tv Worldwide Exchange CNBC January 23, 2013 4:00am-6:00am EST
hello and welcome to today's edition of "worldwide exchange." from davos, i'm ross westgate. >> i'm kelly evans in london. these are your headlines from around the world -- british prime minister david cameron promises to hold a referendum on the e.u. warning that a concession for the democratic leadership is wafer thin. >> if we don't address these challenges, the danger is that europe will fail and the british people will drift toward the exit. google could light a fire under u.s. markets today as the
giant's fourth quarter profits top forecasts on higher ad revenues. and here in davos, bank ceos fight back against regulators in an exclusive cnbc debate, apologizing to scandals of the past but defiant it the role of the industry. >> i think there's so much misinformation out there that's used aggressively by people for their own purposes. we provide a service to you. we make a little money every time we do it. that's what happens. and ceo confidence down for a third year in a row according to a survey here. despite markets hitting multiyear highs with lack of decisions in the u.s. weighing on sentiment. okay, hello and welcome to the start of our coverage from the annual meeting of the world
economic forum here in davos. day one of three come. kelly, i could tell you things already warming up. we've had a great debate already amongst ceos. we'll get more on that. how are thing there? >> pretty good. we've been listening to david cameron's speech. it's interesting he chose today for the timing. you see cameron on the one hand, bank executives on the other hand. it's like a confluence of events coming together. what's the mood out there? what are people most gossiping about? >> well, obviously the british ceos are keeping an eye on what david cameron is saying. we know big business broadly supportive, trying to keep a strong role in europe. we know from the bcc survey. in terms of commerce, a lot of smaller smes want big renegotiations. david cameron's got to tread the path between business. here we've got conflicting signals. i mentioned the survey and headlines. the pwc survey suggesting ceos less confident than last year. we've also got the survey that
steve leesman came up with, the phrase i like, precarious stability. this is the first time, as he puts it, that we're meeting in davos without an imminent crisis upon us. we know the impact of the ecb's otr suggestions. we know the money that other central banks are putting in. we're through the u.s. elections, ahead of the debt ceiling debate. in some sense there isn't an immediate crisis. it's a question now whether ceos can get through the real economic fundamentals. in some ways we're betwiked and between, kelly. >> i like the scarf, ross. >> yeah. that's the point. look, there's plenty to come on our coverage today. let me recap some of the people we're going to be talking to. john lipinski, formerly of the imf. and hamish tyrwhitt, construction group out of australia. we saw rates dip a little today.
suggesting there's room to cut rates. and the executive dean of peking university. we're more relaxed about china, more relaxed than three or four months ago. we'll get the inside there. all of that is coming up on today's "worldwide exchange." how are the markets looking? >> perfect. we'll check the markets in a second. i want to bring news out of the bank upon spain saying fourth quarter gdp was down 1.not -- 1.7% drop, it was .6 drop. pretty large. and 2012 gdp down 1.3%, down from a contraction of 0.4% in 2011. more difficult news for the spanish economy. now in a long-anticipated speech on the future of britain in the european union, prime minister cameron has warned that democratic consent from a u.k. membership is "wafer thin." speaking in london, he said he's in favor of having e.u.
referendum but not at the moment and urged e.u. leaders to address the challenges currently alienating the electorate. >> there's a gap between the e.u. and citizens which has grown dramatically in recent years and which represents a lack of democratic accountability and consent that is, yes, felt particularly acutely here in britain. now if we don't address these challenges, the sdarj that europe will -- danger is that europe will fail and the british people will drift toward the exit. >> i spoke to unilever's paul pohlman to get his thoughts on the strained relationship with the european union and whether a potential u.k. exit is bad for business. >> if you create a certain level of uncertainty between now and 2017 or whatever the date is of a proposed referendum if this is what comes out, you create a period of uncertainty that is not to the benefit of business. >> some caution there which as ross was saying we've also been hearing out in davos.
and our team out there has been asking business leaders how they think britain's role should play out. ross, what more can you tell us? >> look, a mixed set of opinions really, kelly, already. i suggested a difference between the big conglomerates and smaller business. let's hear a recap of some of those thoughts. >> what it does is introduce the -- introduces a fifth one. we've got enough uncertainty. maybe eurozone is better under mario draggy's leadership. >> i see the u.k.'s future being in europe, but i accept that it is going to have to somewhat change the nature of that relationship. >> people have really tired of europe. even many pro-europeans just feel brussels isn't delivering. >> some of the thoughts already expressed this morning. it's only the first morning of our coverage. joining us for the next half-hour i'm happy to say, if you can stand the chill, we'll
warm things up, steven king, global chief at hsbc. can't believe we're back again. as always, the focus on things going on outside davos. what do you make of david cameron? the speech kind of as expected. what is this doing, this political uncertainty? >> well, he want to resolve the uncertainty by saying we need a referendum to once and for all sort out the european problem. the difficulty is the referendum, if it ever does happen, will happen after the next election. you have to see who will win the next election, also big uncertainty. >> bear in mind the labor and the polls -- >> absolutely. and you would have to have negotiation with europe before you put the negotiation to the referendum. it may be that the rest of europe won't agree to the negotiation that they want to have. in one sense the promise is there. but will it materialize is still, i think, a tricky issue. >> tim standly made this point which kelly pointed out, i'm going steal her thunder, sorry,
kelly, saying that the speech to him sounded like it was to brussels and it was really the referendums being used as leverage to gain concessions rather than actually anybody wants to sort of press ahead with -- >> my impress is that cameron himself is a believer in europe. he's got a problem in the sense that his party is split as it always has been in terms of its attitude toward europe. he wants to heal rifts in his party and bring supporters back to conservatives who shifted across to the u.k. independence parties. he needs that, as well. he's got one eye on winning the election and hopes by making the promise of having a referendum in the future that maybe conservative support will go up. >> the british chamber of commerce survey a couple of weeks ago, 47% of their members, they polled, want a looser relationship. only 27% want the status quo. clearly there's a pig chunk of british small and medium size businesses that believe the e.u. is a burden. >> i think they did. but at the same time, i think
that businesses in general have not been particularly quick to grab the opportunities that exist outside the european union. one of the fascinating things in britain about europe is actually our trade linkages with europe have grown enormously over the last 25 years. whereas trade linkages with china, india, or parts of the, merging world have if anything actually fallen away over the course of the last 25 years or so. so opportunity's been this to grab elsewhere in the world but haven't -- >> you make a good point. if you spin forward not five years or ten years, you spin forward 15, 20 years, if you're running u.k. plc and are going to set out a strategy, how different is the world going look in terms of size of economies and who you would decide today in 20 years should be my biggest trading partners? >> if you're planning now, thinking about china, india, brazil, you wouldn't be thinking quite so much about what's going on elsewhere in the european union. the reality is that with the european union, we become more engaged with i'm and disengaged with other countries. the peculiarity is that if you
look at examples of germany, france, or italy, they've increased their exports to parts of the emerging world. been successful in some cases, particularly in germany's case. but actually at the u.k., it's been slow to grab the opportunity. >> all right. we've got mints coming up later. we'll -- minutes coming up later. and people writing about whether sterling upon -- sterling will look weaker. and this week we'll run an online poll, as well. when it comes to europe, do you believe lack of the current crisis mentality is a sign of real progress or, b, only temporary? a, sign of real progress, b, only temporary. go to our web page, www.cnbc.com. tweet @ross westgate or @kellyevans. we'll close it by the end of the week. kelly? >> thank you very much. let's check as he suggested
global markets. they're trading amid all of the news flow. the europe stock 600 for the most part trading lower. decliners are outpacing advancers by a 7-3 ratio. overall the move down 0.06%. this follows a session where we did see stocks end lower. the nikkei in particular. first, let's focus on the borces in europe. the cac cac down .2%. the ibex giving up .5%. the xetera dax, the weak performer yesterday, trying to rebound. barely above the 7,700 level, adding .1%. and the ftse up .1%. perhaps reaction to david cameron's sp or given the cross currents that we're seeing coming out of the u.s. in particular. the bond space gives you a sense of also what we're seeing, and it's differentiated trade again. it's been consistently inconsistent for the last several trading sessions. we're seeing spain rally with the yield going to 5.12%. italy weaker with the yield rising to just over 4.2%.
