tv Worldwide Exchange CNBC June 25, 2013 4:00am-6:01am EDT
hello, everybody. welcome. you're now watching "worldwide exchange." i'm louisa bo yboisen. trying to calm moves, calm in a flexible manner and helping a rebound in european stocks. dallas fed president richard fisher is trying to calm the markets, saying feral hogs can't deter the central bank. that's what jean-claude trichet is telling cnbc, that ben bernanke is doing the right thing, adding that there's only so much that policymakers can do.
>> it was the worst since world war ii and perhaps the worst since world war i. and where in the world is edward snowden? the admitted leaker of u.s. government secrets is now believed to be still in russia today as washington is pressing moscow to send him home to face prosecution. and an all-star guest lineup today. the former goldman -- former chairman, excuse me, of goldman sachs asset management, jim o'neill, author of the gloom, boom and doom report and blackstone senior managing director john kosinski all are coming up in the first hour of the show. hi, everybody. welcome to a packed show, and we're not lying when we tell you that we've got some phenomenal guests coming up, so you'll want to stay tuned, at least for the next two hours to catch all
these phenomenal interviews, especially given what's taken place in the markets over the last couple sessions. again, a reminder that we saw a huge sell-off, especially towards the end of last week. the selling continued here in europeay. overnight we managed to see a little bit of a reversal in that. ex-japan, we actually saw some of the asian markets faring a little better. the stoxx europe 600 gaining almost 0.9% at the moment. flat to higher at the moment. xetra dax higher approximately 1% right now and the ftse 100 higher by 0.6%. on the session, it's worth noting and super interesting to see here, ftse 100 now virtually having to erase all of the gains that we previously had made since the beginning of the year. so, year to date, we're now higher by just shy of 3% having come off significantly here within the past two weeks or so,
and the same for the xetra dax as well, if we look at that chart. let's head out to asia, though, and check in on what's been taking place in the overnight session. sixuan joins us. sixuan? >> louisa, indeed, a wild ride in asia with china markets stirring up the high volatility. after yesterday's worst daily loss in four years, the shanghai composite and shenzhen tanked by 5% and 7% respectively midday before bouncing off their lows and ending weaker by just 0.2%. and shares in hong kong also reversed early weakness to finish higher by 0.2%. china's pboc basically skipped the liquidity operations once again today, but the markets turn-around really happened during the last hour of trade, when investors were eyeing the financial board in shanghai, hoping central bankers and authorities will address the credit crisis in a press conference. and after the market closed, a pboc official said the central
bank will manage liquidity in a flexible manner and guide money rates to reasonable levels. meanwhile, they're still controlling levels to local government financing vehicles. and on the market, the driver of the rebound was the banking sector. midsized lenders were tanking by as much as 10% in the morning while they expect wealth management products maturing in the last ten days of june. and hong kong listed banks were also under pressure in early trade after moody's outlook cut, but actually, the sector made back most of their lost ground with most of them ending in the green today. and for the rest of airbornea, the nikkei, the kospi and australia's asx 200 actually ended the session in the red before china markets turn-around. and sensex trading higher by 1.1%. back to you. >> sixuan, thank you very much. and good to see you. so, a lot taking place in today's session. on today's show, chinese
stocks have entered bear market territory now as credit crunch fears trigger yet another global sell-off. we'll be assessing the outlook for china with the brick star economist jim o'neill from the international capital conference in paris. that's coming up imminently. plus, europe's economic chief telling cnbc in an exclusive interview that cyprus is not a template for future bail-ins, but also is warning that europe's banking system remains under pressure. and we'll head out to sunny california, where yahoo's agm is set to take place later on today, this as ceo marissa mayer is approaching her one-year anniversary at the helm of the tech giant. tune in. that's taking place from 11:45 cet. now, speaking of china, the shanghai composite falling by as much as 5% today but recouping most of its lost ground to end just a tad lower, as indicated, this on hopes now that the chinese authorities will step in to address the short-term cash crunch and calm the recent market turmoil.
at a news briefing in shanghai, china's central bank is assuring investors that it will manage liquidity in a flexible manner and guide market rates to reasonable levels. it said that the recent spike in money rates was due to seasonal factors which would gradually fade. but the chinese banking fears, though, they are likely to come under discussion at the fourth annual international capital conference, which is held in paris today. and the event brings together more than 300 chinese and western business leaders. a lot to talk about. ross joins us live from that event in paris. ross, a lot going on in the markets, so a perfect place to be to have access to all of these phenomenal people. >> yeah, and they're all wondering what is going on with liquidity to that shadow sector. and let's get the view now of jim o'neill. we brought him out of retirement. formerly chairman of goldman sachs asset management. didn't take long, jim. >> i've got to find somewhere for a free breakfast, so here i
am in paris. >> and no better place for breakfast as well. we had comments from the pboc, looking to avoid defaults by local governments, liquidity risks are largely under control. the surprise isn't what they've said. i suppose the surprise is why they left it so long to say something. >> yeah, well, you know, being retired as i am, i'm not following it day to day, but as one picks up in discussions with a large number of chinese people here, i think there's an underlying view that the policymakers are trying to execute change. so, quite clearly, quite a lot of this, at least initially, was deliberate, and maybe they want to set an example or maybe it's got a little out of their control, but i think this is part of the, broadly speaking, the ongoing efforts to try to
engineer better quality growth maybe at the expense of the quantity of it, but obviously, the past few days it's gotten a little out of hand. >> when we say quality growth, you mean sustainable growth, and what sort of amount? >> i mean, i think it's all geared around the five-year plan, 7.5%, but they've gone out of the way to tell us this time now for nearly two years that they really mean that, as opposed to previous five-year plans, which people didn't pay any attention to. i think it's based around 7.5% growthish, possibly even a bit less, including more consumption for the genuine middle classes, not elicit gifting for the luxury kind of guys, for more and more of the masses and less focus on government state-directed investment, less focus on state-backed infrastructure and trying to cut out so many of the excesses of the past decade plus. and i think that's, it's quite clear that's what they're trying
to do, in my opinion, and it has been for a while. what i find myself wondering is can they try and influence so many different areas, so at least by their standards, indeed by ours, too, quickly, and pull it off? in some ways, it's one of the biggest capitals that china's tried in 20-odd years. >> and what we're looking at with these liquidity fears, clearly, look, they have the money to deal with the liquidity crunch, right? >> the notion that there's a genuine liquidity crunch i think is crazy. china's the biggest underlying market is that they save too much. so, if they want to bring rates down to zero, they could do it in five seconds. so, there's clearly this element of we're trying to discourage some people and activities and we want to move on, and the only way to do it is to make these guys lose money. but with any aspect of policy management, you've got to get the balance in mind. >> there is an issue, though, as there always have been, about control at a local level.
>> right. >> and you know, it's all very well -- guys in beijing might say something. it's actually about getting the policy down on the ground at a very local level there. >> no, i think that is part of the complex detail. as with everything, devil's in the detail, and i think you hit one of the big nails on the head there. how you persuade it's in the long-term interest of all these local guys that have spent 30 years just trying to juice up things as much as they can, you know, that's obviously a big, big challenge as well. >> and there is, i suppose, one other risk presumably here is it's all very well trying to rein in what is called the shadow banking system, but actually, don't we also need to have a diversified financial services system that isn't just state-run banks? >> well, i think, again, you're on one of the underlying issues. in some ways, the whole emergence of the so-called shadow banking system is because the official financial system hasn't kept pace developmentwise with the economy. so, this is what happens.
