past week. speaking of the analyst, it was nonsense called for going for a rate cut. so i'd say it was a bit of surprise but not as huge a surprise as it would have been earlier a week ago. >> it follows some weaker manufacturing data yesterday. is there a sense that from the central bank that the economy there isn't holding up as well as previously thought? >> well, that's true and, you know, much data came out of sweden during the summer was very puzzling. sweden is a hugely export driven country and the rest of the world was coming undone. we were wondering how long can sweden keep up and it turned out
4:55 am
that it couldn't. so pmi data on monday also confirmed that sweden is now plunging into recession as well. >> interesting comments here because if you look at the expectations now around growth that the swedish have said, the 2012 gdp at 1.5%. this is up from the.6%. where is the growth coming from? it doesn't look as bad as some of the recent growth has expected? >> in 2012, it's not surprising that they've upped the forecast simply because the first two quarters were significantly higher than previously thought. that's sort of a legacy from the first half of this year. next year i'm very much in doubt that the swedish economy will deliver the kind of growth that they forecast simply because the riksbank will grow in the
4:56 am
eurozone and the tensions will go away and also that the swiss consumer has spending power. i don't think that's going to happen. >> no, certainly that picture looking cloudier, par magnusson, thank you for joining us. >> nokia and google rolled out their new phones. today it's amazon's turn to pull back the curtains. they're hosting an event at 1:30 eastern time in santa monica. they're widely expected to unveil a new version of the kindle fire tablet. other rumors have amazon possibly rolling out an apple like tv. or a docking station to transfer data from your kindle fire to your tv. nokia shares have continued their fall this morning after losing 13% in yesterday's session. the move started after the hand set maker unveiled the lumia 920 phone.
4:57 am
they said it was one step on a wider turn around. >> today's an important step in that journey because you see the second generation of smart phones based on the windows platform. it's an important step because we've had the opportunity to include some of the unique differentiators, photographic capability, navigation capabilities, things that we have not yet put in devices that are landing in these devices for the first time. so it's an important step but it's also important to realize that there are many steps ahead. of course, i know what's in the r&d labs that come next. it's one step in an important journey of going through the transition of nokia. >> little bit disappointing. the market had such high expectations. >> that journey is getting tougher. coming up on the show, we'll speak to the ceo of ford, alan mulally. that's coming up 5:45 eastern time.
4:58 am
4:59 am
5:00 am
welcome back to "worldwide exchange." if you're just tuning in, i'm kelly evans. these are your headlines from around the world. >> ecb president mario draghi is waiting for a meeting. and talk of the ecb action helped push spanish yields down. the treasury will fall significantly as the latest auction of sovereign debt. >> it was a night of star power at the dnc as former president bill clinton makes a rousing announcement about president
5:01 am
obama's record. >> we speak to the ceo of ford as the auto giant tries to get things moving again in europe. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. we're just waiting for some numbers to cross on the eurozone q 2 gdp numbers. let's see what we've got here. here we go. we've got the eurozone second quarter gdp unrevised at minus .2% quarter on quarter. at minus .5% year on year. the last estimate was at .4% -- minus .4% year on year. there is a bit of a retreat in terms of contraction in terms of the growth numbers. in terms of the forecast that we were expecting on that quarterly number, the market was setting up for a number of minus .2. the same set of numbers came bang on today for the quarterly numbers. as we mentioned, the yearly
5:02 am
number coming slightly worse. this sets up for the meeting today. mario draghi is set to outline the terms of his bond purchase today. speculation rises as to whether he will deliver on his promise to save the euro while acting within the central bank's mandate. they're providing their economic prospect. the chief economist had this to say about their forecast. >> certainly the euro area is slowing down and in a recession. the slowdown is also in the united states and in large emerging economies. the overall picture with respect to a few months back is worse. >> speaking of that oecd forecast which is just out, among the various details, oecd is predicting germany will shrink .5% in the first quarter. it still sees the economy growing. it warns about the fiscal cliff,
5:03 am
of course, that the u.s. is facing. talking about contraction though, the japanese economy is shrinking by 2.3% in the third quarter. it says fiscal tightening may push the u.s. economy into recession next year and that euro crisis is sinking global economic confidence. further action is needed on there. let's get to sylvia who joins us from frankfurt. she's outside the ecb there. sylv sylvia, a downgrade again to europe's growth. do you expect to hear more concern from the european central bank today? do you expect any of the measures we're did going to hea from them will turn this around? >> we'll get economic staff projections from the ecb as well. that's almost a footnote today. another modern footnote, one of the rare conveniences of jon claude yonker is taking part in
5:04 am
