tv Worldwide Exchange CNBC September 27, 2012 4:00am-6:00am EDT
be live from the paris auto show. so welcome to today's "worldwide exchange." we'll be spending quite a bit of time on the iberian peninsula. >> at least steve is. we've sent him down there to cover the situation on the ground and the's remarkable because we knew heading into the budget today that we might get some unrest, but i think it survived everyone how soon it began and the scale to which it has spread. speaking of which, protesters gathering in madrid raised their call for the spanish government to resign. demonstrators again clashed with police, which left 64 injured and led to 38 arrests. prime minister rajoy's reforms have proved deeply unpopular. out to steve sedgwick now who is
following the story. steve, are we expecting the intensity of the protests to increase? >> i don't think we are. they've made their point in some cases violently. this is another protest scheduled for saturday evening. just have a look at what's going on in the sxaexact area. this is the neptune fountain, this is the heart of the madrid heart and we have the five star hotel that kelly i'm sure you've stayed at many a times. and this is the area which leads up to the congress, to the parliament. and you can see there are a lot
barricades waiting and ready. it's a very normal business day here ahead of what will be yet another bought of austerity for rajoy's government. this is a government that isn't one that ran up huge debt to gdps during the good time. they had ale balanced budget in the good times. it was actually the private sector and that is the very subtle difference between spain and pretty much everywhere else, different from italy, different from greece, in the fact that now the government is having to mop up the problems from the housing sector, from the individuals who spent too much, from the regions and of course the banks, as well. the 2012 budget had 64 billion euros worth of austerity built into it. that was designed to get the deficit levels right back to those iconic levels, but they missed on their deficit star get last year and they'll miss on
this year. they're hanging on to #.5% bond you this believes if not reable because austerity on top of a recessionary environment is a toxic mix. >> the ecb saying spanish bank deposits down 1.1% on the month in august, which means they're now the lowest level since april 2008. and we've got a prime minister there who has effectively said to the markets come out and short me because we're not going to go for a bailout unless webo costs go higher. and he's trying to delay aid until after the catalonia elections. and that seems like a pretty thin tight rope to walk. loan i.
>> and we'll get the report on just how much money the banks need. it is suspected it will be in the 60 billion plus. but the elections on october 21st, that's rajoy's own province. and then you have the cat lo loaniloa loanian region think they're the richest region giving too much to the others. the rest of the region has seen a dramatic change. during the good times, they had revenue. from the developers, people buying properties, now that's all going and they're left from the legacy.
from cat loan i can't to the canaries, you name it, all of these places, they're all struggling.alonia to the canari you name it, all of these places, they're all struggling. so a multitude of problems for rajoy. but this is a man who has a mandate from the people as of december last year for four years. he's only in the first year. he should perhaps have the courage of conviction that if you can do shock and awe in the early stages, perhaps it might be easier at a later stage. >> a mandate from catalonia in two months time which is a deeper question. we'll be back out to you of course for plenty more during the show. meanwhile the greek prime minister is meeting with his coalition partners to finalize a 12 billion euro austerity package after thousands of protesters took to the streets yesterday in the latest attempt
to fight government cut backs. julia is still there. >> as you said, the company a lig will meet today to try to come together and it's been a process going on for weeks. the press have been speculating what the cuts will involve. we're hearing cuts to pensions, also civil service cuts. it's politically very difficult for all of these coalition members right now. perhaps the most initially democratic left, the smallest party, more civil servant cuts is something they specifically said they won't allow. they only have 17 members in this parliament.
starting to look increasingly difficult to remain in the government. and then you look at the conservative party, their leader already said if they don't vote through these megs, they will be rejected from the party. and the social list party, what they've seen is that actually the far right has overtaken them in the polls. so they each individually have real problems coming together and agreeing to the cuts. and the european leaders are suggesting that they will be given more time, but that's undermining confidence here. and that's a huge risk both politically and socially here in greece. particularly given the protests that we saw yesterday. now back to you. >> speaking of those protests, what is it like on the ground there take and was the mood yesterday -- we talked to you you yesterday, we saw the people
gathering in the square. what's happening today and what do you expect in terms of the social unrest from here? >> a few hours after the protests, things were back to normal. and despite the pictures that you saw, it was a very peaceful protests. just a few hundred anarchists that arrived carrying gas masks and they immediately started z to speaker abiliinteract with t. it was just a few people that wanted to start the violence, wanted to make the situation escalate and they actually achieved that. but it was a very short period of time. and then everything went back to normal. the risk of course is that it didn't coincide with the voting parliament. that's still to come. and certainly the conversations we've been having is that given this has got to go through in the next week and a half if they want to make the decision before the euro group, we could see an escalation in the strikes at that point, too. >> julia chatterley following
the latest for us in athens. thanks. a bit of a bounce back from yesterday. dow jones stoxx 600, advances outpacing decliners by around about 7:3 at the moment. so what does that translate to in terms of gains? ftse just up 14. cac 40 yesterday was also down 2.8%. it's currently up half a percent. the ibex up 0.4%. we saw spanish yields pushing back through the 6% mark. we are still there. right on 6.03% this morning. we have btp auctions later today. how will that be affected? we have seen even yesterday with t-bills spanish borrowing costs at auction was still coming down to the lowest levels since
march. we'll take a look at it. aussie dollar still fairly steady. here we go, euro-dollar, 128.76. just tying to crawl back some of the losses. so that's where we stand. let's get over to singapore for the update. >> asian markets staged a comeback after steep losses yesterday. offset by a giant rally in chinese stocks. the shanghai composite rallied 2.6% on rumors of market reforms and fresh easing hopes from beijing. this after china's major industrial companies reported shrinking profits in august due to slower growth and higher labor costs. the pboc injected $58 billion, a record amount into the market this week. and cheech economist expects more action from the central bank in the fourth quarter. we saw broad based gains in financials, resources and
developers. strength in the mainland also lit the hang seng. major oil and blue chips leading the gay. nikkei was helped by financials and utility stock, but sharp shed nearly 4% despite a report on a financial life line from a major lender. samsung and hyundai led support, but other units tanked after the parent wanting holdings filed for a court receiver ship. meanwhile banks and miners helped the australian markets ending higher by half a percent. sensex higher by 0.1%. that's all from me. >> okay. thanks very much for all of that. still to come, we'll be joined by bentley ceo about luxury demand and the need for speed as the brand gears up for more sport competition. bob...