if you don't let the regulated side grow as much as the needs, you end up with the kind of things that have been going on. so, not all of it is necessarily about that. you certainly don't want to get rid of it all or there will be bigger negative economic consequences. >> but you're confident in this government and what they're trying to do? i mean, you say how complex a task they've got ahead of them. >> well, you know, i've been assuming -- i've taken them at face value about 7.5% for now two years. and the mistake i made thinking about it marketwise is that i just assumed everybody else realized that, but the markets have been on this jog of 10% growth and they're clearly going off that. what i now find myself wondering is if the china clamp down on banking same time on luxury gifting and house prices are they going to be able to actually get 7.5%? and i don't think it's impossible that we could be
looking at probably being less, which in the big scheme of things, i mean, it's not that big a deal. i mean, 7.5%, that's equivalent to the u.s. growing by 4%. so you know, it's huge. but the china change a lot of things at the same time, and obviously, as they creep forward more through time, it gets probably harder to control so many things. >> and at the margin it matters a lot to investors as we're rather binary, the markets. jim, nice to see you. we're on a panel together a little later as well, so look forward to that. jim, thanks very much, indeed. jim o'neill. later as well, we'll be joined by the head of blackstone advisory marters, john studzinski and charles liu as well, big pe group, charles hao capital. also, yesterday i sat down with an exclusive interview with jean-claude trichet, former head of the ecb. and in light of what we heard yesterday from the bis, who were
basically saying, look, no more good will come of central bankers and their liquidity programs, i asked him, should, actually, global central banks withdraw liquidity, regardless of the consequences in the spike-up in bond yields? this is what he said. >> all central banks, which is the case, are reflecting on whether the new is commencery to the present certificate. if they do too much, then they are only paving the way for the other partners, the governments, the buyers and the private sector, not to do their whole job. it's clear that the central bank cannot do everything. >> and he was very clear, louisa, to say, look, a lot of people have been talking about the experience of 1994, when we saw a sharp spike higher in bond yields, very clear to say this isn't 1994. we'll bring you that interview in the second part of "worldwide exchange." back to you. >> i find that fascinating, our fascination with the bond yield
story, especially given that if we head back to kind of levels that we were at before quantitative easing, you would assume that bond yields have to go higher. we're not going to remain at 2% forever and ever, are we? anyway, ross, see you soon again. great stuff. loads more coming up out of france, out of paris for you. the irish opposition has called for an inquiry into the collapse of the country's banking system. this comes after the "irish independent" newspaper published transcripts of conversations between two senior figures at anglo irish bank dating back to 2008 when they openly acknowledged the $7 billion bank cash shortfall. he went cap in hand to the imf and eu to bail out the financial sector, costing the taxpayer 30 billion euros. european finance ministers failed to agree on a deal to create a banking union in the early hours of saturday morning. now, as a result, they all have to head back to brussels and try to hammer out a deal tomorrow. julia is in brussels waiting for
them. and in the meantime shaerks's been speaking to one of the men at the center of those talks, julia. >> reporter: thanks so much, louisa. i've been speaking to olli rehn, who is the commissioner for economics and monetary affairs here in brussels. we talked about the issue of banking union, whether there's an appropriate level of urgency, but ultimately, i did ask him what's the likelihood we can thrash out the issues between the 17 and the 27 individual companies and push forward with a date on the banking union. the bail-in aspect of the banking union tomorrow. listen in. >> i hope so. i believe we have a fair chance of reaching an agreement on wednesday. it will be very important to maintain the momentum towards the banking union in europe. >> reporter: now, the commission itself has come under fire yet again over the last few days, this time from a french minister accusing president barroso of the commission of fueling right-wing populism. with that in mind, i did ask
commissioner rehn ultimately what he sees as the commission's biggest failure since he's been in brussels. listen in. >> certainly a collective failure in europe has been the rise of unemployment, especially in many countries we have an unacceptable level of youth unemployment, and we have to now do whatever it takes to overcome the unemployment crisis and return to recovery and sustainable growth in europe. >> reporter: plenty more to come up in the show of that exclusive interview. potential support for smes coming up in the summit later on this week. the concern over rising bond yields and setting the record straight on the cyprus bail-in. for now, louisa, back to you. >> julia, thank you very much. we'll see you a little later on as well. coming up today, "worldwide exchange" heads out to the front forum international in monaco, too, so tune in to check the pulse of the japanese markets with charles beazley, ceo of nikko asset management. that's at 11:20 cet.
welcome back. i'm louisa bojesen. the shanghai composite falling by as much as 5% in today's overnight session, recouping most of its lost ground to end just a tad lower. now, after the market close, a pboc official said the central bank will manage liquidity in a flexible manner and guide money rates to reasonable levels. joining us from the fund form international in monaco is marc faber, publisher of the gloom, boom and doom report. marc, good to see you. we just spoke to jim o'neill moments ago, and he was essentially saying that a real chinese credit crunch doesn't exist and that, instead, what you're looking at is a situation where the chinese, if anything, are very, very good savers and that the credit crunch is not genuine. do you agree with this? >> i completely disagree with it. i think china, if you look at the expansion of credit as a percent of the economy, had a colossal, not a small, a
colossal credit bubble, and there are lots of poor credits in the system because all kinds of companies, instead of manufacturing and making money out of manufacturing, they resorted to financial transactions. in other words, they borrow at low rates from the state banks, and then they lend it out to very questionable borrowers. and as a result of that, i think the chinese economy will disappoint very badly and i have maintained for a long time the chinese economy does not grow at 7.8% or 7.9% at the present time but more likely just at 4%. >> but at the same time, i also know that you think that equities, that bonds, gold, that they're oversold right now. i mean, shouldn't we be selling precisely if we think that the chinese economy is going to get weaker? >> well, near term, treasury
bonds, gold, equity markets are oversold, and they can rebound for say the next ten days or even one month. new highs in emerging markets and in high-yield bonds out of the question. and if it happened in the s&p, which i don't believe, it will be driven by very few stocks. longer term, the market is far from oversold. it still has considerable downside risk everywhere. >> why shouldn't i believe in bernanke? i was reading some of your musings, and you indicate that if you believe in bernanke, then you believe in father christmas. i believe in father christmas, too, but why shouldn't i believe in bernanke? >> well, first of all, if you look at why we have such a mess in the world, then we have to see that it was continuous intervention with fiscal, and particularly, monetary measures,
especially ahead of y2k already bailing out ltcm, and then after the crash in the nasdaq, keeping interest rates artificially low and creating a gigantic credit bubble in the u.s., whereby the credit flows into the housing market. and mr. bernanke couldn't see a bubble occurring and he made statements that it was contained and that home prices would level off but not go down. the dear uncle ben has no credibility whatsoever among say market observers. >> marc, i was also looking closely at what mr. fisher was saying yesterday, the fed's fisher. and essentially, he was attacking people he called the feral hogs or the feral hog forces of the markets, those who are trying to prevent the fed from starting its tapering
program. and i know, again, that you're saying that you think we could be going to qe-99, quantitative easing 99. >> yes, correct. >> we're at qe-2, qe-3. we are looking at at tapering program, though, slowly but surely really coming into force now. why assume that we have to continue? >> well, i think that, actually, the economy will weaken and not strengthen globally, because if you look at where did the growth come in the last ten years or since the recovery occurred in june 2009, we are four years into an economic recovery already, it came almost 80% from emerging economies. at the present time, the emerging economies, in my view, are not growing. they're not in a deep recession but just stopped growing, and corporate profits will come under pressure, and that will have an impact on the western
european companies and the u.s. multinationals. >> so, marc, where do you see value in the market at the moment? if you think that we're oversold for the time being, i mean, what should we be betting on? i spoke to someone yesterday who said he thinks that cash at the moment is a pretty good bet. but at the same time, you look at the japanese market, the nearbyie, we've come off very quickly. i mean, there must be buying opportunities out there as well. >> yes, but i don't think these markets will make new highs in the next, say, three to six months. i think they can rebound. so, are you a trader or are you an investor? if you're an investor, you wait to buy. if you're a trader, you buy this morning and sell in the afternoon. and i think if i look around, as a trade, i would draw the buy ten years u.s. treasury, which is very oversold, where everybody is buried, where sentiment is terrible, compared to say the s&p, where sentiment is still relatively optimistic.
