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tv   Worldwide Exchange  CNBC  January 15, 2015 4:00am-6:01am EST

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hello, good morning and welcome to worldwide exchange. >> thank you for watching. these are headlines from around the world. >> crude comes off a six year low late in trade yesterday. >> spain falling further into deflation recording the steepest drop on prices on record in december. this as former spanish prime minister tells cnbc job creation in the country still needs to be improved. >> it's not enough for the people. it's motte enough for me. it's totally unacceptable. >> indian bank stocks rally
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after rbi governor takes the market by surprise with a rate cut citing lower energy and food prices. >> no deal on the line. blackberry shares reverse course after jumping as much as 30% after the phone maker and samsung deny a report of a $7.5 billion deal. >> you're watching worldwide exchange. bringing you business news from around the globe. we have just got confirmation that german gdp has come in at 1.45%. that's the strongest rate in three years. it's coming in as expected at that moment and the quarterly number shows a big bounce back to around .5%.
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it must be hah number. from q 3 which was only .1%. if we rewind to october when we got it people were fearful that germany and europe was falling into that falling growth falling possibly into recession category and that lead to a big sell off in risk assets. the fact that we can say that germany is growing with friday jillty around it. >> germany is the largest economy in europe. a lot of focus on not only the success but the strength in it's economy. it was in the third quarter it narrowly avoided a contraction in growth so a lot of focus over the german economy over the last couple of others. the other big concern is the impact of western sanctions on russia given that germany is one of the biggest trading partners is russia. how that will impact demand going forward. >> absolutely.
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plus 3.7% year on year imports. so as we said overall the number coming in plus 1.5% for german gdp growth as expected. >> already moving it's right now up about 1% in today's trade. as you were pointing out the euro trading at 117. it's been hovering around that level against the u.s. dollar. the world economic forum launched it's annual global risk report outlining the most significant risks facing the world economy. it comes days before the start of the forum's annual congregation of business and political leaders. we spoke to president of global risk at marsh and asked him about the shift from last year to 2015. >> last year and a number of prior years the big focus was on economic risks. the fiscal crisis and some of the government fiscal problems stemming from the last financial
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crisis were at the top of the list. geopolitical list and societal lists are the ones with the most potential for medium term harm. >> any surprises that crept into this year's report that you think are worth highlighting. >> surprises, maybe the fact that economic risk did drop as much as it did because from our standpoint it's still out there in the form of low interest rates and the potential for that to get even worse could potentially cause monetary policy that inflates asset bubbles and we could be back with economic risk again but i think this year the perception survey certainly focused more on geopoliticals and societal risks. >> let's talk with richard kelly. head of global strategy at t.d. securities. you heard that interview. what do you think is the biggest
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risk going into the new year? >> if you're looking at financial cry cease and the credit cycle in general that could fall out of falling oil prices and the lack of growth we're getting. but most immediately what you have to see is a sustained pick up in growth around the world. getting traction from lower oil prices. it may not be an immediate driver of crisis but if we don't get the traction we do have significant risks of depolice station and worries a bit from now. >> in your notes you wrote that oil prices are positive for consumer demand. on top of that we're a long way through the q-3, q-4 surprise that oil prices were falling so sharply. it's now consensus that they will stay lower longer. so why are risk assets responding negatively as well? why is that still the case? >> the issue is we haven't seen the positive benefits. it takes about six months before you actually get to start to see the positive benefits from
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consumer spending from the declines in oil prices as they feed through and consumers build up disposable cash and start to spend it. until markets see the benefits and u.s. retail sales yesterday didn't help the case. we just ceelo oil prices. >> oil of course is many times seen as a big risk going forward for this year. we have been discussing the broader implications. norway, western europe's largest oil producing nation, their oil and gas investments will come in lower than forecast. versus an earlier forecast of 180 billion. just to give you more headlines the director says if the oil price should remain around 50 to 60 barrels overtime this will result in an additional reduction in investments.
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of course stat oil a big oil giant in norway. we're talking about the impact of lower oil prices going forward. is there a trade here when looking at norway? >> you continue to be short norway, you're being short against the u.s. dollar. if you're looking at two g-so markets that will struggle those are the two still there and you still have a risk of further easing on the back of this. >> norway when you take a step back and look at europe is considered to be one of the richest countries in europe given that there's so much oil money. so what happens to the wealth of the nation if oil prices continue to decline. >> it's a stock versus flow effect. there's still a lot of wealth there like there's still wealth in the middle east but the inflow is going to trickle and you'll have to adjust the business plans that are in place. >> we'll continue the discussion with richard kelly. thank you for your time. more about europe in just a bit but first let's get a market
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update. let's have a look at european markets and we're in the green today up about .94%. all to explain why let's recap what happened yesterday. european markets were off sharply because of commodities. mostly copper. the energy stock performance for european stocks was a lot worse than u.s. stocks. european markets catching up today and the two best are oil and gas and basic resources as well. u.s. markets finished the day down for different reasons because of the retail numbers. the reason we're bouncing back today in europe is because energy stocks rallied after european stocks closed yesterday. let's have a look at where that splits itself out.
