tv Worldwide Exchange CNBC December 10, 2014 4:00am-6:01am EST
a very warm week to "worldwide exchange." i'm wilfred frost. >> i'm seema mody. >> the travel sector is leading the way up. but oil prices fall again as opec scrambles to plan an emergency meeting in june. >> the shanghai composite shrugs off fears of deflation as chinese cpi physicals to a five-month low. stocks fall again after closing out the worst losses since the 1980s.
the man who led the country into the euro warnings a snap election could cause disaster. >> this scenario without controversies, without the social and economic disaster. >> jamie dimon's jpmorgan reportedly needs over $20 billion of additional capital to comply with new rules unveiled by the fed. but the bank says it is well capitalized and will deliver strong returns for shareholders. >> you're watching "worldwide exchange," bringing you business news from around the globe. welcome to the show. so, seema, the last couple of days, there's been a terrific off sentiment, but i think it's interesting to point out what happened in the u.s. it opened down yesterday. europe was down 2%, china was
down 5%. but the fact that it rallied throughout the day i think is a bullish signal for the u.s. equity market in the short-term. it shows a little weakness when people are willing to step in and buy again, whatever their reasons are. >> stocks were able to come off the lows of the day, but we should point out that the volatility index back again in focus for traders. it's now trading at sh, well below the historic average. we're seeing volatility, but that's not always a good sign for markets. >> people are looking at the u.s. and saying there's so much negativity, so much volatility outside of the u.s., there's a reason for buying the u.s. in the long-term or even in the short-term. >> the best house in a bad neighborhood. >> exactly. china, there are fears of deflation in the world's second largest economy. eunice yoon joins us with the
latest. >> hey, guys. the markets racketed back up today. a lot of that was because we had some consistent messaging out of the state press. the state press's line was just calm down, everything is going to be okay. there was a very influential state paper that was making the rounds, the commentary said that investors shouldn't be afraid, that the logic for the bull market still holds and it also said that people shouldn't be pessimistic and that these adjustments are very normal. so trying to educate a lot of the new investors. now, overall, when you looked at the economic data, that was actually kind of lackluster. the consumer prices came in, rising by 1.4%. this is just about where the october number was at 1.6%. and what we're seeing is that the pricing pressures are coming down.
overall target for the government for the year is 3.5%. so this isn't a major issue. the oil price was a big factor that is not only affecting the consumer price but the prices for the ppi, the producer prices, as well. so a lot of the focus today, though, in terms of those prices was on the ppi he. it was another indicator of that lack in demand domestically. guys. >> eunice, i'm not so concerned about the reason for today's bounceback. what do you now think is the main reason for the 5% declines yesterday. >> well, it seemed like the main trigger was the fact that the government changed some of the rules in order to try to take some of that leverage out of the market. there was changes as we were
talking about that basically was telling investors you can't go ahead and use some of the poor quality corporate bonds as collateral and borrow more cash. so that affect the bond markets, it hit the currencies in addition to the stock market and has been the main trigger that hit the market. so, that said, it's not as though investors have been completely put off. there's been more and more margin trading over the past several months. a lot of investors coming into the market opening new brokerage accounts and seeing this is a new way for them to invest. it's been around for a while, not a very sophisticated way. most people here, in order to invest, would look at the property market as an option. but a lot of the property is starting to come down. people are focusing more on the shanghai stock exchange. >> eunice, thank you for that update. >> the shanghai composite closed up nearly 3% after suffering the
biggest one-day drop since 2009 amid continued record volts. oil stocks have been particularly strong with some names up as much as 10%. let's bring in tim ash now. thank you very much for joining us. we had 13 straight sessions of gains. offset for us this market is retail investor driven. >> sure. lots of people have been forecasting the china crash for years. it's never happened. the chinese authorities are still very confident. would you r we're a long, long way from that. xhod tir prices are very good for china. clearly, the chinese economy is slowing down and low commodity prices, inflation story, but
talks about the china crash, it's way too early for that. the chinese are very prudent on how they manage things. >> what did spark the initial rally in chinese stocks was a surprise rate cut from the central bank. given the data that just came in on inflation, is there enough to provide a stimulate growth in china and really improve the economic situation? perhaps more is needed. >> some more. don't expect huge fireworks. i don't think they're panicking just yet. they look at it as gradual. it's not about makie a big knee jerk reaction. i'm an equity guy and i'm not a stock picker.
i would say that we're a long way yet from china pulling down the global economy. tim ash, you're going to stay with us to discuss this morning. but what do you think, viewers? of course, a bounceback today, up about 3%. e-mail us, email@example.com or tweet us, @cnbcwex. >> yesterday, we had around 2% to 2.5% declines in europe with the biggest story coming out of one of the small markets. greece off the better part of 13%. the stoxx 600 is up 0.4%. they're supposed to have a quick look across the individual markets. where is the strength coming today? as you can see, it's a bit of a bounceback across the board. 0.2 pergs across the board.
germany, 0.6%. let's look at some individual stocks. frankfurt listed tui as trading higher after full year forecasts beat expectations. this is the company's final set of earnings ahead of its merger are tui travel which was agreed in september. in fact, it is now down in trade. bg is up 3.4%. the london says the deal would result in a tax profit of $2.7 billion. the volatility level has -- no, we haven't got continue vix. it's up again today, two sessions in a road now with higher volatility. what does that imply for equities as we go into the end?
gold has been seen as a safe haven. oil in decline again, having had a prespike at the end of last week. 66 for brent and 62.9 for wti crude. >> let's look at bonds. this risk-off trade, we've seen yields particular down. the u.s. were at 2.2%. germany, 0.7%. similar story for the likes of france which are viewed as core bonds. the opposite is true for some of the most risky ends. there are fears other default riegz with that snap election. you would think this risk off
trade would see the u.s. dollar higher. since then, we've seen a bit of profit taking. it hasn't been helped by the fact that we have the u.s. dollar coming back. in general, the u.s. dollar giving up a bit of ground in the last couple of sessions. the yen hit a seven-year high of 121.86 a couple of days ago. we're now back below 120. 119.12. let's check in on markets in asia. samantha is standing by in singapore. good afternoon to you, sam. >> afternoon, wilfred. the yen is accounting for the nikkei, 2.25% fall today. one of the big standoffs when it comes to weakness in asia. we have government surveys showing consumers and manufacturers losing confidence in the economy. that, of course, as we know, goes to the polls to vote, give they are vote on abe nomics.
if you look at the biggest manufacturers there, they become less positive on investment going forward. turning our attention to the hong kong market, up ever so slightly today. the first listing of a nuclear power play company in 2006. this is cgm power, china's largest power company. we saw the stock up 19% on its debut. it's 20% oversubscribed. perhaps demand going into this listing is certainly behind it. we've spoken about the shanghai composite, the rebound there. the inflation figures, a lot of analysts coming out and saying the case off the back of those weak inflation figures shows the
central bank action is imminent and that is what we're expecting. back to you guys in london. >> samantha, thank you so much. coming up on "worldwide exchange," we find out how ukraine's president plans to attract investment as the imf warns the country's bailout is at risk avenue collapsing. we find out why teenagers still prefer to hit the brick and mortar stores with "vogue." and find out why billionaire investor mark cuban should not have been allowed to list in the u.s. we'll get more on that, coming up next.