>> where do you think the u.s. ten-year yield is going to be at the end of the year, though? >> probably around this level or even slightly higher, but i think before we go slightly higher, we'll go down to maybe 2.2% yield. >> to 2.2% before? because again, marc -- >> yeah. you asked me what is good value. i'm trying to tell you. if you're a trader, then you buy this. >> no, i understand. i completely understand. but looking then at some of your longer-term viewpoints, emerging markets, an area close to your heart, i know, have come off also substantially. where do you see buying opportunities in emerging markets? >> yes. i don't see any buying opportunity from a longer-term perspective, yet short-term, some of them are very oversold because they dropped 20% or more. some are down 27% from the highs
in january, like hong kong, so they can rebound. but from a longer-term perspective, i think they will still move lower. >> marc, thank you very much. bearish tone coming from sunny monaco. >> i want to tell you what happens in the world. can you give me the umbrella, please? >> good, good, good. we completely understand. and i know it's very sunny, so it's nice to have an umbrella for sunshine as opposed to -- >> i will tell you what happens in the world. doom! doom! >> it's an umbrella collapse. good. marc, thank you very much. marc faber, publisher of the gloom, boom and doom report. and we'll be returning to the monaco fun form international to speak to nikko management ceo charles beasley. also coming up, john studzinski, senior managing director for blackstone group is with ross at
the icc conference in paris. let us know what you think. find us on twitte twitter @louisabojeson. i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business? i need help selling art. [ male announcer ] from broadband to web hosting to mobile apps, small business solutions from at&t have the security you need to get you there. call us. we can show you how at&t solutions can help you do what you do... even better. ♪ [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room.
liquidity in a flexible manner and also helping an early rebound in european stocks. dallas fed president fisher trying to calm the market, saying feral hogs can't deter the central bank. that while former ecb president jean-claude trichet tells cnbc that ben bernanke is doing the right thing, adding there's only so much that policymakers can do. >> it was the worst since world war ii and perhaps since world war i. and where in the world is edward snowden? the admitted leaker of u.s. government secrets is believed still to be in russia today as washington presses moscow to send him home to face prosecution. and we'll be bringing you an exclusive interview with the vice president of the commission olli rehn as commissioners try once again to hammer out a deal on a banking union. yes, hello, everybody.
welcome back. just on an agenda note, the bank of england governor mervyn king is delivering the may inflation report before the uk treasury select committee, making his final official appearance before turning over the reins to mark carney. so, that's taking place here this morning. also just to mention that dale, one of the bank of england members, saying they see modest sustained economic growth. so, that's just coming out. we're also hearing they're saying that excessive stimulus is encouraging risk-taking. i see the bank of england member broadbent is indicating that the biggest economic risks still stem from the eurozone. no big surprise there. dale saying the short-run trade-off between outflow and inflation is unusually uncertain. european markets flat to a little bit higher at the moment. for some of them, you're looking at the xetra dax, cac 40 and ftse mib slightly stronger, ftse
100 up by 0.8%, so really turning around from the losses that we saw heading into the close in yesterday's market session. we saw weakness in asia overnight. in japan, not ex-japan, we managed to see a little turn-around there as well. and the u.s. still also very much looking closely at any fed indications of easing. the bond yields all reversing a little bit again from the spikes that we saw yesterday, so just coming off by a bit to the u.s. ten-year now yielding 2.5%, having been somewhere in the region of what, 2.6%, 2.65%? so, that's what we're seeing on the fixed income level as well. now, the french supermarket chain carrefour is looking to sell its businesses in china and taiwan. the world's second largest retailer is exploring an ipo which could raise around $1 billion. according to "wall street journal," the company may also look to combine -- you know what? i'm so sorry, we just had a little bit of a jump there in what i was reading.
let's switch gears and let's head out to ross westgate, who joins us from paris where a conference is going on with a whole lot of top names, ross. we were just hearing from jim o'neill at the top of the hour. who have you got with you now? >> well, we're joined by john i sisinski, partner at blackstone partners, and there is a huge amount of interest in china m&a, outbound and inbound as well. so, let's get straight to john. john, good to see you. we dragged you off your panel to speak to us, so we appreciate that. >> yeah, well, it's good to be here. good to be here. >> look, we'll get on to liquidity concerns in just a moment in china. i know that's your area of speciality. but we have seen an increase of chinese businesses now investing in europe. buying into sunseeker recently in the uk. we've got an example of
investments in club med and the ceo of that company says that's our position as well. what is the interested day of chinese companies investing in europe? has it been diminished at all by the financial crisis or how are they going about it? >> chinese companies are very interested in brands, they're interested in r&d, they're interested in manufacturing capability, and there's a lot of that in europe. and the chinese, remember, take a long-term view. and for them, long-term is 5, 10, 25 years. so, the short-term recessionary issues in europe are not really bothering or troubling the chinese. so, i think from that standpoint, there's a very rich number of investment opportunities. and i think to your other question, the model of buying a minority position in an international company, either for brand access, distribution
or other types of r&d access, it's a very good model because they then are going to help bring the club med format, which is very much a french format, to china. they did that with folifoli, and i think that because their criteria are so specific -- and i encourage all chinese companies to be very specific about their criteria -- they have been very successful at their deal flow. >> yeah. you said something to me just before we went on air. you said buyers don't necessarily want to buy stuff that's for sale. just explain what you mean. >> well, you know, i think one of the things that i'm encouraging more and more of our chinese clients to do is to network, to travel, to talk to ceos in their space and to find out what their issues are so that you can create investments, you can create deals that are win-win. sometimes if something's for sale, the buyer of last resort is often a chinese buyer. they think, well, but many times
the chinese have to be very particular, and i advise them not to necessarily look at things that are just for sale but to try to create transactions, and how do you create a transaction? you develop relationships, you look at buying less than 100%, you look at doing -- look at the lynn yolenovo deal. that was licensing the think pan brand from ibm. so, these types of nontraditional, non-100% deals -- 100% deals are things that the west has done for the last 40 years. china is a big market. they can do a lot of things. they don't necessarily have to be buying 100% of anything in order to accomplish their objectives in their domestic market. >> you talk about their domestic market. we're having this discussion about china learning what's going on in the west and that's the reason we have conferences like this here at the icc. but in the domestic market, there is concern about the chinese market, there is concern about liquidity and is money getting to small and medium-sized enterprises as well. but look, what's your
understanding of the complexities of understanding what happens, you know, from a government level down to a very local level? >> well, i think what you're referring to is in the last several days the markets have been very focused on beijing taking a much more assertive approach towards regulating and handling the shadow banking market. and i think from that standpoint, they're coming to grips with that in a very constructive, thoughtful way, which is what the west should see as a good step forward. they shouldn't see it as fragility. they shouldn't see it as anything other than a proactive, well-managed approach to what's happening and try and get a handle on the shadow banking sector in china. >> and where does that leave western businesses who still want to invest in china? i mean, is it -- how is it doing
that today compared with the new government, new regime, compared to the last five years? >> the new government is a real class act, and they're very serious. >> are you just saying that because they're the new government? >> no. they're a very -- well, first of all, let's remember -- and i think i've said this to you before -- by the time you get to the top of the chinese leadership and when you look at the top leadership of china right now, it would be the equivalent in america of president obama having been the governor of new york, california or the mayor of chicago and dallas and having run the department of education, the department of health. these people are very well trained, very well experienced. and right now, this government is very pragmatic about the need to develop a consumer economy, to balance it with the export economy, and also to maintain reasonably high growth rates. there's an obsession with growth, and obviously, we'll see where the growth comes out at the end of the day.
>> yeah. and so, how does that then reflect back into western businesses now, you know, the next stage of investing in china? >> i think this is even a more promising stage. i think strong advice is you really do need a chinese partner. and if you look at some of the big, successful role models, they have had strong chinese partners and they will continue to have strong chinese partners. and one has to look at a market like china as investing in stages. and i think many of the companies who have been there for a long time, like volkswagen and seemens, nestle, constantly reassess what their business footprint is, how their ownership and their role model works, and i think that's going to continue to evolve. remember, it is a population of 1.3 billion people, and the reality is, "a," you've got to be in china, and "b," you want to be able to control your business in china, or at least control who your partners are in
china. >> which is the important thing. john, thanks very much indeed for that. we're in the busy hallway here. >> i know. i mean, charles just appeared here. i thought we were going to get charles -- >> we were going to try to get charles. he flew away to do some business deal, so. >> well, next time. and then you would be able to have a three-way conversation with charles. >> good to have you here, john. thanks very much indeed. >> good seeing you again. >> thanks very much. john studzinski. as you might have just gathered, louisa, the latest session has just finished, which we dragged john out of, and so, there's a lot of traffic. >> excellent. >> going through. i think john did a very good job dealing with that, actually. >> i know how it is when you're being distracted by a whole lot of things going on in the background, but fantastic to be in the middle of all of it, ross, and we'll see you very soon again. i just want to mention to viewers, as we were saying, governor king, mervyn king is speaking in front of the treasury select committee for the last time before handing over the reins to the new bank of england governor, mr. carney. he's saying, mr. king, that
banks should not conduct a conversation with supervisors via the newspapers and that they should not lobby the prime minister or the finance minister to pressure the bank of england to back down on bank supervision. so, this taking place just as we're on air. we'll continue to keep you up to date with what's going on. the this is a live picture of the bank of england. governor king speaking in testimony there for the last time at this treasury select committee hearing before he leaves his post. the japanese rail and hotel operator seibu holdings held a meeting today and reject ed cerberus's proposals. now we have a report live from tokyo from sachiko. >> the larkest shareholder, cerberus recommended former u.s. vice president dan quayle and seven others to become directors at the japanese company.
