tv Worldwide Exchange CNBC September 18, 2012 4:00am-6:00am EDT
. welcome to "worldwide exchange." >> these are your headlines from around the world. >> china's defense minister says beijing has the right to take further action against japan, but both sides urge a resolution after markets take a hit with the tensions. >> spanish government says it's still considering the terms of a possible bailout as bad loans are expected to reach a record high. and u.s. regulators are searching for the cause of monday's rapid plunge in oil prices saying it's unclear if high speed trading played a role. plus mitt romney tried to explain controversial comments,
but the republican presidential candidate isn't backing down. >> welcome to today's program. we'll kick off with some news out of friess. finance minister says they will meet the 2012 deficit targets in nominal terms, but not as a percentage of gdp. >> you stack that up against a lot of countries, they would be looking pretty good. unfortunately, they're coming from such high prior deficits and have had to do a lot of adjustment on the spending side. >> various brokers take on the euro group meeting, that they were being allowed another two years sort of suspension of debt repayments. >> and there was a sense they were going to get some extra time, but we'll ask our guests this morning whether this is more or less than the expectation going into that meeting.
>> absolutely. >> meanwhile, we'll be joined by a ton of experts in china and japan as tensions escalate between the disputed islands. toyota, sony and honda have suspended operations as this continues. and borrowing costs creep higher with the word bailout of course on everyone's minds. plus motorola, yet another phone being unveiled in the september smartphone bonanza. >> them and htc coming up. meanwhile stocks have slipped. the disputed islands have long been a bone of contention. there's a risk this recent feud could affect trade on a much
bigger scale. emmy has filed the details in this report. >> concerns over escalating protests and violence have prompted many japanese businesses to close up shop at least temporarily. honda, mazda, nissan and toyota have announced stoppages at some of it plants. panasonic, cannon and sony haves also halted operations at some of their factories. a number of stores and retailers have closed their doors with staff members told to stay at home. a group of japanese business chiefs are now rethinking plans to meet up with top chinese politicians, something the group has done regularly for the last three decades. many expect protests to continue as nationalistic fervor intensifies in china. today marks the first anniversary of the japanese occupation of various parts of the mainland. fitch says the ratings of major
auto and tech manufacturers may come under pleasure if the clash between the two sides escalates and is prolonged. china is japan's biggest trading partner. $345 billion last year. beijing has said that japan's economy could suffer for up to 20 years if answers were to be imposed. the tensions could cast a had low over growth in the region which major western countries are counting on to drive the recovery from the global economic slowdown. >> leon panetta is urging both countries to remain calm. he's also called on china to improve military contact with washington as a way to avoid confrontations or missteps. >> and the point of this is to accepted a very positive message to all of the nations of this region and the world that we intend to establish a relationship that is healthy, stable, reliable and continuous.
>> he's scheduled to meet with t chinese vice president later in the day. for more, we're joined by a professor and tokyo correspondent. ben, let's kick off with you. how is it being viewed this latest deterioration in relations? >> it's being viewed extremely seriously. it all kicked off of course last week after the decision to effectively nationalize the disputed islands in the south china sea and since then, japan has watched in horror as you've seen the pictures from various locations around china of worker unrest, of demonstrations and of highly policed demos. no specialties so far, but they're very conscious that this
could escalate. >> it's remarkable because this comes at a time when we've been focusing on china, japan, concerned about the health of their domestic sectors and then this territorial dispute all of a sudden is putting the trade relationship into focus. what tensions is this really revealing and how much more serious could this dispute become? >> it's more serious for japan than china. japan depends on china far more than china depends on japan for it national income. if you look at some of the share price moves, it's been a big consumer facing japanese companies like the cosmetics companies that have been really hit because they send visible brands if you're a chinese consumer and you're faced with a choice of taking a japanese brand or nonjapanese brand,
you'll certainly elect for a nonjapanese brand. but it's also spreading to some of the big construction machinery companies. they've been suffering anyway because of the big turn dunn in domestic construction and this is adding to their woes. >> frank, let's bring you in on that point that this is worse for japan than china. does that mean china will exert more pressure? how much will a trade dispute damage chinese companies? >> i think the trade dispute would be very damaging to both sides. and the chinese are saying it will hurt japan more. but that's not the way to look at things. the three countries china, japan, south korea have been talking for years now about regional integration and this is going to be a huge set back to
this idea of regional inta integrati integration. i think they should take a deep breath, step back and start talking to each other rather than making threats. >> total trade, $345 billion. that is not an insignificant amount of money. how do you think this is going to lay out? >> well, it is worrying that china is threatening basically economic warfare against japan. and we saw that two years ago when there was another crisis over the same islands. and china stopped exporting rare efforts to japan. earlier this year, japan refused to import bananas from the pill peens when they had a dispute over another island. so the fact that china is
willing to use economic means to achieve political ends i think is worrying. and they used to say that politics and economics should be separate, but it seems to be that now they are not abiding by that principle. >> is there a role here for the u.s. or not bearing in mind they're challenging china in the wto? >> i think china sg see the does see the u.s. playing a role. they blame the u.s. for the problem in the first place because when the u.s. was running okinawa in the 1950s, the islands were redefined. up until then, the islands had not been included. so in 1972, it returned the
islands, as well, although it took the position that it's neutral on sovereignty. but the u.s. says these islands are covered by the mutual defense treaty between the u.s. and japan. and china is very unhappy about that. so for it were to come to blows with japan, it means the u.s. would be involved, as well. >> ben, would you agree? >> yeah, i would agree. this is very serious. and of course tensions have been escalating all over the pacific since the u.s. announced i think back in january that it would retr deploy. japan of course is embroiled on three separate fronts. >> ben, thanks for joining us. and frank, thank you, as well.