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indonesia's report says the country's growth rate will ease to 6% this year and next, below the 7% to 9% growth needed to hit their goal. meantime netanyahu will make his case against iran at the u.n. general assembly today. reports say he will present his own red line spelling out what limits the international community should set. he's steady low massey has failed. >> endowment fund at harvard hit, hurt by overseas investments. the nation's biggest private endowment fund rose more than 21% in fiscal you 2011. they still beat its bench mark and the school says it's
committed to investing in emerging markets. >> we'll have nigel on to talk about emerging markets. but this is an asset class last year, if you you had said what would you rather bet on, peripheral europe, western europe, emerging markets. they underperformed in 2011 and that's now actually why some including my bell see opportunity. but it wasn't a good year for harvard. you would have thought bet on emerging markets, but it didn't happen out. >> it are they supposed to be better than investing than anybody else? >> it's harvard. of course. whether they are is a different matter. >> middle east biggest private equity group is venturing into new markets. yousef has a look ahead to his interview. so is this a man who sees
opportunities or is he more aware of the risks? >> he definitely sees a lot of opportunities when it comes to africa. we're talking $7.5 billion in assets under management. and their global push out of the middle east was amplified by the recent acquisition that gives them exposure to over $600 million in investments in africa. and despite what he has described as addressable risks when it comes to governance in africa, there are lucrative rewards on the continent. >> the opportunity everyone seems to think is natural resources. and everyone thinks this is the continent where commodities is the only play. but the reality is there are 300 million africans who are in the emerging middle class. the important thing is that only a third of the african story is about resources and commodities.
we have telecoms, infrastructure, so the space in africa is a very exciting investment destination. >> one market that they're particularly excited about is saudi arabia, the region's largest economy. we keep talking about the risks that come from swings in oil prices at least for the audi economy. and stability in the country. he says that's not really the biggest risk. at least not from a brush capital perspective. >> for the start, we have a business in the country, a large group of investors and they're focused in development. the issues are not about whether or not the economic opportunities are there. i think they are. i think saudi arabia and in terms of individual sectors,
they'll perform extremely well. it's about the politics, not the economy. i think the people generally speaking are quite happy with the stimulus package and with the political system. >> tensions indeed remain high especially in some towns in the eastern province of the kingdom. of course we also got a start on the broader concept and developments in the arab spring. why he chose india over china when it comes to their broader investment strategy. and of course we'll talk about the art of private equity, as well. but just on a closing note, ross, the commonalty in these investments in the strategy, the philosophy of these strategies, is basically an emerging middle class and growingoff the next few years. >> all right. look forward to that. yousef, thanks very much. a good teaser for us all. now, elsewhere, l'oreal chairman has warned hollande of the consequences of a 75% top rate
of income tax. stefane is in paris with more on this. we'll see the talents either flying out or not going i guess, stefane. >> that's the view from chairman and ceo of l'oreal, the head. he spoke to warn the government about its plan to implement the new income tax rate of 75%, that france won't be able to attract top talents if the government goes ahead with its plan. it's one of the country's highest paid ceo. last year he had nearly 4 billion euro in remuneration. under the new plan, it would pay 75% of taxes on the part which is above 1 million euro, which means 2.25 million euros in taxes for the part above 1 million euros.
hollande still believes the richest people should contribute to the debt recovery. last year he signed to call for the new tax on rich people in a degrees chur of national solidarity, but 75% is too high for wealthy people. globally speaking, the french business has been extremely vocal about the plan to implement a new tax rate. they believe that it will threaten investment in france and keep job creation in the country. so watch this space because we will have the announcement from the french president hollande. >> just a quick question. interesting juxtaposition with the executive's warning about
what this would do to france's competitiveness, while at the same time, we have seen figures an increase in unemployment there. is there a sense that the french economy is becoming more vulnerable here, that it's really softening? >> yes, it's not linked to that plan of course to implement a new tax rate, but, yes, we've seen some very bad figure for the french labor market not only the last month, but the last couple of months. the last highest level since 1999 and it will not improve, the situation will not improve very soon because plenty of companies have announced some job cuts. the last one was sanofi the drug maker who announced a new round of job cuts on top of what has been announced already. so, yes, the end of the year will be extremely difficult in france in terms of labor market. >> thanks very much for that.
we hear more and more investors talking about there will be focus on france and we'll get details from the budget tomorrow. and, you know, the sense that frances has really avoided a lot of the attention that people have focused elsewhere, but it has its own competitiveness problems. >> and politicians and regulatories, will they make things worse than they might have been, you know. you can't afford -- you you can't let talent walk away. right? so we'll see. meanwhile the well off are feeling a bit better off. where is this? a new study finds affluent americans feel more in control of their finances and are being less conservative with their investments. a study polled people with at least $250,000 in investable assets and they say they recognize they'll likely be more volatility ahead because of the u.s. elections, looping fiscal cliff and uncertainty in europe.
>> do you think that wouldn't be the case over here? >> actually the well off have done quite well because mortgage rates got slashed. so they all benefited from -- >> especially you get the flow through immediately. >> i think now things are ticar. meanwhile the a canadian autoworkers union has struck a tentative deal with chrysler. it mirrors those struck with ford and gm cutting pay for new hires hand freezing pay for current worker, but giving them lump sum payments to cover inflation. chrysler had been reluctant saying it was too costly. starbucks has concurred nearly every market ket it seem, but there is at least one exception and next year the coffee chain will be setting up shop under scandinavian skies. the "wall street journal" reports the company plans to open stand alone stores in
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rajoy prepares to unveil another round of cuts. >> and greece's coalition government due you to meet now in a bid to finalize yet more spending cuts. >> shanghai surges on rumors of market reforms after the pboc pumps record amounts of cash in the banking system. and automakers warn as people scale back their spending. we'll be live from the paris
auto show. contraction in the uk not quite as bad as we thought it was in the second quarter. it's been revised to a minus 0.4% last estimate was minus 0.5 prgs. annual was unchanged. have we got anymore breakdown? . have we got anymore breakdown? household spending -- here we go. >> quarter on quarter as if that came in at a decline of just 0.2% .