cerberus hopes to win more influence and bosk profitability before selling the shares but rejecting the proposals, the president said that the fund's actions are hurting corporate value and a letter was sent to shareholders asking not to let cerberus use their proxy votes. cerberus has spent more than $1 billion acquiring its stake in seibu, which was delisted from tokyo stock exchange in 2004 for breaking exchange rules. the relationship broke down recently as seibu claimed it was being forced to list at too high a price. prime minister abe is recommending japanese companies to add foreign directors to increase foreign investment for economic growth, but this case shows that domestic opposition to the influence of foreign funds remains very strong in japan. back to you, louisa. >> thank you very much for the update from the nikkei. now, stay tuned, because coming up right here on "worldwide exchange," we'll be bringing you an exclusive interview with the eu
meeting of the institute of international finance starts today in paris, and karen joins us from there. karen, a lot going on in the markets. what's kind of the main talking point at your event? >> reporter: well, there's a set agenda here, louisa. we've got discussions taking place on stress testing, regulation, how to conquer some of the problems of growth across the eurozone, but this is all set against the broader backdrop of rising yields across the board after the fed started talking about tapering its quantitative easing program. we've been having those discussions this morning. a short time ago, i spoke with a former member of the bundesbank and ecb, currently president for the center for financial studies. and this is what he had to say about the exit program for qe. >> this had to happen, and it's not related to the european crisis, it's related to the question when will this period of interest rates end?
one day it has to end, and it might be an abrupt change, and markets are waiting for that, expecting that, fearing that, and depending how it is managed, we might see some turbulence in markets to come. >> reporter: dr. issing is talking about these very issues with members currently in a session that's been moderated by the chairman of the ubs, axle vaber, but very much a discussion for markets. what happens to the banking system as yields start to rise. we're going to be talking about this more with an industry player coming up later in the show. we have got dr. richard clarida. he's the executive vice president and global strategic adviser at pimco, but also is a former u.s. treasury official. so, hopefully, he can shed some light on just what this is going to mean for investors worldwide. louisa. >> karen, thank you very much. good to see you. we'll see you later on again. european finance ministers failing to agree on a deal to create a banking union in the early hours of saturday morning. as a result, they all now have
to head back to brussels to try to hammer out a deal tomorrow. julia joining us once again from brussels. and jules, we're really trying to make sense of kind of where we are with regards to the financial malaise and whether or not we're going to have to take yet a step down in markets from here, given the huge correction we've already seen. >> reporter: well, actually when i spoke to olli rehn, who is the economics commissioner here in brussels that was one of the things i asked him, and actually, whether the rising yields that we've had will actually precipitate some quicker decision-making process on the back of the union. he said there was a fair chance of a deal tomorrow. so, the question does remain open. but i asked him, if we're looking at banking union here in europe, yes, it's vital, but we're talking about another year down the line before we can really get moving on that, and doesn't that almost beget the point that right now we still have the crucial issue at the heart of the crisis here in europe, and that's that the european bank still need a proper cleanup. listen in to what he had to say. >> we are currently, there is a
suggestion that we are stabilizing the european economy. you had a protracted recession in europe now we are stabilizing the economic situation and we expect that next year economic growth will be somewhat stronger than this year. and of course, we have to work on all fronts, including the banking union and completing the finance and ensuring better access to finance in europe, which is an important model of economic growth. >> reporter: and the issue of the banking sector, what lies at the heart of the issue is cleaning up the banking sector. do we need to take progress on that more quickly? >> i believe it is sensible. at the same time, it is important that we have the right fiscal policy, we are pursuing
economic reforms in order to unleash the profit potential to create that in europe, and at the same time, important that we refinance, because that goes to the heart of the program. >> reporter: have we wasted time? have we wasted time to reform in the eurozone, given the calm we've had in the market over the last year? >> of course, in retrospect, i would have wished that many of the reforms either in the member states like market reforms or patent system reforms of the european would have been conducted earlier, but at the same time, we have done a lot and we will finish the work in order to facilitate stronger economic growth. we need economic reforms before that. we need rightly tuned fiscal policy for that. and yes, we need to complete
that to end the crisis. >> reporter: olli rehn being quite diplomatic there about whether or not time had been wasted over the implementation of reforms. i asked him on this note, who are the biggest culprits? >> i'm not participating in any blame game or seeking for culprits -- >> reporter: but it's an opportunity -- >> my task and the commissioner's task is to bring things forward, and now it's essential that we maintain the momentum and that we bring countries together in order to find an agreement, for instance on the bank recovery and resolution directly, which is one of the key pillars of the banking union. >> reporter: when you mention the need to complete pension reforms or labor market reforms, i think the first country that comes to mind for me is france. what's the commission's current message to france, to the leaders of france about what they need to do about the economy and to progress in reform?
>> we have had a message to france. first, because of lower economic growth and france, we think the fiscal targets we have extended the timeline to correct the excessivity is for france from this year 2013 to 2015, so by two years extension. second, at the same time, we have reforms over the labor market to reduce labor costs to improve functioning of the labor market, employability of people, and we have called for pension reform that will insure the sustainability of public finances. among other things, we have recommended also other things to
france. and there has been quite some discussion about this in france. i'm fully aware that at the same time, i believe that this has been considered as a serious set of recommendations. obviously, paris must be visited, the senate, both houses of the parliament, and we had very serious and substantive discussions with members of the parliament of france. >> reporter: and you're hopeful for an increase in the speed of progress and reforms? >> the french government is committed to move forward with economic reforms and stick to its revised fiscal targets. >> reporter: diplomatic on france and their reform process there, too, from olli rehn, particularly in light of the barbs that have been thrown this week and the implication that the european commission has
fueled extreme right in france and their politics in that country. louisa, i just found out, actually, that the european finance ministers don't arrive here until 5:30 p.m. tomorrow evening, so i have my sleeping bag and my matchsticks ready for this meeting. can you see the joy on my face? >> excellent. >> reporter: joy! >> i mean, this is what you get as a reporter on the ground, you know, all the excitement of never quite knowing what the plans are. then when you find out, you have to rush to get there and then you get there and you wait, so. >> reporter: and you wait all night. >> exactly, exactly. well, jules, plenty to talk about in the meantime. thank you very much. we'll see you a bit later. greece has reshuffled its cabinet in the wake of last week's pullout by junior coalition party the democratic left. evangelos venzelos has been named the deputy minister with viannis stournaras staying on as
finance minister. the party has been slumping in public opinion polls. italy is next in line for a eu rescue and could require a bailout within six months, this according to the italian bank media bianca. in a research note, they say that a deepening economic crisis and a credit crunch could spread to italian companies and that time is running out for rome to solve its economic problems. and staying in rome, silvio berlusconi says that his conviction for abuse of office and paying for sex with a minor is an incredible ateammate eliminate him from politics. the former italian prime minister has been handed a seven-year prison sentence and banned from public office for life, but berlusconi will avoid jail while he appeals the decision, and italian law allows house arrest for people over 70 years old. the ruling adds that further pressure now is on enrico letta's coalition government. on monday, the sports and equal opportunities minister was
forced to resign over a tax evasion scandal. and just to keep you up to speed with governor king, mervyn king, the head of the bank of england speaking in front of the treasury select money for the last time before he steps back from his post. he says that the low level of interest rates globally has caused unsustainable high asset prices. he's speaking there as we're live on air. still to come on the show, we'll be bringing you a first on cnbc interview with the former ecb president, jean-claude trichet. he tells ross how serious the circumstances of the last five years have been. >> we have to pay homage to the central banks, because without their bold and swift action, we would have a great depression. what we had to cope with was the worst challenge since world war ii, and perhaps the worst since world war i. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second.
