tv Worldwide Exchange CNBC September 17, 2012 4:00am-6:00am EDT
welcome to "worldwide exchange." >> these are your headlines from around the world. >> stocks in europe begin the week lower and the euro eases on the high on the latest round of stimulus, so is risk off the table? january sneeze factories in china shut down as violent protests escalate. the u.s. urges calm saying good relations are in everyone's interests. spain's leadership is divided by bailouts. reports suggest the prime minister wants to avoid full sovereign aid although the finance minister is ready for a rescue. and india's central bank frees up new cash by cutting reserve ratios for lenders. but the rbi keeps its key rate
on hold muting the government's push for more growth. start of a brand new week. >> yes, it is. >> you've been busy i understand. >> that's right. so this weekend, went and caught a couple fashion shows here for london fashion week, and i have to say, it was quite the scene. basically everyone standing around taking pictures of one another. this was pretty extraordinary. almost like you're looking at modern art, trying to appreciate it? no, this was one of those where you showed up and she's a favorite of the middleton sisters. >> stuff you can actually wear. >> absolutely. you sort of wonder aim going to
wear a black glitter bathing suit tomorrow, no. but could i maybe wear one of those, sure. >> well, you wouldn't wear it on air, but -- okay. a lot more of that coming up. >> yes, we'll talk plenty more about that today and throughout the week. maybe it's paris fashion week next. >> that would work. also on today's show, no surprises in new delhi where the lending rate has been kept unchanged. and in china, anti-japan protests over a number of disputed islands have caused cannon, pan so thattic and toyota to halt operations across the country. >> and we'll be checking out the runway with the top designer as fashion week has certainly kicked off. >> it's an occupy anniversary. it started a year ago today in new york. rupee rose in hopes for more foreign in-flows for investment,
but the rupee, sensex and ten year bond yield have eased. the rbi said it's still worried about rising in-nation area pressures. let's get straight over to mumbai. the key rate left unchanged, but they did look at the deposit rates. >> hi, thanks for that. it was definitely a big surprise for the markets as well as the bond markets oop i'll come to the reaction. but the rbi cut to 4.50% and that is above a little expectations, because expects rbi possibly going to hold going forward. so that's exactly why the markets were disappointed. so the nifty came off the day's high. yield rally back up to levels of
8.17. however the rrr expected to infuse around 7,000 into the system in terms of liquidity and that is something. inflation continues to be a concern is what the rbi said in it policy. back to you. >> and joining us today for the first half hour of the program, senior director of asia pacific. thanks very much indeed for joining us. clearly the rbe is worried about inflationary pressures. are those going to be more of a concern post qe-3? >> i think it's the domestic pressures that are a concern because now we've had the government make an important reform in terms of the diesel fuel price hike by 14%. that's an important long term reform, but it is going to add to near term inflationary pressures. and india's major concern is also global oil prices which have edged back upwards in the last few weeks. and that's also going to add to
near term inflationary pressures. so the combination of these factories plus the pea p potent impact of the drought is concerning the rbi and making it difficult for them to lower interest rates significantly. and we actually have wholesale prices moving upwards, which is the wrong direction from their point of view. >> do you think this is going over better for the market broadly given the big bank reforms we saw last week as opposed to if there hbt been a move in the direction of opening india further to foreign investment? >> i think we've seen for months and years the indian government has been doing almost nothing. so it was welcome news that they were making important reforms. on the diesel fuel, something that had been long looked for in terms of fiscal reforms, and also the move to again allow fdi into the multibrand retailing
sector. so i think these are important reforms. i think we also need to see much more movement on the long term fiscal reform road map, as well. but this is a good start. and of course the global environment has improved in the last couple weeks, as well, with the ecb action, the fed's qe-3 and chinese stimulus, as well. >> we'll come on to that. just wonder whether these reforms in india are going to receive the necessary parliamentary approval first. >> unfortunately, i think that's going to be a very difficult struggle. there's already been quite a lot of dissent ebb within the ruling coalition government about the diesel fuel hikes. and also i think on the reform of fdi into the retail sector, that's another very contentious issue. and i think the government may well face considerable opposition within it own ranks within it coalition minority
member parties as well as from the opposition. so there is going to be a difficult struggle. and i think that's really going to test the government majority in the parliament. >> okay. we'll leave it there for the time being. moving on to china where japanese run factories and schools are temporarily shutting down following escalation of protests. police used tear gas and water cannons to where he up demonstrators in some cities. they're angered by the move to buy disputed islands in the east china sea. panasonic says workers sabotaged one of their pack toers and has shut down two factories up tuesday. cannon has closed three plants and the people's daily is warning japan of another economic lost decade if the dispute isn't resolved. markets are closed for holiday today, but japan's prime minister is calling on beijing to protect japanese people and
property. noda is hosting leon panetta at the time. >> it's in everybody's interests, it is in everybody's interests for japan and china to maintain good relations and to find a way to avoid further escalation. >> those good relations have been complicated by the sudden death of japan's new ambassador to china just over the weekend. how concerned should investors be about the latest flare up in tension between these two incredibly important asian regions? >> i think it's very concerning because we're seeing this on the back of tensions between china and the philippines and vietnam in the south china sea. now we're seeing diss put tws japan and china, as well. so it's creating political uncertainty and heightened risk of, you know, military arms race in the asia pacific over the decades ahead if action isn't
taken to diffuse these tensions. economic cooperation between the e station countries is very crucial and would he have seen some efforts for increased cooperation throughout this and other initiative, but all of that is at risk if these kind of high level tensions continue to flare up. and if the governments of these countries such as china don't take leadership action to try to diffuse these tensions. >> do you agree japan is more vulnerable at least in economic and trade terms? >> i think the japanese are vulnerable, they have a lot of investments in china, but i think china is also vulnerable if it's perceived as military threat in the region. it's going to put at risk its economic relations in the region. in the end, if there's an arms race, it's bad for all the
parties. they're looking for trade cooperation, investment koochings, about how can all that happen if there's going to be these escalating political tensions that could also increase military tensions in the region. so will this is a dangerous game that's happening and it needs high level leadership from china and other regional governments to try to prevent escalation of these tension in the general public and their countries. >> stay with us. we'll be back for more in just a second. barack obama is planning to file a trade complaint against china. later today, a white house official said obama will tell crowds at a campaign tour in ohio that he's initiating a case against beijing over its unfair support of the mainland's auto industry that puts american factories at a disadvantage. ohio of course is heavily dependent on its auto sector and also a political important swing
state. meanwhile in spain, tens of thousands took to the streets of madrid over the weekend to protest against austerity measures. the demonstrations were organized by the country's social summit union which represents 150 organizations. spanish prime minister looking to delay or requesting a full sovereign bailout while the finance minister wants to ask for assistance as soon as possible, according too a rep a in the newspaper. for more, staff fan oefane join. how fierce is the debate about when, where and how they get assistance? >> it looks like there is a debate even within the spanish government. if you look at the report, the finance minister believe that the bailout would be the best solution for the spanish economy, but the prime minister still hasn't made up his mind on the question or at least would like to gain some time.