>> exports is the missing link here in britain. >> we also have the bank of england comments. >> fpc is taking a look at several factors that could affect financial stability. it see as drag on bank earnings. talking about bank should raise equity and boost their capital position, should consider debt conversion. identify core indicators. certainly people in the market keep an eye on, but officially keeping an eye on to gain financial stability. >> risks from u.s. money market funds. interesting on that. how much risk is there? >> tons.
and sec frankly which was supposed to come in and really tighten control, make them less vulnerable to run, has thrown up its hands and said we won't do anything about this year. so rightly people in other parts of the world are concerned about this industry. >> we'll see how equity holders feel about the idea that banks should raise equity to boost their capital position. that might ripple through. european stocks meanwhile just getting back towards the flat line. we were down fairly heavy yesterday. ibex now under water again half of 1%. ftse, xetra dax up 0.2%. but of course big losses for the xetra dax and cac yesterday. >> and the risk off gauge, all that really matters on this board as we show you you now for ten years is what's happening for spain. and we're still seeing it slightly it to the up side. quite clear markets are pushing spain to ask for a bailout. until it does, this kind of
environment is likely to dominate. aussie dollar just below the 1.04 level as we look at reaction in china. >> over to the automakers now. ford staying off staff in europe, while fiat and vw say any recovery is somewhat off. automakers are gathering in paris to unveil their latest models. so what are brands doing to try to increase sales? we caught up with the ceo of audi asking him about the brand new hatch back trying to lure younger drivers. >> the younger generation is the best symbol because they are always connected between each other. so we tried it on come up with the story with wi-fi hot spots in the car, with twitter apface books in the car, whereby with voice recognition you can receive your e-mail.
and i think this is what young people want to hear and see. if you're stuck in traffic, you make your time useful. and this is important. >> this is terrifying. >> i'm not sure, but if you're drive along and you're looking at facebook or tweeting, i'm pretty sure at the very minimum you'll get points. if you drive dangerously -- >> frankly the only saving grace is the fact that cars may become driver less. in government the state governor backed legislation for dangerous cars. >> yeah, that sort of scares me, as well, as a man who likes to drive. but you sell cars to drivers. passengers don't buy cars. surely those are passenger -- unless i'm missing something.
>> he did say you can check them in traffic. >> maybe they put a heads up display, you know. so you can see the road below. >> we have to move on. but anyway, later in the show we will be live at the paris motor show to speak with the ceo of peugeot. in its latest report, indonesia's growth is expected to ease to 6% and in 2013. that's below what's needed. but they're not ruling everything out. it says the country is full of potential. >> by working on the airports,
by working on the bridges, by working on the railroads, et cetera, creating the right regulatory and pre-difficultable stable rules, the right regulatory framework even with modern amount of money from the public sector site, from the budget, they can. >> outlook is improving and should improve flows. time for a take a look at that stat. look at this, outperformed the emerging markets. >> wait a minute. the ibex has foiled my plan here tod today. >> it's lower. so it doesn't work out. >> but it was close.
>> the point being in 2011, peripheral europe broadly speaking -- >> the fact that we've flipped to the down side in major indexes this morning. in any case -- >> until yesterday morning, the eye beibex outperformed. nigel, thanks for joining us. clearly you prefer to put money in emerging markets rather than spain. but i got to tell you, the shanghai has been an awful performer. so are you avoiding that one? >> we do see flows picking up in markets. largely by the large international central banks and the provision of internationally liquidity. however in asia, the story is a
little bit nuanced because the underlying view in china is of concern for investors. our view is one much more of growth stabilization much rather than a strong growth recover i. so as long as you don't see that pick up in growth in china, as long as you don't see some kind of turnaround in the private sector, i think that will curb in-flows in to china, it will mean the shanghai compass it will underperform and in-flo in-flows -- >> we've seen the pboc injecting the most in history pretty much. china everyone know we've been talking about whether it's been ahead or behind in the curve certainly seems to be getting more aggressive now. this has to flow through at some point. >> i think a lot is in response in run up to the golden week next week.
i think in the end that will be unwound. one ps thing the central bank is doing is they are using open market operations much more and injecting liquidity rather than using quantity controls. but i don't think you can take from the recent that that will drive up equities in china. >> so how different is china then from independeia? >> i think for a long time they were stuck in a policy status, the economy was slowing significantly. the government was unable to respond to the policy given the fiscal situation is quite weak and the debt high. so going forward, well, recently you've seen the government taking new initiatives, they've
opened up the domestic economy to more fdi, trying to reduce taxation on external corporate borrowing. they also raised diesel prices which is important to the fiscal position and also to make the domestic fuel prices more in line with international prices. so all those things we think is a positive dynamic. we think that will lead to a slow recovery. that's the general story we see in asia, stuck in second gear. they are recovering, but much more subdued than most will think. >> flip over to latin america. samsung second biggest offering. hugely overdescribed. mexico fundamentally to most people seems like a place that's having such a difficult moment. but nevertheless appeals to
investors. is that your view, as well? >> it does look a popular choice to the vin tors. at least doing better than some of the other industrial economies and growing at a reasonable pace. and i think the fact the central bank is willing to let the currency appreciate does attract investors into that market. >> is there any sign it's becoming frothy? >> i don't think so. i think there's some room to go. >> give us a sense, where do you think the flows, the bulk of the flows will go between those two regions? >> what we've seen so far, much more of a preference for flows to go into latan. i think the underlying growth story there is perhaps a bit better than in asia. and also i think for most
there's much more willingness to allow currencies to appreciate. in asia, what we see is central banks. you because the growth story is weak, even if flows do pick up here, i think they'll be very reluctant to let the currencies appreciate very fast or for a very sustained period, so you'll see much more foreign currency intervention than perhaps elsewhere. >> nigel, thanks for joining us. have a good evening. >> and talk of market reforms and revived hopes of further policy easing has sparked a big rally in chinese shares. still sentiment rose on a couple of other developments. pboc's continued efforts to liquidate helped, although offered liquidity. it's pumped $58 billion, its largest weakly injection so far. and data showing shrinking profits from chinese industrials have underlined the need potential for even more government help. meanwhile, a top treasury
official is in beijing to negotiate more opportunities for american businesses. the visit by the treasury undersecond comes just weeks before washington releases its current city report on major trading partners. also as america's presidential candidates continue to trade bashes over who is tougher on beijing. mitt romney says he'll label it as a china manipulate directory while obama accuses of profiting from jobs september overseas. japan continues to take a hard line in its territorial dispute. let's go to the nikkei following the story for us. >> yes, prime minister noda is sticking to a hard line that japan will not compromise over its territorial issue dispute with china. in a speech to the urn and press conference yesterday, he stressed the islands are an integral part of japan and the issue should be settled under international law.