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ftse 100 up and germany with the gdp coming in line with expectations confirming 2014 growth was 1.5% of gdp growth. let's look in on bond markets. now the u.s. yield is well below 1.9%. 1.8 period yesterday. there was a 30 year yield that came in at 2.43%. strong demand for that yesterday just coming off some of the highs in bond prices. yields ticking up a fraction. german yields despite decent enough growth figures still very low pointing to expectations of bond buying from the european central bank 0.44%. >> the u.s. dollar bounced back against the yen today at 117.5. it did go below the 116 handle. haven't seen those levels since back in early december. so the yen has been
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strengthening against the u.s. dollar for the course of this year. that's not the case for the euro up today 0.25%. it's still above the lows it hit in wednesday's trade which is below where we are at the moment. just above the 117 handle. the euro in and around the nine year lows on expectation of balance sheet expansion from the ecb. commodities have been driving markets significantly. wti and brent both off today but yesterday if you look at the u.s. market trading hours it was the best day since june 2012 for oil. coming off today 47.6 wti. 47.4 in brent but we're back above the 5.5 year lows in european trade yesterday. sri is standing by in singapore as ever. over to you. >> good morning, wilfred, very constructive session.
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i wanted to highlight one of the big stories of the day, that was central bank policy from the reserve bank in india. rate cut by 25 basis points and the prospect of further easing to come. so up sharply 2.8% at this juncture and the nse bank index outperforming as well. a record high for the index. the best day in the mainland stock market since january 5th but remember liquidity and volumes were on the thin side because a lot of the ipo activity locked up some of the liquidity so it could be exaggerated to a degree. so outside gains is -- oversized gains is how i would probably characterize it. up by 3.5%. we did have disappointing lender data. weaker than expected but that probably builds the case for more policy action. one of the reasons i did see quite a big move. the other factor here, local
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media reports at beijing could channel more infrastructure spending into the western provinces. stocks were solid today. they put in a solid performance as did financials and energies. the nickikkei seemed to be an indicator but that pause benefitting it. best day for the nikkei. back to you. >> coming up on the show smartphone wars reunited. xiaomi's biggest rival. how does it compare? and 3,000 feet over 19 days. we tell you about two americans that completed the challenge of a lifetime and the nba lands in london. the new york knicks face-off against the milwaukee bucks. cnbc asked hakeem the dream who
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he is rooting for? >> the knicks because they need all the help they can get. so i would do something like that.
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the price of copper rebounded slightly today after falling to a 5.5 year low yesterday in part after the world bank revised down it's global growth forecast. copper is seen as a key barometer for economic performance. it's up 1.6% today but still down over 30% -- 13% over the last 30 days. we're joined now by andrew head of metals and mining and still with us is richard, head of global strategies at t.d. securities. andrew. let's start with you. thank you for joining us this morning. copper's belated sharp sell off year to date particularly yesterday, is it catching up with the general commodities sell off we saw last year particularly in oil? >> that's what the market is trying to get it to do. there's a narrative in the market at the moment that we're trying to get all commodities to do the same thing all at once. copper is sitting out there.
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it's a very high profile, liquid, high beater commodity. people do try to lump them together. the hard thing is commodities do tend to move together for lots of reasons. you can get a dollar strength depression. you can get implications of oil coming through and of course you get a lot of redemptions and a lot of shorting of it as an asset class. the market is trying to mark it into a demand issue. there must be a big physical problem in the copper market. the problem is actually there's not a lot of data that says that. industrial metal industries fell in the fourth quarter and most markets are still doing what we all expect them to do in any case. everybody is trying to lump it into a demand issue. >> given the recent drop in the price of copper do you think some countries will take advantage and buy on the dip? one example is china which saw a
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record oil import number earlier this week taking advantage of a decline in oil prices. >> the big lesson in 2009 is that the chinese are able to buy and store significant amount of cops. copper is different to oil is that you don't have the storage constraints. china is about 45% of demand they net buy about $9 million in copper a year. they're investing in other areas. >> i guess you can store oil on sea which as copper you can't do the same. >> but you can store it in warehouse and it's a high value dense material. so you can have large quantities of it. >> so therefore i think if
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you're going to see a lot of potential buying out there. it's a real bear trap at the moment. >> i get that people are trying to explain the oil commodities. doesn't explain why yesterday we saw 7%. all of a sudden a massive sell off. what's the reason for that move particularly yesterday? >> the thing that's changed a lot of people trying to point to inventory moves. when you look at producers they're not saying they have an immediate demand issue. what you're seeing is a significant growth in short interest. i think copper has been sitting out there as a very visible commodity to go short on in terms of growth issues and in terms of the commodity narrative. it's mostly speculative shorting taking it down to this level. >> and in the short-term in terms of trying to workout when that supply demand balance can move up again does chinese new year have a big effect on