he has instructed the pie nachbs minister to work on the conditions of the bail jou and out and get the country ready. but he also requested to work on the option to carry on the economic reforms without any external financial report. he's not convince that had the country will get the bailout and the ideal would be not to request the bailout, but he also believes that spain would have better condition for financial assistance if it would not run for bailout. in the meantime or so, he has to face conflict positions because they say it's up to spain to make up its own position.
flans frns france is increasing the pressure to ask for assistance. merkel is not keen to deal with the spanish bailout, so she's supporting the wait and see option. >> all right. stefan stefa stefane, thanks very much. let's get out to jane foley. what are the implications for the euro? does its sharp rally look overextended to you you here? >> from where we've come on the euro-dollar, back? july we were trading lower, so we've come a long way. so most people's instincts would suggest that perhaps we have a long way -- pe have some corrective pressures about to hit. and of course i think spain is the most likely cause of those corrected pressures as we've been hearing. as we've been hearing, it's going to be a real testing time
for spain. they have an election but they don't want a -- a regional election i should say and they don't want the imf in at all, but certainly not before that regional election. so this wait and see mode. but will the markets carry on having patience. and i think the litmus test will be ongoing spanish auctions and the yields that we do see at these auctions. >> jane, thanks for your thoughts on that. we'll be back with more in just a bit. >> more from jane, but let's remind you where we stand just over an hour into trait. we're wasteighted do the down s but it's on the backs of pretty good moves. last week the ftse 100 up 2%. dax last week up 2.7%. 52 week high, up 25% for the year. this is where they stand right now. xetra dax is flat. the cac 40 down just around 0.3%
ibex at the moment down around 0.4. bund yields hit 11 week highs on friday. quite a big selloff. today they're trying to reclaw. yields back down to below 1.7%. ten year spanish yields, last week down to a near 5 1/2. this week 5.9. ten year italian yields back over 5%. treasury yields steady at the moment. 1.68. we talked about the currency markets. euro-dollar there, we hit the four month high on friday. 1.3092, a little weaker. dollar-yen down to seven month lows. we're at 78.35. aussie dollar got up to 1.06, somewhere around there, on friday. just below it, the dollar index of course is down at seven month
lows. we will talk about the dollar and commodities in a few moments time. let's low before we do all of that, kelly -- >> for those of us who still have blackberries, new yahoo! ceo promising their choice of a smartphone to employee as. blackberries weren't an option. this program is reportedly called yahoo! smartphones, smart fun. and that prompts our request this morning, if you were a yeah hugh employee, which phone would you pick? email@example.com. you can also tweet us @cnbcwex or reach us directly. and should we finally upgrade?
commodity prices over this time scale. the real thing is there's a bit of a push/pull between china data weakening and of course stimulus policy. we have open-ended commitments from both the ecb and the fed. take a look at copper here. jackson hole fed minutes were sort of a low point but since we've seen a steady rise. you can see the rise that we've had. so the big question now is what happens to base metal prices and this push and pull between liquidity and continuing weaker chinese data. >> and it's a great question. do you think base metals look extended here after the run up that we've seen in the last several weeks?
>> i think the liquidity push is a key driver. it's certainly true that it is weak. all the discussions are indicating that momentum is still slowing down and we're expecting growth of only 7.4%. momentum is still moderating. there's no sign of a peck up in real demand just yet. i don't think it's now deck start the chinese economy anytime soon in a big way. so i think we'll still see moderate momentum in china. i think after leadership transition, then we could see more fiscal stimulus, but what's very worrying right now in asia, not only in china, but across the board in most asian countries is the very big
negative declines in exports year on year that we're seeing. and that's not good news for real demand for commodities. >> the dollar angle is important on this, as well. jane, no surprise we have gold up at seven month highs, dollar entex at seven month lows. so i suppose the question request is the momentum going to remain from a continuing weakening dollar. >> clearly as you pointed out the weak dollar is an enormous story, but for instance if you put copper against the aussie dollar, you'd generally see a pretty good correlation. and you're seeing copper well off the high, aussie still perched before there suggesting that some of the legs under the aussie really are a little shaky right now and of course when we look at some currencies like the aussie for instance is probably a prime example, what you're seeing is dollar weakness we've seen the aussie propelled
higher. are we going to see a big connection in those currencies. i think the dollar will remain weak well into next year if not beyond that. but i to positido think some cu are looking weak right now and the china story is part of that. >> do you think it's chasing yield? >> even that is a lot more shaky an usual because everyone's known for years that the aussie dollar is overvalued and yet they're putting up with that because of the yield.