we're just getting some flashes out of a russian news agency interview with prime minister medvedev he is saying that russia may be forced to revise its 2015 budget if economic conditions change sharply. he says they'll have to review scenarioes and eventually make decisions on the budget, but they are not doing that yet. he said the ruble devaluation is not good for the russian economy in the long-term and says, gb, a line that we've heard plenty of times out of him and mr. putin,
sanctions are harmful on the russian economy. >> and, of course, instability in ukraine is one reason investors have been staying bearish on russia. the imf has identified a $16 billion funding shortfall in ukraine's bailout page saying the war-torn country faces collapse if western nations fail to fill the gap. the figure comes on top of a $17 billion package in april. the shortfall follows a 7% contraction in gdp, halted exports to russia. >> ukraine has accused rebels of following a one-day cease-fire. government troops claim combat operations stopped at 10:00 a.m. tuesday, but identified at least 13 violations by rebel forces, including two attacks on the
donetsk airport. . >> to implement, including closing the border, launching the political process for the local election and the legislation and finishing is much needed. in the occupied territory. >> now, in the meantime, the russian rouble is trading moderately lower in early trade today amid lower crude prices. traders expect action in the currency to be subdued ahead of the russian bank tomorrow. the bank announced $400 million worth of interventions on monday following 4.5 billion measures to support the ruble last week. let's talk more about the future of the ruble, where it's headed
with timothy ash hd of research another standard bank. to staurt the russian rouble, will that be enough to provide a floor to the ruble? already the central bank has spent backside 70 billion trying to support its currency. >> it's about $4 billion including jobs. i think it's been interesting this year is initially they tried to slow the rates of depreciation. they wanted the ruble weaker earlier in the year. then i think recently with the heightened geopolitical risk, the rubble with the west of ukraine, i think what's changed is they view this conflict going on for a long time. like three, four, five years. sanctions have been extended for long periods of time. access to international markets pretty limited. now there's a strategic premium. they think maybe they're going to have to use them to build pipelines to china. they ask jobs with cash. that's absolutely clear.
that's limiting what they can do on the exchange rate. we have seen some intervention in the last couple of weeks, but pretty modest. we've seen a couple of billion dollars here and there. they're not doing that, so they're kind of struggling. between, the messaging is strange. we haven't seen big loss in terms of the interest rates. you can let the exchange rate move. you can raise interest rates to deflate domestic demand. you have to use interest rates our let the currency go. >> they wanted a weaker report. but the decline is serm not welcome. that pace of decline, the way you look at it, do you think that is weak economic management by the central bank or too much interference from mr. putin with what the central bank is allowed to do? >> very long-term factors and then long-term, it's massively overvalued. we've had 15 years of high oil
prices. in real effective terms, the ruble basically doubled over that period. so when we came to this crisis, you had a very expensive currency reflected by the fact that with oil at $1100 a barrel, the russian economy is growing at 11 is%. can you imagine that? russia wasn't working partially because of the overvalue exchange rate. you let the currency go, but then it became a vicious cycle, people started to focus on the exchange rate, reserve loss. added on to that, you've got sanctions, geopolitical risks. they're kind of in the situation where they don't really know what to do. i think this crisis is going to go on for a long time. let's keep the reserves and pick up the pieces afterwards in terms of systemic problems. use those fx reserves to clean up afterwards. again, i think in the end, given
what we're seeing globally in terms of oil prices, no evidence of sanctions easing, probably the ruble will continue to see downside pressure. >> thanks for that. let's talk about turkey, a disappointing growth reading out of turkey came early this morning. 1.7% annually, well below a reuters forecast of 3% growth. in some positive news, turkey revised first and second quarter gdp readings higher. the situation in turkey is obviously under pressure. you think low oil prices would be helping them a lot. but certainly not the most recent set of gdp numbers. when you look at it as a whole, is this a very negative outlook going forward, is it a structural issue or is it the end of a long cycle turkey has enjoyed? >> 2014 has been about rebalancing. the theme of rebalancing, tightening policy earlier in the year. the current account moderated and that was really helpful. and i guess we're seeing it in terms of the data.
again, policy tightening, heightened political risks, we have a security situation in the southeast of the country. 2% countergrowth for the year is okay given the concept. and the assumption is next year growth will begin to reaccelerate. we have elections in june. central bank probably on the back of this data and the low oil prices and improving current account may feel comfortable in easing policy rates. provides a bit of stimulus. fundamentally, unlike russia, fundamentally i think turkey is structurally and systemically pretty sound. >> you look at the turkey index, it's up about 26% so far this year, outperforming the s&p 500 and the msgi emerging market ind index. turkey able to benefit from lower oil prices given that it is a net importer. how much do you think that could help the economy going forward?
>> a net energy imports is $55 billion. so basically the whole of the current account is basically oil. each $10 change in the oil price saves them $4 had billion. so if oil is down 40 bucks, 50 bucks, that is a huge turn around in turkey. it helps the current account, the fragile five where people were concerned about external financing risks, current account risk. that kind of disappears. helps on the inflation front, allowing the central bank basically to cut rates. the lira has been pretty stable this year. ruble has been crushing, lira stayed pretty solid. that's helped central banks. you mentioned the outperformance. in the end, investors have to put their money somewhere, right? russia is a big part of everyone's indices, right? people don't want to put their money in russia.
where do you put it? turkey is a big beneficiary. tim ash, thank you for your time. the eight largest banks want to hold capital to make sure they do not rely too much on risky debt. stanley fischer accidentally let slip at a public meeting that jpmorgan is the only bank facing a capital shortfall, $20 billion. the company is well capitalized according to a jp spokesperson. but some analysts said this shortfall could weigh on earnings in the coming quarters. >> the share price -- the share price reaction is not quite in
yesterday's trade and only 0.6% in after hours trade. it's not been a huge thing. i don't think this capital requirement is anything like as important as the one we had in europe a month or so ago. it does rebeg that question that we had for a long time, these massive banks moving forward, will they want to be smaller so they don't fall foul of the toughest part of this bank regulation going forward? by being systemically important, the regulator is so stringent. >> wall street seems to think so. the s&p financial index is outperforming the s&p 500, goldman sachs up 1.7%. jpmorgan, morgan stanley up 18%. there's been a pretty good run for these financial companies despite capital share hold and talking about legal disputes, as well. >> indeed. coming up, we hear from the man who took greece into the euro. stay tuned to find out his warnings to greek voters if they back the radical left in the story. that's the big story, coming up.
scrambles to schedule an emergency meeting in june. >> shanghai composite up more than 3% as chinese cpi falls to a five-month low. >> russia's prime minister warnings the government may have to -- if economic conditions weaken. the greek yield survey bursts while stocks fall again after closing out the worst losses since the 1980s. the man who led the country into the euro warns cnbc a radical victory. >> this is not the scenario that we realize without controversy, without the social and economic disaster. >> we're just getting data out of the uk. britain's good trade deficit
narrowed in october to its lowest level helped by fuel imports and a slight rise in export. the deficit slightly shrinking to 10.5 billion pounds in september. exports in the month edge up, 23 pounds particularly helped to india while imports fell to nearly 7 million. not much reaction off the back of the data. 1.5676, we're flat on the day. the weather a down day yesterday due to down beat data out of germany and the uk. the ftse 100 up about 0.3%. the xetra dax, german markets up about 0.75%. we did see that rally in china after what was a big sell-off in the shanghai composite. perhaps some of that relief rally trickling into the european markets at this time.