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hi, everybody. welcome back. you're still watching "worldwide exchange," the second hour. i'm louisa bojesen. your headlines around the world. china stock markets on a roller coaster ride. the they're hoping to calm in a flexible manner. amid warnings of feral hogs roaming the markets, former ecb president jean-claude trichet tells cnbc that ben bernanke is doing the right thing, adding that there's only so much that policymakers can do. >> what we had to cope with was the worst since world war ii and
perhaps the worst since world war i. now, less than a week to go until mark carney takes over as the governor of the bank of england. in a moment's time, we'll bring you his comments on what beijing is doing. and where in the world is edward snowden? the admitted leaker of the u.s. government secrets is believed still to be in russia today as washington now is pressing moscow to send him home to face prosecution. so, welcome, once again. if you're just tuning in, thanks for joining us. markets now, just looking ahead to the u.s. market open in a couple of hours' time, we're being called little bit higher on the futures. so, just a couple of points up, if anything, just coming off of the lows that we once again hit in yesterday's session. the european markets this morning also reversing the negative trend that we saw
cemented in yesterday's late-market trade. the ftse cnbc global having corrected quite significantly, and the ftse 100 trading higher today to the tune of 1%. you've got the xetra dax higher by approximately 1.5%, the ibex 35 and the ftse mib also hanging on to some slight gains this morning. the main forces and the main markets that we're looking at. again worth noting that we virtually erased all of the gains that we otherwise had made since the beginning of the year. the ftse 100 illustrating this quite nicely. heading into the month of may, remember the saying sell in may and go away wasn't holding. we were talking a lot about that during the month of may as markets rose to multiyear highs before then dropping off quite substantially here heading into june. so, again, we virtually erased all of the gains we've made year to date within the last two weeks or so of trade. year to date, we're higher 3% on the ftse 100. having been up on these markets by somewhere in the region for 10% for a lot of our european
markets, the german market, xetra dax, europe's largest economy, just illustrating the same points here, again with a little bit of a softening stance heading into may. we then recovered that significantly only then to lose ground, especially after we've heard news of potential fed's taper iin in tapering. people taking money off the table, despite the fact that it won't happen overnight, and if you believe marc faber, we're looking at a fed qe-99. we're at 3 now, right, qe-2, qe-3, depending where you look. this is the main european markets rights now, just to recap where we are in the larger, the grander scheme of things. taking a look at the fixed income markets, we're seeing a little bit of buying back into this unloved asset class. we're seeing selling off of bonds significantly here within the last couple sessions. the bund now yielding 1.7%. the spanish yield about 5% and the ten-year yield above 2.5%.
it was above 2.6% in the last couple sessions as well. speaking of the u.s. ten-year, a lot of people are saying this is really the significant contract that you have to look at in order to figure out where the market-driving forces are. so, again, we've seen this huge spike higher in the ten-year yield during the month of may and early june as you've seen, given the fed's moves to potentially start to ease off on its stimulus program. but again, of course, keeping in mind that if we broaden out this chart and show you multi, multi, multi-year chart, then we would have been a lot higher than we are now. so, once you start to see normalization, some argue you have to see yields head up to 4%, 4.5% anyway. but, let's move on and just recap what took place in the markets, if you're just joining us right now. it's always nice to know what took place in asia. li sixuan is joining us out of singapore. sixuan? >> thank you, louisa. another day of wild swings in asia with china markets stirring up high volatility.
after yesterday's worst daily loss in nearly four years, the shanghai composite and the shenzhen boards tanked by 5% and nearly 7% respectively at midday before bouncing off their session lows and ending weaker by just 0.2%. and shares in hong kong also reversed early weakness to finish higher by 0.2%. china's pboc basically skipped a liquidity operations once again today, but the market's turn-around really happened during the last hour of trade when investors were eyeing a financial forum in shanghai, hoping chinese authorities will address the short-term cash crunch and calm recent market turmoil. after the market closed, china's central bank assured investors that it will manage liquidity in a flexible manner and guide market rates to reasonable levels. also, they're aiming to avoid large defaults by local governments. in china's midsized lenders, which rely heavily on china's interbank system for funds, they managed to stage a major
turn-around in the final hour of trade. and just so you know that some of them were limited down by as much as 10% earlier in the session while fitch expects a more than 1.5 trillion yuan worth of wealth management products to mature in the last days of june. but we saw most of the banks finish in the green today. for the rest of asia, the nikkei, kospi and australia's asx 200 all ended shop in the red before the rebound in china today. and india's sensex tracking higher by 1.1%. back to you, louisa. >> sixuan, thank you very much for that. now, moving on. we were just talking about snowden and where snowden is. we're just hearing via the wires that the russian foreign minister, lavrov, is saying that snowden has not crossed the border into russia, this according to reuters. dow jones also chiming in, indicating that the russian
foreign minister is saying that russia has nothing to do with snowden or his movements. the foreign minister rejecting the u.s. pressure over snowden, saying, again, russia has nothing to do with him and that the snowden case and the accusations against russia that they're groundless. again, just on the line that the russian minister saying that snowden hasn't crossed the russian border and the u.s. accusations about moscow over snowden are unacceptable. this coming from mr. lavrov in russia. now, let's look at what's going on today in the agenda. in the united states, the may durable goods are out at 8:30 a.m. eastern time. demand for big-ticket items is forecast to rise 4.5%. at 9:00 a.m., we then get the april case-shiller home price index with prices expected to rise by 10.6% there. at 10:00 a.m., may new home sales and june consumer confidence. as for earnings, look for results from a host of
companies, carnival, lennar, walgreens, barnes & noble and smith & wesson. a scathing attack from richard fisher overnight to the markets' reaction to ben bernanke's announcement that the fed could begin to end tapering by the end of the year. the dallas fed president said "big money does organize itself somewhat like feral hogs. if they detect a weakness or a bad scent, they'll go after it." mr. fisher went on to liken the market reaction to an attack led by george soros on the bank of england on black wednesday back in 1992, which led to the uk pulling sterling out of the european exchange rate mechanism. mr. fisher, though, insisted that no one could break the fed. meanwhile, the former ecb president, jean-claude trichet, has told cnbc's ross westgate that central bankers, they could cause problems if they intervene more than necessary. >> we should not, i would say, take that ddis is sending
messages which are exactly the same for all central banks and all advanced economy. the main message is you have to be sure that what you do is exactly commensurate with the kind of responsibility that you have yourself as central banks. and i told you this is a good message, this is a very good message, but also for banks. it doesn't mean they are all in the same situation. japan is not in the situation of europe, which is not in the situation of the u.s. but it means don't forget, you central banks, because if you do more than what is really needed in the circumstances, you are permitting, as i said, the other partners not to correct their imbalances or bad management. and therefore, you might pave the way for future problems. >> there is a risk, some injoerst say there's a risk of a miscalculation from the fed and from china. what, if we go back to another
experience as in 1994, which is another sharp spike higher in yields, what would the appropriate way to counteract that be? how wary should we be of a move like that? >> first of all, we are not in the domain of decisions. in '94, we had a decision which was taken and not preannounced, so the market was totally taken by surprise, not on a fancy decision but on the real image of decision to increase rates. so, it's a totally different universe. it's a universe where no decision has been taken, where the qe is going on, where the zero rate are going on, and where it has been said by ben that you might have at a certain moment a progressive -- but progressive, and not an interruption, certainly not a demolition of the stock,
certainly not an interruption of the flows, but a diminution of the size of the flow. which again, even if ben had not said that, it's obvious that this is not necessarily for eternity and depends on circumstances. so, i would say it's good that, as i said, it's been said. it's good that the market is looking at things. and we are not in '94 as far as i see it. but again, one has to understand that the central banks cannot be on the fed, as well as all others: not be the prisoner of, you know, an environment, because then what is absolutely necessary, and that means there is the appropriate paving the way for a resilient economy, for an economy which would not be in an artificial fashion but will
really re-earn its right to grow and to have job creation. >> at the same time, we now have got spanish yields have hit 5%. this week, albeit briefly. italian yields are going higher again, bund yields are going higher, but it's not to do with european policy, because this is part of the fears about the fed. but is there a danger here that the ecb may lose control again of sovereign credit market? >> it clearly demonstrates that we are all intertwined, that the interlinking between all economies, all markets, particularly, of course, all bond markets or treasuries market, is very, very impressive. i think that it was, in my view, personal view, appropriate for ben to say, well, this will not