some argue it's attractive, but not as attractive as it was. one of the sure props behind the aussie is shakier than it was and a lot of people asking questions about the aussie and i think it does look vulnerable. so if you to get a correction lower in euro-dollar, i think the aussie would be one of those first to go. >> and i wonder, too, if the fundamentals don't support the dollar being quite as weak this team around as we saw the last couple rounds of quantitative easing. if that's what the indicates will key off it and more to come out of europe, maybe the uk, maybe not, but in the u.s., yields rising on the back of optimism. will it keep the dollar roughly at these levels or support it next year? >> i think that's a crucial point. if we do see yields going higher in the u.s., i think the dollar will find some leg.
again we get to the question has the fed done everything it's going to do. is it going to do more extraordinary type policies. and the answer to that is, well, yes, it's certainly something it could. >> okay. jane, thanks very much for your time this morning. just want to bring you you these new splashes out of china. the pboc has released a financial five year plan. it's targeting direct pie naptsing to account for 15% of total social financing by 2015. says it will accelerate its deposit insurance legislation and establish bankruptcy law for financial institutions.
rajiv, just curious whether these kind of reforms are necessary at this point to the outlook for improving growth procespects going forward or whether it's a side issue. >> it's not in central focus, but i think the gradual reforms are important reform measures to make their financial system more competitive and stronger. so i think the pboc is extremely capable central bank and i think they are gradually showing a shift towards market reforms and the supporting the financial sector p about also we have to think about the risks in their financial sector. although they're still profitable, nonperforming loans are relatively low, but the background to all that is if there are high potential increase this is nonperforming loans looming over the medium term because muof the lending t
local governments, a lot of which will become bad debts over the next few years. so you need further strengthening of the financial system to support the banking sector. having said which the chinese government still is extremely strong fiscally and also had a lot of foreign exchange reserves over $3 trillion should it need to recapitalize the banking sector. which is not something they imminently need to do. >> but a great point. thanks very much for joining us today. >> h and m shares are lower, down 2.3%. the retailer reporting sales that fell shy of estimates. >> blaming a heat wave across europe for the disappointing results. total sales up 6% in august, compared to the 11% expected gain. still to come, yes, i hit the
cat walk. i didn't actually get out there, at least we got on part of it, but it wasn't elevated. in any case, we wanted to know how the industry is bracing for a slowdown if it does i in fact see a slowdown in china. here's what some of the biggest names in the business had to tell us. >> china is a booming market. india could be ready soon. >> at the moment it's in china. if we didn't have the chinese buying things, the fashion
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month highs. so is risk off the table? >> japanese factories in china shutting down as tensions escalate.us urges calm saying good relations are in everyone's interests. >> spain's leadership is divided by bailouts. reports the prime minister wants to avoid a full sovereign aid, although the finance minister apparently ready for a rescue. >> and india's central bank freeing up cash by ultimate canning reserve ratios for lenders. but the rbi keeps its key lending rate on hold. we mentioned japanese factories shutting down. now sony says it's discouraging nonessential business trips to japan as territorial tensions escalate between china and japan this morning. japanese markets are close dad on holiday. it.
european stocks meanwhile coming back -- sorry, retreating from the highs that we closed at the end of the week. ftse 100 today down 0.2%. dax has been up 25% this year, just town a tenth at the moment. >> we have seen yields in spain and italy were at about 5 1/2, under 5% for italy there just in the last week or so. now moving back higher this morning. 5.88% is the level fof spain. gilts at 1.95%. just remarkable. you can remember how low they were just over the summer. >> down 1.5% not long ago.
euro dollar up towards 1.3160. dollar why not 78.37. let's remind you what's been happening in asia. >> thanks, ross. asian markets began the week on a more tepid note. shank shy com positive tanghai r by more than 2%. home sales value you'll likely to decline 10% on month. disputes between china and its neighbors escalated. the hang seng finished higher by 0.1%.
the kospi pulled lower by samsung electronics and costco. slashed the country's gdp target and called for more rate cuts. gains in resources help willed put the aussie market higher. >> now europe's finance minis r ministers failed to agree. the main sticking point appears to be who should supervise the proposed region wide system. rejecting the idea speaking to silvia, the polish finance minister said banking union was less urgent. >> it's going to be very, very
difficult to make the commission's self imposed did deadline. but fortunately, we're not in the situation where we have to rush to that september. and we all know that a proper banking union with all the elements is, well -- well, on the one hand will take time, but on the other hand is necessary if the monetary unions function properly. >> what's interesting, since the ecb's action, less pressing need for bailout. less pressing need for bank. i mean it's like -- >> it's true it's that paradox. you take the pressure off the need for reform. >> meanwhile commission president attempting to down play german worries. he said fears were exaggerated and he's added that it was unthinkable for savings deposits
in the country to fund wider you'you are european bank requests. and spain preparing for economic reforms that could be the blueprint for conditions of a full sovereign bailout. speaking at a meeting in cypress, the dutch finance minister also told cnbc a bailout wasn't necessary. >> it's up to spain whether or not it will ask it for -- up to now, not one single deposited, still a lot to gain without asking for a full program. but it's up to spain whether or not to do that. i'm not pushing them in any direction in either the no or the yes direction. so it's up to spain to do that. but for spain, it's very
important also that they continue the path of economic reform and austerity because this is the structural approach. >> and joining us, senior european economy at jeffries international. thanks very much for joining us. is the pressure off spain having to agree to a deal now? >> pressure seems to be off. markets have reacted very positively so for the time being it seems like we're in limbo where the ecb is waiting for spain to step up and ask for a bailout, but we're not really -- we're for the quite sure what the timing of that response will be from spain. so basically just waiting for spain to respond. >> it would seem it's going to be markets that push spain into a response here. it will be yields back above 6% or something like that. what might be the catalyst for that kind of move, that kind of risk off mood to play out in markets? >> one important catalyst could