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chinese copper. >> i'd love to see a big effect and i tried to look at it over several years. you get a slight interruption in demand but tends to not necessarily see a huge amount of price action, seasonality over the past year or two. i think what you're seeing at the moment is consensus. a supply driven surplus. the narrative of that is coming in. most people are in the process of gutting their supply surpluses this year because of a lot of delays to mine projects and we're seeing people bring their fundamental things back toward a balanced market. so you're actually seeing a strange shift at the moment. people are getting more bullish fundamentally but the markets selling off. >> thank you for joining us this morning. andrew keen head of metals and mining. we'll bring you flashes on russian auto sales. they finish the year as a whole
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down 10.3% year on year but did see a pick up in december which was up 2.4% from december in the previous year. of course the year on year number for the whole of 2014 unsurprisingly down given the economic turmoil faced in russia at the moment but interesting to see december pick up a little bit. there were some stories that people were trying to off load the rouble assets they had throughout december and buy assets like high end cars. i wonder if that had a factor with december showing a little bit of a tick up. >> and let's switch focus from russia to spain. spainish prime minister says the country's economy grew 1.4% in 2014 just above previous projections. reforms in greece and spain were delivering results. >> translator: we are convinced that these are forms when necessary to enable us to create better economies with solid and
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guarenteed foundations where prosperity will be continuous. the reforms that greece and spain made are baring fruit. >> let's have a look at this wall which used to be the european inflation wall. it's now the deflation heatmap. we had the latest numbers coming out of spain. spain fell further with cpi at 0.6% on the month. that's the deepest drop on record. much of the fall of course to do with lower energy prices but food and beverage prices also contributed. we glance very quickly and you can see that greece is the darkest red on there down 2.6%. italy in a pink color. the numbers just below flat as we look at things. stefen is in madrid as we continue our tour of europe ahead of next week's ecb meeting. stefen, good morning to you. do these numbers do you think drive a little more to press the bond buying button? >> well that for sure.
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the reaction of the european level from the central bank will perhaps change given the latest that we had in spain. that being said deflation is a risk for the spanish economy and the unemployment rate remains one of the darkest spots in the spanish economy but despite this the spanish economy is recovering the growth was 1.4% last year and for this year the prime minister is targeting something around 2% target that has been confirmed by the bank of spain. driven by exports which have been recovering last year. driven by consumer spending even there's a slight recovery for now. it may be boosted in the future by the lower price of oil. of course we mentioned labor market which is under deflation. so what can we expect from the central bank? is the european central bank doing enough to support the economy recovery in spain? i asked the question to the
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former spanish prime minister. >> the job is positive. another thing is you are supporter or no you think that it's necessary policy similar to quantitative division in europe. maybe we needed to stimulate growth in europe because there's the lack of growth and this is a very serious problem. this is one of the reasons because the countries that make reforms can reach more rights of growth than the countries that don't. >> but do you think the ecb should take non-conventional measures? >> i think it will be maybe in taking some decisions in favor
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of some kind of quantitative easing. >> what do you think is the risk of deflation in europe? >> deflation and lack of growth. because the problem fundamentally is the lack of growth. we're trying to eliminate risk in terms of deflation. >> and because of the gradual spanish recovery confidence is back on the bond market with the risk premium below 100 points and the banking segment is improving. at 13% at the end of last year. that was the lowest ever in one year and the economists believe lit continue to increase and could hit 10% at the end of this year. with that i send it back to you. >> stefen thank you so much and i hope you enjoy your time in madrid. i haven't been yet. >> it's a lovely city and one of
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stephan's favorite in fact. >> i bet. now of course deflation not the only challenge posed to spain. the regional leader has announced regional elections to gauge lawmakers appetite for independence. the election will be held in september and could allow catalonia to declare independence from spain. the spanish prime minister says spain's constitution would prohibit catalonia from breaking away. let's talk to richard kelly head of global strategies at t.d. securities. how much are you factoring in political uncertainty which includes greece's election on january 25th. >> and portugal has elections coming up here and trying to find an italian president. it was one of the features into 2014 that would have more scope other than the greek side of the elections. this is the aftermath and it was
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the growth that makes things look better. it's one of the star performers that's seen traction because they delivered a lot of difficult reforms and we're seeing the same thing in ireland seeing a lot of the traction. it's areas like italy where you're not getting the traction. greece mcoming through because of poor growth and not delivering structural forms. >> richard, thank you for joining us. richard kelly head of global strategy at t.d. securities. coming up after the break we go global. we're live in tokyo and beijing for a wrap on the moving news out in those regions. stay tuned for worldwide exchange at its very best.