>> let's have a look at bonds. yields have compressed particularly in the core and the ten-year german bund is one to note. a record low of 1.87%. seeing bond buying particularly in the core. germany seeing its yields fall. let's have a little bit from that. we're seeing bond buying in the u.s., the ten-year treasury is back towards 2.2%. gilt compressing to 1.91%. the one moving in the opposite direction has been greece where yields have gone up, particularly at the short end. this is a look at forex rates. the dollar has given.up a bit of ground against the yen having hit a record high of 121.86. the euro is flat today, 1 .23811 is. australian dollar strengthen a
bit, 0.8312. >> greek stocks are trading down today after their biggest daily loss since the 1980ss. the news sent shock waves through the athens market amid fears. the news could pave the way to gain control of parliament. >> louisa spoke to the current prime minister and asked him if the right moves were made. >> there was a negotiation between greece and the european union about the end of the memory randa. that is the relation, the debt that was given to greece with the european union.
but the europeans did not want to sign an agreement without knowing what would happen politically in greece. because they knew that there would be an election in greece, because of the presidency, they thought that they should give greece a time of two months to put in order their political situation. this was done and now greece has the possibility to elect the president, to have elections, to have a new government and a new government will discuss now with the european union about the future of the greek economy and the greek debt. if this was not done, there
would be a situation of not rm knowing what is to happen and crisis is not a good thing. >> if there were to be a snap election two months down the road, what do you think this means for greece's bailout situation? >> this depends on the result of the elections. if the president government has a gain in majority but want to continue the present policies with the european union, i think the result will be very positive as far as the debt is concerned because the european union wants to finish with this questions. and amend to all these discussions. if a party is elected that does
not accept to the conditions and wants to change many points of the loan contracts and strong, then this will create more instability. >> if things go according to the prime minister's plan, how much flexibility do you see coming from the troika? do you think greece will be cut a bit of slack from the eu and in particular from germany after the elections, i think that the troika, germany and the european partnership will be far more ready in order to find new ways that are not so district for greece. >> joining us on the phone from athens is constance. thank you so much for joining
us. >> good morning. it's a pleasure, if i can say a pleasure on such a difficult day for us. >> indeed and we really appreciate it, kostas. the moves we saw yesterday were bigger than at the height of the european crisis and it's declined further today. is this an overreaction, in your opinion? >> yes. it's the market reaction, if i may put it so, to this new level of uncertainty that we have now with the recent he lug necessary greece. it's sure that we already had uncertainty. we didn't know if we could have or not have snap elections. but now this has come down below because the first will be held in a week's time. this creates a new level of
uncertainty which is being reflected in the stock exchange. as it is every time. >> and it's not just reflected in the stock exchange, also in the bond markets. >> in the bond markets, you're right. >> you're sayingite an overreaction, but we just heard from your former prime minister that there will be, quote, no stability for some months, at least for a couple of weeks. you must admit there will be no stability until the first round of the presidential elections and it could go much longer, much more uncertainty. >> yes. let me put into perspective what is going to happen. the -- let me first say that the crucial round is not the first, but the third round on the 29th of january where the majority needed in the parliament of two-thirds of the parmentariapa. the only possibility is there
because for the first two, you need to have a jort of 200 out of 300, which is impossible in any terms never has been elected by such a majority. has always been elected by the two-thirds, the 180. so the crucial date is the 29th of january. on that date, we will know if we could elect -- and, again, it's an indirect election by the parliament and not the people. the president of the election which would mean the parliament could continue voting in its current form, the needed legislati legislation, or if we can't have the 180 on this date, snap elections, national elections would be called for i think the beginning of february. so that's the calendar and that's the important dates.
>> kostas, what happens if luisa does, in fact, come to power inspect they said they would tear up the agreement and not make a deal with the so-called troika. what is the state of greece's economy if troika comes to power? >> first of all, i'm not at all trying to interpret what the various leaders are saying. but let me say for our sake that the official position of series is that they will not gear up, either the memorandum, the political agreement with our leaders or put in question greece's might be to the european unions. there have been ambivalent declarations from the other members which have put doubt over those official positions, but, again, the official
position is that they will possibly renegotiate or try to find other solutions, but within the existing framework. so that is one thing that i think needed to be cleared. >> we're going to leave it there. thank you so much for your time. and the yield on the greece three. year has risen higher than the level of the ten-year amid political uncertainty. let's talk more with sylvia, european economist at nomura. do the threats widen from here? >> there is a huge uncertainty. i would expect this uncertainty to keep dominating the market action until more clarity is made on the result of the presidential elections first and
then eventually to the chances of new elections. but i think the threat on greece can continue to widen. i would like to mark out the fact that from position from where it was when it was the first leg of the greek crisis years ago. and we need to keep in mind this could inter convenient on the markets. so the call on greece is more about politics. >> this in tig, does it not provide fresh ammunition? it begs into question whether
certain periphery -- >> absolutely. and i think it is already in place if they do not agree. the reason greece will be excluded from the sovereign purchase program of the ecb and that i think will be a very stronger negotiating power. we single out the market to periphery countries within the eurozone. we've had in mind there wouldn't germany make sure that mario draghi doesn't announce the sovereign bond buying program at least until the current political uncertainty in greece is solved? >> we don't think that's a driving factor in the ecb at this juncture. we think the program will come. what happened to greece, if greece hasn't got an agreement, an extension of the program or a
new form of conditionality attached to it which is strong enough, the ecb will not buy that. the problem with europe is the deflationary schedule, banks are reduced and financial institutions reduced dramatically the risk towards greece. we see across substantially less significant implications for the european financial system. >> but how much political uncertainty from greece impact away on investor sentiment. if i'm an investor, i'm putting money in hurp, how much should i be watching what's happening in greece? >> we're seeing that yesterday there's a sharp move in greece was cited by much, much smaller, obviously, increase in countries. so this is a theme there which markets are watching very, very
closely. even if you get in a snap election environment, there is no question about membership to the euro area and there is no question about the fact that the nomational, the ecb was trying to try partially back in the prices. and i think this is something which mitigate tess fall out of any development in greece for the rest of the region. >> thank you so much, silvio peruso. we'll be watching very closely. moving on, the french government is currently presenting a series of economic reforms which is economic minister says will unlock the economy. stephane joins us live from paris. >> i don't know if you like shopping, but among the new measures, more shops in france will be able to open on sundays. there's an exception for large retailers to open only for five
sundays to europe. this will be extended to 12 some days. also, the government wants to create some international choice area where the shops can open every day and until midnight which is much later than the current authorization. and last but not least, the plan wants to de regularegulate froms which are not really open to competition. it's the case for taxi driver. the plan is being presented right now at the cabinet meeting. it will be discussed at the national assembly at the beginning of next year. already, we know that the debate might be a bit difficult since the left wing of the socialist party threatened to vote against the bill if some of the measures are not diluted. the economy minister, as you say, wants to unlock the french economy, but he wants to send a strong political message to brussels at the time. france is less than -- to avoid a sanctions from the european
commission because of its public deficit. back to you. >> stephane, thank you very much. now, business sentiment among japanese firms worsen in october to december period showing lingering effects of the consumer tax hikes back in april. makiko has the story live from tokyo. >> the results came from a quarterly government survey asking large scale firms their positions. the index is at five for the final quarter this year, down from 11.1 in the previous quarter, which means less firms see business conditions as improving. a breakdown shows machinery and automaker res still suffering from the effects of the consumer tax hike in april. the finance ministry commented the data underlines the slow but steady recovery.