the deliberations today. he was asked before he headed into the meeting, there's a german expression, how do we get the cow off the ice. that's the rest of the occupy camp that's ravaging behind me. and he said, look, we're trying our best to get that cow off the ice today. we're going to lay the groundwork for that, but it's always difficult to get it but not up so easily. that's certainly one of the deliberations there. what do they do with the bond purchasing program? is that going to help? unlimited is the word on the one hand. on the other hand, sterilization. that is kind of a contradiction in itself. also mario draghi said we have to keep acting within the framework of our mandate. conditionality is the name of the game. do we need an official bailout plea from, let's say, spain or italy before the ecb can act. what do they do about collateral
5:05 am
requirements? do they have to lower them again to free collateral. untimely it may be, but the latest opinion poll shows that only 18% of the germans polled have confidence and trust in mario draghi to do the job right. 42% don't trust him to come up with the right measures. okay. 31% don't even know him. but he does have a confidence or a trust problem certainly as far as the germans are concerned. >> sylvia, have to mention what was going on behind you. can you explain, is it one guy outside the ecb? are there more people? >> there is the rest of the old occupy camp that's here in the shade of the ecb. maybe the cameraman can pan over there. the camp itself was cleared a few weeks ago, but there is a sort of core camp that's still entrenched here and the guy that
5:06 am
was participating in our little infotainment show was one of them. >> thank you for handling that so well. joining us now for more is managing director of market research and strategy at rubini global economics. what jumped out at you most from sylvia's discussion but i imagine it was some of the action going on offset. >> besides occupy, i think the main issues here are that the ecb is changing its game a little bit, right, because we're talking about unlimited sterilized bond purchases albeit with conditionality. this is different than collateralized lending. >> new, bigger version. >> but does it not basically amount to snp programs? if they're going to sterilize these purchases, there's no expansion. what net boost is there going to
5:07 am
be? what change is there ultimately going to be? >> technically there would be an expansion of the balance sheet but it wouldn't go through to the monetary base, right? i think there's a difference between the snp and this monetary outright transaction that they're talking about. that difference, again, technical but i think it has a big, very important meaning and kind of, you know, putting down the gauntlet which is this is about restoring the functioning of monetary policy and the credit transition mechanism. the snp was about buying bonds here and there. the stated goal was not to fix the sovereign debt problem or to fix the financial system. the objective is to try to fix the financial system so that the eurozone is one again. whether that can be done or not by this program is another question. >> the framework, but the other part of this is whether countries can go there. today we get to see what the
5:08 am
conditionality is about. spain is on the page that it doesn't need to provide any more concessions because it's gone so far down the austerity page. italy is also suggesting perhaps it doesn't need to either. so what are we going to see that's going to be enough to passify the jettison hawks? >> more pressure. things have to get worse before spain and italy sign up on the dotted line, right? in our opinion that's only a matter of time. this will help to arrest the collapse that would otherwise have occurred. draghi's program, right? but actually restoring monetary transmission, restoring financial stability, restoring growth, that's going to take a lot more time and effort. >> what's interesting, karen brought this up, this whole question of conditionality. matt eglisias had a position yesterday of a shadow
5:09 am
government. they're taking on that role. is he wrong? >> there's some truth in that. that's been the case in a certain sense for a while because the members of the eurozone have given up money and monetary policy to the ecb. so it's had a role in public policy all along by definition. it is now stretching the mandates that it had, i would agree with that. it's necessary, otherwise, we would be in much more difficult circumstances. >> it may be necessary for there to be some conditionality in giving this money to countries, but should that conditionality come from the ecb? can it even? >> i don't think they're saying they will design the conditionality. what they have said previously is that if spain, italy, whoever signs up a memorandum of understanding with brussels, then we will do this, right? that memorandum and the conditions in it has to be set out by the eurozone and maybe eventually by the troika. that's also on the table that the imf would be involved to help placate some german resistance to the whole program. >> right. that again raises the spec tor
5:10 am
of those countries, spain and italy, not wanting the imf involvement. stay here for the rest of the hour to walk us through all of it. karen? as we've been talking about, this is a big day for mario draghi. these markets have been moving higher on the expectation. this is how we're looking across futures for u.s. markets. the gains right across these keyboards. let's look at markets trading in session. we have seen gains. you can see across the board for the continent more than the u.k., up .75%. 1.3 now for the german market. just over a percent for the cac. some of these are the peripheral markets. they have they've been pushing high. the ibex up 1.5%. let's look at the short end of the curve because this is where we're expecting to see some targeting by the ecb. we have seen some moves, 2.71%.