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as these may increase the risk of serious side effects. put the odds on your side. visit to learn how to save on your treatment. talk to a headache specialist today about botox®. oil and energy stocks lead european markets higher after crude comes off a six year low late in trade yesterday. >> spain falling further into deflation recording the steepest drop in prices on record in december. this as former spanish prime minister tells cnbc job creation in the country still needs to be improved. indian bank stocks rally after they take the market by
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surprise with a rate cut citing lower energy and food prices. >> no deal on the line. blackberry shares reverse course after jumping 30% after the phone maker and samsung denied a report of a $7.5 billion deal. and deflation continues to be a big concern for investors but is it impacting european equities today? not so much. xetra dax up about 1%. ftse 100 around .6%. this is following the sell off that we saw on wall street yesterday. a lot of focus on the disappointing retail sales data that weighed on investor sentiment. >> let's also look at some of the individual stock movers here in europe. shares in home retail down 7.5% as black friday promotions lead to weaker than expected sales
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for the period. they still expect to hit the full year pretax profit target. tullow oil is just below flat. it had been out performing earlier in trade. it wrote down $2.3 billion relating to export projects last year. they also decided to cut it's investment plans for 2015 for the second time. h&m is up 1% after december sales beat expectations up 15% year on year. they opened 361 new stores since december 2013. finally bovis homes up 5.8%. that's in line with analyst forecasts. it expects further revenue growth and plans to announce a final dividend in may. speaking of squawk box earlier, squawk box europe earlier this morning the ceo gave insight into the company's growth
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strategy. >> for us it's about how we drive our business forward and the growth of our business will not come from an improving market. it comes from solid investment. we bought more land in 2014 than ever before and that's what will drive the growth for our business over the next few years. >> u.s. retail sales fell 0.9% in december. the biggest drop in 11 months. despite some calling the slump a blip. courtney reagan takes a look at how it impacted last month's sales. >> maybe as some economists are saying the government retail sales figure is wrong. it's a fact that prices at the pump have been lower for more than 100 straight days drivers may not be diverting those into retail spending. the average american driver will save $800 this year thanks to lower gas prices assuming they stay around these levels but it's also important to remember
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those savings come a little bit at a time and many americans are also facing higher health care costs, higher education costs and other large bills that may be keeping them from plowing gasoline savings into retail. now the census bureau says retail sales fell 0.9% in december. much lower than forecast and the largest decrease in 11 months. now those readings are part of the equation that the national retail federations economists used to tabulate their holiday sales results so according to the nrf, total holiday sales in store and online rose 4.0%. just one tenth lower than the group's forecast for the season which came out in october. total sales they say came in at $616.1 billion. that's $800 million shy of the initial estimate. now if you separate out non-store holiday sales those
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increased 6.8% but still shy of the 8 to 11% forecasted growth. the consumer discretionary sector is one of the weakest growths. some of the biggest retail stock losers include guess, new york and company, foot locker deckers the company that makes the uggs and pvh. back to you. >> now just going to bring some news out of switzerland. the swiss bank has risen after the snb lowered deposit interest rate to minus 0.75%. lowered the target range to minus 0.25%. some comments coming out of the snb saying the swiss bank is still high but the overvaluation has decreased. as you can see at the moment the swiss franc has weakened against
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the dollar today 0.3%. 1.0214 where as it has strengthened a little bit fwens against the euro. >> the swiss equity index is extending it's losses down better than 1.5%. a reaction to that decision. we'll keep you up to date on what's happening out of switzerland but let's take a look at india. they've been in rally mode today. the rbi governor surprised the market with an unscheduled 25 basis point rate cut. the market is calling this a surprise rate cut but perhaps expected given the recent decline in inflation. >> the rate cut was always expected. it was the timing that was a surprise. there is a scheduled credit policy announcement on february 3rd so the expectation was that with inflation numbers over the last two months distinctly
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trending lower a rate cut would come on february 3rd. that got advanced and was a surprise but it was expected and also widely seen as the first of more some cuts. >> question for you if oil prices continue to decline should we expect inflation to continue to move lower over the coming months? >> yes, oil will be one import. not all of the oil prices got passed on so they got cut. that's not the biggest contributor. they've been coming down because food inflation is under control. wages were rising at 13 or 14% in the past five years. they have now sobered to about 3%. a whole host of actions have been taken on the fiscal front to control the fiscal deficit. that's controlled aggregate demand. so the price controls have
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worked for many and we have seen wholesale price inflation actually fall to 0.1%. retail inflation is down to 5% from double digits over the past five years so you know that's what is expected. the policy rate in india was 8% after the rate was cut to 7.75. there's still more rate cuts. >> we'll continue to watch to see what the rbi continues to implemented in terms of central bank policy. the big concern was slowing growth and high inflation but it seems like inflation is starting to stabilize a little bit. pleasure to have you on. i wish working with you back in mumbai. >> we'll bring you more flashes out of the swiss national bank because they abandoned the minimum exchange rate as well as lowering interesting rates. quite a big development coming out of switzerland.