be the downgrade from moody's. we're basically waiting for some sort of comment either in late september or early october. and if they were to cut spain below investment grade, at that point you could see real money investors begin to sell spanish paper. so even though there's support at the short end of the curve for spain, because ecb said it would buy spanish debt in the one to three year range, the long end of the curve, it there might not be booi buyer in the market. >> and could stop the capital flow flight that we had. >> that is an important consideration. spanish lost about 11% of deposits. july was a particularly bad month. there's a distinction between the markets, they've been buoyant since the beginning of august are and what's happening in the real economy. i'm not quite sure the real
economy will be turning around anytime quickly in spain. you'll have to rely -- spanish banks will have to rely on ecb assistance to deeply liquidity in that economy. so, yes, markets might be in a positive mood, but i think of what's happening in the real economy is a lot more key prede. >> you point out they're more bearish than the ecb itself. is it your view that there will have to be more action, perhaps just full out quantitative easing from the ecb or some other measures to support what in their view you would say is a growth voss pekt far too rosy for what's likely to play out? >> the disi think so is very important because one consideration obviously what sort of bailout spain will end up asking it for, what markets hope for is that spain ends up asking for this enhanced credit conditions line which is basically a light version of a
bailout. ideally you want to keep imf out of spain because i think the arrivings is that once imf begins to open up spanish books and looks at level of private sector debt as well as public sector at the time, i think speculation will rise and you need to have restructuring of spanish government debt. the other side is obviously ecb's response. i think it's very interesting off justly looking at the contrast between the fed which is proactive and the ecb which is being reactive for the time being, basically waiting for the politicians to ask for a bailout before they start supporting the euro economy. but euro is in recession, so the ecb will have to move up the quantitative easing sort of independently of what happens to spain. spain is just one part of the problem. the whole story has now moved on. it's not about greece or spain, it's about the wider economy being in recession and the immediate for more. >> how on earth are they going to justify that and get away with it politically? >> the focus will be on the
inflation mandate. it's not about financing governments. it's about the risk of an inflation undershooting ecb's inflation target. they have a clear mandate. and about if your area is in recession, at that point ecb can turn around and say what it needs to do on sterilized bond approaches. they will buy german bunds and frefshlg and italian and spanish paper probably according to the size of putting capital into the ecb and justified purely on the inflation mandate. it really wouldn't be about financing governments. it's the same argument the bank of england made and of course the bank of england basically had to adhere to the same treaty. so they have to justify on inflation and the e skrchlt b will have to do the same. >> i think that's quite funnily you talk about the bank of england because while they've
been printing qe, inflation has been above their mandate for a very long time. so sort of their target, they've missed much. we've got to go unfortunately. but good to see you. >> well get into more of the situation in britain later on in the program given larry summers has an op-ed. look up the larry summers op-ed where he talks about how britain is still vulnerable and then we'll have a discussion about the pound a little bit later in the show. first, though, aeds is preparing to give germany job guarantees in a bid to gain approval in a merger. patricia is following the story for us. should we take aeds at its worth here? >> they're not commenting. we must not just thrash ahead.
but one thing we did it know is that they're going around the government of course trying to schmooze them into accepting the deal, trying to create the world's biggest defense and aerospace company. it's a deal almost $50 billion worth. and if you put it into a larger perspective, how would it compare to the u.s. competitor. it would have about 20% more turnover a year than boeing. around about 100 million u.s. dollars. about twice as much as lockheed martin has right now. and they say it would be credit positive for both of the companies. it's looking fairly good. however the likelihood of it going through depends very much on some of the stumbling blocks such as government control, sovereignty of all the countries being involved. so all in all it is a german
franco pact and that may not be valid if you see the merger going through. >> bae reported to ring fence concern measures trying to protect according to a source speaking to reuters. can i just mention something else about this story that i thought was interesting. because you know how the governments want to -- apparently brussels may not allow that. you're allowed a golden share with a defense company, but not with an aerospace or like airline make business. >> something we've learned about brussels, they're open to negotiation. >> but that's the ultimate irony. brussels which is pushing for the one eurozone state might be the institution that might block the one european company. that would be really ironic. >> moving on to china
construction bank which has reportedly set it sights on europe, in an interview, the financial times group's chairman has said the company is looking to spend around $15 billion to buy a whole bank or stake in a larger entity. and if the deal goes ahead, it would be china's biggest foreign bank acquisition. and there's a story again here in the paper of $16 billion for this deal in europe. china, though, has been burned in the past by its investments. notably in u.s. banks. >> i won it ter what yder what 6 billion in the banking sector. six months ago, would you have got a good price in june. that was the time to buy. >> rbs and commerce bank are named. >> is the british public ready to sell their stake to a chinese
company? i don't know. we're open for business, you but we need to see the profit on the table. >> the world's top designers have been showcasing their latest collections in london. i went down to check out the shows and find out just what the forecast is for the luxury market. asked vivian westwood where she sees pockets of growth. >> at the moment, it's in china. if you didn't have the chinese buying things, then the fashion business would be completely on the floor. it won't migrate to africa, you know. it's just not going to happen. by then, we'll be frying by then in this climate change. we've got to do things in between. if we do things in between, i don't know where we'll be in the future. but i have far too much product. the nation of the fashion