5:11 am
the spanish is moving higher on the yield, 3.18%. the world of debt auctions where the yield came down from the previous auction. on markets, some of those yields are increasing a little bit higher. we're just above the 0% mark. the 4 year markets, there is some sentiments permeating through the markets. 1.2614 is the handle. i want to show you 1.0238. there's been enormous fluctuation in this risk currency. today is the day to be buying that trade you can see according to what's taking place. let's take a look at some of the asian markets and what's been playing out that way. feels like there is some risk out there as well. let's get to singapore today. thanks, karen. asian markets finished. the bond buying hopes,
5:12 am
infrastructure related stocks, especially the rail transport sector rallied after beijing approved $110 billion worth of intercity rail projects. shares were up. after acquiring brazilian electronics maker for $150 million to double its market share in the world's number 3 pc market. the nikkei helped steady after losing for five straight sessions. sharp shares tumbled over 4%. moodies downgraded their rating to junk. telecon left the game. a local report of rising customer win for next generation phones. tech makers and automakers also rallied. australia made back lost ground. it was higher by .8%.
5:13 am
linus shares went up a bit. sensex higher by .6%. >> thanks very much. all of that green despite the fact that goldman is trimming its china gdp forecast, 2012, to 8% which apparently is the new level to be concerned about. in any case, after the break, in europe all eyes are on the ecb. in the u.s. the focus is on the all important jobs report out tomorrow. we'll have full discussion of that next. bob... oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign. looks good. [ male announcer ] fedex office.
5:14 am
now save 50% on banners. a passionate belief, and the foundation on which merrill lynch has been built. today, our financial advisors lead from a new position of strength. together with bank of america, they have access to more resources than ever before. a steadfast commitment to help you achieve your financial goals in life. that's the power of the right advisor. that's merrill lynch.
5:15 am
5:16 am
president bill clinton makes a rousing speech at the dny. we'll be speaking first to the ceo of ford as the auto giant sets out its plans to get sales moving in europe again. in the meantime though, at least in the u.s. the tension is still very much on the labor market. the august adp private sector jobs report is due out today ahead of tomorrow's all-important payroll report. managing director of market research and strategy for rubini
5:17 am
global economics is still with us. let's talk first about tomorrow, the big august figure. what's your expectation? >> well, we don't forecast every nonform payroll. we don't have a specific point forecast for this one. what i would say is that the labor market is still stuck. we'll probably get a number north of 100,000 but south of 150,000. 150,000 is the break even for demographics, new entrants to the labor force. if we don't have the headline unemployment rate going up as a result of tomorrow's number, it's because people are becoming discouraged long term falling out of measurement of the headline unemployment number, right? so situation in the labor market remains dire, remains stuck and that's why we're going to get qe 3 sooner or later. >> what's interesting is you do see the unemployment rate, while it has made some progress, stalling out at roughly above 8% level. if it's not significantly below that in the next couple of months, that's when you hear economists worrying about it.