the yield over 1.2% and the bunds, 1.5%. in asia we have the latest on how the nikkei is responding in the aftermath of the bank. japan's major of japan's addition is settling. the nikkei got walloped, down more than 2% to a three-week low. the yen strengthened as investors pounded a year-long wait for hoef hype ended stimulus. financials were weakly today. the shanghai composite finished in positive territory. defense stocks soared as many are still hoping these stocks will benefit from beijing's plan to strengthen its military after territorial disputes simmer on. shares in hong kong finished a
touch weaker dragged by industrials and growth-sensitive counters. and investors closely watching that hsbc china pmi data out tomorrow. the kospi ended down .8% mostly on concerns over domestic q4 earnings. technology shares retreated ahead of apple's report card due out later today. the afx 2 -- asx 200 closed at the highest level in 21 months. the h.p. bulletin gained after a half a year of iron ore output. nation data raised chances of -- nation data raised chances of another rate cut next year. >> thanks. ross? thanks. print more to come on "worldwide exchange." coming up, a little bit later we'll be joined by john lipski, former director of imf. we'll get his views. deputy managing director. see you in a few minutes. what are you doing?
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some of the biggest plays in davos from the world of finance. we're in it. let's bring a recap of what they said. >> i think the industry has to come back from the past. i think a lot of companies are doing fine. you know, banks continue to lend and grow and expand. finance is a critical part of how the economy runs our functions. you're going to have loans and movement of money and investors and, you know, presumably everyone i know is trying to do a very good job for their clients. banks since the crisis -- jpmorgan since 2008 has lent or raised $7 trillion-plus for people. all around the world, including governments, schools, cities, hospitals, small businesses, large -- that's our job. we try to do it very well. the whale mistake up there -- no customers, wasn't venal. terrible mistake, if you're a shareholder, i apologize deeply.
we did have record results, life goes on. >> when i came to the industry, i was under no illusion that the industry didn't have its issues. they need to be fixed. and what we tried to do at ubs is two things. first, i think banks need a new strategy. and we embarked on a bold new strategy for ubs. the right strategy. at the same time we need to deal with the legacy. to get on top of the issues, you need to get to the bottom of things. for us, a settlement of libor was an important step in going in that direction. these things need to be on the table. taxpayers want to know about it. and transparency simply has to be there. when we found this issue going on in the bank, we completely made contact and complied with the regulators. we had a very good interaction with regulators, we helped them separate from staff that basically was involved in misconduct that is completely
unacceptable. it's not the values of switzerland, it's not the values of something we can tolerate. you need to separate from that past. that's a necessary condition for the bank and for the industry to focus on a better future. and you have to do both. shape the future with new strategies at the same time, basically get out all the issues from the past. there have been excesses. there have been problems in the good years. what we need to do is fix those and then move forward in a -- in my view, different mode. >> i think we're still doing the right thing. we're taking risks to do that. so -- i just -- i think there's so much misinformation out there that's used aggressively by people for their own purposes. paul, you trade with us, right? quite a bit. >> very happily. >> why you do that? research, execution, capital, and price. we provide a service it you. we make a little bit of money every time we do it. that's what happens. and -- and the fdic for the folks in the room, the fdic insurance guarantee, okay, is
paid for by banks. so yes, it's a government guarantee. but jpmorgan chase has paid the fdic, will pay over a five-year period $5 billion to pay for the failure of small banks. so it's not that one side of the street. >> it's great to have the opportunity to continue my conversation with jamie in this intimate setting. i appreciate that. [ laughter ] >> and he's right about in a way, about the opacity of hedge funds. i would remind everyone that no hedge funds supplied any systemic risk in the 2008 crisis. it's for a specific, important reason. most of us, almost all of us in the hedge fund community -- and i don't dayeign for hedge fundsr the industry, but most of us are customers of firms like jamie and dr. weber's. and as such, we have credit
departments looking over our credit and positions all the time. what the 2008 and -- jamie, of course, runs one of the most widely respected large financial institutions in the world. but what 2008 showed is that many financial institutions didn't actually have a handle on, nor did their regulators, on the nature of their risks and the risk models that were being used. we're not adequate -- were not adequate to describe transmissions. i'm not saying that the institution or group of institutions is unsound and all of the things that jamie said about the risks that they take and the services they provide as well as his colleagues of course is accurate. what i am saying is the path to normalization and a crystal clear able of global financial
institutions to exist outside of an implicit governmental guarantee partially -- partially is dependent upon more deleveraging, more disclosures. >> so vigorous debate going on there as you've been listening as i have. i can't speak, you see. i have, as well, is what i wanted to say. >> i know your lips are probably frozen from standing out there. you know, what's interesting is that it was nice to see different kinds of people in the industry talking to each other about these issues. we also had comments about shadow banking, the dangers. i liked jamie dimond's quip about the banking industry
there. >> yeah. >> what caught your attention, though? >> i just think -- look, everybody needs a healthy financial system. i don't think we've still quite got our heads around the dichotomy of saying we want to build toward a more stable financial industry, higher capital. better regulation. i think we need more regulation but better regulation. i still don't think we've worked out how to transition to that future at a time when we still actually need, clearly, a lot more help for businesses, a lot more access to funds. and i still think we're working our way through those things that are seemingly in opposite to each other. >> it's interesting, ross, too, because as you said we're moving out of the acute economic crisis. it seems that there's so much political crisis here. i'm sure that there were comments about that elsewhere in the panel about regulation. but do you feel generally speaking that the mood has shifted from looking at just this -- pure play economy to actually having to consider all the various political cross
currents? >> well, huge political cross currents. look, they had a win, right, the banks had a win with the delay in basal three which suggests the battle between imposing rules quickly and trying to give breathing room to the banks, it's the latter that perhaps will win out. what's also interesting, coming up on friday, kelly, it's the first chance for e.u. bank to start paying back early the ltro money from the ecb, as well. we might be seeing some withdrawal of liquidity on that. we'll see how many banks decide that's the route they want to go down, as well. so that's the future of banking. plenty more discussion coming up on that. we'll have more from maria in the next hour of "worldwide exchange." we'll get the views on those that have already been discussed, as well. so what we're going to do is take a -- a little break in a few moments. i'll hand it back to you meanwhile.
>> perfect. let's bring you up to date on some other stories. israeli prime minister nbenjami netanyahu is followed a setback as his party ekes out a win in the elections. across the second term he will reach across the aisle to center left rivals to cobble a coalition government. jim maceda is following the election from tel aviv, a pleasure to have you on. what can you tell us about how the election is playing out and what this means for netanyahu? >> reporter: hi, nice to be with you. well, it's gone from bad to worse really for prime minister netanyahu. you recall first the exit polls that came out last night predicted that his right wing block in parliament would squeak out a one-seat majority. barely enough to govern. now with almost all the votes counted, it looks like a hung parliament. 60 seats on the right. 60 seats on the left. that means that netanyahu must now do something that really
none of us took too seriously last night. he must reach out, as you say, across the aisle to the center left. that means turning to really the big winner in these elections. a newcomer named yayer lapit. a former news anchorman, charismatic head of a centrist, secular party which ran on mostly domestic, economic meat and potato issues. what will that mean policy wise? i think first we'll see early on a kick-start of the peace talks with the palestinians which have effectively been dead, those talks, for four years now. lapid is a strong president supporter of a two-state solution. we're likely to see movement there. that will, by the way, improve strained to say the least relations with the united states and the allies. but i don't think netanyahu's tough positions either on iran, on future air strikes in gaza, for instance, will change hardline positions as galling as they are for the western
community. they do resonate with israelis. that's why he won the election. >> okay. we'll leave it there. jim maceda from tel aviv. thank you very much. stick around. straight after this, we'll bring you u.k. unemployment data and the bank upon england's minutes for its january policy meeting. we'll have plenty of reaction and analysis. we'll be right back.
you're watching cnbc's "worldwide exchange" from the world economic forum in davos. i'm ross westgate. >> i'm kelly evans in london. here are your headlines -- prime minister david cameron pledges a referendum on the e.u. if he wins the next election but says it should not be seen as a signal that britain necessarily wants out. >> i never want us to pull up the drawbridge and retreat from the world. i am not a british isolationist, but i do want a better deal for britain. and google could light a fire under u.s. markets today as the search giant's fourth quarter profits topped forecasts on higher ad revenues. some of the world's best business leaders in finance have been hot in debate this morning in the global financial context. >> i think there's so much misinformation that's used aggressively pie people for their own purposes. we provide a service to you. we make a little bit of money
every time we do. that's what happens. now we're just getting news out of the bank of england, minutes from its latest policy meeting showed members vote the 9-0 for the rate action that david miles wanted 25 billion pounds more in asset purchases. tail risks were described as receding, a modest improvement seen. there was concern that fresh asset purchases might be less effective and encouraging signs were noted in the funding for lending program. they talked about how exports are disappointing and the current account deficit exchanges that real exchange rate is high. sterling up .1% on the back of this news today. perhaps has something to do if we can turn over and talk about the employment figures that are just out. get this -- it is more of the same and by the same i mean more record high unemployment in the u.k.