but china reacted by saying china has broken international law. meanwhile the tensions continue to damage china related businesses. cancellations for flights to and from china have reached 40,000 seats. and production cuts are in china. >> stay there for one second. another story that we're following as relations between japan and china aren't going so well, japan may be getting companyier with myanmar. is that right? >> yes. the japanese government is teams up with myanmar's public and private sectors to set up a training center next spring. the aim is as to boost business skills to acceptable levels as more foreign companies set up shop in the country. the nikkei reported this morning that the world bank, imf and asian development bank are are considering spending loans worth up to $10 billion to support
myanmar's economic development. japan is also set to sponsor the program to be discussed at the imf meeting in tokyo next month. that's all from the nikkei business report. back to you you. >> thanks very much for that. how many times have we heard myanmar in this program. every executive is eyeing area for opportunity. lots of activity there. in any case, a quick look at what's on theed a y agenda in a tomorrow. malaysia will announce the details of its 12013 budget. and a vote on the apb deal. meanwhile still to come, getting revved up for the paris auto show. we'll bring you all the latest from the top ceos.
history and culture scoring mixed results. >> written by whom? it's the iconic association with the british empire. britain rules the world. who wrote that, do you know? >> you're testing me there. >> set to music in 1740 where the magna carta was signed. >> running me. >> yes. >> right. >> and the literal translation was what, you have magna -- >> again, you're testing me. >> magna carta litter means great charter. >> are you popular? >> not very popular, now. >> in that spirit, we're going to quiz ross on some culture rap questions.
how many parliamentary constituencies are there? >> 630 odd. >> you're not far off. 646. this is remark be. >> i'm within 15. >> is the following statement true or false? a dialect spoken in northern ireland. >> true. >> look at this. two for two. okay. i'm getting excited now. in which year did mattered women get the right to divorce their husba husband. >> this happened after the first -- i think between the wars. >> he's off by a good century. 1857. charlotte will be relieved. in which two of the following places does the european parliament meet? do we show the options here? london, strasburg, paris and brussels. >> brussels and strasburg. p i didn't need the options for that one. >> which of the following two
types of people get hair prescriptions free of charge? those on minimum wage, pregnant women, those 18 or under or those 60 and over? >> 60 and over and 18 and under. >> only half right. 60 and over and always go with the pregnant women. >> is that a moral for life? >> that is. finally, the number of children and young people under the age of 19 in the uk. this is a tough one. 15 million. but you did remarkably well. i think you might have done better than cameron. >> to be fair, he might have known those answers. >> but magna carta, even i could have guessed at that. >> a scotts man actually wrote
rule britania. >> maybe you can help -- >> it's a lot easier to ask the questions than it is to answer them. >> that's why we're in this profession. >> what i got was 60%, 75%? >> three for five. we'll throw in a couple points for the effort. in corporate news meanwhile, h and m -- i can't believe you did that. they missed analyst forecasts. earnings stood at 4.9 billion swedish crowns. world's second biggest retailer blamed bad weather. shares down on the news. there is a reason we have a production meeting every morning, folks, okay? >> and we know we can count on you to be a little late for it. >> i'm getting there on time tomorrow. confidence group has announced it will cut operations
in southern europe. compass will instead focus on its core u.s. market. shares in response there down almost 1%. >> i could do harvard scholars. harvard's endowment fund slipped by 0.05%. hurt by overseas investments. harvard did still beat its benchmark by 98 basis points. the school says it remains committing to investing in emerging markets. >> automatic the toe makers are gathering to unveil their latest models and patricia joins us with the latest. what have you seen, what's impressed you the most? >> i tell you what, there's a lot of new releases coming from the mass market like peugeot, for example, ati.
on the other hand, we have fantastic new releases, for example the gt 3 from bentley announcing that they will go back into the racing business. and i also managed to catch up with the ceo of vw group, we discussed a lot about the seven theories of the gulf generation but also about the outlook in general now that porsche is part of their brand collection. >> we're talking about the outlook for 2013 and not for 2012. 2013 will be a very ambitious year. especially in europe. but we've confirmed our targets in 2012. >> the european car market is down about 6%. no big surprise there. countries such as france and italy in general. so the question really is to these big corporations which are
being rebuilt, what can companies do to help to sort out the european debt crisis. >> out of 520,000 people that work for us, 390,000 work in europe. we stand strongly behind europe. we will integrate young people into our education system? order to help reduce unemployment. plus we've invested if n. spain and italy. vw is very much investing in europe. >> so the bottom line here is investment, investment, investment needs to stay here in europe, whatever the crisis is, wherever it is in the cycle of the crisis. and other carmakers, as well, that's the big question. later on i'll talk to the ceo of bentley and we'll talk about luxury cars and the exclusivity aspect as well as as i said
earlier on because bentley is back into the racing game with the gt 3. back to you for now. >> patricia, thanks very much. and for that bentley interview, what would you like to ask? tweet us @cnbcwex. we're also getting people to respond to the story about the ceo of audi and putting facebook and twitter in the young cars. most people feel about it as we do. >> which group of drivers have the worst record, right? >> sounds like a trouble waiting to happen. but stick around, because still to come, china scrambling to tackle signs of labor unrest. our next guest warns price pressures could push workers to the brink. 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.