5:18 am
what do you think that level is? sort of the new natural or inflation accelerating the rate of unemployment? >> there are lots of different elements. we're in the 7% cap. below where we are now. the economy is still healing itself. balance sheets are not in good shape. credit is not growing. overall, total credit is not growing. and, you know, the fiscal cliff, at least the fiscal slide of some kind lies ahead. we'll have more slowdown and heading towards the stall speed. the probable outlook for the labor market is weak and treading water in the short term, then potentially some down side risk going into 2013. hopefully later on in 2013-2014 things will improve. >> many thought ben bernanke spelled out his case for the qe 3 in jackson hole. they confirmed that manufacturing has been weak. the issue is getting this through in this type of an environment where the qe 3 will be something the republicans
5:19 am
will seize upon in influencing the elections. doesn't this nonfarm payroll need to be sufficiently weak to allow ben bernanke do his thing? >> i think that would help in a perverse way if the number were very weak. i don't think it's about one particular number. it's the general situation in the united states as a whole that shows up in the labor market being. >> showing up in general, but over the course of his speech he laid out the foundation for why he thought qe 3 should happen. the market still thought potentially that wasn't enough. he was pretty certain that all the economic conditions you're seeing today were not going to bring down the long-term unemployment rate. doesn't a lot hinge on this data because it gives him the political momentum for him to bring about change? >> i agree. if it's weak enough, it could tip the scales. that's not going to change the other factor that you pointed to which is the polite tieization
5:20 am
of the standard. so it's very political, totally agree. >> we'll talk a lot more politics coming up. still to come, bill clinton firing up the masses at the democratic convention. he made a strong defense of president obama's economic record. did he though go far enough to convince undecided americans to give the current commander in chief another four years on the job? we'll head down to charlotte, north carolina, for a view next.
5:21 am
5:22 am
5:23 am
welcome back to the program. as we get closer to the start of the u.s. trading session, let's see how futures are positioned. for the most part green arrows. dow jones set to start higher by 85 points. 19 for the nasdaq at 11 points for the s&p 500. now delegates at the dnc were up late last night officially nominating president obama to his second term just after midnight. the roll call came after former president bill clinton gave a stirring speech appealing to americans to stick with obama. he said many people don't yet feel things are improving but he proclaims we're coming back from the worst economic situation in generations. >> when we vote in this election we'll be deciding what kind of country we want to live in. if you want a winner take all,
5:24 am
you're on your own society, you should support the republican ticket. but if you want a country of shared opportunities and shared responsibility, we're all in this together society, you should vote for barack obama and joe biden. >> and joining us for more reaction now from charlotte is tony fraddo. managing director and former white house deputy press secretary. cnbc contributor. tony, good morning. thanks for getting up for us. we're seeing bill clinton's speech sort of widely being praised. do you share the enthusiasm? do you think it helps president obama? >> reporter: well, look, it was a terrific speech. bill clinton, he always gave a great speech. he didn't always. he became throughout his career a much better speech giver. he gave a terrific speech for the partisan crowd here in charlotte. i think that's the real question, kelly, you know, whether the speech is really going to fire up the bases of the democratic party going into
5:25 am
the rest of this election or is it something that can appeal to independents. you know, i think what are independents looking for? it's a vision for the future. what we're seeing so far is we have the best defense they can make of the obama administration at this point. >> what's interesting, tony, is republicans have managed to clearly shape the debate about whether americans are better now than they were four years ago. do you think the democrats can mount a strong defense on that point? >> they're certainly trying. they keep tripping up though with some of the platform issues that they've had here, you know, the kerfluffel was the removal of god and putting it back in. that tripped them up until they got to president clinton's speech. the changing of the venue here has taken up a lot of the communication efforts here. i think rhetorically it's been more of a defense of the effort
5:26 am
that the obama administration has done to try to improve the economy, less about the specifics on what they would do going forward to create jobs and growth absent stimulus plans. >> tony, what do you think the president needs to say tonight to appeal to his base but also to those independent americans that may be tuning in? >> i really think it is that vision for the future, kelly. we haven't seen -- if you think about what do we know about what the president wants to do in a second term, we know he wants to, you know, protect the legislation that he was able to pass already in the first term, health care and dodd frank legislation in particular. then we know that he wants to raise taxes on rich people. that's a theme that they're going to come back to over and over again. i'm sure you'll hear it again from the president tonight. but we don't know anything about any types of, you know, plans for reform or new efforts to improve the fundamentals of the
5:27 am
u.s. economy. so to reach independent voters, i think that's really what they're looking for, is what would a second term be about. what would the policies of a second term be. what would change the direction of the country, you know, by definition a challenger like romney has to lay those things out. he's tried to do that. people have to agree or disagree with his plans, but we haven't seen that yet from the president. >> tony, weather is playing a bit of a destruction force. the republicans were forgsed to move theirs. now the democrats having to move to a different stadium where you're standing. there is a suggestion that some people won't get to go to the convention today. do you think this is really going to have any real impact on the run on that the democrats might have gotten from the speech from obama tonight? >> maybe a bit. it is a huge logistical problem that they've created for themselves by changing the venue. i know they were bussing in people from a lot of the neighboring states to come and attend the event in the football stadium. there were concerns whether they could actually fill the football
5:28 am
stadium and maybe, you know, they decided to have concerns about the weather in making a venue change. it is definitely a problem. they liked the grand stage for president obama and his ability to deliver a speech on that grand stage. this will be about 1/3 of the size from the football stadium. i'm sure he's going to deliver the same speech. the kroutd here will be very, very excited but their efforts to get enthusiasm from that much larger crowd definitely gone away. >> appreciate the time today. thank you for joining us. managing director at hamilton place strategies. former white house deputy press secretary and a cnbc contributor. we're going to go for a break. up in about 20 minutes we speak first from cnbc from ford, alan mulally, as they unveil a growth plan for europe and some new models. ♪
5:29 am
[ male announcer ] how could a luminous protein in jellyfish, impact life expectancy in the u.s., real estate in hong kong, and the optics industry in germany? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 70% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses
5:30 am
to read and consider carefully before investing.