thank you both. >> turning our attention to spain briefly here, the country's reporting that its july bad debt load came in at $169 billion euros. bad loans rose to 9.86% in july, this up about 40 basis points from 9.42% in june. perhaps not shocking given that the country is dealing with recession, but bad bank loans rose to 9.8% in july. >> we're just an hour into trade here in europe. weighted to the down side as you can see on the stoxx 600. advancers outpaced by deshricli by nearly 8:1. yesterday losses for the ftse of around 0.4. we're down 40 points at the moment. xetra dax off just 8 points yesterday. cac 40 down 0.7% yesterday.
and down 1.8% for the spanish ibex. spanish bond yields back over the 6% level. spanish t-bill auction, 3.5 billion. that auction takes place in around about 20 minutes or so. first time they've auctioned more than 3.5 billion you're roses in a bond sale since march. and of course we have a ten year and three year coming up on thursday. euro-dollar still maintaining some of the gains that we've had. resource minister again in australia suggesting the commodities boone is over. such a big move in brent yesterday. currently trading up five bucks.
some talking about a big automated series of trades. spot gold down 1756. let's go to asia and the trading today there. >> asian markets retreated from the significance gains sparked by the fedded's qe-3. the shanghai com positive the lost another nearly 1% after a 2% pull back. the hang seng came off its 4 1/2 month high. following state owned firms as well as growing tensions between china and japan undermined market sentiment. some automakers that have partnerships with japan also got sold out. the japan markets reversed early
gains after yesterday's holidays. totally 7%. exporters also paired morning guns on a weaker yen. the aussie market flipped lower after mixed message from the rba minutes. index lower by 0.1% at the moment. back to you. >>. >> airbus has been floated by eads as the potential name for company if the merger goes through. bae not surprisingly opposes the
use of the new name arguing it won't go over well for american as they see airbuseing biggest rival. so what do you think it should be called? you can e-mail or tweet us. respond to that or anything else you've heard on the program this morning. >> bret tisch airbus, i'm sure that will go down well. mining strikes could do long term damage to the economy, that's the message in brussels today. we'll have more from julia when we come back. 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.
chinese premiere wen is due to travel this week to attend the summit in brussels. he'll be seeking to boost ties between the eu and china. protectionism has been placed front and center at the summit to properly deal with trade disputes. now markets are still waiting meanwhile for the latest it foreign direct investment figures out of chew in a. worries about a slowdown in the
country continue to build. a senior government official vowed it improve policy environment and step up efforts to booth domestic command. so are areas of china overing investors opportunities now? joining us now is head of investor relations for changdu. welcome to the set. you're in town to bring investment opportunities. what kind of interests are you seeing from investors? >> it's slowing down, but if you look at the western part of china, it's still growing quite fast. if you look at chengdu, annual gross of more than 15% per year. so i believe that the western
part of china will become a new begi engine. >> there's this move from where china's growth comes from. are you looking now for service company investments rather than manufacturing basis? >> it if you look at inner part of china, it's far from coastal cities. so trying to develop high tech industry and service and also the aviation.
also shanghai and europe, we can easily transport. so chengdu i think is looking for service and technologies. >> what do you make of the current trade dispute? is that a set back or problem for attracting investment into china and chengdu? >> no, i don't think so. >> perhaps it's just one of those political risks when you try to get comfortable with visibility, you know, comfortable with the fact that there will be free flow of capital. what is chengdu doing to address
those concerns? >> if you look at east part of china, the labor force has become more and more expensive. chengdu, it's still lower level. every year we can supply more than 200 for the companies you do if you want to set up in chengdu. >> how funecessary is to have local partners or is it pabl possib possible for -- >> it's possible. if you want more than 3% of state owned companies to control, it's not -- yeah. >> okay. thank you very much for stopping by. western china perhaps not
getting as much attention. akzo said the ceo is taking medical leave for a few weeks for fatigue. he's expected to return in the first half of october. he's been in the job since april of this year. meanwhile a mediator says workers at the plant had agreed to lower their salary demands for the first time. they're trying to put an end to violent demonstrations that left more than 40 people dead. at the same time, south african's president addressed the country's largest federation of unions and stressed south africa could not afford to slip into another recession. those comments were made ahead of the scheduled visit to
brussels where he's due to discuss the strike and various trade issues. julia has gone over to brussels for more on that. so so much focus on the disruptions at the hospital. what is the outlook now for resource output? >> all we've seen from the likes is that they've now cut it for the second time. yesterday that was the announcement. it looks pretty bleak. we saw a 30% drop and this does represent 56% of the exports of south africa. so certainly where the trade balance is concerned, it's very concerning. but i do think in terms of the international community, the president will likely use this as an opportunity to calm things down and say that he does have the situation under control. and it will be isolated to the mining sector. there's certainly been concern that perhaps the social unrest could spread back into the manufacturing sector which is also suffering at the moment.
30% of the exports of the south african nation do flow into the eu, 75% of the foreign direct investment also comes from the eu. so it's a very vital relationship for south africa between the eu. i dos also think the president's comments yesterday, though, are pretty important, too. he suggested that there is going to be and ongoing debate about this and the multi nationals that are operating need to play their role, too, in resolving the situation in the mining sector. listen to what he had to say. >> mining companies are required to improve the housing and living conditions of workers. and also to invest in development, employment equity, ownership as well as local community development. >> despite the issues it that we're seeing in the mining sector, the exchange rate has held in quite well, trading
around the 820 level since june. similar story in the bond markets. traders tell me this is because citi announced that south africa would be joining their global world bond in-dweks next month. so while the portfolio in-flows are obviously beneficial for south africa, it does mean they're more sensitive to the sentiment surrounding the country from the international community. and i certainly believe this is something it that the president will perhaps look to address later today. but we wait for the press conferences. for now, back to you. >> no doubt that investors will want the government to get is -- we're in the sixth week now, still no clear way out of this. >> and as guests have noted, this could affect the country's sovereign rating at some point. >> absolutely. coming up next, we're heading out to madrid where there is its biggest auction since march. and as yields climb higher, we'll see how that auction goes town.