start forever, last forever, yet, you have to take into account the fact that, of course, at a certain moment, which he remained very conditional, so i think it was very well done. it was skillfully crafted. and i mean, that you have some kind of overreaction is something that we have to live wi with. it tells you something on the way the market are looking at things, but i am confident that things will restabilize. that being said, of course, the fact that we are all intertwined doesn't mean that we do not have our own responsibilities in each continent, in each, i would say major advanced economy, because it's very much a problem of the mid and giant advanced economy at this stage. and i trust, of course, the ecb to, again, as i said, to craft
what it does within its own responsibility and within the european euro area with its own problem. but you mentioned spain. when i look at the current account deficit of spain in 2008 to 2009, which was minus 8%, between minus 8% and minus 9% of the gdp, and where we stand now where we will probably be at 1% over the last 12 months, i see enormous progress. >> so, trichet there speaking a little bit earlier. just wanting to mention to you, we're just getting through on our wires a little bit of news on the italian bond auction. and i just want to get that to you as quickly as possible. we're looking at the italian bond auction results there for 2015, june 2015, bid-to-cover ratio of 1.4. they're selling 3.5 billion of
the new june 2015 contracts versus 2.5 billion euros to 3.5 billion as planned. so again, 3.5 billion in the upper targeted range of how much they wanted to sell. a yield of 2.4% on the 20-year contract and a bid-to-cover ratio of 1.48%, so that's what we're looking at in terms of the italian bond auction results just hitting the wires right now. the former bank of canada governor, mark carney, is in switzerland less than a week before he takes to the helm at the bank of england. carney holding a press conference in bazell following the g-20 financial stability board meeting. members there discussing the vulnerabilities in the financial system and the progress of regulation throughout the seconder. carolin was there and joins us from zurich. >> reporter: hi, louisa. look, he was in bazell as his capacity as the chairman of the board, so as expected, he didn't
want to weigh in on the doe a bit on the fed's communication last week, but what he did make very clear to financial institutions was that they'd better get ready for higher interest rates now. >> i'm not going to interpret what the fed did or didn't say. what we have been urging supervisors to do, and in most cases, they have been doing, but also very importantly it starts with the institutions themselves, is to be managing their risk physicians, looking at stress scenarios where there's material increases in volatility because of exactly these types of transitions, because eventually, and just to take it out of the current conjuncture, eventually, across all major jurisdictions, the objective is to move away from exceptional emergency accommodation. >> reporter: another very important topic obviously being china and all the volatility that we're seeing there. well, i asked mr. carney whether the volatility and the lack of
action by chinese officials posed a big risk to the stability of the financial system in that country. >> we had, governor sixuan was present and the meeting and we discussed all markets, including china, and he outlined the authorities, the dynamics that were affecting those markets. he is best placed to make those comments publicly, but i would say that the authorities have the situation well in hand. >> reporter: well, according to mr. carney, chinese authorities have the situation in china "well in hand," and i can't help it, louisa, but i feel that some of these central bankers pretty sanguine and very relaxed about what's going on in china. >> you know, they are at this stage, they are. maybe just kind of figuring out exactly what is going on. carolin, thank you very much for
that. really interesting, interesting interview. now, u.s. authorities continue their search for fugitive whistleblower edward snowden, as he fails to board a plane out of hong kong. more on that after the break. we went out and asked people a simple question: how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed: the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪
hi, everybody. welcome back. i'm louisa bojesen. these are your headlines. china's central bank promising to manage liquidity after another roller coaster day in the markets. former ecb president jean-claude trichet offering praise to ben bernanke, saying that he's doing the right thing, given the difficult conditions. and the plot thickens as russia says that u.s. fugitive edward snowden has not crossed into the country. and coming up, we'll head back out to the fund forum international in monaco. we'll be speaking with charles beazley with nikko asset management. i want to make things more secure.
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hi. welcome back to "worldwide exchange." i'm louisa bojesen. the shanghai composite falling as much as 5% today, recouping most of its lost ground to end just a tad lower. that's on hopes that the chinese authorities will step in to address the shore-term cash crunch and calm the recent market turmoil. at a news briefing in shanghai, china's central bank assured investors that it will manage liquidity in a flexible manner and guide market rates to reasonable levels. it said that the recent spike in money rates was due to seasonal factors which would gradually fade. now, joining us from monaco at
the fund forum international, charles beazley, ceo of nikko asset management. charles, welcome. it looks fantastic in monaco, beautiful day to be there. i just want to kick off on china, first of all. i mean, a lot of people saying that we're heading into a severe and serious potential of a credit crunch in china. we spoke to jim o'neill about an hour and a half ago, and he was saying, actually, we're not looking at a genuine credit crunch scenario emerging out of china. what do you think is happening? >> well, i think there is a contrast between the short-term and the long-term issues that they've got to deal with. the short-term issues, of course, is to try and prevent the excessive speculation that i think the oversupply of money in the system was providing. longer term, growth is the issue, but that's a structural reform issue as opposed to a monetary issue. so, i think there's a little bit of conflict in the markets at the moment, and i think jim's right, i think it will settle down. i think the long term is a
political or social issue rather than a monetary supply issue. >> is the pretty severe market volatility that we've seen within the past two weeks especially, is that going to continue for the next couple of months? >> i think it is, but i think it begins with the may 23rd statement by bernanke, which is announcing, in a sense, the beginning of the end of qe, and i think the market is still trying to work out how it reprices risk around the world, what the risk premium should be with various asset classes. and so, at the minute, i think it's quite a confused picture, but i do expect it to calm down, but this level of volatility, clearly in the fixed income markets and in individual cases like china is a short-term cause for concern, but i think medium-term and longer-term in some other markets are going to be pretty good. >> how are you reading it, though? i mean, what happens if and when the fed starts tapering? my reading is it's not going to happen all at once, so aren't we starting to get used to it, and at some stage, it needs to happen? marc faber telling us earlier on the show he thinks the fed will go to qe-99, but we shouldn't be
expecting that, though. >> i know very little about the insides of the federal reserve. i'm not a fed watcher, i'm not an expert on the u.s. at all, but how it teams to us as pragtitionists is that the end is in sight, particularly if the united states continues to surprise on the up side, but they've said they're going to be very flexible, they're giving the market plenty of time on adjust to this. interest rates will, of course, head up. that's normal if economic conditions warrant. so, i think it's a perfectly logical process, but there are a lot of people invested, if you like, on the wrong side of the trade. and for them, they need to work it out. >> as an asset management group, what do you do about yields spiking as they have been doing recently? >> well, remember, for our investors, particularly the retail investors in japan, 58% of our assets are in international securities or non-yuan denominated securities already. there's really no change in
their long-term thinking. i think more money will invest in the united states. i think more money will come out of japan as the migration into mutual funds takes place over the next three to five years. this is sort of medium-to-long-term things, louisa. i don't think it's shifted around too badly by short-term concerns in the marketplace. >> speaking of medium to longer term, maybe we could bring up a chart of the nikkei for our viewers to look at. i know traditionally, you've been quite optimistic on the nikkei. we've had this massive correction. we've had a huge sell-off, especially within the last two weeks or so. do you get back in? do you think the nikkei is going to continue its march higher? >> listen, we had hoped that we would have a correction. what we didn't expect is to see the correction in three or four weeks. but like i said, i think that was inspired more by bernanke and the hot money which flows in and out of markets and was clearly anticipating the rise in the nikkei. that money is, i think, leaving. i think it will be replaced. i think these are extremely good entry levels for international up investors and particularly
domestic investors, too, for the nikkei over the medium and long term. >> charles, good to see you. enjoy monaco. charles beazley, the ceo of nikko asset management. >> thank you. >> and we will be returning to monaco and to the fund forum international tomorrow when we speak to martin gilbert, ceo of aberdeen asset management, and jonathan larson, global head of retail banking at citi is with us as well. i just want to mention a follow-up. we were just talking about snowden and how the russian foreign minister was indicating that snowden hasn't landed in russia, and he was against the u.s. accusations saying that russia had anything to do with snowden, saying that russia has nothing to do with snowden. we're again hearing by reuters out of moscow, an airport source confirmed that snowden did indeed arrive on sunday to moscow from hong kong on sunday afternoon and that he was due to depart for havana the following day but he didn't use his ticket. again, that's according to a moscow airport source via
reuters, so some conflicting news coming through with regards to the potential whereabouts of snowden. now, u.s. treasury yields have come off yesterday's multimonth highs, but could there be renewed selling? one man who might know is richard clarida, global strategic advisor for pimco, and he joins us after the break. you can get your e-mail comments or questions to us. find us on twitter twitter, @louisabojesen. we'll leave you with a look at how the futures are opening ahead of the opening on wall street.