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it's back as you can see. we'll bring you the euro swiss franc any second now. it's coming through the euro against the swiss franc. euro against the dollar tumbled to below 116. remaining active in the fx market the snb has said but abandoning the flaw that they've had in place for some time. a railroad sharp move as that has been removed. it's now trading down the best part of 14%, 13.6%. 1.0377. big developments there. >> absolutely. the central bank hassen been defending the cap for some time. we had that swiss gold referendum a coup of months back where they were looking at bringing the gold standard back but citizens at the end of the day voted against that but a lot of developments coming out of
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switzerland. we'll keep you up to date. >> switzerland has been wanting to protect it's competitiveness and decided to throw in the towel after the euro being too much of it to maintain. >> tax incentives one of the other reasons you see wealthy individuals and companies headquater in switzerland. so there's that change i guess going forward as something else that we'll be watching as well. >> moving on japan's price index for december fell 0.9% on the year marking the second straight month of decline. let's get out to the nikkei with the story live from tokyo. >> thank you wilfred. the recent plunge in oil prices and lower demand from asia pushed down the price of goods and this decline is working against the bank of japan's target of reaching 2% inflation by march 2016. although imports of goods have risen as the yen has depreciated oil prices continue to place
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downward pressure. at the quarterly meeting of the bank's branch managers the governor stood by the view that japan's economy is still on a moderate recovery trend and overall his speech at the meeting didn't contain any surprises though it is interesting to note that he has always mentioned the price index at these meetings but today for the first time he did not and this is a sign that the sluggish cpi is generating concern. also he maintained his pledge that the central bank would continue it's qualitative and quantitative easing adding it would make adjustments as appropriate. all eyes on how the boj will approach the situation at the policy meeting held next tuesday and wednesday. back to you wilfred. >> thank you very much. let's have a quick look in on the wider euro chart and see how that's doing at the moment. the wider euro dollar is at an 11 year low. it's fallen during today's
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session. it had a tiny bit of ground. you can see it's off the best part of per cent. session lows from the swiss national bank. this is the euro dollar we're looking at. it's an 11 year low, 1.1679. >> we have been able to cover japan, switzerland, india and what's happening here in europe. this really is worldwide exchange. >> absolutely is. >> we'll continue to follow global developments but the nba landing in london. the knicks face-off against the milwaukee bucks later today. cnbc did ask hakeem the dream who he is cheering for. >> i think i might be rooting for the knicks because they need all the help they can get. so i think i would do something like that.
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let's recap what's been happening in switzerland. the central bank of switzerland dropped it's 1.2 flaw against the euro and lowered deposit rates by 0.75%. it's fallen 20% against the swiss frank. the swiss frank rallying off the
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back of this. it's now below parody. 20% move as the snb has removed the currency flaw of 120 against the euro. it's had a big effect for other currencies as well. the euro dollar pair has plunged a significant amount. to about 1.168 and has touched an 11 year low against the u.s. dollar off the back of this. significant lieu quiddity and volume we're seeing in the trades of both of these currency pairs over the last ten or 15 minutes. significant development, the swiss national bank deciding it's no longer worth trying to protect it's competitiveness given how expensive it would to keep the flaw in place. >> aggressive intervention over the past couple of years is something we've seen to protect the swiss frank so definitely an interesting development. one trader was saying that the negative rates could prove to be
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costly for swiss banks so that will be one sector to watch as the banks and financials how they respond to this recent development. we'll keep you up to date on that story but let's also talk tech. blackberry and samsung are denying a report. they held talks about a possible take over. samsung offered to buy blackberry for $7.5 billion and representatives from both companies met last week. blackberry shunned a hand full of overtures as they believe they will get better shareholder value. it was up about 30% on the reuters report but fell back more than 14% after the company denied that story and you can see checking shares right now in after hours trade again they were down about 14% and that's how it's trading at this moment. >> interesting one, this talk that we've had over the last 24 hours, 12 hours really. they have obviously come out and
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denied it since then. i think it's a bit of a weird one because samsung suffered on the smartphone market recently but that's because it's not had any significant software to offer and i don't think buying blackberry would solve that. anyway as you were saying blackberry moved up 30% after european markets closed and in pretrade is down. net result up 15%. >> i have been following the stock for awhile even from the nasdaq in the u.s. speculation in the market has been there for awhile. one of the reasons we have seen such volatility in shares for blackberry. denying the report but it's something we'll watch going forward. it depends on whether it creates value not just for blackberry but samsung as well. >> we'll go back to the big story breaking in recent minutes which is snb's decision to scrap
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it's currency flaw with the euro. joining us on the phone for more reaction is jeffrey. a very significant surprise decision. the only most recent december rate cut was expected to come in in a couple of days. they preempted that with two big developments. >> it is surprising. at the same time the statement suggests that they expect the euro zone as almost a given and it's going to be very hard to defend. they're looking for a plan b. right now looks like an interest rate a decision. they had a range of negative 125 basis points. so that's where they probably want to see if it can work. a bit more otherwise in terms