business is that in order to support the nucleus of what you do, there are so many spinoffs that you have to have because it has to be subsidized by these spinoffs. what i do would lose money if it didn't up the spinoffs. i don't know. it's just a whole way that the world is work. what i think is very important is that people should stop buying all this rubbish. >> you think it's no longer about rich and poor? >> well of course it's about rich and poor. if people can't afford the clothe, then they can't afford them. but they have to nevertheless try to choose in some way, whether it's from the charity shop or whatever it is to try to find things that you really like. never buy things just because they're cheap. of course you have to buy things if you're cold and you really need to wear something. but try to choose things that you really like. this is the trouble with people who have got money. they're just spending it on
rubbish all the time. >> it was fascinating because she's a designer who is standing there basically saying to people don't buy my clothes. and when she referred to earlier is we'll be frying by then, she's extremely concerned about climate change. she's wearing the shirt that's her whole theme this year and when i was asking about the rich and poor, she matt comment about how it's no longer about rich and poor, sort of smart and not smart about climate change. always controversial and there's no are from london fashion week. we have irish fashion designer sharing his views similarly. something surprising he has some common with marc faber. and we'll also tell you about my favorite collection, a favorite of the middleton sessions, as well. >> plenty who amore to came fro
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tropical storm lane has become a hurricane, it's in the eastern pacific. we think lane doesn't qualify as a name, but it's become a hurricane. >> it's not a first name, is it? >> i have a good college friend named lane, so she would disagree. >> sorry, lane. obviously it is. better regulation in europe is improving accessibility to foreign markets. >> we know it's the right invoice meeting all the requirements, we're provide to -- if invoice is reviewed and approved by the customer but is not paid, then with that information, the small supplier can go to the bank or financing institution saying that, hey, i
have this receivable but it's not paid yet. and that helps the small businessis able to improve the process and their business. >> these issues that we're talking about, how much have they been an inhibitor to do you think small business around the world doing more business internationally? >> definitely it has been an in-bibt tore in many ways because it's so time consuming, entrepreneurs want to do the business. but what we do offer as an example, they are able to get the streamlineded process in place. >> governments in the west talk a lot about cutting down red tape, cutting regulation,
enabling more business to happen across borders. export drives is what they talk about. is that actually happening? is the world getting more complex and making it harder to trade? >> it's becoming harder and who are complicated, but i have seen the many countries and governments and european union here in europe, they have taken actions to make this international business easier for also that there are more and more clear rules which do help the businesses to do international invoicing and money transfers. >> is it helping if you're getting three large trading blocks, is that making rules easier it for you rather than having to concentrate on individual countries, and you are more able to concentrate onic making sure you're checking
off in blocks? >> at least i do know the best at the moment in european situation, in europe opening the markets more within europe, but there is still work to be done between america or in asia. >> and do you get the sense from your own clients that there is greater nand for smaller businesses to trade with the rest of the world? >> there are because there are -- many people are looking for expankd business and internet and making it easier so the addressable market is larger than before and now about if they have these kind of services making sure that the financial processes are also -- >> and the right taxes. >> exactly. and it's also the government so
the report goes to the right order, as well. in some countries there are challenges that the tax authorities won't get the information easily of the invoices or the trades that have been made. >> and just a reminder about our trade link series here on "worldwide exchange." every week we look at how the financial crisis is affecting global trade and business. mondays 10:50 european time and plenty on the website tradelinks.cnbc.com. still to come, plenty more "worldwide exchange." 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.
if you're just tuning in, i'm kelly evans. >> and i'm ross westgate. here are your headlines. >> it's risk off in markets. a bit of a mood after some of the gains we've seen in the last couple of week. investors perhaps stepping back. >> japan still very much in focus, as well. data there and tensions with china increasing. spain protests, as well, as there a division within the country about whether they should have a full or partial
bailout. india central bank cuts its reserve ratio for lenders. but keeping its key rate on hold over inflation concerns. take a close look at the indexes. the dow jones industrial average after friday is closing now just 4% below its all-time high, that level of course was 14.164. still about 13 1/2 here. and we are looking for a lower open here across the board. the dow about 4% blow its all time high, the nasdaq keep in mind what the technology bubble did to this index, it's still 37% blow its all-time high. it is at the highest level since november 2000. this one about 6.5% below its
peak. quick look it at the global 300. down about 0.1%. ftse 100 down about 0.2%. xetra dax roughly the same. cac 40 shedding about half a percent. ibex 35 down about three quarters of a percent. >> yields have come a little lower today. remember we hit 1.14 was the low earlier in the summer. spanish yields continue to climb. italian yields now back over 5%. treasury yields slightly lower. the dollar index is down at a seventh month lows.
euro-dollar, four month high. aussie dollar, we hit six month highs, again, the dollar a little bit better than where it was. sterling-dollar still firmer, 1.6226. keep your eyes on that. and commodity scores qgot a big boost post the fed. nymex got to 142, somewhere around that. as you can see, weak frer thoer those positions. spot gold, we got to about 1777. 1768 is where we stand. copper also a little weaker this morning. so that's where we are trading right now as we go through the european session looking ahead
towards the u.s. >> shanghai composite is the worst performer in the region, weaker by more than 2% developers left losses on slowing home sales and military industrial stocks got a strong boost. south korean bank showed strength, but the kospi pulled lower from its five month high. country's gdp target was cut and called for more rate cuts. gains in resources helped it to push the aussie market higher.
reports the company has waivers on its debt. index trading higher by 0.8% as the rbi cut reserve ratio by 25 basis points. that move expected to inject more than $3 billion into the financial system. but the central bank left its key rate unchanged. >> it is the start of another trading week here. if you could turn to page 13, tremendous foresight i think you'll find. stocks are down today. >> but i have to say, this is not a trm term i knew. >> saint leger day is a classic horse race which was run on saturday. >> obviously -- i didn't realize there was another part to that rhyme.