the government survey shows consumer sentiment was down beat falling unexpectedly in november. and for indicators which include income growth and employment conditions fell for the third month in a row, which is a first since comparable data from ten years ago. and that is all from the nikkei. back to you. >> makiko, thank you very much. still to come on the show, oil prices continue to sink, hit ago fresh five-year low as algeria's oil minister hints an emergency opec meeting could be in the works. we'll discuss that, that's coming up next. s8
amazon has may debuted a make a haggle option on its site. this allows sellers to negotiate lower prices available on more than 150,000 items. would you hike to know, are you a haggler? do you haggle on some purchases, not on others? if you want to join the conversation here on "worldwide exchange," get in touch with us by e-mail. firstname.lastname@example.org or via
twitter, @cnbcwex. this thing fills me with dread. if i want to get online and buy something quickly, i'll do it. for once, i don't want toing whattel over the price. >> i think haggling delays the whole process of making that purchase online. why do you want to haggle? i just want the best price. interestingly enough, amazon says this is a game changer for amazon customers looking for great prices on one of a kind items. but perhaps adding to the fun this holiday season. >> i'm not a fan. >> i will say, last night i spent some time on amazon looking for your christmas present. >> oh, gosh. make sure you pay for next day delivery. you don't want it arriving too late. opec could be arriving at an emergency meeting in the next few months. algeria's minister said they may have to meet before the june meeting. meanwhile, the american
petroleum institute reported a rise of 4.4 million barrels, adding to downward pressure on the commodity. wti is up around 40% from this year's high in june. now we're joined now by misun he is sch. thank you for joining us. how much further does the oil price have to fall for the elasticity of demand to pick up? >> very great question. it depends on how it is taking place on the retail level and it's very different. in the u.s., for instance, you've got gasoline prices to 9 the% cheaper already compared to november. whereas if you look at europe and the uk, for instance, they're only 3% lower despite a 25% drop in crude prices. it gets worser when you look at emerging markets such as china, india where it's dropped by 1%. and ultimately, we will have to see the end consumer having the benefits of the crude fall.
i think it will be a three to four-month period. typically, we need to have that trickle down effect and help demand. >> it's very interesting now, the price of oil is dropping, everyone is coming out and saying, here is what the support level will be, here is where it will bottom out. why weren't any oil analysts, including perhaps yourself, not seeing or we're seeing this price in the drop of oil, it's come as a surprise to global markets, wouldn't you say? >> absolutely. i think we'll be putting the analogy to our clients, opec decision essentially for, like for football games, the goalkeeper walking and now they've said, let the markets do what -- whatever it takes, essentially, to balance it. essentially the they have to use supply and demand and it's never been tested for the last two
decades. that's where the flow is allusive in that sense. who is benefiting oil importers versus oil exporters? in the longer term, are any countries set to benefit in the long-term inspect who has the biggest storage capacity and picking up their oil supplies for the long-term? >> china is a great example where strategic stockpiling is already under way. that is already getting good momentum now with where price res. they did come into the market in october even before the price collapsed. now they will get a bit more active. commercial stockpiling, as well, very interesting. china has close to 80 million barrels of that to fill and india is starting up an str next year which is great for them because the timing couldn't be better, in a sense. >> do you think we see the price of oil drop below $50 a barrel? we could see a rise in m&a, some
of these oil companies saying we're going to consolidate, find ways to combine our assetes and fight off in the price of oil? >> absolutely. in the u.s., it will essentially be plays that are highly leveraged at the moment. they are having a tough time in the credit market whereas the ones that are rich in cash are now in a great position because they could count for assetes and some of these independents will become -- have great valuations coming one to two months. >> let's talk about, as well, quickly about the technicals. we've fallen significantly. what are the next downside levels for support or capitulation? >> psychologically, it's the $60 a barrel level. calls for an opec meeting will get stronger once we go below that psychological value. going into the end of the year, we'll still have refineries that are active because the margins are very attractive at the moment. but at the end of the day, as we
mentioned earlier, the session needs to take place at retailer. psychologically, $60 a barrel and we may go below that and hopefully the physical market reacts thank you very much for joining us, we appreciate it. >> sure. and could the u.s. ten-year yield hit 1% next year? that's what one well respected bond investors is forecasting. we'll debate that, next.
welcome to "worldwide exchange." thanks for joining us. i'm seema mody. >> and i'm wilfred frost. >> stocks bounce in europe after a late comeback on wall street when the travel sector leading the way, but oil prices fall again as opec scrambles to plan an emergency meeting in june. the shanghai composite grows nearly 3%. >> jamie dimon's jpmorgan reportedly needs over $20 billion of additional capital to comply with new rules unveiled by the fed, but the bank says it
is well capitalized and will deliver strong return for shareholders. costco brings up a strong quarter thanks to higher membership fees. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> i don't know about you, wilfred, but i'm getting duzzy watching the shanghai composite. we saw it suffer one of its earlier falls this week, but then today a comeback. is the volatility over? are investors more convinced that china's growth story is more intact? >> i don't think the volatility is ever over for the chinese market, but i agree with you, it's astonishing that we've had a 3% rebound today. yesterday, the rules were announced that would make it harder for retail investors to
use leverage. the fact it's bounced back so quickly today is very worrying, i think. i think it highlights how leverage led this rally is. and as we were talking about a couple of days ago, when the h-shares market is at a premium to the a-share market n, i think this will be short lived. >> i see this gets you excited. >> exactly. and i remain a china bear. so this rally i think is short-term and i think we've worried about any further gains. >> we will be debating that with our market panel coming up throughout the hour. let's take a look at u.s. futures to see how they're trading ahead of the wall street open. the dow jones industrial indicate ago move lower by around 10 points. the nasdaq down just about 5 to 6 points. the s&p 500 also indicating a lower move. we should point out that yesterday in the u.s. markets, while markets were able to stage a bit of a comeback, the nasdaq was able to outperform. not just that, the small cap index, the russell 2000 has been outperforming the market posted
one of its best days in over a month. diving into the europe yap markets, they're open, how are they trading? right now we're in positive territory. that weighed on investor sentiment and even industrial orders came in weaker than expected out of germany. but today, a little bit of a rebound. we're looking at the cac 40 up 23 points. the italian markets up just about 160 points. remember, growth fears in china didn't, again, weigh on investor sentiment yesterday. after markets came off their lows in the u.s., we did see european markets follow through. so green across the screen right now for europe. but it's not just about european markets. a couple other asset classes getting the attention of traders. you have to take a look at gold many times seen as a safe haven for investors especially when there is a rise in volatility yesterday. take a look at the volatility index. it did gain about 4.5% yesterday. gold, while it did rally yesterday is coming off the highs of the day. down just about 0.1%.