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of levels right now, i'm afraid the market is running through technical levels so let it settle and we'll talk about levels next. >> jeffrey obviously we have seen volatility spike up because of the surprise level of this decision. would you expect the central bank to be stepping in and providing some level of he liquidity and support? >> we have to separate what's happening within the rates markets right now. it's a repeat of 2011 when we're running through so many key technical levels that the market can't wait for anyone else but again looking at the statement it does note that the snb will continue to take account of the exchange rate situation and formulate monetary policy in the future and will remain active. this is them telling us if they see the markets, levels aside, if there's too much disconnect
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between what's happening on fundamentals maybe they will step in and be active. that's very important but otherwise for now just let it run. >> taking the deposit rate to 0.75% could prove to be costly for swiss banks. tell me what you think about that. how do you think financials and the banks will respond to this cut? >> right now we need to look at whether there's going to be any other announcements because when they first went to negative they set the threshold to the point where swiss domestic institutions need to pay the penalty rate so right now we need confirmation and there's going to be a press conference at a quarter past one. but let's say now that they're going to apply this as aggressively as possible and i think the s&p will try to make sure that we see an avoidance so this isn't passed on because that would be extremely difficult. >> for those holding the swiss frank what would you recommend
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they do? >> hold it right now to be honest. let the market clear. it's still quite volatile right now and once it settles at a level let's wait but we have more comments coming later on today. they'll probably move the markets even more. if you earn volatility that's fine. >> we're seeing the swiss frank rise against the u.s. dollar and the swiss equity market down by about 7.5%. we'll leave it there. thank you for your time. fx strategists. >> let's do a quick update on european markets in general. in the red now as we look at things quite significantly. of course they were in the green earlier in trade but we moved low because of the correlation from the swiss national bank decision. and the spike in volatility off the back of the huge surprise decision. we've seen a 20% move in the euro. a 7% move to the down side of the swiss equity market and 1%
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move of the euro down against the dollar hitting an 11 year low. that lead to significant risk. ftse 100 down 1.3%. >> notable reversety in european equities after the snb announced this further interest cut. let's look at how u.s. futures are responding after the volatile day on wall street. the dow jones industry is indicating a lower move by around 20 points. that disappointing u.s. retail sales number did weigh on equities yesterday. but we did see a move in oil. staging a big rebound ahead of an options expiration. crude oil jumped nearly 6% for the best day since june of 2012. how are we trading today? that's the big question. it's down about 2.4%. brent crude trading at 47
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dollars barrel. we'll continue to keep you up to date on the oil tried which continues to be the big story or why equity markets have been moving. now a story in the tech world. the chinese hand set maker unveiled a new smartphone. it's said to be thinner and lighter than the iphone 6 plus. the ceo said he juans him to be the biggest smartphone maker within ten years. joining us on the phone from beijing is eunice. you're with us. take it away. >> thanks a lot. well xiaomi translates to little rice but they're not short of ambition. today it launched the xiaomi note which is going to be a direct competitive to apple's iphone 6 plus and they took the stage in front of hundreds and hundreds of people and he basically went speck to speck taking on the iphone 6 plus.
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it's going to come in two models. the base model in black and white but you can get the proversion in black, white or gold and the company says the phone is going to have a great camera, 13 megapixel camera at the rear and 4 mega pixel at the front and it's different from the iphone in that it will have quality sound. the biggest selling point is that it is going to be thinner as well as lighter and a little bit shorter than the iphone 6 plus. now this phone is a bit of a departure from xiaomi's other phones. it's the third largest in the world because it's selling all the cheap smartphones but the base model falls into that category. it's going to come in at $376 but the one with all the trimmings, the proversion is $540 which of course is going to
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be less than the iphone 6 plus in this market. however it's a bit on the high end for the company and the strategy is shifting as it eye balls the overseas markets. >> thank you very much for that update. now we'll bring you more recap on what's been happening in europe. the snb decided to abandon it's currency flaw with the euro which previously stood at 1.2. that's seen a 26.8% rise in the swiss franc against the dollar. that's 0.7453. against the euro it's more like 13% change. it's come off the bottom. this has had a huge knock on effort for markets in europe. the euro-dollar plunged to a record 11 year low and caused more sentiment across european equity markets as well. >> after the swiss national bank
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abandoned it's 3-year-old cap at 120 franks a year. remember the swiss frank for so many years is seen as a safe haven trade but of course investors now questioning whether that will be the case going forward. we're seeing a lot of volatility in the currency space. we have seen markets turn lower. trading down across the board. that's down better than 7%. right now we're looking at the italian markets holding on to a little bit of green but xetra dax down almost 1%. we'll keep you up to date on the news out of switzerland. what it means is coming up. plus weak u.s. retail sales spooking investors sending the dow on a four day losing streak. we'll discuss that as well. jill's social security number to open credit cards destroying jill's credit and her dream of retirement. every year, millions of americans just like you
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a big market day. >> here are your headlines from around the world. >> we'll start with switzerland. jumping against the euro as the swiss national bank drops the 120 minimum exchange rate and cuts the interest rate to minus 0.75%. >> the decision surprises markets and european marks turn sharply lower. and u.s. futures also making a u-turn into the red. >> bank of america and city group reporting before the bell. >> no deal on the line.