welcome to "worldwide exchange." here are the headlines today. >> protests rock madrid. prime minister rajoy prepares to unveil another round of cuts. >> in greece, the country's coalition government is due to meet now in a bid to finalize more spending cuts. a rebound rally for china's stock market. shanghai surges on rumors of market reforms. plus automakers are warning of a challenging environment in 2013 and beyond as consumers
scale back their spending. we'll have more live from the paris auto show. let's take a look at u.s. futures. seeing a bit of a rebound after yesterday's losses. dow jones implied to add about 34 points. nasdaq and s&p also pointed higher. 1431 the level to watch on the s&p 500. but take a look at what's been happening across the globe. because rebound initially has given way to cautious mood. china versus spain. up a quarter of a percent on the cnbc global 300, but if we show european bourses, for the most part we're barely hanging on to gains. xetra dax up a third of a percent. cac 40 which is down sharply yesterday adding a third of a percent this morning. ibex 35 which was also one of
the indexes majorly in the red yesterday now looking to shed another three quarters of a percent. >> so let's take a look at the key thing with the bond yields at the moment. and currently markets up. euro-dollar 1.2873. the low we hit yet, 1.2835. the point is we're still around the 6% mark for ten year spanish yields. we have big focus in italy in the next half than hour because they're auctioning 2 to 3 billion of five year and ten year b it tps. already this week we've seen with italian auctions yields have come down since the auctions in august. so we'll see what happens with this in the next 15 or 20 minutes. >> automakers are gathering in paris to unveil their latest models. patricia is at the paris auto show. what's the word? >> the word is very positive and everybody's really trying to
forget and look beyond the eurozone debt crisis. so let's stay on an upbeat note for now. with me is the ceo of psa group which of course is peugeot. thank you very much for making time for us. let's talk about something exciting, the new model. is it really going to pick up? >> definitely. i'm convinced it's the perfect example of the way we put on you are on market. on the peugeot stand, you will see the ones that will be a success. we have launched the d 13, 4 and 5. and here you've got the ds 3 w which is a top model. >> of course the pipeline and the new model rollout is huchblgly important to any kind
of sale success in the future. but let me focus a little bit on your home turf, the french environment. down 11% in august alone. how difficult is the current working and operating environment for a french company in france considering austerity, considering taxes at 75%? >> well, it's tough. because at the same time, as you can see, we have the best range of products that we have ever seen in the company. but the markets first in europe, we look at this year, in france it will be worst, probably 12%. but also we are we are focused on france, spain, italy. and just an example, the spanish markets on five years has lost 60%.
so there is overcapacity. we need to react. >> that was tough with the government, of course. >> it's a shock for us, a shock for the public opinion, shock for the government. but i'm confident we'll find our way. there will not be layoffs. we'll find a job for everybody at the end. and what is important that we show the way. and the overcapacity in europe, we cannot be the only one to close a plant. >> of course one of the way to grow is for corporations to prosper. the latest corporation is with with gm tell us about what you're going to do with gm, also venturing perhaps into latin america, brazil is one of the key issues, i think.
>> we have to upscale our brands and must share the costs of a number of projects. so to do this i think reliance helps no question. the second is globalization, international development, especially in china, latin america. and we for example in reliance on gm a joint venture global and this will help our globalization. and unless europe, we have to restore profitability. we have some ideas of common projec projects. >> let me focus back on gm. 7% stake now. do you think they will increase that in peugeot? >> well, in the context of the
master agreement that we have, we must keep it at 7% and this is where we are. and we are focused on achieving the milestone of the grept and by the end of the october, we should be in position to stay more. >> thank you very much for making time. a lot of success for the rest of the show. >> thank you very much. >> and with that that, ross, back to you. i'll be off to talk to the bentley ceo. >> and ask him whether they'll have facebook and twitter in the dashboard, as well. patricia, good stuff. we'll be back out with you later. thank you. confidence down for the sixth straight month in september. sentiment not exactly brilliant in madrid,rs gathering for the
second night. and also getting news kelly's waving this in front of my face -- >> spain going to seek 800 million euro worth of aid from the central government, this according to sources telling reuters. >> this of course as we wait for the budget from spain. could be public sector wage cuts. steve is in madrid. ste steve, we think budget cuts of over 40 billion, but now spain may have to add the 60 billion for further capitalizations on to their own debt pile. how will this work out? >> it means targets will be missed left, right and center. it means last year's target, that could be in double digits. this year's, which they still
steadfastly say 6.3%, that could be 7, 8, possibly as high, a 9%. and next year's as 4.5%. let's be honest about it, no one really believes that is attainable. interesting you can hear to many other areas, and of course cat catalonia, all these regions are overspending. a large part of the overspend is the regional governments. i know viewers are saying they should be reigned in, but the problem is they are living with a new dimension in the good old days they had revenue, building homes, developers, it was boom times all the way down. but the problem is they have the legacy of that and a million unsold homes and plus the banking class. but in terms of what the government can do here and now, within the next three hours, we'll get the announcement of the budget cuts.
justice ministry might get away with only 4% cuts, but then agriculture could see 30%, public works and infrastructure seeing cuts of between 25% and 30% on their budget. rajoy is very serious about trying to keep brussels off its back. so much so it's taking on some of what would be the brussels conditionality before they even asked for a bailout such as having a new budget office to take a look at just where the tax is being raised and the revenues are being raised. and looking at the spending, as well. so playing a dangerous game with the public and the markets and indeed the broader eu. at the moment there are concerns that they're not taking enough assertive action. we'll find out the latest moves within the next three hours.