5:31 am
welcome back to "worldwide exchange." i'm kelly evans. >> i'm karen. these are your headlines from around the world. >> ecb president mario draghi takes the spotlight. there's much talk of unlimited purchases. >> and it was a night of star power at the democratic national convention. former president bill clinton makes a rousing defense of president obama's economic
5:32 am
record. and we'll speak first to the ceo of ford as the auto giant sets out its plan to get sales in europe moving again. >> announcer: you're watching "worldwide exchange" bringing you business news from around the world. if you're just tuning in, thanks for joining us on the show. here's how markets are fairing ahead of the u.s. open today. mario draghi is set to talk about bond buying in europe. we have gains right across the early charts for the u.s. markets. this comes on the back of what was a fairly cautious day in session yesterday. almost a similar tone we saw leading up to jackson hole. sitting out waiting for this event today. let's move on to how the european markets have been fairing so far. there is some early optimism out there to report. you can see particularly in some of the peripheral equity markets. spain now pushing up almost 1.5%. along with it the italian market
5:33 am
is tracking higher. there's been some solid gains in france and germany. these markets are holding around the levels at which they opened up. just a slight bit back from the .75% we saw in the european markets. still up 35% today, kelly. >> karen, thank you for that. how do you make money in these markets. here are some thoughts. a couple of positions were definitely worth taking on. that one would be the spanish. we've gone the distance on that as far as i'm concerned. you manage two year yields, more than half, sings the end of july. >> i wouldn't be short on the euro. it is a bit of a disappointment. even if you don't see the euro
5:34 am
weakensing today, i think the advantage is it's one of the markets that will be there. >> investing in emerging market countries is a safer place to be as well as a better place to be. well, volatility by some measures has been unusually low, and that may be a good thing for stocks in the fourth quarter. yesterday was the 22nd straight day in which the s&p 500 didn't close up or down by at least 1%. now this has happened only ten times over the last 15 years. and in those ten times it did happen the s&p 500 was up 80% of the time more than three months out. going up three months, the average return was almost 4%. i want to get some reaction from arnub who's still with us. are we making too much of this low volatility or is this significant when it comes to
5:35 am
investing in the next three to six months? >> well, our take on this is that the underlying environment is extremely volatile and uncertain and volatility in the markets is periodically being suppressed by central banks who through qe or promises to purchase bonds or whatever are becoming effectively short-term sellers of volatility. volatility is going to rise once again once the effect of those statements and those interventions are done. >> you would argue that even though the outcome on europe is still binary and people are still worried or positioned for one extreme event or another that in fact the net outcome of that is not much action? >> yeah. what's happening is that the markets are pushing when it comes to the euro area, the markets are pushing eurozone into one corner solution or the other, right, which is really integrated or disintegrated. the fat tail risks are rising sharply. the central bank comes in and thins out the flat tails. that causes volatility to fall.