90,000 jobs added to 29.7 million, the highest record on average. average earnings still weak in the three months to november, averaging 1.4%. the weakest since mid 2010, in fact. ross, let's get out to you and get some reaction on these weak earnings. strong employment, though, and the bank of england happy to stay on path. >> bank of england standing pat. we also have steven king with us. mervyn king suggesting there might be room for more options other than qe. what are they talking about? >> they're hinting about the weaker sterling. we've gone back totuate -- to 2008, 2009, lack of competitiveness driving things to lower levels. blaming other countries for going through currency wars. strange situation. i think the risk for this year is that sterling ends up being weaker over the course of the next few months. >> the safe haven currency. if we feel slightly better about the ecb for whatever reason and the u.s. -- >> that's exactly what's going
on. last year sterling benefitted from the fact people worried about the euro, the fiscal cliff, saw it as a safe currency. with the rest of the world stabilizing everyone's looking at the u.k.'s underlying fundamentals, no growth, lack of competitiveness, banks talking about weaker sterling. sterling looks vulnerable. >> what happens with the government's finances? the ocd's come out said public spending for 2012, 49% of gdp. it was 49.6% 2011. it was supposed to go down, it went up. >> the gdp numbers were much weaker than expected. we thought there would be a decent recovery in activity. it's than public spending overshot, it's that gdp has undershot. from the ratio point of view you've ended up with a higher level of public spending. >> when you talk it weakness in sterling, what is hsbc saying -- >> against 1.8150. not a huge fall but sterling is one of the weakest of the -- generally soft currencies over the next few months. >> before you go, let's move
away from the u.k. just give us your -- your general view of how 2013's going to shape out on a global economy. >> it's a great rotation in the sense that i think we'll see a decent recovery in china. >> 8.6 -- >> 8. %, not as strong as it was prefinancial crisis, but better compared to 7.8% last year. and anyone who's connected with china is going to do well which includes many of the countries which are linked to china in asia. maybe some of the countries in africa, latin america. but at the same time, i think the west will still struggle to post the kinds of growth rates you normally expect in the recovery. >> is the fear of europe temporary, or have we done something decise sniivedecisive? >> the ecb has done a fantastic job in threatening to buy bonds, but spain's weak economy is contracting. we had fourth quarter numbers out which were still soft. if it continues to contract, its end fiscal position will look
poor. there's a political question as to what to do about countries that have unsustainable fish and wildlife positions. >> @kingeconomists is your twitter handle. thank you very much. >> thank you very much. u.k. prime minister david cameron has pledged a referendum on the e.u. if he wins the next elections. he says this shod not be seen as a signal -- this should not be seen as a signal that britain wants out. >> i never want us to pull up the drawbridge and retreat from the world. i am not a british isolationist, but i do want a better deal for britain. not just a better deal for britain, i want a better deal for europe, too. so i speak as a british prime minister with a positive vision for the future of the european union. a future in which britain wants and should want to play a committed and active part. >> that was the british prime minister this morning here in davos. we've been speaking to a number of executives about how they see
the debate evolving. >> 2017 will probably mark the time when western continental europe really starts to recover. >> we have a record level of unemployment in europe. it's time to change the model. austerity is not doing what they said it was going to do. it's not improving employment opportunities. it's not improving investment. it's not helping the business climate. we want to put business to work. we want to put the cash to work. then we will have a much better horizon. >> certainly more positive than a year ago when we were in western europe. i think europe feels better. certainly not out of the woods, but much better than it was. >> all right. that is the view on -- of the british debate in europe. meanwhile, we're running our own debate here over the next three days on line and on air and on social media, wherever you want, about europe. when it comes to europe, do you believe that a lack of crisis
mentality is a sign of real progress, a, or b, only temporary? log to to www.cnbc.com. let us know your thoughts. that's the question with our next guest, john lipsky, former managing editor of the imf. you're known of the school -- >> advanced international studies. >> advanced international studies. john, thanks. let me ask you that question, though. right now -- lack of crisis mentality in europe, is it because we've got real progress or is it temporary? >> it's possible that the answer's yes. obviously there has been real progress in terms of putting in place institutions that will be able to deal with the problems of -- of the structure of the eurozone. at the same time, not -- they're not all operational yet. they have to be proven. and they will require policy adjustments in many european countries.
so it's -- could be temporary. we'll have to see. >> at the same time, the unemployment situation is getting worse. the economics haven't improved to any great degree. i know we had a bounce yesterday, investors survey in germany. in your dealings, is there a sense here that we'll -- we'll do whatever it takes to preserve the idea of the euro? and if that means, you know, putting a generation out of work, we'll take it. >> well, this was never going to be easy because the starting point was a significant loss of competitiveness within the eurozone, a number of the weaker economies. what has happened under the pressure of higher unemployment is you're starting to see a change in relative labor costs. in other words, a gain in relative competitiveness of those that have been the weakest. that's an essential element of progress. obviously at a cost, better -- >> very high cost. >> better than it would have been avoided.