reach a record high of almost 9 pnt9.9%. >> u.s. regular hate tors are searching for the cause of monday's rapid plunge in oil prices. >> and mitt romney tries to explain controversial comments secretly caught on tape at a recent fund-raiser. the republican presidential candidate isn't backing down. >> we have seen a dip down in headlight rain of inflation for the uk, ticking down despite a rise in oil in fuel costs this morning. consumer price inflation was 2.5 last month, down from 2.6% in july and that's in line with consumers forecast, as well. easing price pressures there furniture health helping. inflation has been falling since reaching that high of 5.2% last september. you have to return across the bank of england predicting
inflation will ease below its target by early 2013, but of course the renewed rise in oil prices and high commodity costs threaten to push prices up again. but today inflation behaving as people thought it was going to do. we'll keep our eyes on reaction to that. sterling-dollar fairly steady. ftse 100 down 0.8%. down a percent now for xetra dax and cac 40. 1.58% lower for spain where we continue to see yields rising. >> take a look at the spanish ten year. 5.96%, testing the 6% level ahead of the t-bill auction later this morning. the ten year in italy, its yield is coming in 5.13%. it's interesting we see yields coming in across the board. it's not so much a risk on risk attitude this morning so much as investor repositioning. the gilt is down to 1.9%, but
still significantly higher relative to where we were just a few weeks ago. >> euro trying to hang on to the gains since the lows in july. it's been up 9% since the july lows. we hit the high, currently 1.3083. euro staer link slightly weak. dollar-yen has rallied off the seven month lows we hit, as well. aussie dollar is weaker. more concerns about chinese growth and the resource minister again coming out overnight and saying that commodities boom is over. >> sony said it was going to close two of its seven china plants today amid protests as the japan/china trade dispute worsens. now sony is saying they were return to normal operations on wednesday. so tomorrow the two plants shut today are expected to be reopened and returned to normal operations. >> the results of a spanish short term bond auction are due out very shortly. aim to sell to 4.5 billion
euros. let's get more on that. stefane has the details for us in madrid. and we are still worried about the spanish banking sector and wondering when is the cycle going to turn for them? >> we have reasons to get worried about the spanish banking sector because 9.86% means that for ten loans in spain, at least nearly one of them repayments is at least three months behind schedule, that's the definition of nonperforming ratio. that's a record level. they have 169 billion euros in bad loans and the levels of deficits was at 1.28 in july. this announcement comes ahead of the result the stress test that the government is going to
release at the end of next week on september 2th. we will know exactly the financial needs of the spanish 14 financial groups and according to the newspaper, the banks will start to receive their individual results by the end of this week. and we're also wait this morning for the result of the latest spanish auction, the troica planning to raise up to 4.5 billion euros in 12 and 18 month treasury bill. the auction taking place of course as the spanish ten year bund is no you close to 6%. again, we were even briefly over 6% yesterday. the urgency on whether or not the spanish government will replace the bailout to trigger the bond buying program from the ecb generateded some uncertainty. but this morning the deputy prime minister said spain was still negotiating the conditions for the bailout, so it's not out of question of course.
>> all right. thanks for that. joining us is chief eurozone economist. ricardo, we're still seeing disappointing news out of the hispanic sector. yields rising. disagreement in the political circles about whether they should apply for a full bailout or not. what's going to be the trigger and how soon? >> obviously it will be the markets who might push the spanish authorities on the back perhaps of some further developments in terms of the finances, the regional governments, the banking sector itself. i think the spanish government would like to wait for at least one month. they have regional elections coming up. i think politically they would rather wait. there are also probably a number of details that need to be negotiated he european level.
because there are still many questions about the european support facility, which options will be taken, who will be running the bond buying program, is it going to be primary or secondary. so a number of things. and then most importantly, the conditionality for the program. >> and on that last point, there's a view in made grid the budget which they'll present at the end of this month will have all the necessary conditionality in it. do you think that will work that way? >> well, the budget obviously will be important. it must be credible. there has been a continued overshooting of deficit targets in this spain. i think the government needs to come clean about both the central government finances and the regional governments. the numbers should be more realistic. it is likely that the target will be overshot onces again, although it was raised. so they must convince analysts
and markets at large that they can bring the deficit down over the next two to three years. perhaps not to the very ambitious progress, but i think down in a credible fashion. >> how significant are these dress tests due at the end of the month for the spanish banking sector? what do they have to do or say to restore investor confidence? >> i think they're important because they are a bit more bottom up than initial assessment. i think it's important to have an assessment of how much is needed to recapitalize the banks and for people to be a bit more confident so that the problems are being addressed. now, obviously if the recession continues beyond this year and next year, this capital may not be enough, but at least we know
for the time being, the means of being dealt with and we can move on. >> they could reduce interest rates and launch another round of cheap funding to support struggling economies. speaking at a seminar. is it your view that the ecb may have to get more aggressive if the current measures aren't enough? >> i think so. there are a number of reasons. first of all, there is no evidence of improvement in the numbers. and as we gain ground, we're now about 130, so the benefit from the july rate cut is now totally gone.