5:36 am
and then the effect of that dissipates because the underlying story hasn't been changed by the central bank action because it's a structural problem, it's a solvency problem, all of those things. i'd like to bring rob borgman in. is there a volcano lying under what appears to be a quiet mountain lion here? >> well, kelly, the markets always seem to do what we don't think they will do. i think going into this year we thought that this year would be somewhat like last year, a high volatility year. i think it is a little surprising. you know, i'm not going to say whether there's a volcano or not, but i in general feel optimistic for stocks here, particularly u.s. stocks. i think they're cheap. i think that, you know, earnings estimates are starting to rise. technically they look good. and there's a lot of negative sentiment out there. a lot of cash on the sidelines.
5:37 am
>> rob, how much of the lack of volatility has to do with anticipation around the ecb action? because one of the big risks out there has been eurozone breakup, and if we get the action of bond buying framework today, doesn't that remove some of the tail risk for markets? >> well, yeah, karen. i think it does. and, sure, i think awaiting, you know, the ecb announcement certainly has played into it, but this has been going on all year though. i was looking recently, we've only had six days on the dow over two points. four days where it was down 200 points. no days where it finished up or down over 300 so it's been a year-long thing. >> do you not think that we'll get these episodes of difficulty and turbulence, whether it's out of the eurozone or whether it's out of the united states because we get a qe 3 that's too small, we have some doubt and uncertainty about the fiscal cliff, how big is this going to be, how bad is it going to be? i take your point that the
5:38 am
earnings guidance is starting to rise off the bottom, but we have the u.s. decelerating or, you know, treading water at best. we have the merging markets going down. we have the eurozone and the united kingdom double dipping. so all of the sources of revenue for the s&p five are under some pressure here. >> yeah. and where that factors into our investment strategy, even though i do like stocks, i'm taking somewhat of a defensive approach here which i have for most of the year, and that is i continue to like those large cap dividend paying growth stocks for a couple of reasons. number one, obviously in a choppy market, which i think it's going to stay choppy even though we've had low volatility so far, the dividends give you some protection against the down side risk. and since there are large cap multi-nationals, they can actually reach the ee moergeing markets of the world where there is actually still some gdp growth going on although in china we'd like to see more.
5:39 am
but that's how that defensive posture factors in. >> rob morgan, chief investment strategist at fulcrum securities. arnub will stay with us. the auto industry is bleeding a lot of red ink. ford is unveiling new plans today it hopes to push its european sales from the red into the black. we'll speak exclusively with ford ceo alan mulally just after this. at bank of america, we're continuing to lend and invest in communities across the country. whether it's supporting a delaware nonprofit that's providing training and employment opportunities, investing in the revitalization of a neighborhood in the bronx, or providing the financing to help a beloved san diego bakery expand, what's important to communities across the country is important to us. and we're proud to work with all of those who are creating a stronger future for everyone.
5:40 am
5:41 am
bob... oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign. looks good. [ male announcer ] fedex office. now save 50% on banners.
5:42 am
>> announcer: you're watching "worldwide exchange." you are watching "worldwide exchange" this morning. these are your headlines. ecb president mario draghi takes the spotlight as markets wait for details on its controversial bond buying plans. president clinton makes a rousing speech about president obama's market. and we'll speak to the ford ceo as they're trying to get their sales going in europe again. ford's top executives are unveiling plans today to jump start sales in europe. ford, like its rivals, have been losing money in the region, more than $4 million. joining us from amsterdam, alan
5:43 am
mulally, president and ceo of the ford motor company. also with us from chicago is cnbc's phil lebow. alan, thanks for joining us. >> good morning. i'm really glad to be here with you. >> quite an event you have today. i can see the new ford fiesta behind you. it will be available in europe later this year. can you explain why you're making a push into larger vehicles and suvs in europe in this environment? >> clearly today is really a big moment for everybody in europe and ford because we're announcing 15 new ford vehicles that we're going to be introducing in europe over the next five years. and through ford's land we are offering them a small, medium, large complete family of vehicles, cars, utilities and trucks. some of the neat things we're announcing is the new fiesta, new focus, new mondeo, new escape, smaller suv. complete family of best in class vehicles that we're sharing with
5:44 am
everybody today. >> alan, let's talk about what's playing out in europe. we know there's been capacity cuts by some of the automakers as they try and deal with all the excess stock out there, but in terms of your strategy, we know that you're losing money on cars here, but you haven't spoken about closing plants in europe yet. what's your strategy and why are you still committed to keeping those plants open here? >> well, clearly we're doing the very same thing that we have done all around the world with our one ford plan, and that is, one, accelerate the development of cars and trucks that people do want even during the toughest of times so we have the freshest, best in class lineup for the customers. this is still a very, very significant market for us. nearly 14 million units. clearly they're going through a tremendous recession, but just like the united states, we're investing during the test times so customers will have the vehicles they want and value as the economy starts to come back. in addition, we are taking down our production to your point to the real demand. we're taking the actions on the