but the issue is getting forward from where we are right now. and the signs, the delta if you will, the changes actually are in a positive direction. >> okay. where is the economic improvement -- i get that sentiment's improving because of ecb actions. i don't see any real -- >> not just that. actual trends and relative unit labor costs are moving in favor of the peripheral countries. >> it should be when you've got unemployment levels of 26% and youth unemployment levels of 50%. >> it's unfortunate, the situation turned out to be more difficult than had been hoped for or anticipated. partly because the rest of the world was weaker than had been anticipated but not only. but as you heard from your previous guest, there are reasons for some optimism in asia. i think there is at least an expectation of improvement in the u.s. economy. in other words, hopefully the external environment for europe will be improving. >> there have been -- how much will the continuing u.s. political debate drag on the
u.s. do you think? >> it's not -- it seemed to me that the biggest risk was of a big break that would produce a serious tightening of fiscal policy that could put in jeopardy both the near-term performance of the u.s. economy and confidence about its long-term prospects. not everything has been solved by a long shot. and there's more to come. but it looks like we've avoided the risk of a serious break. and that's a positive because people were worried. >> and you mentioned china. how -- how encouraged are you by the leadership transition? what -- what is your concern? >> well, there's a very clear roadmap for economic and financial reform in china. that's the five-year plan that was promulgated over a year ago. the question, of course, will the new leadership put this into practice. if it does, there's every reason for not just short term but medium-term optimism. but it's an unknown. many of the elements of the
12-5-year plan were in the '11 five-year plan. >> how what about a global currency war? you heard about the u.k. -- >> of course, this is a real challenge. i'd like to put it in a broader context. when the -- the crisis erupted, the institutional innovation was the g20 leaders summit to bring together leaders not just to the g5 or the g7, even the g8 but the g20. one of the key goals was to produce improved economic performance through policy cooperation. what seems to be happening today is much more everybody for themselves. and that creates the risk of the kind of what you call currency wars. let's call it greater instability, potential instability in markets because of worries about incoherence or inconsistency of policies. it's important that the context,
in other words, that the leaders once again insist on a cooperative approach that will build confidence, not produce conflict. >> always good speech. thank you very much for joining us. >> thank you. >> john lipsky. we'll take a break from here in davos. and we'll have more from australian's latent holdings. back to you. let's check the european markets. trade earlier was seen as broadly weaker. you can tell there, not a ton of action. the ftse and xetera dax are a little higher by 0.15%. the cac giving up .2%. the ibex is the underperforming, down by about .4%. and bankia, one of the weakest performers in the euro stock, down about 5%. in fact, we can show some of the names that are moving the index. there you see, down 5.8% now. bmps, this the focus of concerns over the money it lost potentially in a derivatives tie-up. shares down 5.this morning. france telecom whose ceo
potentially will be reshuffled by the government, down 3%. on the flip side, those who were hoping to drive the market higher or at least trying to includal catell lucent up -- include alcatel lucent. national bank of greece up 4.4%. greece received the latest round of january traunch funds from the troika. novartis rallying up, up 3% after earnings. same for unilever which are trailing as results have pleased investors. let's take a quick look at 4x before we hand it back to davos. there's the swiss for the exchange rate, anyone traveling from the u.s. to the forum, down .1% this morning. the dollar/yen, an interesting one to watch. the yen strengthening again against the dollar. closer to 88, giving up more than .3% after a big move yesterday, continuing on the heels of the bank of japan's policy decision to pursue
unlimited quantitative easing to hit a 2% inflation target. questions about how and when they'll get there remain in markets. the euro/dollar, .1% higher. the sterling, .2% stronger. the bank of england out in minutes saying the current account deficit would suggest it should be weaker. selfishly i agree. almost half the world's iron ore has been at a standstill. a tropical storm has intensified to a category 1 cyclone and brought shutters down on rio, bhp, and more iron ore ports. offshore oil production has been halted. the storms expected to weaken, 1,-300 gmt. ports expected to reopen later today. we'll keep an eye on. that we're also keeping an eye on davos. ross, what have you got going on? >> we'll continue the australian theme, as well. joining us, ceo of latent holdings, a mining group in australia. thanks for joining us. you're keeping an eye on the
storm. might be impacted? >> they are. we've got projects that have been affected by it. that's normal for this time of year. it's a cyclone season, we do get hit by cyclones during this period. >> it's been a huge focus on australia's resource industry and actually on the sort of levels of production. what's -- what's relevant for the chinese demand and with iron ore and everything else. what's your take now on whether we've bottomed out on that or whether there's more contraction to come? >> what we look at is volumes, not necessarily the price of the commodity. so as long as the price of commodity doesn't drop to levels that makes mines ineconomical, we mine volume. certainly the demand for volume and tonnage is there. and we see that continuing based on the growth that we're seeing both out of china, as well as the emerging markets in asia. >> and since in the last set of data, china was doing quite a bit of stockpiling. this wasn't really demand. >> no, i think what we're seeing
if you look across the whole region, if you've got 6% growth, you know, cross countries including indonesia, philippines, malaysia, vietnam, there's enormous populations there. so the energy demand and energy supply and infrastructure deficit is there. and you know, we see, you know, doubling of energy demand over the next decade. and that's going to continue fueling the name for -- >> you see that sort of energy demand then. how are you reacting in terms of what your investment strategy is going to be, your production strategy? >> we've been in asia for just over 40 years. and leighton is one of the few companies with a full economic footprint off of asia. we continue to export services where we can extract value. we're excited about the opportunities we see, especially in countries such as indonesia. >> just talk about australia. we heard inflation, a little weaker than expected today. mr. swann from rbc says there's
potentially room to cut rates. do you think they need to? what's your view of the economy? >> i think the big issue for us that we're seeing affecting a lot of businesses is the strong australian dollar. and i think companies need to adjust to a new norm of having a stronger dollar and what does that mean and how can we make ourselves sustainable. if you look at davos' theme this year, it is about a global world. and it's being resilient. about positioning us for sustainability. and australia, you know, really needs to look at its position at the foundation of the asian sentry. we no longer suffer the tyranny of distance with north america and europe that we used to. >> it's interesting about coping with australia. germany has always coped with the stronger deutsche because they had a higher value business. in the resource business, you're at the other end of the chain. a material impact. >> it goes back to our location. you know, if you look, you've got mines that are already established. infrastructure that's in place. australia's real issue is to continue to put in place strong
infrastructure, making sure we continue to reduce the cost of operations and focus on productivity. we've got to be competitive in the region. and that obviously fields, you know, a series of things coming to play there. cost of labor as well as the strong australian dollar interest rates. for us it's about productivity and improving effiencies. >> good to talk to you. >> you, as well. >> good to see you. >> good to see you. >> thank you. and coming up, fu jun of peking university. and we'll have other guest views on china and the region. more to come. what are you doing?
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welcome back to this truly "worldwide exchange" show this morning. i'm in london. ross is out in davos. chinese factories expected to churn out 10% more next year lower than the 14% gain in 2011. china's industrial company picked up in the fourth quarter as domestic demand made up for sagging exports. some european exports are saying any recovery probably won't
translate into more orders for them from china until the second half of this year. just what do business executives think about the asian growth story? is it over? ross has more from davos. yeah. well, they think, kelly, that there's still residual strength in asia and emerging economies. let's listen in. >> when accelerating investment in africa, in southeast asia, in china, we stepped up investment in the second half of last year. >> so primarily as we trend from an export-driven growth model to a more consumption-driven and domestic-driven model, i think they're doing reasonably well. >> the global growth markets are being driven by some fairly unstoppable forces like, for example, a young and growing population, rising consumer demand. the theme this year is resilient dynami dynamism. i think all the growth in the
next year to 18 months is going to come from these markets. >> some of the thoughts we've already had. we heard steven king from hsbc say he thinks china will grow at 8.6% this year, which is not bad. not the heights that they had previously. but the gdp is still certainly getting bigger all the time. joining us is fu jun, executive dean of peking university. good to see you. thank you very much, professor fu. do you agree mr. king's aexertion -- aexertion about china's gdp this year? >> i can't say whether it's 8.5 or 8.6, but it will be good for us to look at the range of 8% while compared with the double digit growth rate that has gold down a lot. it still continues to be the highest in the world. and now it will be very difficult for us to come to -- continue to have that double
digit growth rates for good reasons. the world economy is slowing down. and domestically, consumption has not been up to the level that is satisfactory for us to achieve those levels of growth rates. >> how easy is it going to be to transist from investment-led growth to this consumption-led growth? this is such a difficult path. and it's hard for many emerging countries to achieve. >> it is. i have noticed that policy wise the government has talked about policies to boost the consumptions. but we have a deep institution to argue for the difficulty of achieving very dramatic rise for domestic consumption. the reason being, the political power continues to combine with the fact that there's production. that is a very powerful institution reason to drive a gap for the rich and the poor. for an economy to move forward,
you need to have a reasonable match between supply side of growth and the demand side of growth. but while i'm confident that a supply side of growth looks very good, the demand side of the growth has questions. so that to achieve very high growth rates will be very difficult. now for me to look at the statistics, if i look at early years of chinese economic reforms, domestic consumption as a proportion of the gdp was as far as high as 50%. now it has decreased to somewhere between 35%. >> so it's -- look, it's a work in progress. what about the sort of structure impediments in terms of the autonomy of the regions? the central government may say, look, we want to do this. but seeing that filtered down, such a big country, is not easy. how much work needs to be done on -- on sort of supply side in that sense? >> the difficult part comes from
the central government for concerns of inflation. if i look at the past few years for the chinese economic reform, we have exercised very impressive or micro economic measures. but the drawback is that inflation would go up so that with a lot of money already injecting into the economy, that, too, seems to be very limited now. the local governments continue to have investment hangers. the problem is not the local governments, it's the overall picture that for the country do not want to see very dramatic economic, macro economic measures. as i mentioned, the drawback is you have problems of inflation. >> professor, good to see you. thank you very much for joining us on cnbc. we appreciate your time. executive dean of peking
university. >> you're welcome. plenty more to come in the second hour of "worldwide exchange." maria this morning, of course, hosting that bank debate. she'll be joined with the ceo and more from carlisle group. they've been making huge investments in china. they recently sold, of course, a big insurance company. we'll get his views on how he's recycling the money, as well. let's recap with some of the things we've already heard here from davos. >> when i came to the industry, i was under no illusion that the industry didn't have its issues. they need to be fixed.