back to you. >> are you suggesting you've scared the protesters away? >> single handedly. the might of cnbc. it's normally isn't it a touch paper for -- whenever we put up the truck, whether hungary or ice land, they're all pelting. but for the moment, the spaniards are far too civil lized to come near me. >> and it's nearly lunchtime, as well, i guess. we'll back out with you later in the show. pippa, thing positive joining us. steve's laid out what's going on in spain. and it's sort of not been dine mated by the fact that we had the fins, the dutch and the germans appear to be going back on what we agreed in june and saying if there's any money for banks, for new problems, which means if either one come out tomorrow and say we need 60 billion of bank recapitalization, that goes now straight on to the spanish books
which was what we thought we weren't going to do. >> i don't think it's so sudden. i think we've been optimistic in our willingness to believe these numbers are accurate to begin with. >> we were willing to believe the politicians in the june summit saying well separate banks from the sovereign and esm can recapitalize banks. >> but the troica said the greek budget testify sit is actually twice as big as we ever estimated. the numbers aren't what you thought they were. the size of the problem is bigger -- >> i'm talking about what i thought was a political commitment to allow to put money into spanish banking system is not there. >> let's put this way. the day that mario draghi announced that he would be able
to do good things with the european central bank, that he would be able to buy the bonds from spain, from italy, within 12 hours, the germans said this ha that is not what we agreed. we said in an emergency for a limited period of time. we never said you could actually bail out all that debt. this is a classic case of a total disconnect. germans remain in that position as the fins and dutch of a limited amount of money. >> and i'm not sure that those countries will stand in the way of for example recapitalization to spain. what it sounds like they're trying to block is aid to portugal, to ireland that would go back to address -- now realizing maybe we didn't pursue the right way here, it's almost it too late for those countries to set the clock back and try perhaps a better way this time
around. >> the spanish think each time they commit, they're done. when in fact it's probably the beginning of five or six or seven rounds of equally painful cuts. >>. >> it's not a one time thing. and they have no appetite for these kinds of cuts. >> they're asking the public to bear a degree of pain that human beings probably can't bear. >> is spain as a country going to hold together? because catalonia effectively now in november will hold an election which is a referendum on saying whether we take any rulings from madrid. this blows the whole thing up. >> this will test the commitment to democracy. no question about it. it will test it in greece, it
will test it in spain, and it will test it in other parts of europe, too. that's the whole point of germany asking for sovereignty to be handed over to brussels. if i hand over sovereignty but i don't get cash in exchange, maybe being a sovereign is more valuable than i realized. and it would come back to they make defaults. >> on that point, we'll take a pause. pippa's with us for the rest of the program. any thoughts or comments, email@example.com or kelly underscore evans or @rosswestgate. >> could italy feel the ripple effect? >> we'll have breaking results from the latest debt auction. 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.
>> so cho that's central banks injected into the money markets. traders suggest that was the news. let's get the reaction out of sync pore. >> markets rebounded. shanghai composite gained 2.6% on talks of market reforms and fresh easing hopes. this after august industrial profits had its fifth consecutive drop and also the biggest drop this year. the pboc pumped $58 billion, a record amount into the banking system this week. we saw broad based gains in financial, resources and developers. shares in hong kong followed to he said well in the green with chinese energy majors and banks leading the gains. elsewhere the nikkei also finished higher helped by utilities and financials.
but sharp shares slipped nearly 4% despite reports on a financial life line from its major lender. some units tanked following the parent company bankruptcy filing. bank and miners helped the australian markets end a three day losing streak closing higher by half a%. and the sensex trading along the flat line at the moment. back to you. >> thanks very much. pippa, it's almost a battle of markets this morning between spain and china, between kind of the macro europe uncertainties we were just talking about in the sense that policymakers whether do more. but there's the sense that it's just not enough. >> we are seeing in emerging
markets, workers are saying i need to get paid a lot more. and if you don't pay me more, i'm going to protest one way or another. so foxconn had to basically shut down operations because they're all protesting, rioting. now, they're getting 25% wage hikes. but it's not enough given the pace at which food and energy are rising. terrible working conditions. same in south africa. so we see mining operations being shut down because of the protests. so now what we see is globally, emerging market workers saying you have to pay me a lot more. whatever we pay them, it's still not enough because the moore liquidity we keep ingesting in quantitative easing whether in the u.s. or china makes commodity prices go higher. they say if they'll pay 22% more to the worker, they would have to cut the labor force in half just to break evening. so you know the production is going to -- >> you think central bank liquidity does end up in higher asset commodity price inflation?
>> i think this is totally obvious. chairman bernanke says i don't know what you're talking about. there is no connection whatsoever. and the brazilian finance minister said this is warfare on the emerging markets. currency wars will come out of the quantitative easing because of this human impact and commodity price pressures as a result. >> pippa will stay with us. stick around, because still to come, israeli prime minister netanyahu prepare to go deliver a sharp rebuke of iran. how might oil markets trade on heightened tension? we'll explore all of that.
so not a bad result from italy. their yields still going down. spain's started to rise again. >> may be low compared to recent months, but the fact is relatively it's still pretty high p about and my question is still who is buying this stuff? and if it's domestic banks, then you're just building up potential problems. >> if you believe italy won't default, pension funds would love that. >> and that's fine. when we just heard that spanish might need an additional chunk of change to recapitalize their banks, we think italy won't have this issue at some point? >> speaking of struggling eurozone nations greek coalition partners have agreed on the bulk of cuts following the euro group
welcome back. >> headlines from around the world. protests rocking madrid. prime minister rajoy prepares to unveil another round of cuts. ten year yield still above 6%. >> treasury sees yields fall as an auction of long term debt. >> and shanghai up on rumors of market reforms while the pboc pumps record amounts of liquidity into the banking system. plus automakers warn of a challenging environment in 2013. consumers scale back their spending.