the adjustment is not happening within the region. so vis-a-vis the rest of the world, we need a more competitive exchange rate and rate cut also helps the banks. the key question is whether the ecb will cut also thes for rate, thus taking it it into negative airer to. i think given the emphasis on the bond buying program, given the disagreements with germany, they will wait on that. i don't think next time they cut rates they'll cut the deposit rate to minus 25. i think it will be a cut in the main refinancing rate and probably come before the end of the year. and if the economy doesn't recover beyond that, then i think at that point they will consider negative rates. >> not out of the question, that's for sure. ricardo, thanks very much for your time. just want to bring you here the
results of the spanish t-bill auction ross as those come through. >> yeah, we have 3.5 billion for 12 month bills and that's kind of what they are looking to sell. 2 versus 1.9. the yield is lower than the 3.07% of the previous auction. and they sold 1 billion euros of the 18 month bills. the average yield on that 3.72. >> appetite waning even as the yields have come in and some concern about the sovereign resurfaces. >> yeah, i'm just wondering if they're looking to sell a little bit more than that. >> total of 4.5 billion euros. yeah, we'll dig into that. and in the meantime, want to draw your attention over to australia where the central bank has signaled that it is ready to ease further if needed. matthew taylor keeping an eye on conditions down under and he
files this report from sydney. >> these are the minutes from the rba september policy meeting where the central bank had interest rates unchanged at 3.5%. the bank sounded less dovish than many economists had expected saying there was policy to respond to what it calls a significant deterioration in the growth outlook suggesting a rate cut was not imminent. the rba says while there's it no doubt camed modity prices have come off recent highs and that wim pact australia's it terms of trade, it added that the pipeline of investment remains strong and is likely to stay that way for some time. as always, the central bank spoke about china and said the recent round of economic data points there had been a touch weaker despite earlier signs of a stabilization. the reserve bank meets again on the first tuesday of october. most economists say these minutes don't suggest we'll see a rate cut at that meeting. back to you. >> all right.
let's remind you what else is on the economic calendar. we'll get minutes from the bank of england and plus the bank of japan policy decision. and on thursday, look out for the all-important flash pmi data for germany, france and the eurozone. and on friday, spanish prime minister rajoy meets mario monti in rome. >> now, after many stops and starts, traders in malaysia and singapore can directly exchange stocks. cross trading starts today in fact. head of securities says it's all part of a bigger trading link. >> this is the first step in the process. on the trading side, it's trying to allow more people to invest into asean as a group as well as more people getting exposure to exchanges cross border.
>> more countries in the region are expected to join thailand next in line. so what sectors are worth considering? joining us for more is equity analyst at cinb. david, thanks for joining us. first of all, how significant is this move snd wheand where is t opportunity? >> will is long term positive for equity trading. but the near term, i don't see much impact. of course if you look at it, as see a as see ann asean exchanges is about 40% compared to not asian exchanges, 121%. u.s., europe, euro, looking at
about 80%. so still a lot of scope for improvement in liquidity trading. so longer term are it's a positive, but a lot of wrork has to be done, creating awareness among investors. and also a lot of standardization of trading and regulations involved. >> even if all that plays out, investors who are eager to get access to these markets, you say for them to take a look for example at the offshore marie sector, to look perhaps to indonesia and thailand, whether it's plan takings or petrol chemicals these sectors who may be underperforming but have good fundamentals. >> it is right. ultimately right now we don't think that this asean trading link will have any impact on valuations. on the other hand, we're looking at a fundamental basis qe-3 and
very weak micro fundamentals will still drive valuations. so for singapore, malaysia, offshore marine sectors. there are some cheap value plays over there. and it's important for jet streams. indonesia, bank very along loan growth, a lot of up side for net interest margins. and also plantation which should be cheap beneficiary for cpo prices up side. and thailand, again, pet petrochemical companies. we're seeing a lot of domestic demand for construction materials. >> especially willy with regard to singapore, there's been attention on its macro picture. actually some indicators pointing toward recession. do you think it's these pressures which are prompting some of this opening up in terms
of its exchange to outsiders or should people just think twice when they to these formerly booming markets as to how held they they think things are on the ground? >> i think ultimately risk is a factor going forward. of course there will be ups and downs. the business cycles will still come and go. but ilt ly fundamentally do the have a strong balance sheet. so we might see recessions or -- in different economies, different issues going forward, but ultimately it's a stock specific period going forward. look for value plays. >> daniel, thanks very much for your thoughts this morning. let's take a quick look at the agenda in asia tomorrow. japan airlines is relisting,
expected to raise more than $8 billion and that would make it the second biggest offering of this year after facebook. and htc unveiling it new windows smartphone in new york. >> and they sold just over 4.5 billion. the yield lower at the previous auction. 2.83% versus 3.07. and just over 1 billion targeted for the 18 month bill and the yield on that also coming down 3.07 versus 3.33. sets us up for thursday because they're going back to the benchmark ten year and the new three year, as well. >> ten year coming in a little bit on the heels of that 5.96% is the level we'll see whether that holds ahead of that -- >> it's's also the first time since march. so being proactive.
welcome back to the program. well, airbus has been floated by eads as the potential name for the 38 billion tie up the merger would create if it goes through. this according to the financial times. bae, though, opposes the airbus title saying that wouldn't go over with americans who see airbus as boeing's biggest rival. so what's in a name? if the potential merger goes through, what should the company be called? send us an e-mail, firstname.lastname@example.org, also @cnbcwex. you can reach us directly, as well. eads will guarantee jobs for 20,000 employees as a group until 2014. patricia is following the story for us from frankfurt. so should we believe these jobs would be cut?
>> of course within the possibility of creating a lot of -- will the interesting part of that story is that of course until current guarantees up 2020. so we do have an issue there, but i guess the merged entity will have to face quite a few hurdles when it comes to the eu walls. what the eu treaty actually says, one can take action in order to protect especially government interests, however, we have to weigh out whether it is still the okay with the competition rules overall. and of course creating a giant, 220,000 employees, is a bit of a tough one to call. and it is again in the detail. how we're defining that new merged entity. because it is about 50% nonmilitary and 50% military. now, if the part of the
nonmilitary is the one driving the merger, perhaps it would be a little less of a competition issue. >> thanks very much, patricia. apple shares are v. hit another milestone after reporting better than expected demand for its new iphone 5. the stock soared past the $700 share level for the first time after the company said it took orders for more than 2 million of the next generation smartphones in just the first 24 hours of its release. jon fortt files this report. >> apple on monday announced that iphone 5 pre-orders just the first 24 hours topped 2 million units. if you want to do the math, that's about $1.3 billion worth of iphones in just 24 hours. a lot of people trying to figure out what this means about the launch strength of the iphone 5. certainly strong out of the blocks for apple a year ago when it was the iphone 4s, apple did a million in 24 hours.