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blackberry shares reverse course after jumping as much as 30% after the phone makers and samsung deny a report of a deal. you're watching worldwide exchange. bringing you business news from around the globe. >> and the big story of course has been out of switzerland. the snb abandoning the 120 ceiling versus the euro and lowered the interest rate further into negative territory. dropping 5.5% to negative .75%. the swiss franc is rising sharply against the u.s. dollar. the swiss franc has been seen as the safe haven trade for many years but now investors will question the trade going
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forward. let's look at the euro trade because that's in focus for investors. strengthen in against the u.s. dollar. >> removing that flaw in particular causing a 15 or 16% move. just off of the lows of the day what's been so surprising is the moves we've seen across the board in risk assets as we touched on earlier the euro-dollar moved to a fresh 11 year low off the back of it. it's now trading just below 117 down 0.85% on the at a. that's a fresh 11 year low and caused significant weakness in european risk assets in general. >> and reversal for european equity were in the green for much of the morning. some of that has to do with the german gdp data but now it's down about 1%.
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the fste 100 down about . 8%. trading well into negative territories. what does this mean for the u.s. market open? wild swings on wall street. yesterday a good case of that as well. then we saw a rebound in oil prices so stocks came off the lows of the day but a move to the down side. right now we're looking at the dow down about 94 points and the nasdaq indicating a move lower by 28 points. s&p 500 down about 10 points in premarket trade. >> before we move on a quick look at the swiss equity market down 7% also suffering off the back of this announcement. let's have a look at commodities. a big mover yesterday. copper started the day down 7% after the european close we did see oil prices rally to have their best day since june 2012 if we're looking at the u.s.
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hours of trade for the oil market and because of the bounce back yesterday oil is now down today and that's adding to the risk of sentiment in u.s. futures and equity markets. brent down 3%. nymex down 1.9%. 47.56. gold buying that's up .7% and copper back since yesterday. still down about 12% year to date. what happened in the bond markets of this s&p decision. a little more bond buying in the u.s. a desen 30 year auction. yesterday german bond buying as well. gits pz -- 1.25%. sri over to you. >> thank you. very constructive session in the regional equities market this
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thursday. let me kick off. 3.5% to the good. this is the best session since january 5th. despite the fact that we got some disappointing lending data for the month of december earlier on today but of course that would build the case in the minds of the market that we could see further easing measures by beijing. remember liquidity, i bit thin on the ground. you have to argue the volumes were not behind it. the insfra truck tour and financials and energy stocks had a good run today. one of our big stories is central bank policy from the rbi. an you unexpected rate cut in some corners of the markets. 25 basis points and we will see more to come. up by 2.6%. nse bank index at a record high. japan, best day in four weeks.
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market closing almost 2% to the good. the yen, the stronger yen trend seems to pause. a little bit of addressrespite for the exporters and it's a indicator but all in all were constructive session for the asian markets. back to you in london. >> sri thank you very much. >> we'll keep you up to date on what's happening in europe as well as the us. joining us down the line from philadelphia is chief investment officer and portfolio manager. i'm going to start with what's happening in switzerland. the snb scrapping it's cap on the swiss franc. how are you digesting that news? is that going to change your views on equities or currencies going forward? >> well the swiss are defending their currency which is a good
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thing. i personally own several of the swiss blue chips and a coup of real estate holdings there. >> i hope you haven't hedged the currency in those equity holdings because you will be doing well net on them today. i just wanted to touch generally on what we have seen. this decision is a massive surprise to european markets but it hasn't just been the swiss dollar and swiss equity market that reacted. we've seen strong weakness accelerated in u.s. futures. does that surprise you some what? the contagion we've seen off the back of the decision. >> the world is so interconnected it's probably not that much of a surprise if you stand back. what it drives to is the fact that the europeans are now getting serious about fighting deflation and that could ultimately be a good thing.