5:45 am
cost side to deal with that also. and as we go forward we'll continue to do that. just like we have in europe over the last eight years because six of the last eight years ford has been profitable. so, again, matching the production to the real demand and accelerating the development of new products is the plan. >> alan, it's phil in chicago. i know you mentioned about matching production to demand. >> hi, philip. >> how are you this morning? >> i'm good. >> your stock is down 10% year to date in large part because a lot of investors look at ford shares and say, you know what, until i know for sure that they're going to take out some plans and are going to make some major cut backs in production and in capacity in europe, this is debt money. what do you say to those investors? >> well, i think the most important thing that they know and believe in is the one part plan, that we will continue to take action to match the production of real demand and continue to structure ourselves accordingly. we don't have anything announced today but we're working with all the stakeholders to continue to
5:46 am
implement that plan just like we have in the united states. but today, phil, as you know, this is really about the products because in addition to the production side we actually want to be there with the freshest lineup as the economy starts to recover. >> alan, i'd like to shift gears to what's happening here in the u.s. your sales better than expected last month. there's a fair amount of optimism that perhaps we're starting to see this pent up demand come into the market in the second half of this year. what's your view of the economy here in the u.s. for the rest of this year? >> well, we see it, phil, gradually recovering. it's the slowest recovery we've ever had. we're come being back from the deepest recession we've ever been in. now, again, to your point, we have continued to invest and we probably have the most new product coming in the second half of this year that we ever have had. we see it continuing to expand slowly but continuing to expand and based on the strength of our products to your point we think
5:47 am
we have the products that people really do want and value as expansion continues. one more thing, phil, that i know you know well, the pent up demand is tremendous. the average age of the vehicles in the united states is a little over 11 years old. when you look at a new ford vehicle, whether it's a fiesta all the way up to f150, the fuel efficiency, you can economically justify the replacement of that older vehicle. we have the right products at the right time. >> a question from our guest. >> i was wondering if you can shed any light about your thinking or contingency planning in case there's a breakup of the euro. >> well, we definitely take that into account. the neat thing about ford is that we operate throughout europe in the different countries. that was henry ford's original strategy. so, you know, we'll deal with the reality if that happens. i think that our best view is the leadership of europe is really dealing with the fiscal and the monetary policy to deal with the sovereign debt crisis.
5:48 am
i think our sense is they really do want to keep this together for a lot of good reasons. we are distributed very well in europe. >> the excitement behind you, alan, but i want to ask you about one of your growth markets, china. we know retail sales are slowing there. you're working on an assumption that there will be compound growth of 5% each year for the next decade. a story that's come out from one of the regions is talking about limiting licenses as an attack on air quality. this is a big twist in events. if many of the regions follow suit, this would be damaging to college sales. how are you weighing up your china story? >> this is a really important question. go back to the first part of the question. clearly asian pacific region and china specifically have slowed down the economic development, but it was, you know, clearly over 10 to 12% before. we think this new growth rate is a lot more sustainable. it will be easier for everybody
5:49 am
to deal with this kind of a growth rate. so we're very positive on china. as you know, we were just there last week. we opened up our third assembly chant in chong ching. we are really pleased with our presence in china and our growth plan. in asia pacific in general we're going to be introducing 50 new vehicles and power trains over the next few years. so they love the ford brand. we're going to be there with the right vehicles. i think the key for the congestion issue that you raised is a lot of the large cities are dealing with this issue. we're part of that solution also on the personal mobility, but the market is so big that i think we have a good plan to support that growth throughout the country and even the larger cities. >> alan, it would seem as though people behind you feel pretty good about that as well. thanks very much for your time and for joining us this morning. phil will stay with us this morning. phil, i just want your quick
5:50 am
reaction there to the comments that we've heard from alan if you can offer that just briefly. >> well, with regard to europe, kelly, i think everybody agrees. yes, you do need to have products and portfolio that's going to grow in the future when that market comes back. you have two issues in europe. one, you don't know when the market is going to come back. year to date, ford sales are down 10%. a lot of people are looking at the overall market. it will continue to sink for the rest of this year and probably into next year. on the cost side, yeah, they brought down production. their production -- their capacity utilization is something like 63, 64%. but at some point you want to see something more dramatic. i know they're tied in because of the union laws in terms of out and out cutting plants, but can they do something more dramatic than what they're doing right now? that's what investors and wall street wants to see. >> alan, the tone from ford seems to be about keeping flexibility in the production process in europe. what wasn't addressed is partnerships. that's where some of the other automakers are going in terms of trying to trim back their costs.