wti crude trading at 6255. brent krun down about 1.6% at $65 a barrel. wilfred, as our guest was just telling us, he thinks $60 is the support level for oil. >> indeed. at the moment, of course, it's on a downward trend. we are having a general risk off trend, of course, contributing to oil price declines for equities declining over the last couple of weeks. but in the bond markets, we've seen buying up bonds because of the risk up trade. particularly in the core. look at germany, down 0.686%. it did hit a record low earlier in today's trade. then just picked up a fraction. the u.s. has seen some bond buying. it's going back towards the 2.2% level having been 2.3% just about a week ago. so bond buying for the safe haven, the opposite true for some of the peripheral bonds. greece in particular as we've been talking about for the last
hour, that called for an early presidential election, causing fears we might be led to having partmentry elections, as well. the greek three-year hit 4.8%. people very fearful of defaults if we get the leftist party winning some seats. a long way from that, of course, the presidential election has to come first. let's look at forex. one would think this flight to safety would be for the u.s. dollar bond buying. the broader index hit a five-year high on monday. today, just a fraction more. the euro is up 1.5%, 1.2393. the u.s. dollar against the yen has lost 0.5%. 111.15. it did cross the 120 handle, it crossed the 121 handle earlier in the week. and the dollar strengthening against the ruble, 0.5%. let's go back to seema.
and let's take a look at toll brothers, a company the luxury home building stock did report earnings of 71 cents a share, which did come in below expectations of 73 cents. but it's still a gain year over year. let's talk about revenue. well, the expectations was 1. 33 billion and revenue did come in at 1.35 billion. so a slight beat on the top line, but a miss on the bottom line. we should point out, though, that toll brothers has been on a tear over the past couple of weeks. in fact, rallying just about 12% since september. outperforming some of the other home building stocks as well as the s&p 500. you know, the long-term fundamentals, wilfred, especially when looking at the housing story seems to be intact, given that the economy in the u.s. is improving. that's supposed to help increase house prices and, as well, just be a positive beneficiary for the housing sector. >> absolutely. and i think as the share price shows the last three or four months, it's recovered quite
nicely. up 12.3%. >> and let's focus in on bonds. i was getting a lot of attention yesterday because a high profile investor is making a bold prediction. leave it up to double line capitals saying it's possible that the yield on the ten-year u.s. treasury could go to 1% next year. now, in a web cast, he says that is more likely if oil prices fall to $40 a barrel, which would mean, quote, something is very wrong with the world. now, he notes foreign demand for u.s. treasuries has grown as yields on german and other european bonds continue to fall. the ten-year yield is running more than 1.5% above the yield on the ten-year german bund. definitely a bold call here. >> definitely. and i think it comes down to what he says on that quote. if oil hits that, it's because there is something crazy going on in the world. a weaker oil price doesn't mean we see a flight to safety.
and the last month, if ever, he told us it's a supply side issue, not a demand side issue. if that's the case, there's no reason it has to be bad for risk sentiment. >> so many people got the bond trade wrong this year, wilfred. many analysts were saying that the yield on the ten-year would be at 3% by the end of the year. a lot of that having to do with the rise in rates. but that's exactly the opposite of what we've seep. of course, now gundlach, a well respected investor says it's going to be 1%. let's see if he's right. the monthly federal budget statement is out at 2:00 p.m. eastern. apart from toll brothers, home builder hovnanian reports before the opening bell. we hear from land's end and vera bradley. after the close, we get numbers from men's wear house, that's coming up. stamps.com is the best.
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is that a bad sign? >> no, i think the market is, as i said, the path of least resistance for the market appears to be up. but i think we're in for a choppy period. markets have a weird relationship with round numbers, 18,000. we got right to the precipice and didn't break throw. sentiment was that maybe we're not going to break through. 18,000, as some magic hold on us. and we see that, you know, same thing happen we're at 17,000. even 10,000 if you go back, you know, a long time ago. so as markets, you know, hit these mile posts, it causes everyone to reassess whether we've gone too far too fast. a lot of people still concerned that fed action might spoil the party a little bit so that, really, quick at the trigger, if you will, in times where we're watching these boundary number sgleps and you say in your notes that next year's gains will coming from owning this year's laggards. that's what we were saying last
year, that we didn't think the bond markets could go higher this year. what about this year, can the bond markets continue to see yields go lower? >> as you were just reporting before, if we see, you know, oil really, really collapse and a ripple effect around the globe of, you know, russia and other economies that are oil dependent really in turmoil, i think you would see a flight to safety to the united states to the secure u.s. treasury. and it could move rates low. but as you said before the break, wilfred, if it's a supply side story, that is a little bit different. you know, as long as the demand is there, i'm not sure that you're going to see, you know, the negative effect on bonds that way. i still think that, you know, the bias is going to be if interest rates start moving up, although it's been fabled that that's going to happen for years. although i think we're at the point next year especially with the employment numbers that we've been seeing here in the u.s. that we're way closer to the end game than we've been in a long time.
>> yeah. of course, encan, one of the big questions is how do you trade the stock market? do you sell the sectors which tend to benefit in a low right environment given the benefit yield? >> i don't think so this time. i think one of the things we have to realize is that when rates start to rise, theorizing from zero. and the fact that they might get to 25 or 50 basis points is not going to help, you know, mr. and mrs. back porch america say, you know, get income coming in for retirement. so when you actually look around for places to go, the equity markets are still going to look very, very strong. i think that you have to look past what is going to likely be a knee jerk reaction to when we first get the announcement that we're going to see interest rates move. we're all now on, you know, pins and needles waiting to hear the fed is going to change its language from a considerable amount of time to something that might read more like a prudent amount of time for when they
will start raising interest rates. and i think investors need to look past that. fundamentals still remains strong. the economy is doing vel, very well here in the united states. to your question before, wilfred, about the laggards, even though last year we didn't get it, the whole idea of diversifying the portfolio is and not putting all your eggs in one basket, i said to you last month when i was on that, you know, an old adage that you have to buy them when they're crying is certainly very well in my career. and i'm not suggesting a rotation around the globe out of a strong u.s. market, but i am suggesting that people should look at their portfolios and if they're under, underweighted things like emerging markets or eurozone, you want to start towing into those things now where while the valuations are attractive relative to what's going on here in the said.