you're watching cnbc's "worldwide exchange." the meeting of the economic meeting in davos, i'm ross westgate. >> i'm kelly evans in london. these are your headlines from around the world -- google could light a fire under u.s. markets today as the search giant's fourth quarter profits top forecast on higher ad revenues. british prime minister david cameron prime minister david cameron promises to hold a referendum on the e.u. if he wins the next election, warning that democratic consent for u.k. membership is wafer thin. >> if we don't address these challenges, the danger is that europe will fail and the british people will drift toward the
exit. and in the cnbc debate in davos this morning, bank ceos fight back against regulators, apologizing for the past but defiant it the role of the industry. >> i think there's so much misinformation out there that's used aggressively by people for their own purposes. we provide a service to you. we make a little bit of money every time we do it. that's what happens. and in a pwc survey here in davos, the ceo seeing confidence down for another year. u.s. politics weighing on sentiment, but they're still bullish about emerging markets. all right, yes we've, we have kicked off our coverage of the economic meeting in davos. we've had a great banks debate already this morning. maria's hosting that, she'll be joining us in a few minutes with a few more highlights. and of course we've been measuring action to that david
cameron speech. >> yes. and that's one to watch, ross, because it's -- you talked to executives over here. we were talking to unilever's ceo, paul polman later, they expressed concern, camera's talking about the -- cameron's talking about the election, talking about five years of uncertainty on a major area of policy. >> yeah. it's noticeable that if you talk to a lot of the bigger businesses, they're clear we want to be at the heart of europe, be at the heart of competitiveness. there's change between that and the smaller smes. i reference, we talked about that british chamber of commerce survey, 46% of members want to renegotiate which probably puts david cameron in something of a -- a bind. he's got to win the election anyway to hold the referendum, he's got to win anyway. there's a big british business community here in davos. they have a big lunch on thursday. we'll be speaking to john karr,
the president of the cbi later tonight on our closing bell. that's going to rumble here. >> great. and to remind people, in a long-anticipated speech on the future of britain and the european union, the prime minister has warned that democratic consent for a u.k. membership is "wafer thin." he was speaking in london and said he's in favor of having a referendum on e.u. membership but not at the moment. and urged e.u. leaders to address the challenges that are currently alienating the electorate. >> there is a gap between the e.u. and its citizens which has grown dramatically in recent years. and which represents a lack of democratic accountability and consent that is, yes, felt particularly acutely near britain. now if we don't address these challenges, the danger is that europe will fail and the british people will drift toward the exit. >> and now ross, i understand you've got a very special guest on this hour with you out there in davos.
>> well, you know, we -- this is sort of an annual event. >> an annual event, kelly. >> yeah. >> great to see you here. >> people usually have to wait until much later to see maria. i'll hand it over to you guys. >> thanks, kelly. it's great to see you again, ross. it is -- i feel like it's our annual tradition to get together during davos and compare notes about what we're hearing and seeing. >> and this morning, we kicked it off as we normally do with a great debate. feisty form, the bankers today, the finance guys? >> i've said, wow, you have eaten your wheaties today. >> your wheaties. >> the wheaties. but you know, it was an interesting debate because i think this question of what happens to your financial services is truly a global question. are we going to see the separation of plain vanilla deposit assets from the riskier investment banking assets. this conversation, if you will, is taking place in europe, in the u.s., throughout the world. not necessarily in the emerging markets that did not see financial services industries
blow up during 2008. >> we've got the advance, investment banking business, right? >> that's right. >> so look, should we listen in to -- i think we've got a highlight here some of this debate. let's remind you of the comments they had. >> i think the industry has to come back from the past. i think a lot of companies are doing fine. you know, banks continue to lend and grow and expand. finance is a critical part of how the economy runs our functions. you're going to have loans and movement of money and investors and -- and presumably everyone i know is trying to do a good job for their clients. >> when i came to the industry, i was under no illusion that the industry didn't have its issues. they need to be fixed. and what we try to do at ubs is two things. first, i think bank need a new strategy. and we embarked on a bold new strategy for ubs. it's the right strategy for ooubs. at the same time, we have to deal with the legacy.
in order to get on top of these issues, you made it to get t bottom of things. and for us, a settlement of libor was an important step in going in that direction. >> where does the financial sector start or stop, where does the economy start or stop? it's intricately linked. we shouldn't throw the baby out with the bath water. yes, there were issue, excesses. we were clear, they have to be fixed. we will not get any growth. the world economy will not get after the crisis in which it is without functioning financial sector. but the finance companies, households, people can go to work thinking they have insurance, there can be no trade without insurance. we perform a valuable social function. i think that's a key point to agree on before we move on in the debate. >> and look, some of the highlights there. >> yeah. >> there's a great -- we didn't
see it, but a great debate between jaime dimon and paul singer. >> paul singer is running a hedge fund. he said the problem with the big banks is there are no -- they're not opaque, and there's too much sort of things that we don't understand, complexity in terms of what they're doing because of the use of derivatives. so jamie dimon turns to singer and says, i guess your business is opaque. he's running a hedge fund. >> right. >> there was a fair amount of debate. i thought the most interesting part, frankly, was axle weber. here's a guy who is running the bundes bank and a regulator for ten years, an academic before that. and now is knee deep in the issues that jamie dimon is facing running ubs. now, weber is running ubs. >> yeah. >> he's got a different outlook, but i should say we came away from the panel realizing he thinks the banks will be split up. that's why he's focused on wealth management. they are restructuring ubs. he thinks that we'll see a real separation of plain vanilla
deposit taking and the complex investment banking. >> this is a debate that's been raging in the u.k. for some time. we had the independent banking commission suggest this. we've stepped away from the full recommendations. but it's interesting that it's gaining more traction, right? >> it is. and you've got a financial tax being talked about in the u.k. >> yes. >> all sorts of different pressures on the -- in the -- facing banks now. and this is certainly not going to away any time soon. >> who's going to join us? >> right now we're going to talk to david rubenstein, the carlisle group. we'll talk about private equity. private equity has also been under attack in some ways. what i would like to know from david rubenstein is how they're allocating capital now. >> yeah. >> how do you make money in this environment, and is private equity expecting the kind of regulation that the big banks are going to face? >> and bmp -- >> yeah, coe. >> will join us. plenty more to come here in davos. kelly, meanwhile, we'll hand it back to you. we'll continue wheile hand it
back to you. we'll look at markets. futures gearing up for the trading session. a couple of fascinating stats, the down for three straight trading days, eight out of the last nine. five straight for the s&p 500. five-year highs for this index. we look at futures this morning, they are pointed lower just a little. although you take fair value into account, we're almost flat, 1,487 for the s&p 500. you can bet people are keeping an eye on to whether it can punch through 1,500. many saying now is the time for profit-taking on the show. others saying there are reasons to be optimistic. tlook nasdaq. this is poised to open higher by 12 points. google, we'll hear from apple after the closing bell. earnings tech was not loved coming into the earnings period. helping to sort of get the market response relatively favorable when the companies come in, even if they just come in in line. let's take a look at what else has been happening across the world. european trade is mixed. we see the ftse up by .1%. it's .2 for the xetera dax.
the ibex, 35, down .3%. bankia weighing on the boerse, down 5%. and the cac is weaker despite the fact that al catell lucent is one of the biggest gainers in the euro stock 600. let's look at the bond space. earlier we saw a pattern -- we're seeing spain rallying, too. a rotation out of britain, at least, into italy, into spain. 4.-- just under 4.2, 5.1% respectively for the ten year this. interestingly, though, even though the u.k. is -- gilds selling off, bunds are getting a bid, 1.57. as i say that, they go roughly flat. forex, the dollar/yen down .3%. the end yes, s-- continuing to . and the bank of england saying it's overvalued compared to the
current deficits. plenty of action at forex and plenty out of davos. coming up, david rubenstein of the carlisle group will talk to ross and maria. we'll will have that coming up. ♪ [ male announcer ] end your long week... with a weekend getaway. save up to forty percent on all weekend hotel stays. book by january thirty first at hiltonanyweekend.com. nothing.