so this is twice as strong. so looking ahead to the launch weekend when it actually goes on sale friday, saturday, sunday, we know that a year ago apple did 4 million units through the launch weekend. at least one analyst expects that twice the volume on pre-order day means twice the volume through launch weekend. he believes around 8 million units is not outside h. side the possibility. he's projecting anywhere from 6 million to 10 million unit. and after that, apple will launch in 22 more countries beyond the nine this coming weekend. and so then who those how many units they can do. a lot had pegged 10 million as total possible. now some of those numbers going up. of course that bodes well for the current quarter and also the
holiday quarter. certainly seems that apple is building up inventories to try to do just that. >> iphone 5 is very much alive. >> you said waiting was the theme of the summer. not it too shabby. it's that time of year where britain's top designers showcase their collections to the buyers and the public. i asked where in the world is the growth. >> we are grateful for our customers. we've been in this business for 30 years. and we see ourselves expand iin in pakistan, ukraine and moscow and also asian market.
even a small economy like macao. so it's tough out there, but the consumer will likely buy what they can't do without. >> ear la >> i asked what business conditions were like in ireland, his adopted country, and he mentioned bad banks and the property market. >> 2007, 2008, they all in equity. so the situation there i don't think exactly what it is and also the bad banking to manage
all the property, i really don't know what will happen. >> coming up wednesday, i also caught up with the middleton favorite designer. find out what she had to say about how europe's recession has affected the production of her line and of course her view on the strength of the chinese. and coming up on this program, we talk to the ceo and where there is strong 2k3457bdemand. 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
searching for the cause of monday's rapid plunge in oil prices. they say it's unclear if high speed automated trading played a role. a very good morning to you. i'm sitting here away from kelly because we have a snapshot, sentiment i index 18.2. and also lower than the poll of 1737 they say still expects german economy to lose momentum. so economic sentiment index
maybe not as bat as we thought. current current. patricia has reaction for us. >> not that much reaction really because i think people are trying to digest what the underlying message is coming through. perhaps a bit more disappointed because it includes the bond buying and decision with regard to the esm and also includes the third qe in the u.s. and for that perhaps some of the people did speculate a little bit of a better picture, but it seems that here people are being cautious indeed in terms of the further economic development second quarter gdp was up, but we have to see what the
expectations are going forward. esm made no impact and the debt crisis not solved yet, risk for economic activity do remain. remember, this index actually shows you what people that are seriously claim the market working are thinking about the action being taken in order to pump liquidity into the economy and get out of the crisis. what we've seen as of the august numbers was actually the worst in 2012. now with this new set of numbers, we really have to see especially now what people think the gtp for the third quarter will be. >> that's right. looking through the details, pa vish that, thapatricia, thanks . not too much movement in the wake of that survey. dow jones industrial average is expected to open lower by about a 35 points.
nasdaq pointed lower by about 7. s&p 500 also looking to shed a couple of points. quek lo quick look at the theme broadly consistent. global 300 lower down by about 0.3%. european bourses, we'll see how the major ones are trading, red is the theme. ibex 35 down 1.5%, so we're actually seeing what started off as a muted risk tone now pick up momentum. >> good news for spain, though. they raised the money they want first time since march more than 3.5 billion. and as a result actually better reaction to spanish yields. you can see they have could
>> shanghai composite fell another 1%. the hang seng came off it 4 1/2 month high. falling commodity prices and energy plays on both the shanghai and hong kong markets. tensions between china and japan undermined sentiment. retailers it up blink 7% as un any globe closed more stores in china. can about porters also paired morning gains on the weaker yen. kospi edged higher in late trade. construction shares losing ground. the aussie market slipped lower after mixed messages from the rpa minutes. mining majors declined, but metalled soared 17%.
back to you. >> thanks very much for that. well, the commodity futures trading commission is talking to the cme and ise. brent crude dropped more than 3 bucks and that may have contributed to the monday stock market losses. i.c. i.c.e. declined comment. they're unaware of any technical issue that contributed to selling. david kelly joins us, chief global strategist. what's your reaction here to that selloff yesterday some does it tell you anything more broad broadly? >> no, we've seen a huge rally
this year particularly in the united states and i think we were due for it a bit of a correction. but overall the story has been one of tail risks and tail valuations. the relative valuations of stocks and bonds are extreme around the developed world and as central banks have moved in and removed some of the tail risks, as that has happened i think markets are a subdued global economy, because more global economy. >> well, oil certainly has gotten focus in the wake of the fed's move on qe infinity. is it your view that prices have further room to run if stocks do as well? i know you're sort of a little cautious on the macro picture here. but macro might not matter if there's more support from the central bank. >> i don't think that oil prices will get pushed up by the global economy that much the question
is whether there be a coordinated attack on the nuclear iranian facilities. if that happens and disrupts oil supplies, that could obviously push oil prices much higher. so i think there is a certain amount of sort of middle east tension risk built into oil prices. hard to disentangle that. >> geopolitics. if the central banks have done their bit and we've had the run up in assets that we've talked about, what is the geopolitical risk? i've read the israelis might launch that before the election. >> well, of course it's possible. everybody pretends to be an expert, but all you can do is rely on people who claim to be experts.