>> yes, it's a horse race and the favorite didn't complete the triple crown. anyway, the point of the article, folks, well worth the read, page 13, is we may be going into after such a great run up, we may be going into slight risk off. >> there's another market table that al table that also points the same way, whether there's anything to these things is a different matter. >> but that's a good point in which to bring in global head of fx straechblg. thanks for getting up with us. what do you think, is this muov overextended? >> we've had a solid rally, so seeing a little bit of a back up today i don't think is a big surprise. but we have seen removal of tail risk in europe and that's very
important and obviously we've seen the fed come in very aggressively, as well. so i think if we see a setback, it would be much more tactical. i think we're topping out, but i wouldn't expect to test it low anytime soon. maybe 127 is sort of a near term get, not a massive risk off phase. >> you've almost quoted the last couple paragraphs in my article here. you've obviously read it. good man. which is basically what we say, is it as spain waits to decide whether they want a bail out or not, is that the koos for the tactical play? >> i think we've had a couple of specific events going very well.
we don't know whether spine will apply for the aid that has been promised and greece a little more gray phase. so i think the european news will be less clear from here and that could be one of the catalysts for a little bit of a pull back. >> we're already seeing speculation that markets are looking for open-ended qe from the central bank. >> from the ecb, i would say that it's quite unlikely that would not be in the style of how they would approach this issue. i think draghi has been very successful in terms of focusing on the removal of break up risk,
removal of tail risk and i think they'll build on rather than try something new. >> we want to turn our attention to china where factories an schools are temporarily shut down following protests over the weekend. they're anxious egered by the m buy disputed islands. panasonic said workers sabotaged one of its factories. they'll shut down two chinese factories until tuesday, while cannon has closed three maplant. they're call to go protect japanese people and property as sony says it has told nonessential workers to cancel nonessential trips to china.
here's what leon panetta had to say. >> it is in everybody's interests, it is in everybody's interests for japan and china to maintain good relations and to find a way to avoid further escalation. >> maintaining those relations has been complicated by the sudden death of the new ambassador to china that happened over the weekend. back out to you, it's not typically diplomatic tensions aren't the first thing people have talked. it's been issues about hard or soft landing or the strong yen. how significant is this geopolitical flare up in your view? >> it's certainly the last thing that japan needs.
we're hearing reports of potential boycotts. so i think that's something to watch. we'll have to do calculations how big this could be in terms of japanese exports. they've already been very weak over the last four or five months. so this would potentially be another shock that would lead to deteriorating trade performance and that potentially negative that adds to the equation. >> you're with us for the rest of the morning. good to have you with us. meanwhile barack obama is planning to file a trade complaint against china with the world trade organization later today. white house officials said the president will say it's initiating it over its support. ohio is an important political spring state. >> and in the meantime, new yahoo! ceo marissa mayer has
promised employees their choice of a new smartphone, but blackberries are not an option. the program is called yahoo! smartphones, smart fun. so if you had the chance, which would you pick so? some viewers saying samsung. e-mail us here to share your thoughts. you can also tweet us. >> and plenty to discuss there. meanwhile spain braces for more protests. we'll be in madrid for the very latest.
an update on a mine in south africa, it says as a result of the situation there, it expects full year sales to be in the range of 700 saleable ounces of platinum. expects guidance to be exceeded. it will terminate it contract with the contractor that supplies the staff. and it says mining activity remains minimal, although all shafts are operational.
>> spanish prime minister looking to avoid a full bailout, but the finance minister wants to ask for assistance as soon as possible. stefane is in madrid with the latest. just how heated is this debate about when and how to request assistance? >> it's not official yet. according to the report, rajarr believes there is no rope and not convinced that the country will need the bailout in the end. the finance minister believes that requesting an international bailout would be the best option for the spanish economy. but for the time being has been instructed by the prime minister to work on the bailout to check you all the conditions and to get the country ready in case
of. but also instructed to work to continue without any international financial assistance. rajoy also believes the more spain will weight, lighter are the potential conditions for a bailout. but spain is facing a huge debt redemption in october and we've seen the yields on the spanish ten year rising a little bit. >> all right. meanwhile more from angela merkel. she says he's concerned about ensuring a sustainable solution. >> and this comes after schaeuble has been the one to criticize him for arg his views. so now mar kell sort of saying no, no, this is fine, we always
welcome his involvement. >> stick around, because after the break, larry summers is worning britain faces as lost decade if it doesn't change course. 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.
pa vish sha joins us from frankfurt. so many sort of different political edges to this one. i suppose you just have to knock them off as they come along. >> absolutely. there is no big surprise really that any of the companies involved in this potential merger would go around the government and try to get some support. what they are looking for is that again nothing really new the company says, plus trying to get that smoothly done and so no real negative impact will be felt across the board. however, that report, one particular one, has not been confirmed by aeds. i tried to speak to daimler but they're not commenting either. holding a 15% stake for the
german government in aeds sitting back watching the developments of a potential merger to then decide whether to scale back their holdings by selling 7.5%. or if it really goes ahead, whether they then have to sell in the open market. that is yet to be out. however interesting moody's this morning did make a comment about that potential merger saying it would be credit positive because it does create a giant with revenues of over $100 billion which is about 20% more than the boeing. >> thanks, patricia. >> bae is prepared to ring fence certain projects to calm fierce. turning now to china, china construction bank has reportedly set its sights on europe. in an interview, the group's chairman said the company is looking to spend around $15
billion to spend a whole bank or stake in a larger entity. if the deal goes ahead, it would be china's biggest foreign bank acquisition. so while we don't have any real merger monday activity to report, we do have the prospect of a tantalizing deal. >> i'm just wondering whether the british goevernment would b prepared to sell for a profit to a chinese bank. >> give it another year of austerity. it is remarkable to see the euro trading above 1.30. but it has come off a little bit since hitting those highs at the end of last week. we are seeing that mood spreading across the major indexes this morning. the dollar yen strengthening a little bit there. 78-35. the aussie dollar taking a hit, a well. keeg off perhaps some of the concerns expressed across china
market. the shanghai composite was 2% lower on the day. we were just discussing the prospect for britain to accept an infusion of cash from central bank. this comes depending on how you look at it at a time when britain's economy is either quite vulnerable or has been underdoing better than the numbers would suggest. but larry summers has an op-ed saying britain risks a loss of decade if it doesn't change of course. >> what they've cut is all the planned investment spending. they've made very few cuts that apply to any other form of government spending. >> nevertheless, what do you make of the pound? are you of the larry summer straw here that britain's economy looks vulnerable or do
you look at the stronger employment data and say perhaps it actually is going to show some strength? >> well, we have a lot of volatile economies around the world, so it's which one is the most when you look at the currencies. we expect gradual down trend in euro sterling, so sterling to strengthen slightly against the euro over the coming months. mainly the euro is driving that. >> not the best news for kelly. she's structuring long the dollar. >> i look at that 1.62 level.