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google's fourth quarter profits topped forecasts on higher ad revenues. u.k. prime minister pledges a referendum on e.u. membership if he wins the next election. and the bank of england takes a step back from watching more stimulus as there's a surprise decline sending sterling to highs. okay. meanwhile, maria and i are here in davos, the annual meeting of the world economic forum. it was something, we heard that deal flow may pick up for private equity groups. >> he said there's opportunities in the u.s. but also outside, particularly in the emerging markets. >> and mr. david rubenstein, co-founder of the carlisle group. you completed a nice sale in china recently, china pacific insurance. what do you take, $700 million? >> the deal was done over several years. it was an investment we made several years ago and turned out to be among the most successful
deals we've ever done. >> what does that tell us about -- are you going to do more of that, the success of doing business in that part of the world? >> we're probably the largest private equity investor in china. we have 15% of our work force in china, all chinese natives. we'll try to increase what we have there. we think it's a great source of profits for us in the future, as well. >> very interesting because, you know, a lot of corporates that we talk to say that you're notes in gleeting a fair shake in -- you're not necessarily getting a fair shake in china because of a joint venture. i guess it's different depending on the industry. manufacturing is different from banking. >> it is. but corporations are probably making investments they'll be there forever. the chinese might not want them there forever owning chinese companies. private equity will make an investment. it's going to fix the company, sell it probably to somebody in china. ultimately the chinese will benefit. we're not as threatening to the chinese as maybe large corporations are. >> we want to talk a lot about what you're seeing in terms of the pipeline and where you see the activity. >> sure. >> let me ask you this -- last
year, your from -- how has being a public company changed life for you? >> since our stock price went up by a fair bit, it's actually not been so difficult. if our stock price had gone down, it would be more difficult. right now we haven't changed things much because we work for our investors. our investors are our friends. if we do a good job, the stock price will take care of itself. hasn't changed my life that much. >> do you find having to report sconce assistantly and telling people -- constantly and telling people what's going on -- the big complaint with people going public is i've got to deal with this rather than concentrate on just delivering what i think the business should be doing. >> actually, it's than time consuming. i report quarterly. if earnings are good as they have been, it's not a big problem. if earnings aren't good, i guess it's a bigger problem. we're in good shape, and the private equity world i'm operating in is it pretty good shape. >> talk about opportunities in terms of private equity deals. is it the u.s., largely outside the u.s.? of course we talked a bit about how significant your position is in china. >> right. >> where are the opportunitying
for deals? >> the single best place in the world to invest is t still the united states. the rule of law, transparency, opportunity to get good managers. the u.s. will grow at a reasonable rate this year, 2%, 2.5%. outside of the united states, the best emerging markets are china, brazil we like a great deal. other places like peru, colombia, chile, south africa, turkey. korea, as well, in asia, indonesia attractive. europe has appeal. it's been beaten down so much we think it's the largest emerging market in the world. price vs. been beaten down and -- prices have been beaten down and we think growth will occur. for example, a lot of banks have to sell assets. we recently bought tcw. an asset in the united states. not a european asset. but it was owned by a french bank. that's a good asset. we think we got it at a good price. there are many banks in europe who will sell assets this year and next. we think there are good opportunities to buy there. >> it's interesting because
banks are being forced to do fire sale prices. they need to raise capital. that's an opportunity for you. >> i hope so. i hope these are fire sale prices. they're probably not going to be that cheap. the banks can't sell everything they have on the books at the prices they will probably get because it would cause problems. they will sell some assets. we think it's a great opportunity. >> so i just want to -- how much does the environment matter to you? there's a sense -- we've been talking about, this right? that there's no current crisis mentality about europe for the moment. the question, do you believe that's because the continent's made real progress, or is it a temporary finish -- phenomenon? >> expectations of what europe will do has lowered so much that given where europe is, it's been looking good. if you came from mars and looked at the financial situation you would say this is a problem. given the expectations that europe won't grow much and it has problems to be dealt with, people are happy. the europe seems to have stabilized. spain and italy have debt that is now actually cheaper than it
was before. i think the ecb has done a spectacular job. i think europe's in a reasonably good shape by the lower standards we have adopted. >> let me ask about sort of the stories out there. for example, dell. would you be interested in investing in dell? >> well, we haven't -- we're not looking at dell. we think there's a lot of opportunity to buy good companies in the united states now. debt is pretty cheap and readily available. you know, the history of buyouts that are $20 billion or more is not replete with a lot of success. we would be cautious about something that large. we're not looking at it. >> in terms of sectors then, do you think financial services, manufacturing, technology, where would be most tune sonic. >> it energy -- opportunistic for you? >> the energy industry is big because of fracking techniques. that's a great place to invest. health care is attractive. the obama administration and other factors in the united states give the united states -- about 20% of gpd s in health care. the baby-boomers are retiring,
they will spend on artificial hips, knees, and have the money to do it. that will be a great area. the third area is manufacturing. there's a revolution going on in manufacturing in the united states because of low cost energy. as a result, you're seeing more in-sourcing now. manufacturing is doubling its rate of growth compared to gdp growth in the united states. attractive area. >> and you mention the debt is cheap, right? are we going to see a mini lbo boom? >> well, i suspect there will be more deals this year than last year. there weren't that many deals the last six months. interest rates will probably stay low for a year or so. bernanke is committed to keeping it low. as people realize it will go up, people will take opportunities of the low interest rate now. >> what's happening in washington from your standpoint? are you expecting a new fight around the debt ceiling in the united states? where are you in terms of this uncertainty surrounding what's going on in d.c.? >> well, there's always some uncertainty in d.c. and as will rogers famously said, the country's never safe as long as congress is in session. you never know exactly what
congress is going to do. but i think the debt limit issue has been resolved really. we're going to get a three-month extension out of congress. the president will sign that. that will put it on the back burner for three months. a year or two would be better, but i think that would be good for the markets. >> we'll leave it there. good to have you on the program. david rubenstein, ceo of the carlisle group. coming up, we'll talk with the chairman of emp power. we'll get a sense of the french banking system as well as the european situation. >> plenty more to come. ♪ [ male announcer ] how do you make 70,000 trades a second... ♪ reach one customer at a time? ♪ or help doctors turn billions of bytes of shared information... ♪ into a fifth anniversary of remission?