if israel goes alone, two bad things happen. one is they may not be as effective in tattacking and leae themselves exposed to retaliatory attacks. so if you're israel, you're trying to negotiate with the current administration and maybe potential incoming administration saying we understand why not november, but after november, we really do need to do something here. and i'm not sure whether they'll sell that or not, but it's hard for president obama for agree to an israeli attack right now or to agree to cooperate with in a before the u.s. election. so i would be surprised if it happened before the election. >> perhaps aside from exposure to oil, precisely because of this tail risk, how else do you position around this kind of event, this kind of major uncertainty that's out there somewhat do you tell clients who basically say, okay, given the
hurdles that i'm facing the end of the year into early next year, what do i do where my money? >> well, i think first question for every investor, are they a long term investor or not. there are a lot of traders who are just trying to figure out next week. but for a lot, this is 5 years, ten-years, 15 years. it there was an attack, in the end that will not stand. the global powers both east and west will not allow the strait of hormuz to be closed. that's an absolute red line, it will not happen. so you could have a spike in oil prices and then a few weeks later they plunge as the strait is opened up. so i wouldn't get head up about it. what i would look at is valuations. long term interest rates in developed countries are so low
and equities look pretty cheap, so i would be overweight equity, underweight fixed income and just ride out some of the bumps here. there are reports of interesting international naval build up in the straits of hormuz, david, which i think we all need to keep our eyes on. good to have you on. stick around. plenty more to come for david kelly. meanwhile mitt romney said his controversial comments were not eloquently stated, but he's not backing down from them. the republican presidential campaign got side tracked when video surfaced, the tape secretly recorded cast many of obama supporters in a negative light.
campaign and he's urging the people who recorded the vitt i don't to release the full tape so people can see the questions asked at the event. >> airbus has been floated as eads as the potential name for the 38 billion euro tie up if the the merger goes through. this is according to the financial times. bae opposes the use of the name airbus arguing it won't go over well with americans. what's in a name? it's tricky if you stick all the initials together. let us know what you think the alternative might be. still to come, investors are still sweet on apple. orders have blown through expectations. 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. ow save 50% on banners. [ male announcer ] introducing a reason to look twice.
take further action against japan in its territorial dispute. >> spain says it's still considering the terms of possible bailout as bad loans hit a record high. >> apple shares have hit another milestone. its pa passed $700 a share for first time. jon fortt file this had report. >> as you can see, customers already beginning to line up outside apple stores for the doors to open on friday. that's right, they don't open until friday. people already lining up for the iphone 5. apple has scaled back the amount of iphones that they're shipping out.
you'll have to wait between weeks. why is it taking so long? because people are ordering them just that quickly. apple announcing on monday that they had sold 2 million just in the first 24 hours of pre-ordering. what does that mean for the overall launch? they did one million units a year ago when we were talking about the 4s. and they ended up selling 4 million over the launch week he said. so they could do easily 8 billion this coming launch weekend, including all the pre-orders coming in. maybe even as high as 10. of course that's an incredible feat to figure out which stores need which phones.
so something tells me part of the process is picking up where the nademand is so they can tryo get the phones into the right hands and make lots of money. and if you're doing the math, again, 2 million units, almost $1.5 billion that apple did in iphone 4 sa5 sales in just 24 h. and the holiday quarter starts in just a couple of weeks. a year ago apple did 37 million units in the holiday quarter and analysts expect to be better than that this year. if they don't, of course this will be a lot of disappointment. back to you. >> 5 really is alive. let's remind you what's on the agenda in the united states. second quarter current account figures are out at 8:30 eastern. followed by the national association of home builders monthly survey at 10:00. a trio of fed officials speaking about the economy today. charles evans and bill dudley and jeff lacker p.
richard fisher will be on "squawk box" at 7:00 eastern. it does start earlier than that, though, it starts at 6:00. >> and no reason to stop watching after we go off the air basically. still with us is david kelly from the u.s. about. which of those events will be most important for positioning in your view or is apple's iphone going to come to our rescue here? >> i think people are assuming that the iphone will be a big success. i'm not an expert in apple, but it's kind of baked in that they will do very well. the interest being one to me is the national association of home builders index. s housing is recovering in the united states. home prices are beginning to move up. that's helping with wealth and confidence and generate more
home building itself. i think it will also be interesting to hear the fed officials talking about qe-3 because we really are very far out at the extreme of what the central bank could do and it will be interesting to see their thoughts on that. >> they're buying mortgage backed securities. they might be offer to go buy more than being issued. are we expecting to see the impact there in the housing market and therefore that's where the job kregs will come from? >> no, i think -- well, that may be how they see it. as i see it, home building is so low, it has nowhere to go but up. housing starts just at 746,000 last month. that was the strongest number we've seen since october 2008, but that number was the allowest in 50 years. we're running at half a normal level. so just pent up demand will peck
it back up even if the federal reserve does nothing. in fact they are making it difficult to make a lot of mortgage known loans. and this commitment to keep rates low until 2015 removes a sense of urgency. if they said rates are going up, people would say i better do it now while rates are low. so i think a qe-3 is counterproductive. housing will get going on its own in the united states. >> home prices are too low. that's what david kelly thinks. thanks very much for joinings us thor this morning. coming up next, we'll talk to the ce off of modus operandi about hot spots.
she saw areas of growth. >> we also do very well in the middle east. it not surprising with the gowns. >> you can catch the full interview on the program tomorrow. joining us now, ceo of know dmo. >> it allows people to pre-order collections and we work with over 300 designers. many of the key designers that show in new york, london, milan and paris.