>> thank you for your time. let's move focus away from the u.s. and go on to chinese consumer deflation which slipped to a five-year low last month. as we were just saying, chinese stocks bounced back today. the shanghai composite closed up nearly 3% after suffering the biggest one-day drop since mid 2009 amid continued record volume. samantha is standing by for an update in asian markets. >> today, concerning what we know about china, conditions are weak in the country, but there was a surprise to the downside. and that is really coming from
supply side factors. of course, you know, a fall in commodity prices are putting downside pressure on inflation across the globe. that is certainly taking place in china, as well. you just have to look at retail oil prices during the month. that, of course, one of the factors why we saw that cpi read coming in at 4% on an annual basis. the commentary out there shows inflation is a concern. hsbc saying cpi falling. the cpi fall indicates that we've got entrenched low inflation in china right now. morgan stanley saying that we'll see inflation in the 1% to 2% range. of course, that is far off the 3% target. if you just looked at ppi, it's been in negative territory now for 13 months. during the month of november, ppi down 2.7% on an annual basis. when next will the central bank act? they're saying that we might see a move in the triple cuts by the end of the year. morgan stanley pointing out that
we've got fiscal expenditures still moving into the economy, so unlikely at the end of the year, more likely next year quarter one. back to you guys. >> thank you very much for that. sam. our headlines at this hour, wall street is shrugging off europe's rally as u.s. futures point to a lower open. costco sees the rise 17%. and fed vice chair stanley fischer let's slip jpmorgan could fies a shortfall of $20 billion if the fed proposes tougher rules for u.s. banks. and forget online. the mall is still en vogue this holiday season for teens. we'll discuss what that means for the retailers, coming up.
let's take a look at the u.s. futures. is this a start of the rally for the small cap, something we'll we asking our guests later on in the show. right now, the dow jones industrial with a lower open by around 10 points. according to a teen vogue survey, young shoppers say they like to see what they're buying
in person while pigging up a little something extra for themselves. jason, thanks very much for joining us. i mentioned in the survey, particularly of the top three reasons for looking forward to spending at a mall rather than online, 75% say they want to see the store decorations and displayed. is this a theme around the holiday period when those decorations are up? >> i think it's a general theme through outst year, wilfred. teenes and millennials in general like the experiences when they go shopping. let's not forget that the world social used to mean less than a decade ago that there was peer to peer reaction. it's taken on a new meaning now that the mall provides a great opportunity for kids just to get out and shop and have great experiences like going to the movies or listening to music. >> your research shows, jason, that teens will spend about $287 this holiday season.
where is that money coming from? are teens employed more so this year than last year? we've been focusing on the strength of the labor market. is that helping the teens? >> we have seen an uptick in teen employment. that's a good thing as new jobs come into america. we also discretionary income from just part-time jobs, whether it's baby-sitting or doing landscaping or tutoring through college. teens have discretionary income. . >> the question is, what are they spending on? every retailer is trying to understand the mind-set of a teen. but it's difficult given that their choices or habits change on a regular basis, given your role at teen vogue. what do you think? what is the big trend this holiday season? >> well, apparel ranked number one on the list, footwear is number two, cosmetics is number three. these are the top three categories that we typically see from our fashion forward audience when they're shopping
during back to school or during the holiday season. we were encouraged to see denid. we're seeing an uptick expected in that over the holiday season this year. >> how about the strength of the teen overall? you're seeing the average amount they plan to spend is $287. how does that compare historically? >> well, it's up about 9% compared to last year, so that is good news for retailers. these mall experiences are really doing great things to draw teens into the mall and shop. one of the interesting things they said about why they prefer to shop online over in store was 43% of them thought malls were overcrowded. that and some ironic statistics bodes well for those who rely on mall traffic. >> jason, thank you very much. now, will, you've often said on the show that you can't see yourself swapping your wristwatch for a smart watch. and it seems like you're not alone.
research recently suggests european consumers are less looip likely than americans to wear a computer like an apple watch on their wrist. however, you guys are more open to waerlg health monitors or smart glasses. americans, on the other hand, are more willing to consider all types of devices from smart julie to smart contact lenses. does that mean americans are more tech savvy that the average european consumer? >> i don't know. i think there could be a lt of generalizations drawn from this. but i guess we can see that kind of sentiment. when the microsoft band came out, i was very excited ahead of that because i was hoping that would be something very small that you could wear on top of a watch. but even those types of things are clunky and i don't see the desire to -- i don't mean to make an overgeneralization, but typically as an american coming to europe, the average european is much more fashionable than the average american many times. so perhaps that has something to do with it, too.
i am still learning about europe. you have your days. some days are quite fashionable, some days i'm like, what is he doing? >> definitely something we'll be watching this holiday season. apple smart watch comes out early 2015. will it be a game changer? we'll have to see. speaking with tech, mark cuban says alibaba should not have been allowed to list in the u.s. we discuss this and the recent tech sell-off, that's coming up after this break.
thanks for joining us here on "worldwide exchange." i'm seema mody. >> and i'm wilfred frost. >> stocks bouncing back in europe after a late comeback on wall street with the saddle sector leading the way, but oil prices fall again as opec scrambles to plan an emergency meeting in june. shanghai composite recovers closing up nearly 3% shedding off fears of deflation as chinese cpi falls to a five-month low. jpmorgan and jamie dimon reportedly need capital with new rules by the fed, but dimon says it is well capitalized. costco sees higher profits
thanks to higher membership fees. >> you're watching "worldwide exchange," bringing you business news from around the globe. >> seem yab i have to say, yesterday i do think the way the u.s. market rallied into the close is very positive in the short-term for u.s. markets. because it started its sell-off in yesterday's trade because office what was happening elsewhere. china was off 5%. of course the u.s. started weak.. the fact that it rallied throughout yesterday's showed that they're ready to step in. >> and there was positive data that came out from the u.s. investors turned away from the bad news happening globely and focused on the data which comes in for the most part better than expected. let's take a look at u.s. futures. the dow was down at the lows of the session. and in the green.