5:51 am
we know research and development is one of the big items on a balance sheet. ford hasn't really driven down that path very aggressively, has it? >> no. i don't think they're going to in the future. that's just not their approach at this point. their strategy is not to pursue those kind of joint ventures in europe in terms of research and development. they're pretty confident in terms of what they have and where they want to go with the product. the issue right now is in capacity and too much capacity. >> phil, can i real quick ask you, did you think the indication by alan mulally that there will be no announcement today was a signal to the markets that on the cost side they may be cutting? >> yeah, i think that everybody -- they've been very clear, kelly, for some time to the market and to wall street, if you're expecting a huge announcement in europe in terms of their restructuring, you're going to be waiting a long time. i think this is what we're going to see for some time, which are these incremental reductions in terms of production. that certainly helps on the cost side.
5:52 am
they've done a better job there. they're going to lose a billion dollars this year. they want to see something more dramatic. >> thank you poor your time this morning. our thanks to alan mulally for joining us there as they relaunch and launch products across europe. up next, we're staying in europe. all eyes on mario draghi as rumors spread that the ecb may be ready to unveil unlimited bond purchases. full details after the break.
5:53 am
5:54 am
okay. welcome back to the program this morning. here's what u.s. futures are doing as we await the ecb's key meeting later today. dow jones industrial average higher by just about 80 points higher. nasdaq up. arnub still with us. a final thought as we get closer
5:55 am
to the ecb meeting. you're seeing the positive tone in markets today. is this going to be a rumor sell the fat kind of move do you think? >> i think mario draghi, not unlike ben bernanke, will say things that are comforting and will help support the markets in the short term. i think after that, after a little while it's going to become another selling opportunity again because the tensions are clearly there within the ecb governing council with the bundus bank. the german government is at the same time being somewhat supportive of draghi and somewhat supportive of weedman. the tensions between germany and spain and germany and greece. nothing has been solved or will be solved today. >> the early positioning shows us their support for the german markets. the money is going into the core terms of equities. it's also going into the italian and german market. does this make sense to you? it seems like it's a multi-faceted strategy here. >> i think the return of money to the large, risky countries of the periphery, that's really
5:56 am
being driven by mario draghi's verbal intervention and steepening of the curve. but that says it all to me. the fords are telling you this is completely unsustainable. >> that will be what to watch today, that meeting just hours away. arnub is managing director of marketing strategy. thank you for being with us. want to thank karen for being here as to mention ross is on a well deserved break. you're going to be doing double, triple duty today? >> staying on for special coverage today. we have a lot coming up. on that note, on a quick programming note we've got eamon gilmore who will join us live at 11:20 bst. that's 12:20 cet. >> and the bank of england's decision. plenty to come up and watch for today. that's it for today's show. thanks so much fortuning in. i'm kelly evans. >> i'm karen. thanks so much for watching
5:57 am
"worldwide exchange." here's "squawk."
5:58 am
5:59 am
good morning. today's top stories, it's mario draghi's moment after weeks of speculation the ecb chief is set to offer details of his bond buying proposal and his plan to save the euro. jobs in america, two key u.s. economic stats before the bell. the adp employment report, weekly jobless claims all leading up to that big number tomorrow. and it's your o money your vote. barack obama will officially accept his party's renomination for president this evening. the last democrat in the white house offering his endorsement last night. >> we simply cannot


info Stream Only

Uploaded by TV Archive on