hi, everybody. welcome back. you're still watching "worldwide exchange." i'm louisa bojesen. these are your headlines from around the world. china stock markets on a roller coaster ride. the pboc promising to manage liquidity in a flexible manner, also helping an early rebound in european stocks. it's an all-star lineup of guests on this show. they disagree about whether or not beijing has volatility under control, but they agree that it could impact growth. and amid warnings of feral hogs roaming the markets, the former ecb president, jean-claude trichet, is telling the cnbc that ben bernanke is doing the right thing, adding that there is only so much that policymakers can do. >> what we had to cope with was the worst challenge since world war ii, and perhaps the worst since world war i.
and where in the world is edward snowden? the admitted leaker of u.s. government secrets is believed to still be in russia today as washington presses moscow to send him home to face prosecution. yes, welcome, once again. thank you for tuning in. if you're just joining us, great to have you with us. we're a couple hours ahead of the u.s. market open, and we're being called higher across the board. we've seen a lot of volatility here within the last couple of sessions, and now we're being called higher somewhere in the region of 10 po 70 points or so, depending on the index that you're looking at. the ftse cnbc global 300 index also showing you some positivity. higher by around 0.33% or so.
overnight, ex-japan, we saw the market stabilizing a little bit, coming back from session lows. the japanese market continuing to be sold lower, though, and again, people looking very closely at what's taking place with china, with regards to the potential credit crunch emerging out of china, and of course, also, the fed speak that's going to be emerging more throughout the week. we've already heard the fed's fisher attacking the feral hogs of the market, saying that the federal reserve is doing exactly what they should be doing, but net-net, we're seeing positivity coming out of our european markets here today. now it may just all be about what's taking place in the fixed income markets. a lot of people saying just watch and see what's taking place with regards to the yield on the ten-year treasury. we're seeing now our main european equity markets trading higher, somewhere in the region of 1.5% or so, but the yield on the ten-year treasury coming back down a little bit. and we saw the ten-year treasury spiking higher. i saw print of above 2.7% here what, two days ago or so? we're back down to 2.5%.
there has to be a normalization process taking place, too, if the fed is pulling away from quantitative easing, and that discussion continues quite aggressively at the moment. let's get back out to paris, where karen joins us once again. karen? >> reporter: thanks very much, louisa. let's continue the discussion about bonds, because i'm here at the iaf spring membership meeting. they hit the headlines when they negotiated that greek bailout and the haircut that private sector creditors would take. the conversation has very much moved along to what central bank policy will do, and implications for bond markets and investing globally. here to talk about this is dr. richard clarida, executive vice president and strategic adviser at pimco but also a former treasury official. nice to see you at the conference today. let's talk about the fed because this is the market with bond yields soaring across the charts. what does this mean in terms of investing in your book? >> what it means is that right
now, bond markets, stock markets, all markets are recalibra recalibrating. we got a lot of move out of the fed. the fed is going to act preemptively and begin to taper based on an expectation of robust growth, and i think the markets have been expecting the fed to wait until it saw that growth before it tapered. and so, you're having very sloppy trading, liquidity is very scarce and prices are obviously adjusting that will provide opportunities eventually, but right now, we're still in sorting through the new information. >> reporter: what you highlighted to us is somewhat of an overreaction then on markets. what gets us back to a level of stability? how will the calm trourn markets? >> well, it's not clear to me that calm can return so long as the fed pursues this form of communication. several years ago, they gave us what was called calendar date guidance. had he said we're not going to do anything for two years. now they're basically turning everybody into the market into a forecaster. what's the unemployment rate going to be? what's inflation going to be? so, there will somebody level of volatility, probably less than today, but for some time to come. >> reporter: if you look at what
this means across bond markets, the u.s. ten-year treasury yield has shot past the 2.5% mark. will the fed be able to taper if bond yields remain so elevated? >> well, i think we will find out. my sense, based upon what i saw last week at the chairman's press conference, is they expect and intend. they're leaving themselves the optionality. in fact, they even say they could increase the program. but clearly, the center of gravity on the committee is to taper, and certainly, i think that that is what they think they will be doing. >> reporter: interestingly, in the backdrop, chinese officials, too, have been tweaking policy, and there's been much concern about a credit crunch playing out in the mainland. how is this impacting the way you're allocating assets and your strategy at pimco some. >> well, absolutely. in our three to five-year outlook, we've been expecting for some time qulin to slow. obviously, over the next year, if the credit crunch continues, you could be looking at very slow growth in china, 5% or 6%, instead of 7%. so, china is undergoing a transition. they're going to move away from
an export-led model to one more based on domestic demand, but a lot of excess is built up and as the team shakes through all of that, you'll have more volatility in china. >> reporter: it's curious that you talk that and perhaps not moving as much capital. some people are saying the allocation is already too low. do you think this will not be corrected in the next couple of years if people are taking money out of the region? >> you know, i think money will continue to go into the region. in fact, i think that we'll have to be more discriminating. i think one thing we've learned is that all the liquidity from qe, where was it going? not necessarily into the price of gold, but into a lot of emerging markets, probably indiscriminately. that will give injoerorvestors bottoms-up analysis an edge, particularly on a country-by-country basis. >> reporter: and yields have risen along with the fed comments on tapering. >> well, for the first summer in three or four, europe is really now following that, leading the turbulence in markets. yields in europe have gone up in
tandem with treasuries, and obviously, spreads have widened as well. but primarily, just because of the global shake-out, essentially, all carry trades, all trades in which you finance at a short rate and invest at a riskier rate are now being unwound, and that's impacting europe. >> reporter: very much appreciate your time. thank you for joining us on "worldwide exchange" today. that was dr. richard clarida, who is the executive vice president and global strategic adviser at pimco, joining us to talk about bond yields. one of the big issues here at the iaf conference, but we're also talking about regulation for the banking industry and the role of stress testing down the track. that is the latest here. back to you in london, louisa. >> karen, i shall happily catch it. thank you very much. we'll talk to you a bit later. coming up also, yahoo's shareholders will be issuing a report card on marissa mayer a bit later today as she nears her first anniversary as the company's ceo. a look back at mayer's achievements over the past 12 months, coming right up. [ male announcer ] we've been conditioned
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how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed: the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪ hi, everybody. welcome back. i'm louisa bojesen. these are your headlines today. china's central bank promising to manage liquidity after another roller coaster day in the markets. former ecb president jean-claude trichet is offering praise to ben bernanke, saying that he's doing the right thing given the difficult conditions.