i liked it better when it was down torts more than 1.50. where is the year he said target for the pound against the dollar or euro? >> i think 1.27 is probably. and cable then will follow somewhat lower. but then i think looking into next year will be much more interesting because after a period where the tail risk has been reduced and we've had some relaxation in europe, we'll see if we get some new ways of crisis in europe coming from either french recession, italian election and that could nuf potentially lower. ♪
interests. >> stainpain's leadership is divided. the prime minister wants to avoid aid but the pie nance minister ready for a rescue. more protests rock madrid. we raised the question of whether risk off is moot in markets. that's been the case as we shift from asia to europe. we are pointed lower not by a huge amount. the dow jones implied to open lower by about 20 points. we're only 4% away from nominal highs for the dow. same true for the s&p 500. the nasdaq much lower from its nominal high. since about 37% lower if you can believe it.
take a quick look at european markets. 14 month highs. cac 40 shedding 0.6%. and since the last time we checked in, we have see markets adding lower to the earlier moves. >> just coming off those highs. here's a recap of some of the thoughts we've already heard on cnbc today. >> i think the trade is looking for a flattening of the yield curve. you can see it in a churning environment.
>> if we see some selloff as people talk about from bailouts not happening, then the and you are euro may suffer. >> where we've been focusing the last couple weeks is on gold. bank of england could be printing more. gold could go up. >> teach englander says the movement in gold is exaggerated well to to the move in commodities.
before we get to that, though, the four year anniversary of the lehman brothers collapse this weekend, that of course widely seen as the tipping point that brought financial markets to the brink back in 2008. looking back, has the global banking system managed to correct the ills of the past? joining us for a few on that is larry mcdonald. great to have you on the program. what lessons have been learned? >> in some respects there's less leverage in the u.s., which is good. but there's a really dangerous hedge if you want that not a lot of people are talking about. and i think it's creating a massive tleft to the world. and that's the federal reserve. if you look it at the balance sheet expansion, the risk reward of the qe-3 is just atrocious.
you've got too much balance sheet risks. earning 3% less than they were maybe four years ago. that's $500 billion of disposable income that we don't have today. so i don't see the risk and rewart. >> there's a different between low rates hurting people and the giant hedge fund. if you're a central bank, that's a bit of a different beast. >> i way i look at it is fannie and freddie owned probably $3 trillion of mortgage backed securities and that doesn't end up very well. what i'm worried about is if you look over the last 100 year, whenever you have a systemic
risk event, you have a period of normalization. and i've been blogging about this and here's the point. people are wounded, so you have this relationship between bond yields and systemic risk. so in the last four years, as systemic risk rises, with the riots and the flash crash, there's a relationship between treasury yields and systemic risk. as systemic risk reduces, there's a massive spike in treasury yields. and if systemic risk ever normalizes, we'll come in one day and yields will be like 2%. >> i think the one thing we've learned, the central bank needs
to come in and make sure money markets are stable, maybe sure credit threats don'texplode. i think one success story is despite the very severe european tensions we've had over the last 2 1/2 year, we've seen financial conditions in the u.s. actually being very accommodative. so credit markets have been holding up, money markets have been holding up and it gives the u.s. economy a chance to grow. not fast, but avoiding the worst case scenario by having these financial conditions remaining easy. >> the heart of the problem is that, yes, we've managed to help the economy by preserving some of these conditions, but the ability that stability in money market funds should be preserved for the sake of the broader economy, even if that doesn't address the current structure seems like part of the problem here. >> i don't think that's the
right way of phrasing it. the money market is a crucial part of the economy. this is the basis for all financial markets. if the money market is not working, nothing will be working. that's why the ecb had to mediate because the private sector was not working. so it has to be a building block to work from and i think it's very important that we see in central banks around really take hold of the policies that are needed to secure those that are working well. >> well, i would say you're right the money money markets are looser than they were this time last year. this time last year, you had a horrific money markets which led to more systemic risk and that really hurt the markets. we're four years after lehman.
what have we learned? we look at dodd-frank, we look at the regulatory framework in the united states. we look at the fed. one of the greatest threats to the u.s. and the capitalism really is academics and bureaucrats that really run our entire regulatory framework in the u.s. and they run the federal reserve. we need risk it takers. people that have actually taken risk to be in the regulatory framework. if you look at the crash of 2008, who is making all the decisions? it was hank paulson, someone from wall street. and we have a situation all these years later where if you look at the fdic, the futures trading commission, the regulatory infrastructure doesn't have approach risk takers. and that's a big threat. >> it sounds like you think the fed are taking risks.
>> i've been behind the scenes taking to hedge fund managers. these are complete experimental drugs, they don't have an exit strategy. they want to make us feel good with academic contrived jargon, but this is a massive experiment. and what i'm worried about, think about in the united states we have a trillion dollars in pensions. they're underfundeded compared to '08. that's a problem in itself. but look at that trillion dollars. if rates go up 200 basis points because of this experiment fails that's a $200 billion loss to u.s. pensions if you did the math. so i just think that if they lose the control of the long end of the yield curve which they easily could, it will kacreate lot of pain here in the u.s. >> there's also the concern that they've forced it into products which is perhaps riskier. >> similar debate here in the uk
has we've launched a third bout of qe is the damage done to the pension funds. >> goes back to would you rather safer jobs. after the break, the helm of yahoo! is handing out smartphon smartphones. is the blackberry headed for the corporate black list some we hav. one is for a clean, domestic energy future that puts us in control. our abundant natural gas is already saving us money, producing cleaner electricity, putting us to work here in america and supporting wind and solar. though all energy development comes with some risk, we're committed to safely and responsibly producing natural gas. it's not a dream. america's natural gas... putting us in control of our energy future, now.