let's take a look at european markets. it is a green day here in europe, despite some down beat economic data yesterday. we got weaker than expected manufacturing data from the uk, but right now, the ftse 100 staging a rebound here, up just about 12 points. the xetra dax up about 66 points. the cac 40, the french markets, up 16 points and the italian markets looking at 0.5% gain. we should point out that tomorrow the health of the banking sector will be in focus. we'll get data on the success of the teltro program. are banks using if cheap loans week offered by the ecb? that is something we will get the answers to tomorrow. back to where we were seeing the action in today's trade yesterday. given the choppy session we saw on wall street, interestingly enough, we did see a rise in the volatility index. it rose as much as 22% over the
past two days, for the first time in over a month, right now trading just around 15. keep in mind it's well below its historical average of 20. gold in focus seen as a safe haven for the market. it did get a boost yesterday, but right now, trading at 1,228.50 an ounce. and then there's wti crude trading at a five-year low. brent crude, same deal here at $55 a barrel. >> thanks, seema. now, the fed is proposing tougher capital requirements for banks. the banks would need to hold more capital to ensure they don't rely too much on risky debt. the rules are toucher. fed vice chair stanley fischer accidentally let go at the public meeting jpmorgan is the only bank facing a capital shortfall. jp spokesperson says the well is well capitalized. it's a little embarrassing that the results of the test has come out early, but the response in the share price shows it's not
been taken that seriously, down only about 0.5% in after hours trade. so i think the bigger question here is whether banks want to be as big and clunky as jpmorgan. because it means they do fall fall of the most string yept part of bank regulations. >> and did they become too big to fail? that's one of the phrases coined around the financial crisis. jpmorgan, muck other banks, have done pretty well so far this year. the s&p 500 financial index up just about 10% so far this year, or 13% outperforming the s&p 500. some of the big banks like goldman sachs, morgan stanley, jpmorgan, all in the green. brushing off these concern around capital shortfalls or legal disputes. we should point out jpmorgan is known for saying that it has a fortress balance sheet. that's why this came in as a surprising statement from the fed. >> indeed. speaking of banks, we got some breaking news in the last few minutes. a source says the hsbc has dismissed its london head of
foreign exchange trading. this is in connection with the global investigation into fx manipulation. now, mark cuban has some harsh words for alibaba. the billionaire investor and owner of the dallas mavericks of the nba team sells cnbc he does not think the chinese company thoovb allowed to list in the u.s. cuban says because alibaba is based in a communist country, it's more difficult to enforce insider trading laws. listen in. >> should the s.e.c. have turned allibaba away? >> yes. >> alibaba should not have been allowed to list in the u.s.? >> no. listen, if you're host -- at least the chinese operations, this is just my opinion, but if you're based in a communist country where the only rule of law is what the communist party says it is, how can you enforce any type of law at all? >> that's mark cuban in conversation with our melissa lee. we should point out cuban acknowledged he's a hip credit because he owns shares of
alibaba. he says the issue is more about laws being applied equally. cuban has been calling for reform of the s.e.c. which prosecutes such cases. now, sticking with tech, the mega tech stocks leading the declines in the market early this week but some staged somewhat of a comeback. the nasdaq was able to eek out a gain yesterday despite losses on the s&p 500 and the dow. will the volatility continue? let's bring in santos rowl. thank you for getting up early with us. the volatility that we saw not just in the new tech names like twitter and alibaba, but even old tech, microsoft, yahoo! intel selling off earlier this week, did that come in as a surprise to you and is that a concern that this is the start of a sell-off? >> no. good morning. thanks for having me. i don't think this sell-off was as big as it's made out to be. i think all the stocks that you mentioned are still doing very well. they're slightly off their
peaks, but still outperforming the overall market. so i think just to make that statement would be -- would not be fair. overall, i think we've been in a risk on environment whethn ther is risk on techs overshoot, people look for growth. these are the growth stocks. investors are driving it up. the correction is warranted and that's what's happening. but i don't think there will be a big sell-off because -- especially the bellwether stocks are really trading on good fundamentals. and investors are really very -- using their discretion at this point. they are pug companies that are not meeting expectations, don't have a good product line or good outlook. they're rewarding companies that are doing well. so i think overall, i don't see a frenzy out there in the tech carrier. >> and overall, with these valuations, as you say, there's a bit of a correction, but tech valuations certainly still very high overall. do you think we're going to see a lot more tech ipos next year? >> yeah. and that is what we follow at
manhattan venture partners. we follow the private companies very closely. i think the whole trend will continue. it will be a much more healthier environment in 2015. you'll see some of the bubbles, so to speak, that you talk about will come off. you'll see some reasonable valuations. and i see a whole -- quite a few teams playing out in 2015. you can see streaming business, streaming music like spotify or e-commerce international business, then also you can see some big data plays like palantir. so i see a number of themes playing out in 2015, as well. >> do you think investors have warmed up to the idea of investing in chinese ipos? it was just a couple of years ago where many times the u.s. investors would say there's still a lot of transparency issues around these companies that list on the u.s. stock exchanges, but now given that alibaba with its success, have u.s. investors warmed up to the idea of investing in these
names? >> i think so. i agree with that. all the risks have been telegraphed very clearly. everyone knows what they're getting into. you really can't ignore the biggest consumer market in the world. it's the biggest economy in the world or getting there, growing the fastest. you can't ignore that and some of the best way toes play that market is alibaba and a few other names. so i think investors know the risks that they are getting into and they have warmed up. >> as we look ahead to 2015, what are you thinking would be more attractive, the growth ends of the tech market or the traditional end of the tech market with a little cheaper valuations? >> i think the traditional will do very well because they are coming off some low base and they're really going on fundamentals. there's a good outlook for all of them, like the microsoft and google and apple has its own issues. but that their product line and all that. so i think if that comes to fruition, that, again, has a lot of growth ahead. but i think it's going to be a
combination of both. it's going to be the traditional tech stocks that will do well and you'll see some good names, private names with good reasonable valuations come to market next year. >> of course, you have to be able to endure the volatility that comes with investing in tech. so we'll have to see how that plays out. santos, thank you for your time. speaking of tech, amazon has day bud a making offer haggling offer on its site. amazon's offering will be available on more than 150,000 items. so we would like to know, are you a haggler yourself? do you haggle on some purchases but not on others? if you want to join the conversation here on "worldwide exchange," get in touch with us by e-mail, email@example.com or via twitter, @cnbcwex. and our pernl handsonal handles the screen now. may be one off large purchases if you're buying a car. the general retailer i think is
about speed. you want to go in sxb get out, i don't have to have to haggle over the price. >> i think if you are online, you want to make that purchase as soon as you can. as a company, i think you offer them the best price. i think the haggle delays that point of purchase. if consumers say we're going to give up and go to another site to make the purees cha. in terms of haggling, i grew up going to india with my parents where if you would go to the markets, you would never pay the asking price. you always haggle. >> do you do that when you go into tesco? >> ten pounds for milk? are you kidding me? >> whole foods, by the way, very expensive here in london. coming up after the break on "worldwide exchange," telecoms warn the fourth quarter profits could get hit as they feel the pressure of heavy promotions. we'll discuss that after the break.