>> one's ends in four days, one's ends in a couple hours. so a limited amount of time about so the show apes on the cat walk and you have a few days to buy what you've just seen? >> exactly. because after the cat walk, the designers are taking the on thes and they need to close their books. the local kidea is connect the customer with the designer immediately. and we're growing at 72% to 100% each quarter. >> and you only started -- >> we only started a year and a half ago. >> what i'm amazed is that you raised $10 million in funding. you said it was like unbelievably easy. >> we've raced since then more. we closed around in june for $36
million. and this was a good time to raise money for fashion. there have been some very big success stories in fashion which i think really helped pave the wave. but it's been a hot sector. >> what are the dynamics that will provide returns that they didn't think before so? what's changed? >> many fashion brands were low to go online. and would he have se we've seen a dramatic change particularly at the high end. it's no longer about finding a deal. they're going there to get access to spinnings that are special. >> and victoria beckham's skirt
is 35 inches. the maxi is back. are hel lin echlt lchlthelmm li season? >> they're actually and i city m asymmetrical this year. >> thank you so much for coming by.nd i city asymmetrical this year. >> thank you so much for coming by.d i city asymmetrical this year. >> thank you so much for coming by. i city asymmetrical this year. >> thank you so much for coming by.i city asymmetrical this year. >> thank you so much for coming by. city asymmetrical this year. >> thank you so much for coming by.city asymmetrical this year. >> thank you so much for coming by.ity asymmetrical this year. >> thank you so much for coming by.ty asymmetrical this year. >> thank you so much for coming by.y asymmetrical this year. >> thank you so much for co >> we'll be back and bring the latest on the spate between china and japan, romney's controversial comments and you united has it numbers coming out today, as well.
welcome back. these are the headlines from rn at world. >> mitt romney tries to explain controversial comments secretly caught on tape at a recent fund-raiser, but the presidential candidate isn't backing to ining down. >> and japan and china urge a resolution and markets take a hit on the tensions. >> bad loans at spanish banks reach a record high in july.
the government says it's still considering the terms of a possible bailout. >> plus u.s. regulators are searching for the cause of monday's rapid plunge in oil prices saying it's unclear if high speed automated trading played a role. >> dow jones industrial average pointed to open lower by about 40 points. nasdaq and s&p lower, as well. whether the losses were related to the big oil trade towards the end of the day, it is clear there is a bit of a risk off mentality back in markets this morning. take a look at european boarses oig. ftse 100, across the board pretty much seeing negative.
ibex 35 now down in the range of almost 1.9%. so losses are mounting. >> and china struck back at washington with a counter complaint of its own. beijing is contesting u.s. duties are nearly 30 different chinese products ranging from kitchen appliances to wind towers. the white house says it will fight the move and it was not unexpected. >> but could the u.s. be moving away from made in china? price cooper says the manufacturing in u.s. is repounding. jo rebounding. johning us is bob mccutchen. thanks for your time. you have found that there is in fact this reshoring effect going on. how much of u.s. industry appears to be moving back home?
>> it's interesting, a lot of the conversation and dialogue has been around labor cost and labor cost gap and i think what we're starting to see is there are a number of other factors influencing the overall decision, principally transportation, energy costs, and in supply chain risk overall. i think the energy story is a big part of it. the report that we did actually seemed to indicate that heavier manufacturing seemed to benefit more just given the production cost impact. >> and a great point because a lot of people focusing on the labor cost issue. the u.s. recession of course has kept earnings low. meanwhile china of course is getting more expensive, but that's just actually one of many factors, several one being energy that you outlined. what are some of the others? >> supply chain risk is an interesting one to watch. post economic crisis, we've
started to see that the supply chain became leaner, companies were focused on liquidity and lead times became shorter. so we're starting to see a more regionalized approach to think mading supply chain risk and manufacturing closer to the customer. so a lot of this is about the risk itself, not just the cost. >> going back to the energy point, everybody is talking about the shared gas revolution. is that playing a part? >> shale gas is a game changer for manufacturing. we actually issued a report back in december of last year is that know focused specifically on the impact of manufacturing, but the affordable energy in shale gas creates a competitive advantage in the u.s. and we actually believe through that report that by 2025 up to $11 about.5 billion can be saved in manufacturing and jobs created. >> so you think this trend is
set obviously for the next few years. the one thing is talent. a survey suggesting we'll get a lot more graduates coming out of both china and india over the next 20 years or so just because of the size. so what's going to happen on the talent front? >> talent continues to be an issue that manufacturers deal with. there is still a significant competitive advantage in terms of the educated workforce here in the u.s., but that gap is closing. i think access to skilled workforce continues to be a challenge for manufacturing and a lot of that is around the impression that folks have around manufacturing today. that manufacturing job is much different than it was several decades ago. so talent and access to talent and retaining good talent will continue to challenge. >> okay. bob, good to see you. the homecoming theme continues, right? you you expect more companies over the next few years to do more at home?
>> yeah, the stage seems to be set here with some structural change that really does create a landscape for a more competitive environment in the u.s. >> all right. bob, thanks for that. bb mccutchen at pricewaterhouse cooper. meanwhile stocks in china and japan have slipped as tensions escalate. the disputed islands have long been a bone of contention. there is a risk of this recent feud affecting trade on afternoon bigger scale. emily has filed this report from hong kong. >> concerns over escalating protests and violence have prompted many japanese businesses to close up shop at least temporarily. automakers honda, maz take, nissan and toyota have announced work stoppages and suspensions of some of its plants in china. panasonic, cannon and sony have also halted operations at some of their factories. a number of retailers have closed their doors with staff
members told to stay at home. global reports say a group of japanese business chiefs are now rethinking plans to meet up with top chinese politicians. something the group has done regularly for the last three decades. many expect protests to continue as nationalistic fervor intensifies. today marks the 81st anniversary of the japanese occupation on various parts of the mainland. in a report today, fitch rating said the ratings of major japanese auto and tech manufacturers may come under pressure as the clash escalates and is prolonged. china is japan's biggest trading partner. two way trade totaled $345 billion last year. beijing has said that japan's economy could suffer for 20 years if sanction were to be imposed over the dispute. the tensions could cast a shadow over growth in the region, which
major western countries are counting on. >> meanwhile the u.s. defense secretary leon panetta has urged china and japan to remain calm and called on to improve military contracts with washington as a way to avoid confrontations or miss steps. >> the point of this is to send a very positive message to all of the nations of this region and the world that we intend to establish a relationship that is healthy, stable, reliable, and continuous. >> panetta is in china for a three day visit. he's scheduled to meet with the chinese vice president as part of his trip. coming up next, a slew of new mobile devices is set to take the market soon and will motorola be able to win over new customers? more on the smartphone wars when we come back. 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. nave 50% on banners.