>> despite headwinds, still at highs. dow after falling yesterday looking to add back to its position by something like 63 points. interestingly enough for the s&p 500, it has been a tale of two septembers. we started out quite strong. we've been finishing quite weak. may have something to do with the fed's decision on september 13th to basically pursue unlimited quantitative easing. ftse global 300 up a quarter of a percent. what's basically been happening, though, is the struggle in markets, the tug of wars essentially between china and spain. you can see how it's spelling
out so far in the session this morning. ftse 100 was among the bourses up in the green, but still not quite as high as we have seen initially. up 0.3% there. 7309. cac 40 which had a really ugly day yesterday now rebounding. but not the case with the ibex 35 down another half a percent. before i send it over to you, let's very quickly take a look at the selloff in spain as that price falls. forex, euro-dollar slightly weaker this morning as well. 1.2859. again, this is the real tug of war this morning, australian dollar just fractionally higher on those hopes of china coming into the market. euro-dollar saying not so fast. the real question is how u.s. markets react to all of this
once trade gets under way. >> and of course you'll find out when you watch it here. >> sentiment lifted by the pboc's continued efforts to liquidate the market. it pumped $58 billion. and data showing slinging stressed the need for more government help. and they will negotiate more opportunities for american businesses. the visit by the treasury undersecretary comes just weeks before washington releases its currency report on major trading partners. it also comes as america's presidential candidates trade more bashes over who is tougher on beijing. mitt romney says he'll label
china currency manipulator while obama accuses him of profiting from overseas. can we -- that's not really helpful, i suppose. >> i think relations are actually deteriorating big time. >> should the u.s. revise its total commitment for japan and insist that both sides go for sort of independent arbiter on this? there's no win here for the u.s. >> but the bottom line is we'll see much more tension between the u.s. or its seeming proxies from a chinese point of view. over who owns the cash flows. but the second thing is this business about the outsourcing and the election, talking about china stealing all the jobs, how remarkable that pricewaterhouse
just issued a report saying it's cheaper to make steel in the u.s. now than in china. manufacturing is moving back it to the united states unbelievably rapidly. so they can argue about currency and outsourcing, but the u.s. is the beneficiary right now. >> they're selling the wrong story. meanwhile protesters gathering in madrid, calling for the spanish government to resign. are a hoig's reforms have proved deeply unpopular. steve, what are we going to get today and what do we get tomorrow when we hear about how much more money the banks need? >> very interesting. i've already spoken to the economy ministry about the financial assessment of the banks. they pretty much have a credit
line of 100 billion euros. that money is waiting really although the conditionality has been questioned after some of the northern europeans, just questioning what the money will be used for and indeed where it goes to specifically. but in terms of the budget today, cuts across the papers. whether 4% at the justice ministry, 30% agriculture, public works. the rajoy is trying to play a catty game. he's trying to reempty the conditionality that may welcome with an official call for a bailout of the sovereign. because he knows that he doesn't want the same strenuous conditions that we've seen on other bailouts such as in greece. so a lot of conditionality is trying to be preempted, ie he's coming up with strenuous cutting across the ministries. but there's some things he doesn't want to do. and one is in the pensions. this is very contentious. one of his election promises was he wasn't going to tinker with the inflation linking of the pensions. but of course that is very contentious given the fact that
inflation has gone up on the back of the a.t. going up to try to raise more revenues and of course that would cause them to as you pay out more money for inflation listeninging all those pensions. so it's a vicious circle. we'll find out in the next couple of hours if he manages to complete his rubix cube. back to you. >> want to introduce a chief economist and pippa is still with us. you heard steve's report. at what point will spain ask for a bailout? >> if things condition, probably within ten days. what spain is likely to do today and tomorrow is to preempt conditionality as steve already said. and on that basis, they will then probably tell europe we're ready to request aid, but please confirm to us that we wouldn't have to do much more as what
we're doing already is about as you see on the screen the limit of what can be done. >> is that likely? >> probably yes. >> likely in terms of they won't get much more conditionality. >> likely in the end, yes. >> i find it hard to believe they would go along with that at all. why after pressing so hard here that there will be conditions will they go they're making reform so it will be okay? >> what spain is doing is pretty tough. spain is doing more austerity than the economy can stand. it has done a huge labor market refo reform spain is ahead of what really matters, the longer term structural reforms. >> which is so interesting
because at the same time, they're making, is the risk they'll undercut their ability to rebound and grow just when they need it the most? >> and the key is they're doing a pretty good job of implements austerity and reform, but not good enough given the debt problems size. so this is the issue. how much is enough. and the answer is whatever will get you to a balanced budget situation and out of your debt problem will kill the population. so this is the question how to balance these things out. >> it's not an issue of balance. you have to be literal for ecb support. central banks can do a lot. >> patricia, who have we got?
>> we are at the bentley stand. the new ceo is with us. thanks very much for being with us. you launched this little beast, which is the gt 3 and announcing bentley is going back into racing. >> yeah, as understand, we will return to racetrack. and the reason why is that our customers thinks that belongs together. bentley on the one hand, on the other side racing belongs together. so we responded. and our first sponsor the response of our customers was very positive. >> let me ask you about the return on investment.
you're putting a lot of money in there, but what does it mean in terms of getting money out? >> it is not that easy to earn money with racing, but on the other hand, we think there is a chance because many, many private customers are interested in racing on racetracks. and after we've done our homework, we have car ready for the first races, we will see if we reach or not, but we're optimistic. >> otherwise you wouldn't have done it. in terms of the luxury sector in general, it is very resilient, but this economic cycle that is in a downturn for quite some time, how much resilience do you actually see more brands like be bentley going forward, how does the market look in 2013? >> to be honest, we also see the
clouds coming, but on the other hand, i think we are very good prepared because of our lines. we announced a car that will come on the road he said of october. also other products are well prepared to maybe increase a little bit our market share worldwide. and on the other hand, we're fighting very hard to bring the korss town. that together is hopefully enough to swim a little bit against the storm. >> what is your client profile like, what does the client look like that is interested in a car that has 102 horsepowers, where do they come from?