and the plot thickens as russia says that u.s. fugitive edward snowden has not crossed into the country. at the same time, though, a moscow airport official is confirming that snowden did arrive on sunday and he didn't take off on his flight to havana as he was due to do the following day. and taking a look at some of the other top stories today. u.s. regulators are reportedly set to file civil charges against the former mf global ceo jon corzine as soon as this week for the brokerage firm's collapse in 2011 and misuse of customer money in its final days. investigators discovered more than $1 billion in client funds went missing. "the new york times" reports that the commodity futures trading commission, the cftc, is not giving corzine an opportunity to settle the case, meaning that it could drag on for years. corzine and his management team, they have not faced criminal
charges. as said, edward snowden's world tour appears to be stalled for now. the former u.s. contractor who leaked details of the nsa's top-secret surveillance programs didn't board his flight from moscow to cuba on monday. wikileaks's founder, julian assange, says that snowden is safe, but he wouldn't elaborate. snowden is seeking asylum in ecuador, but a high-ranking official tells the "associated press" that ecuador's ambassador to russia hasn't seen or spoken with him. the irs has scrapped so-called be on the lookout screening lists that it used to scrutinize conservative and tea party groups seeking tax-exempt status. those lists were at the heart of the agency's targeting scandal that exploded back in may, leading to firing of the acting irs commissioner and replacement of at least three other officials. new irs chief danny wuerffel is
reaffirming that no employees or outsiders intentionally subjected extra groups to scrutiny. yahoo holds its annual shareholder meeting today in santa clara, california, just a stone throw away from its headquarters in sunnyvale and just a few weeks shy of marissa mayer's first anniversaiversarn ceo. bertha coombs has more on marissa mayer and the one-year anniversary and what we can anticipate from the meeting today. >> it is her first shareholder meeting, louisa. it's interesting because yahoo used to be headquartered in santa clara, so in a sense, they're going back to their roots as they look to their future. mayer was named yahoo ceo on july 17th last year, coming over from google. and the stock has responded fairly well under her tenure. at one point, it was up nearly 70%. now nearly a year later, it is back a bit, still up a respectable 54% for her tenure. analysts say much of that gain,
though, has come from share buybacks and the sale of yahoo's assets, including ali baba. mayer has revamped key products, such as yahoo's home page and e-mail and jump-started acquisitions, notably, last thursday, the company finally completed its $1.1 billion purchase of blogging site tumblr. at the reuters global technology summit last week, they say yahoo is working on ways to expand its video content. reports say yahoo is in the bidding for hulu, the online tv programming hub owned by disney and news corp. online video commands higher ad rates than other web content and is becoming an increasingly competitive business. mayer said her biggest near-term goal to measure yahoo's progress is the amount of time users spoend its websites. she says the challenge is how to grow web traffic. but while google and others are branching out to new revenue streams, such as retail and music, mayer has said yahoo is squarely focused on advertising.
well, she certainly has captured wall street's imagination. yahoo very much also ran for a long time, folks very intrigued to see what she says today. sprint shareholders will vote today on softbank's revised $21.6 billion deal to buy a majority of the wireless company. sprint's second largest shareholder, the hedge found paulison & company, has said it will vote in favor of the deal. last week, dish network dropped its pursuit of sprint after softbank sweetened its bid. louisa, that's it stateside. back to you. >> bertha, have a good day. talk to you soon, bertha coombs. still ahead on "worldwide exchange," we hear more from our exclusive with jean-claude trichet. find out what he says about ben bernanke in a couple of minutes. ♪ [ agent smith ] i've found software that intrigues me.
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hi, everybody. welcome back, once again. the former head of the european central bank has voiced his support for u.s. fed chairman ben bernanke and his exit strategy. in an interview with cnbc, jean-claude trichet spoke about the recent market volatility and said that he believes the fed is taking the right action to build a more resilient economy. you know what, we'll try to get you that interview. we just had a little bit of audio difficulty there. but in the meantime, though, let's talk more about what's been taking place in the markets, because volatility has, indeed, been rocking china over the last couple of days, as you've seen. the shanghai composite following as much as 5% but recouping most of its lost ground to end just a tad lower. that's on hopes that chinese authorities now might just step in to address the short-term cash crunch and calm the recent
market turmoil. at a news briefing in shanghai, china's central bank assured investors that it will manage liquidity in a flexible manner and guide market rates to reasonable levels. it said that the recent spike in money rates was due to seasonal factors which would gradually fade. and we've been speaking to an all-star guest lineup, including the former goldman chief, jim o'neill, chief economist, and marc faber, author of the gloom, boom and doom reports, and blackstone senior managing director john studzinski. we asked them all about china's efforts to calm markets, and here is what they had to say. >> they're coming to grips with that in a very constructive, thoughtful way, which is what the west should see as a good step forward. they shouldn't see it as fragility, they shouldn't see it as anything other than a proactive, well-managed approach to what's happening in china, get a handle on the shadow banking sector in china. >> if the china clamped down on
shadow banking, same time on luxury gifting, house prices, are they going to be able to actually get 7.5%? and i don't think it's impossible that we could be looking at a couple of years of it being less, which in the big scheme of things, it's not that big a deal. i mean, 7.5% growth is equivalent to the u.s. growing by 4%. so you know, it's huge. but the china change a lot of things at the same time, and obviously, as they creep forward more through time, it gets probably more and more hard to control so many things. >> i think china, if you look at the expansion of credit as a percent of the economy, had a colossal, not a small, a colossal credit bubble. disappoint very badly and i have maintained for a long time, the chinese economy does not grow at 7.8% or 7.9% at the present time but more likely just at 4%. >> well, europe's markets this morning recovering from the
sell-off that we continued to see yesterday, so we're higher somewhere in the region of a percentage point or so. u.s. futures also indicating that we could be looking at a slight pop on the open stateside once that happens in a couple of hours. joining us, though, on the cnbc news line, is michael pervis, the chief global strategist at weeden & company. michael, what do you think is going on in the markets? >> well, clearly, we've seen ben bernanke do his thing a week or so ago with rates, and i think what, you know, the volatility we're seeing in equities is really being imported, if you will, from the fixed income volatility that has been driving several factors here. but one thing that's very, very important about what we've seen in the sell-off in the u.s. equities and sell-off in u.s. treasuries is really the end of what i call the convertible bond market way of looking at the united states equity market, which is, last year, equities
involved, we were able to use sort of a bomb-like dimension in how they were valued. that's gone. so, going forward, equities may range higher offer the broader course of the next 12 months, but in a much more volatile way. >> they'll be looking, then, to value the equity market if we're not looking at it in the same way as the bond markets. >> right, right. we're going to have to look much more at, you know, real classic, old-school fundamentals here. and that's going to be difficult, because you know, whether any of the u.s. economic metrics are able to achieve escape velocity against a rising yields curve is going to be very, very challenging. and the fed, of course, has been a bit too optimistic over the last three years on its estimates. and so, if we revise down further again, it's going to create yet more turbulence in the equity markets. >> european markets entering correction territory officially, down some 10% from their may highs. are there buying opportunities still in equities? >> oh, i think there are,
actually. i think europe is very interesting right now. and partly, you know, you've seen some of the economic metrics in europe, the pmis are actually going in the right direction now. but i think the other thing to step back is to that if you look at the three big central banks, the u.s. has clearly spoken, the bank of japan is really sort of in an intermission phase right now, and the ecb may well end up being the next sort of incremental easier, and that will be, you know, obviously, very positive for a lot of risk assets in europe and particularly equities. >> michael, good talking to you. thank you very much. we appreciate it, michael purves, the chief global strategist at weeden & company. that is it for today's show. i'm louisa bojesen. thank you very much for watching "worldwide exchange." thanks for all your comments as well. good to hear that you're out there. we'll see you very soon again. stay tuned to the channel.
good morning. today's top stories, china's central bank, yep, they just made some comments to calm jittery markets. we'll see if it's working. and u.s. equity futures pointing to a positive open on wall street, but investors not without worries here. at the top of the list, a stampede out of the bond market. it's tuesday, june 25th, 2013. "squawk box" begins right now. ♪ the heat is on, the heat is on ♪ >> good morning, and welcome back to "squawk box" here on cnbc. i'm andrew ross sorkin along with, well, not joe and becky. they're enjoying some time away, so i am joined by kayla tausche and scott wapner at the table
and we'll get to them in paa minute. a chinese central bank official saying the pboc will be guiding interest rates to a "reasonable range," suggesting a potential end to the country's cash crunch. at a news briefing after the markets in china closed today, the official also argued that recent interest rate volatility in the nation's money market there temporary. that's what they're saying. stocks in china as a result of some of those comments pairing their losses into the end of that session, actually, rather on rumors of that expected news conference, and the shanghai composite closed down 0.2% after plunging as much as 5% earlier in the session. the index still, though, of course, in bear market territory. back here in the u.s., prepare for a packed economic agenda today. at 8:30 eastern, we'll bring you may durable goods. then we have the s&p case-shiller index, the fhfa house pricing index. may new home sales, june consumer confidence and the richmond f