at&t, century link and windextrewin windstream. so a tough day for telecom stocks, wilfred. >> absolutely. they're wanting the rules on net neutrality to be relaxed, but so far, not likely that's going to happen. uber may be a fast growing company with an estimated valuation of $40 billion. but the ride sharing app's list of woes is start to go mount around the globe. let's get out to landon at cnbc hq with more. >> prosecutors in los angeles and san francisco have filed a consumer protection lawsuit against uber. it alleged the ride shares service is misleading people about safety and is overcharging passengers. this claims uber is making false statements about the background checks it conducts, saying it doesn't fingerprint passengers making background checks
completely worthless. uber charges $4 toll for picking up and people dropping off at the terminal. the district attorneys in san francisco and l.a. are seeking an injunction, forcing uber to stop violating california civil law along with penalties and restitution for riders who suffer economic harm. a spokesperson says the company will continue to meet with prosecutors to address their concerns. in a statement, she says californians and california lawmakers all agree, uber is an integral state and an established part of the transportation ecosystem in the golden state. separately, state prosecutors have reached a settlement tooem deal with lift which has agreed to pay $500,000 and change some of its business practices. list will stop picking up passengers at airports until it gets the proper pirmts and it's
out to a state testing agency to measure accuracy, something uber refuses to do. uber is facing pushback. police in india said a driver arrested this week on suspicion of raping a passenger is a career criminal. he was out on patrol for assault and robbery. in thailand wants to ban all out-based taxi services. wilfred, back to you. >> landon, that you can very much. in other news, let's put focus on congressional leaders having agreed on a massive 1.1 trillion spending bill to fund most of the u.s. government through next september. homeland security is only funded through february, setting up a fight between the white house and republicans over president obama's immigration policy. the 1600 page bill includes money to fight isis and ebola, a pay raise for active duty military and federal workers and changes to campaign finance laws. detroit is set to exit
bankruptcy today as the city's adjustment or restructuring plan takes effect. detroit filed for the largest municipal bankruptcy last year. it won approval from the u.s. government last month to shed about $7 billion of its $18 billion in debt. detroit is expected to settle up with critters and plans to borrow $275 million from barclay's capital to retire debt .pay settlements. >> would he have been talking about the rally in airline stocks, a lot of that having to do with lower oil prices. but some is more good news to the industry. the iata has upped its profit forecasts for global airlines this year. iata says falling fuel prices and stronger economic growth means airlines will report nearly $20 billion of net profit in 2014 up from its previous forecasts, up 18 billion. and better news, iata says profits will jump to $25 billion next year. now before we go to break, a reminder of your headlines.
the stock rally in europe failed to light up wall street as u.s. futures point to a lower open. costco sees its profit rise 178%, but the bottom line misses expectations pep. and vice chair stanley fischer accidentally let it slip jpmorgan could face a shortfall of $20 billion as the fed proposes tougher rules for u.s. banks.
a choppy session for u.s. markets yesterday. the dow was down as much as 22 points, then came off the lows of the day thanks to better than expected economic data. right now, futures pointing to a lower open ahead of the wall street open. the dow indicate ago move to the downside by around 10 points. the s&p 500 and the nasdaq both down in premarket trade. we should point out, though, yesterday, the focus was really on the russell 2000 which was able to eek out a gain, its best day in over a month, a gain of about 1.5%. but let's get you a rundown of what to watch this trading day. the monthly federal budget statement is out at 2:00 p.m. eastern, home builders, we heard from toll brothers. we also hear from hovnanian later today. we get earnings from land's end and vera bradley. after the close, our attention will turn to men's wearhouse. yum brands is cutting its full year outlook for the second time. the the parent company of kfc and taco bell now expects full
year profit growth in the mid single dij percentage gains down 10%. yum fell 6% if after hours trade. it's down about 4% thus far in frankfurt trade. coastco reporting first quarter results in the past two hours. the discount retail club operator profit rising 17% beating estimates thanks in part to higher membership fee s. revenue rose 7% fairley shy of estimates. just about 7% both in the u.s. and internationally, excludeing the impact of foreign currency and, of course, lower gasoline prices. let's break down the trade on costco with brian negel, retail analyst at oppenheimer. i guess my big question is does cheaper fuel mean its customers are spending more time and shopping more at costco because they think that they've saved at the gas pump? >> good morning. it's a possibility.
you know, i think the bigger way that -- or probably the more important way that lower benefits fuel costco, that's essentially manifested itself in better margins for costco. we saw clear evidence of that in today's report. >> let's talk about the earnings overall. the eps came in at $1.12, coming in slightly better than the forecast at $1.07. what were the main drivers for that? >> gross margin. i go through the release, costco puts out short press release, says we're going to have to wait for the company's conference call here to get more details. i think a lot of that reflect tess benefit of lower fuel costs, there's the possibility that they're seeing improved merchandise margins at the company. >> another question, brian, is will future earnings from costco see a strong tailwind from lower gas prices given that it is one
of the largest fuel retailers out there? >> i think so. you know, in this, the benefit will tail off to a certain extent, but we probably have at least another couple quarters. i mean, this is obviously depending on what's happening with fuel prices. but if fuel prices stay where they are now or continue to moderate lower, i would assume you get at least another couple of quarters to benefit from this. >> if we look ahead to 2015, we've been talking a long time about whether the low end retailer is going to benefit from the improving employment situation. the oil price as we mentioned, is coastco a good pick for you for 2015? >> my only concern with costco has been valuation. i recognize costco is one of the best run retailers at least in the united states, potentially in the world. my concern is the stock trade, depending on what earnings you're looking at upwards of 30 times. the bigger question, it's something i'm wrestling with. i think there will be beneficiaries out there with
respect to lower gas prices, but i don't think so b the benefits are going to be as clear cut as the market believes at this point. >> let's talk about the international opportunities for costco. it will open a flagship online store in china operated by alibaba. how big of an opportunity is china for costco and does it have a brand name that will resinate in asia? >> the best way for me to answer that is that coastco has been very successful outside of the united states. and a company comments continually that some of its best performing highest volume clubs are indeed outside the united states. i think that is a very good base to say when we start thinking about costco in china. it's difficult to say the alibaba relationship because that is something that will be new for coastco, but they have been successful overseas. >> we're going to leave it there. brian nagel, retail analyst, from oppenheimer talking costco. appreciate your time. let's give you an update on
of what happens in asia overnight. yesterday, 5% declines in the main a-share market in shanghai. today, we bounce back, 2.96%. making it look like that was just a brooe one-day correction. a big move, big volatility in shanghai. what has that meant for european markets? european markets bounced back today. they declined around about 2% to 2.5% yesterday. today, they are up around 0.4% for the stoxx 6 hup. germany is leading the charge up about 0.8%. >> but, you know, political uncertainty continues to way on the athens index. the greek stock market posted its largest drop in at least 27 years yesterday, down just about 12%. as we've been discussing ones "worldwide exchange," that political uncertainty most likely will continue. >> what does all this mean ahead of the u.s. open? yesterday it recovered from its lows. but today, u.s. futures pointing to a negative open. that's all the time we've got today on "worldwide exchange." i'm wilfred frost. >> thank you for watching. i'm seema mody. "squawk box" is next.
good morning. the government suggesting relief at the bump, averaging $2.60 for 2015. los angeles and san francisco are suing uber. meantime, rival lift is settling with prosecutors. and a health record card, new rankings out this morning finds americans are smoking less but eating too much. that's what happens, right, when you try to quit? so how healthy is your home
state? it is wednesday, december 10th, 2014. "squawk box" begins right now. good morning, every. i'm becky quick along with joe kernen and andrew ross sorkin. let's get to the three big stories on our watch list. congressional negotiateses reaching a deal for a $1.1 trillion spending bill. the key development will allow lawmakers to avoid a government shutdown tomorrow. john harwood will join us from washington later this hour. overnight in asia, chinese stocks rallying to recoup nearly half of yesterday's losses. this despite worse than expected inflation numbers that added to worries about a cooling economy there. so we will take it. however, stocks dropping sharply in tokyo. main reason? a government survey that showed big japanese manufacturers are becoming less optimistic and predict conditions worsening in the coming months. pe