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i think a lot of company are doing fine. banks are lending, growing, expanding. finance is part of the critical part of how the country runs or functions. >> that was jamie dimon speaking this morning at the debate that maria was hosting in davos. >> that was interesting. we talked about the future of financial services and how the banks are doing. how the banks may change. we'll continue talking about that right now. >> yep. >> with the chairman of bmp, baudouin prot. good to see you. thank you for joining us. i want to get your take on that. where are we, would you say, in the european crisis? i mean, it seems to have come off of the front page. is there still pressure in terms
of your capital and where you stand with the debt that are on the books? >> no. what we've got in the eurozone as a whole, i think the position is better with the draghi and central bank took bold initiatives last year. the governments -- we now have the european stability mechanism, individual countries have made great progress on. that front i think -- you know, last year the euro breakup was a scene in davos. this year is different. the surz here to stay. this is -- euros is here is on they. this is clear. bnp paribas has a ratio of 9.5%, which is best in class. we're -- we adapted very much to the new requirements and liquidity requirements. we're fully prepared to serve our customers. the essence of banking definitely is to finance the economy, serve the customers, individual customers, smes are very important. this is what we are committed
to. and we are -- we're going to do it every single day of this year and next year. >> you talk about the role of a bank is to finance the economy. how much of a win was it then that we've pushed back in production from -- >> in terms of liquidity rate? >> yes. >> even if pushed we're going to comply with the new scr sooner rather than later. as for capital, you know, the new capital requirements was officially for 2018. as bnp parabas, we're complying as of this year. i think that the phasing in is something that then the industry -- certainly we've been moving ahead and have tried to anticipate things and move ahead. >> and you mentioned the benefits of the ecb's program hasn't been used but spreads in italy and spain have certainly come in -- a long way. i suppose the question is, is this just -- are we in a temporary window here? are we -- and are we using that
window correctly? are we still going to go back to crisis because the economies haven't improved? we're in a strange phase. >> well, you know, you see -- portugal and spain, exports are going up because the competitiveness of countries have definitely improved. and as far as europe is concerned, every individual country is making good progress in terms of fiscal adjustment and also structural reforming of the labor market. we've had structural reforms of the labor market in italy. we're heading to spain. and lately in france, the employee federation and trade unions signed an important agreement to make the labor market in france more flexible. i think we are really up. there are still challenges, there are -- there's more to be done. and we're going to continue the work. i think we're on the right track. >> so how do you resize the bank going forward given the realities of the marketplace now? you've already cut jobs, slimmed
down, sort of resized the bank based on what we're seeing. but can you categorically say that job cuts are done, or are there more ahead? >> well, regarding bnp parabas, we had deleveraging last year, and in terms of deleveraging and balance sheet adaptation to the new environment, this is done. then we're going to adjust to the business in the different fields. for example, in banking with further digitalization, we're going to be -- cost are going to be certainly very well controlled. overall, we don't expect significant job cuts in our cib operations over the next few months. >> are you surprised by the level of money moving into the stock market recently? it's been obviously a fantastic beginning of the year for your sector. as investors see this easy money -- do you think this is sustainstable. >> i think this is a combination of on one side yields are low on other products, the other side, the confidence in the economy
and the confidence in the corporate sector which in many corporates are in good shape. i think this is a combination of the two. i think that it might not continue exactly at the same pace. i think this is a trend that will continue. >> and look, just -- we're going to start seeing how many banks stop paying back the ltro money. we'll get the first indications on friday. do you think we'll see a lot of early repayment of that money? which effectively might become a sort of withdrawal of liquid wit. >> it's too early to say. i think we'll see some earlier repayments but only for -- only partial repayments in the next few weeks. >> let me get your take on the policies coming out of france. for example, the 75% tax rate. how do you feel about that? >> actually, it is not yet been lamented because of the caution of the court challenging it. and second thing is, which is very important, it should be temporary. it should be only for two years. so i think it's a temporary --
this is to be understood in the scope of wider effort to adapt the french economy in terms of fiscal adjustment. this is important. >> if it's not temporary, will you leave the country like gerard depardieu? >> no. he's a great actor, but i think he's only -- >> you're going to stick it out? >> yes. >> good to have you on the program. >> a large actor, as well. >> yes. >> you might have noticed. >> thank you. good to see you. >> thank you very much. we'll take a short break. we'll look at health care when we come back. >> we are. we'll talk with ken frazer, ceo of merck. in a rare interviewer. doesn't usually do interviews. we're excited to talk with ken frazier coming up.
you're watching cnbc's "worldwide exchange." we're here in davos at the annual meeting of the world economic forum. i'm ross westgate. >> i'm kelly evans here in london. these are your headlines from around the world -- google could light a fire under u.s. markets today as the search giant's fourth quarter profits topped forecasts on higher ad revenues. u.k. prime minister david cameron pledges a referendum on the e.u. if he wins the next election, he says this should not be seen as a signal that britain necessarily wants out. >> i never want us to pull up
the drawbridge and retreat from the world. i am not a british isolationist, but i do want a better deal for britain. >> in a cnbc davos debate, bank ceos fight back against the regulators. they apologize for the mistakes of the past. they're still defiant about the role of the industry. >> i think there's so much misinformation out there that's used aggressively by people for their own purposes. we provide a service to you. we make a little bit of money every time we do it. that's what happens. and the latest survey of ceos. suggesting confidence is down for a third year in a row. u.s. politics have weighed on settlement. they're still upbeat about the opportunities in asia and emerging markets. >> major indices in the u.s. up half a percent yesterday. the dow industrial average up three days straight, eight of the last nine sessions.
here the s&p 500 has been on a five-day winning streak. the question is, can it continue for a sixth? if you take fair value into account, we are pointed to open higher. 1,488 the level, 12 points from 1,5 1,500, a psychological level if nothing else. the nasdaq opening higher 13, 14 points after tech earnings bolstered the market. first let's look at what's happening in european trade. kind of mixed picture. the footse 100, xetera dax, adding .1,.25% respectively. the ibex down 35. bankia weighing on the market here today. there's been a lot of stock-specific names, not necessarily a macro-driven market today. we can swing over and look at names in particular which are trading off the back of earnings. google and ibm up about -- look at this -- almost 5% respectively in frankfurt trade this morning. you can see the positive reaction to their results dropped last night. sigh men's came out with earnings and talked about
weakening demand. showed profits feller the german industrial conglomerate. shares down about .75%. it's a different story, though, for the swiss pharma giant novart novartis, up 3.8% on the back of its earnings. on that note we want to swing back to davos with maria and ross who are staying with the pharma sector to talk to merck. >> we're with ken frazier of merck, talking about the environment and what's happening. we were looking, kelly evans, looking at the pharmaceutical stocks. health care has actually done well over the last several months. what's behind that? >> well, i think it's an exciting time to be in the innovation space. there are a lot of really important advances in science and medicine. and i think that's driving a whole new wave of innovation. we're seeing that at merck. >> in terms of growth, i want to ask you about merck and what you're excited about in the pipeline. there is some speculation that we're going to see deals, really
empowering growth for merck as well as the pharmaceutical group. would you say growth at merck comes organically in the next couple of years or through acquisitions? >> i would say very much organically. we have a number of important medicines in our pipeline. i'll talk about a few of them. one of our drugs, organic -- one for osteoporosis, an important medicine because the medicine that's women were using before, they'd stop using them. they've not had the right effects over the long term. that's an important medicine. beyond that, we have a very important medicine for cancer called the anti-pd1. an exciting medicine. and there's a medicine for alzheimer's which we have high hopes for. >> are we in terms of the trials for the cancer drug and some of these very important drugs in the plane? when would you actually expect those drugs to come to market? >> we expect to be filing and launching our osteoporosis drug along with our clean compound, another new drug, in three years. we'll get important data on
drugs like our cancer drug as well as our alzheimer's drug. >> i was interesting in looking at the pharmaceutical industry developments over the last years. the big pharma's being really big. to sustain your size and get revenue growth, you've got to have huge blockbusters. is it hard to justify the size of the drug that justifies the size of the company? >> i would say yes, but it's by no means impossible. one of our drugs, januvia, is a terrific drug. a $5 million drug growing by 25%. i don't believe that there won't be more blockbusters. think about what an alzheimer's drug would be like in society. >> i want to ask you about the news items of the day. certainly the president's health care reform. first, speculation about bausch and lomb. are you going to acquire bausch and lomb? >> we don't speculate about potential deals. i know there was press, but there was misrepresentation. >> but say it looks good. worth looking at, right? >> actually, i said no comment.
>> okay. >> that didn't get reported. >> you said it looks good. okay. >> that comes back to the other point, how much do pharmas have to buy growth or buy people who are researching, you know -- how much research can you do, how much do you have to go and buy research and new drugs from other people? >> in the history of merck we've always done two things well. we've been committed to discovery in house, but we've also been really good at finding the best science outside. so i see those as totally consistent and complementary. >> it -- in terms of buying and complementary drugs, in terms of the eye care business, i don't want you to just comment -- you don't want to comment on bausch and lomb. is there a market, do you think, for that business, that kind of business in terms of i -- the eye business? >> society is aging, people want to preserve their sight. it's a good business to be in?
in terms of the president's health care legislation, what impact has it had on merck so far? >> it first imspakt obviously we gave up some rebates. we're happy to do that because in exchange, lots of americans now have access to health care coverage. that's important to us. the bigger issue, how do we deal with the debt and deficit situation, you had do we create certainty for companies like merck that have to invest 15 or 20 years in advance to have a new drug? >> and you don't know if medicare will be held, medicaid's going to be cut. there's complete uncertainty. >> i expect that we'll have to see some change in the way medicare is funded. that's not a problem. we have to contribute to that as an industry. the question is, are we going to make smart cuts and are we going to do it in such a way that will provide a sustainable, available benefit for senior citizens and nurture innovation. >> in the midst of this, how are you going to encourage shareholders to stay with you? should we expect dividend increases next year, should we
expect buy backs, what about investors? >> we increased our dividend this year. we've been shareholderen tree for the company. the most exciting thing for investors is merck remains an innovation story. we're exited to r&d, and the r&d is paying off at merck. >> ken frash eaziefrazier, good. we'll take a break in davos, "worldwide exchange." still to come, the latest from tel aviv. and more chat as well in davos. ♪ [ male announcer ] end your long week...