>> our clients are very special. they not only buy a car. they buy a dream. you can accelerate on a public road like a formula one car. and that is very special. you cannot have that experience in any other car worldwide. and this is what they want. >> and live the dream of course. thanks very much for your time. that was the ceo of bentley. but earlier on, we also caught up with the ceo of renault and this is what he had to say on the economic outlook. >> the market in europe is down 8%, unfortunately, we do not see any better condition between now and the end of the year. and also unfortunately we don't think 2013 is going to be a year
of pick up p about i think 2013 at best should see a stabilization of the market. and most probably another decrease in the market. so all car manufacturers, no matter what they would like to see, have to accept the fact that we are all facing a very tough situation and which will continue in europe for a while. >> that's all coming out of the paris auto show. >> stick away, still to come, we'll finish the discussion we were having just a couple moments ago and talk about the battle for the white house. 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.
protests rocking madrid as prime minister rajoy prepares to unveil another round of cuts. >> and the pboc pumps record amounts of cash into the banking system. >> and we've been live at the paris auto show, car makers warning of a challenging environment in 2013. a short while ago italy saw yields for both five and ten year auctions coming down. the five year, the lowest since may 2011. and for the ten year, back to march. but knstill with us -- is that
going to happen, spanish yields back up and force the government's hand? >> it's at last possible. as a result yields would drop nicely again. >> earlier we had to sort of jump in, but there's this interesting question as to whether that means we've reached some sort of solution at all with regards to spain and some of the struggling peripheral countries. >> a safety net buys time, it doesn't do the reform. having said that, spain is one of the countries which really is doing the reforms. you can argue that. but what spain needs is time for everything, including the matters to be announced today, to take effect. and if it they are granted that time, they'll be fine. >> so legit into the use these mechanisms? >> my point is these reforms are not enough. and the public thinks they're way too much already. and they're probably constitute a quarter of what the public is actually going to have to do. >> i think they are enough in terms of the structural reit forms, in terms of the fiscal
repair. but we do need to buy the time for these reforms to work. >> okay. thank you very much for staying with us and for all your time this morning. still to come on the show, we'll look at u.s. markets, the losing streak the s&p 500 has extended to five straight sessions. can we turn that around and will u.s. politics play into that question.
it's next wednesday that president obama and mitt romney will go face to face in their first debate. they continue to battle each other from of a par in several key swing states. both campaigning just a few miles apart in ohio on wednesday. >> so if they go around as they have in ohio with some board behind them with the numbers
saying how it's a moral obligation to reduce the deficit, j ask them, well, explain to us how the numbers work. because they don't. they don't have a deficit reduction plan. they have a deficit expansion plan. >> i don't worry about the polls. i worry about making sure that my message gets through to the american people and the best chance for that to happen will probably be through debates as well as the ads that we each run over the coming weeks. it will be a very intensive time and i'm absolutely convinced that the american people do not want four more years of the last four years and that's why i'll win. >> pippa, there is so much pressure on mitt romney to perform well at the debates. but it seems quite clear that he's given up what lead he might have had in the polls. will he be able to turn his campaign around and what's the impact for markets? >> bottom line is that the whole race costs down to five states and probably only 11 counties. romney is losing his lead in those counties. and i think part of it is through mistakes that need not have been made.
he was campaigning in toledo, ohio, which is never ever going to vote for him. what are they doing putting him there? but at any rate, i don't think the debates will change anything either the polls are showing one thing in spite of all the advertising, no americans are changing their opinion. so the whole thing comes down to voter participation. the democrats are apathetic and the republicans are not energized. so both sideses are having trouble getting their people to actually show up on that day. >> the swing voters, the small number of people -- >> i think the polls are showing for the first time in many elections there is no swing vote. it's only about how many of each side actually show up. it's voter participation, not swing. >> so all the debates can really offer is some sort of message that the people will key on. >> enough to say instead of watching a football game that day, i'll actually go to the polls. >> make them think something is
going to happen -- in terms of your own base. >> are we going to pivot from -- maybe the deficit is more of an issue to turn out the gop, but that's when you get a little off message. >> they're divided between those who view the government as their source of income and want it bigger and those who are the entrepreneurs. and how do you change the numbers on those two groups. the country is split right down the middle on that view. >> which doesn't bode well regardless of who takes the white house then after this for coming to some sort of agreement, ending the partisan politics we've seen. >> absolutely. i think what it means is neither candidate will emerge with a clear mandate. and then this is going to make it hard to negotiate the tough stuff. >> good or bad for markets? >> i think it's neutral for markets. politics isn't the answer to what we're seeing in markets.
>> tell europe that. >> today weekly jobless claims out at 8:30, they're forecast to slip. we also get durable goods. 10:00 a.m., august pending home sales are out, expected to rise half a percent. and then research in motion after the close. weekly jobless, that's kelly's favorite thing. >> it's become even more important. it's employment that matters. >> and the fed has said until unemployment is down to 6.5% or maybe even 5.5%, they'll keep foot on the gas pedal. my job is to figure out the actual situation versus what the government tells me it is. and that's true worldwide. and i think we'll see emerging markets bear the brunt of that pain rather than the u.s.
>> any sign of inflation outside of food and oil, but more of a tax on consumer spending. >> we it actually need to live is the point. >> but it doesn't foster broad based inflation so much as rob people of spending -- >> inflation takes time to build. in the '70s, my estimate is we started in 1965 and it took up '79 before we decided to fix it. it can be 15 years. and the early stages, the market will like, i have to say. it's usually good for equities. >> reflation at this point is welcomed all around. pippa, thank you so much for joining us on the program. >> comes down to when the worker decides that they want their share. that's the point. we'll see. we have to go. "squawk box" is up next. we hope you have a profitable day.
today's top stories, spain set to unveil its 2013 budget. the major economic reform proposal comes amid a week of anti-austerity riots in that country. can global markets on high alert, s&p on its longest losing streak since mid-july, but european shares are starting the day on a positive note. and the major asian markets closed in the green. plus the crisis on the gridiron is over. the nfl agreeing on a deal to end the labor dispute with the referees. it's thursday, september 27th, 2012. "squawk box" begins right now.
good morning. welcome to "squawk box." i'm becky quick along with joe kernen and andrew ross sorkin. we do have a number of major stories on our agenda this morning. first and foremost, spain. anti-government protesters gathering near parliament again. the country's prime minister is trying to enact further cut backs as part of an effort to try to bring down one of the eurozone's largest public deficits. reforms are expected to include a new tax oversight body, limitations on early retirement, new taxes on green house emissions and stock transactions and elimination of some tax exemptions. steve sedgwick is in madrid and he'll have more for us in a moment. the situation in europe is a key part of any discussion and we have a number of major newsmakers ready to tackle the temperature topics this morning, including larry