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the question is whether there is a tactical shift to be made p. >> if you're just joining us, these are your headlines. risk may be off the table. stocks beginning the week lower. the euro easing. january the japanese factories in china shut down as tensions are escalating. and spain's leadership may be divided over bailouts. united statess has olded all nonessential to leave embassies after anti-american attacks last week including killing of the u.s. ambassador to libya chris stevens. it was sparked by an amateur film posted on youtube. the evacuation order is a precautionary measure. a guilty plea is expected
from the man accused of defrauding customers of $200 million. he will appear before a judge in iowa this afternoon in exchange for a guilty plea, he'll be freed on bail until his sentencing. he faces up to 50 years in prison. >> and another day without school for students in chicago. teachers are extending the strike that began last week after union leaders failed to come to a deal over the weekend. at issue are contract negotiations including teacher evaluations, merit pay and job security. the strike affects some 350,000 children in the country's third biggest school system. and no signs of progress in the nhl lockout. this is the second work stoppage for professional hockey players in less than a decade. the move will likely push back the sports season scheduled to begin on october 11th. >> and mcdonald's will begin
posting calorie counts in all of its menus today. this comes as part of america's new health care law. and mcdonald's is the first large fast food chain to post nutrition information. all restaurants with at least 20 locations will have to follow suit. the worst offender on the menu, it's not the big mac, it's the big breakfast clocking in at 1150 calories. all the more reason to try one the next time you're state side. >> oh, yeah. >> they do display calorie information for the most part here in london. >> i think they do. >> we'll check it out over lunch. still to come, occupy wall street protesters are set to march later today. one year old, is the message falling on deaf ears. 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.
today marks the first anniversary of the beginning of the occupy wall street movement. demonstrators are heading back to the financial district for coordinated protests at the new york stock can change ofexchang. rallies are also scheduled in more than 30 cities worldwide. so will the momentum be anything this year like it was last year? kay kayla tausche joins tru s us fr zuccotti park. it's dark and looks quiet. what's it like there? >> well, we're expecting that it will kick off in just about an hour or so. that storm on the stock exchange expected to begin around 7:00. but zuccotti park is relatively
sleepy. hard to believe that this is the place where just a year ago a small cluster of protesters against wall street and the financial crisis and against the government's bailout of all the companies here. but since that began, launching worldwide protests in 82 countries, nearly 1,000 cities. and some of them raged on. hong kong occupiers evacuated just last month even as the movement as a whole starts to lose some steam. but not taoday. today is the third days in three days of a rally that they're calling a carnival. it began on saturday with the march from washington square park here in new york city all the way down broadway to zuccotti park where it all began. as you mentioned, a dozen protests. and we're collecting a lot of activity today. roughly 1,000 to storm the stock exchange before a sit-in that's coordinated in the lobbies of the buildings. security is on hand. definitely expected to an pretty active day. >> and that's what's so interesting because a year ago, this really took authorities in
new york by surprise and you saw a lot of owner of private parks trying to shut down access to them, trying to change the rules for access to public parks. this time around, does it seem like the police presence and just the general handling of the situation is much more on the front of their minds? >> i think the december lags last year was the big issue. because it lasted for nearly two months, there is roughly $13 million in taxpayer money that went to pay the overtime of the police officers. that was the great irony of what ended up happening. ic now they have the system down, they know what will happen and how many are expected. >> kayla tausche up there for us watching all of it. thanks so much for that report.
>> we're at 52 week highs for the xetra dax, so seen quite substantial rallies since the lows. >> u.s. futures also pointed slightly lower. dow by about ten. it is of course only about 4% off its all-time high, though. and the s&p 500 same story. but highest level since 2007 when the recession began. >> larry, we talked about a bazooka inspired rally. we certainly had a rally. was the bazooka substantial enough in terms of what we've got from the ecb and the fed to sustain risk? >> i think the biggest near term risk, ross, is a repeat of 2010. remember, we were just talking a
couple minutes ago the austerity measures in greece. about three or four months after the measures were put into greece, there were riots in the streets and people died in the streets of greece and bonds plummeted. i think now if spain really wants the money and needs the money, which they do, they need about -- i think they need $300 billion, that austerity program, the people in the streets of spain are already starting to realize what is facing them. and that will manifest -- that risk will manifest itself in the bond market over the next two to three, four weeks. so i see a repeat of 2010 here the next couple of months coming out of spain a risk off trade. >> when we talked about the euro and pound even, a lot of these currency, you weren't super excited about the size of the moves that we could have in the months ahead. what does have your attention, what are you worked up about this morning? >> i think we're moving from funding crisis to potentially a
growth crisis coming on. and if market is a bad trend again, but a less vie lend trend than you have coming out from the imminent fund crisis that we seemed to be facing earlier this year. growth indicators is what's coming out of china. are they managing sort of more moderate slowdown or more severe slowdown. that will be key to the global growth outlook. >> and complicated lately by the global tensions we've seen with japan. thanks to both of you for being with us. >> that's just about it for today. coming up next "squawk box," they'll have all the countdown to the trading of today state side. >> and we'll see you back here same time same place tomorrow.
we use this board to compare car insurance rates side by side so you get the same coverage, often for less. that's one smart board. what else does it do, reverse gravity? [ laughs ] [ laughs ] [ whooshing ] tell me about it. why am i not going anywhere? you don't believe hard enough. a smarter way to shop around. now that's progressive. call or click today. [ grunting ]
good morning. today's top stories, riding the rally. stocks coming off the second straight week of sharp gains. september may be the worst month of the year historically, but this time around, that has not been the case. major indices up nearly 4% across the board so far. still on strike, chicago teachers saying they're not happy and will stay off the job. meantime, mayor rahm emanuel says children are being played as pawns. he wants a judge to force the end to the whole thing. and an international crisis at least 20 countries have now seen uprisings against american embassies. it's monday, september 17th,