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welcome back to "worldwide exchange." in the headlines, google's fourth quarter profit tops forecasts on higher ad revenues. u.k. prime minister pledges a referendum on e.u. membership if he wins the next election. and the bank of england takes a step back in launching more stimulus as the u.k. jobless count falls, sending sterling to highs. israeli prime minister benjamin netanyahu is dealt a setback as his hard line party ekes out a victory in hardline elections. while he appears set to win the third term, netanyahu will be forced to reach across the aisle to center left rivals to cobble together a coalition government. jim maceda is in teleachieve d
aand -- tel aviv and joins us with the latest. great to see you. what can you tell us about the prospects for a netanyahu government that is led by -- with more of a coalition feel to it? >> reporter: yeah, absolutely right, kelly. good to be with you. well, what it means is that prime minister netanyahu now at that horse trading phase has begun must now do something that really no one expected. he's got to broaden the government to include the center left. that means turning to someone who's become the big winner in these elections. he's a newcomer to politics. a former news anchor named yayir lapid. he leads a sencentrist party th deals with meat and potato issues like the high cost of living and things that favor the trawl religious. he won a surprising 19 seats to come from virtually nowhere to second place behind netanyahu. policy wise, i think a weakened
netanyahu and centrist government means we will see a move early to kick-start the palestinian talks. they've been stalled since netanyahu took was four years ago. lapid has been a strong voice for the resolution, an important voice there. that would improve strained relations with the united states. i do think that netanyahu's tough positions, however, on security, for instance, on iran's nuclear program, building more separation walls here, or, in fact, bombing gaza again if netanyahu thinks is necessary will change. as galling as the hardline positions are for the international community, they resonate with many israelis. expect to see more economic change, especially israel's enormous debt. back to you. >> yeah. big issue there. jim maceda joining us from tel av aviv. thank you very much. the house of representatives is set to vote today on a
measure to extend the u.s. debt ceiling for nearly four months. that bill is expected to get almost unanimous support from the republican caucus, meaning it will pass. democrats would prefer a longer term solution. senate majority leader harry reid has expressed support for the house bill. the white house says president obama won't stand in the way of it becoming law. ross? >> yeah. we've been asking as a result here in davos how well u.s. lawmakers' persistent failure to come up with a permanent solution impact the u.s. economy. this is some of these views. >> the lack of decisions in the u.s., kicking the can down the road will be a drag. i think it will be a slower start in the united states as a result generally. >> actually very concerned because the issue is demography, medicare. it's not -- everybody focuses on the cost of running the state.
about 15% to 20%. but in the short term, i think actually there will be answers. >> longer term, i think u.s. will be supported by the shale gas and the shale oil industry that is growing very fast at the moment. the energy bill will did g down a lot and they'll be much more competitive. i think the debt problems will resolve themselves. >> all right. that's the views of some of the people we've spoken. to only halfway through the morning of our coverage from the world economic forum. still to come on "worldwide exchange," we'll be joined by a first on snebs, -- first on cnbc, the ceo of first bank china. ♪ [ male announcer ] how do you make 70,000 trades a second... ♪
all right. if you've just joined us stateside, welcome to the trading day. opening futures slightly up, more positive start. the dow up 41. the nasdaq currently caught up 13 points. we're talking all things global, of course, here at the world economic meeting in davos. including china. the politburo in china promised economic reform. recent data hinted at a pickup in growth. but do these factors equal a positive investment case for china? economists have been divided. >> we're going to see a decent recovery in china. -- 8.6% for this year, not as strong as it was prefinancial crisis, but doing a lot better. that compares with 7.8% last year. anyone who's connected with china's going to do well which includes many of the countries which are linked to china in
asia. >> there's a clear roadmap for economic and reform in china. that's the five-year plan that was promulgated over a year ago. the question, will the new leadership put this into practice. if it does, there's every reason for, it not just short term but medium-term optimism. >> it will be difficult for us to continue to have that double digit growth rates for good reasons. the world economy is slowing down, and in -- domestically, consumption is not up to the level that is satisfactory for us to achieve those levels. >> views on china. maria, of course, with us for the week, as well on "worldwide exchange." >> great to be here. thank you very much. >> yeah. >> we'll continue the discussion. >> yeah. we're talking about china and the development there with one of the leading developers.
we have ceo at soho china. leading beijing's largest property developer, as well as in shanghai. good to see you. >> good to see you. >> thank you very much for joining us again. how would you characterize things right now? i mean, we've talked in the past about the huge boom that you've seen, whether in beijing or shanghai. then a bust where government was putting rules in place to slow things down. how would you characterize things today? >> i think for the last two years we've been in this slowing mode. clearly every data you're looking at, real estate sales, land sales, transactions, all these data is really coming down. pricing has also been quite capped because of the lack of transaction. the government has been careful in providing lendings to developer or, you know, actually they've had a -- a prohibition of buying. if you own one apartment, you simply cannot buy a second one. that policy has been in place
for two years. and my sense is that really if we look at the massive intense period of urbanization for china, it's coming to an end. you know, we live in the world today that production is so fast, a city that accommodates ten million people can be built in five to ten years. most of the chinese cities -- you go to beijing and shanghai is built. if you go to second and third tier cities are also very much being built. so that's on the one hand. you are seeing pretty much coming to the end of the urbanization. but on the other hand, you also are seeing these big cosmopolitan cities like beijing and shanghai where people are trying to get in because it's a better place to live, better place to work. so companies are coming in to open offices. you know, service industries are growing. so in beijing and shanghai, while residential apartments cannot be sold, office demand, demand for office is actually
really strong. so you have these two kind of very different scenarios that i can see that if you go to beijing and shanghai, you don't see any empty buildings, office buildings at all. not even a single floor. as soon as you have floor empty, boom, someone's going to take it. >> wow. >> as you go down to the third-tier cities, there are lot of empty buildings, residential compounds built. and not much being used. >> you had. >> sounds a bit like they're the international sense -- there's a difference, only we see this in london compared to the rest of the country. perhaps new york a competitor. the international sense -- census will participate differently. >> you look at hong kong, the middle of shanghai, up to the north is beijing. for a country as big as china, it does have a few multiple centers. >> how exposed is the country still to real estate? we have such a big boom in real estate. how exposed do you think the
banks are to real estate assets? >> banks are not as supporting to real estate. the banks are very much lending according to the government policy. the policy is not supporting the real estate, then the banks are not lending as much. so real estate as a whole i think if you look at the nationwide, it is nowhere near what -- what it was three years ago, four years ago, it was really at the peak and the boom time. >> where are you seeing the opportunity? you've been expand iing beyond china looking to the united states. tell me about the opportunity for soho china. >> for so highway china we're only in beijing and shanghai. personally we've been looking at the u.s. real estate. that's nothing to do with soho china. the reason we're only in beijing and shanghai is because we believe that right now the only thing we're seeing the opportunity is the office demand is where these companies want to come in to open offices in beijing and shanghai. not so much in residential, not so much in hotel.
not so much even in retail because in retail you're competing with online shopping. people going on line. that's where generally in real estate that's the situation in china. >> are you seeing good opportunities in the united states right now in terms of pricing? how would you characterize pricing? >> it's amazing to see how manhattan's prime real estate are still going so high, pricing. we're also living in a time where money comes, you know, relatively inexpensive. they are chasing after you. we also live in a world where there are a lot of parts of the world that are relatively unstable. many are also looking for, you know, safe haven. that's london and new york. >> thanks for being on the program. >> that if for today from "worldwide exchange" in davos. plenty more to come. "squawk box" is kicking off in a few minutes. extended closing bell for european viewers later. for maria and i for now -- >> see you later. have a good day.