oig boeing's biggest rival. if you want to share your own thoughts here, e-mail us or tweet us and respond to that or anything else you've heard on the program this morning. >> i think british airbus. i know they stopped coining it bae, but if you had british and airbus combined, it would be british airbus. >> i don't think that will go down. >> something else we'll be looking forward to today, because you have -- have been to a soccer match yet? >> yes. >> and i called it soccer just for you you.
fourth quarter results since they floated back on you go a the 9th. stock hasn't done too well. before trade yesterday, it was down 9%. you can see it reboundi ining 4. so since the float down 7.#43%. we think it will see a fall in profits because they didn't qualify from the group stages of the champions league last year. what is interesting is they play tomorrow night, they kick off the champions league at home. but how they win will still an big question. merrill lynch saying if they win a championship, you might get profits up by 15%. if they don't, you could see profits drop by 9%. despite all the other things about the fan base and the sponsorship deals, how they perform still very important. we'll hear more from the company results before the bell around
about 6:00 eastern. so just as "squawk box" gets off. and then a conference call later in the day scheduled for around 8:00. i believe that's been pushed back to around 11:00 eastern. but another one of thoefs ipos, we'll see how they perform with these results today. >> and i do think that the term soccer originally came from a british nickname for the sport of football. in any case, if you're just joining us, mitt romney isn't backing down following controversial comments caught on tape. china's defense minister says beijing has the right to take further action against japan. and spain says it's still considering the terms of a possible bailout as bad loans of the country's banks hit a record high. apple smars have hit another milestone after reporting better than expected demand for the iphone 5. the stock ran past $700 a share
for the first time ever after the company took orders for more than 2 billion of the next generation smartphones in just the first 24 hours of its release. >> all the biggest brands launching their latest. samsung kicked it off. sort of a half phone, half tablet model. and then tokyo cae nokia came os latest. and then a week later, the iphone 5. today of course it's motorola's turn, the latest version of their razors but you powered by intel chips. and then tomorrow htc holding an even in new york rumored to unveil a range of the windows 8 hand sets, as well. so on the day of the latest launch, we've been around to the streets to test people's memories of the motorola brand
phone. >> probably about ten years ago. i don't even remember it anymore. it was okay. >> did you you ever have a motorola phone? >> yes. >> how long ago was that? >> like, what, five, six year ago. >> what kind of phone was it? >> i think it was a motorola razor. >> years ago, but probably wouldn't use one anymore. they seem to be sort of like lagging behind everybody else. >> would you ever think about getting a motorola phone now? >> i don't know much about the range they have in their phone. so i'd say no. >> they did find one person there who said they have today a motorola phone. >> so motorola now your turn to tell the world what devices you you to in fact have. and stick around, ted ex-and
fedex reports at 7:30 a.m. earlier this month it cut its forecasts citing global economic growth and echoing a similar warning in june. fedex expects to earn about between $1.37 and $1.43 is share. shipments of the iphone 5 could provide a boost to earnings through year end. fedex shares down in early frankfurt trade by about a tenth of a percent, just over 1% in the last three months. let's bring in senior
transportation analyst. donald, how much is priced into shares? is fedex if they come out with figures consistent with what we heard last time potentially going -- can they say anything to help support investor sentiment? >> well, i think it will be somewhat anticlimactic because obviously as you previewed, they themselves have let everyone know, let the cat out of the bag that earnings will be less than were originally guided -- less than originally expected. predominantly because air freight worldwide has been weak. we saw asia pacific last month down, u.s. domestic air freight down. and international is the most profitable that fedex has so when you see declining lines there, you'll see declining earn
hei heings. and i think the iphone effect is completely overplayed.earnheing. and i think the iphone effect is completely overplayed.eings. and i think the iphone effect is completely overplayed.ings. and i think the iphone effect is completely overplayed. what's happened is fedex -- apple has gotten smarter about how to ship these things. so more and more of them are ending up in ocean freighters and less in air freight. as a result, while it's an e event, it's not enough to overwhelm the planes of fed ebs. fedex. >> global seems to be more important and of course still sending out caution flags.>> gl important and of course still sending out caution flags. where do you think we end the year? >> we tonigdon't see any up sid shares. and we have u.p.s. rated at sell. i don't see any up side to either of the shares and i'm
cautious about the global macro. global pmi index has been indicating that the manufacturing economy of the world is contracting. and that's not a point in time in which you want to be actively investing in the shares of either of these companies. >> and what are you expecting -- i'm interested in sort of the air freight side out of hong kong and asia. >> well, we have done preliminary studies, the international air transport association takes their sweet time at releasing the data, so we go out and look -- enter ruing the individual airports nap indicates, although the august data is not out yet, our studies indicate that august is going to see a 2.8% decrease in europe and asia pacific 4.1% sequential decline.
>> and that's consistent with some of the figures we're getting out of the regions. donald, thanks so much for your time. second quarter current account figures are out at 8:30 a.m. national association of home builders out at 10:00 a.m. and there's plenty of fed speech. charles evans, bill dudley and jeffrey lacker will all be sharing their views. plus richard fisher will be the guest host on "squawk box" at 7:00 a.m. >> just ahead of the u.s. open, you're p you are pea european socktocks r the session lows. that's it for today's program. coming up next, "squawk box." ou the session lows. that's it for today's program. coming up next, "squawk box." u the session lows. that's it for today's program. coming up next, "squawk box." are session lows. that's it for today's program. coming up next, "squawk box." re
#. today's top stories respect september stock surge pauses at least for one session. the dow now closed lower for 14 of the past 15 mondays. just a simple case of the mondays. crude realities. oil prices moving higher this morning follow something weird steep late logses yesterday within a matter of minutes. many investors are still trying to figure out just what happened to trigger the high volume selling. now plus delivering the real story on the global economy. fedex set to post quarterly results. we've already heard some rumblings. today is tuesday, september 18th