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the thing that investor versus to remember is so many of the european companies that me may have equity stakes in do business outside the euro zone and drive a lot of their profits so a cheaper euro will actually once the dust settles be a net positive for stocks. >> does this change coming up ahead of the january 22nd meeting, martin? >> well i don't know what the consensus was but over here we were thinking that the european central bank was going to embark on massive easing and that seems as if the markets are run ago head of that. >> let's touch on oil prices because we're a long way from the surprise we kline we saw last year. the consensus is they'll remain
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for longer. does it move u.s. equities as well? surely we're aware of falls now. >> well there's going to be winners and losers and the consumer is the winner. the consumer of energy is much better off. what the markets are trying to do is figure out in terms of the losers who are the losers and how bad will it be. the in your face loser will be the pure play producers but there are so many businesses which are so tied to the energy complex and companies that perhaps people haven't thought about have derived 20 or 30% of their profitability from the infrastructure of oil and gas. so investors have to be very very careful about what they own
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right now because as you say things could stay lousy in that oil pouch for quite sometime. >> but if lower oil prices are the new normal do you think we'll see a rise in deal know? more oil companies coming together to consolidate? >> yeah we'll probably see bankruptcies before we get to that stage but the strong will get stronger and the weak will die and the template that i'm using is the late 1980s when we saw a similar decline. the pun the pun dants said clearly oil stocks will go back up and that never happened and people were saying there's hots of opportunities to buy these undervalued companies but in many cases they no longer existed after another couple of years. but the lesson i took away from those times is that you want to own the pristine balance sheet
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companies that are very strong t exxons of the world but to a lesser extent some of the companies a fill yated with oil stocks but which may profit from lower oil prices. for example, companies that store oil and gas and that have a business model. some of those stocks have been hit hard and actually will prosper during this time period. >> we'll see if you're right. chief investment officer and portfolio manager thank you for your time. let's also take a look at the other top story at this hour. bank of america reporting 4th quarter results at 7:00 a.m. eastern. the company is forecasted to earn 31 cents a share of $21 billion. b of a continues to face legal issues adding $400 million to its reserves from q-4. separately an activist investment group is requiring the company to have an
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independent board share. he was given the additional title last year. take a look at how shares are trading right now. in frankford they're up about 3% in today's trade. >> citi group reports results at 8:00 a.m. eastern. they're forecast to earn 9 cents a share on revenue of $18.5 billion. investors will listen for any comments on the bank's capital plans after it failed last year. citi is up about 3% thus far today. >> we did hear from jp morgan yesterday. senior executives are reportedly pressing managers to cut costs after the bank reported a 3% decline in 4th quarter revenue. reuters says jp morgan may impose specific expense targets for business units. the company expects to disclose more at its investor day on february 24th. let's look at how shares are trading. this was one of the biggest
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losers in yesterday's trade trading down by 5%. right now seeing a little bit of a rebound up about 2.5%. >> still to come xiaomi is raising the stakes in the global smartphone war. all the details after the break. how could a luminous protein in jellyfish impact life expectancy in the u.s., real estate in hong kong and the optics industry in germany?
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welcome back. let's give you some headlines the euro hits an 11 year low against the u.s. dollar after the central bank abandons it's cap on the swiss franc. crude still off a six year low hitting the middle of trade yesterday and city and bank of america set to report fourth quarter results before the open. >> let's get you up to date on the big story of the hour and that is the snb abandoning the swiss franc 120 ceiling versus the euro and you can see that move reflected in the currency space. investors taking action. the swiss franc has been sharply rising against the dollar. we'll get you that trade in a second. also rising against the euro. the other news coming out of the snb is its lowered it's interest rate to negative .75%. strengthening about 12% against
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the euro. the euro as we were telling you hitting a fresh 11 year low breaking 117 -- now it's coming back just a bit but it had initially hit an 11 year low against the u.s. dollar on the back of the news coming out of the swiss national bank. also there is further speculation on what mario draghi will unveil and that could send the euro even lower. >> yes. let's look at what this decision means for equity markets. smi up 5.44%. it has also had an effort on european markets too. let's have a look at the main forces in europe. they're showing a little bit of green. they were catching up on oils rally yesterday in trade. they all slid sharply at 1 point down. the best part of 2%. they now rallied off their bottoms. let's look at the session chart of the german market the dax and
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we opened up in trade earlier today, up a best part of a percent and slid quite sharply down because just of the huge uncertainty. spike in volume and spike inially inquirity and it has recovered a bit of the grounds. it's up 0.3% on the day. sharp moves throughout the day all from that decision by the snb. >> as soon as we got that decision to scrap the floor on the franc they e-mailed me. when you're looking at the swiss banks, trading lower today. negative rates could prove costly for the swiss banks so that is the question going forward. we're looking at it down better than 10%. we'll get you the chart in just a second. we'll switch focus to tech. that continues to be a big story. blackberry and samsung are
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denying a report. they held talks about a possible take over. reuters says samsung offered to buy blackberry as much as $7.5 billion and representatives met last week. the toronto globe and mail reports blackberry shunned a handful of overtourures. they believe it will deliver greater shareholder value. it was up as much as 30% on the speculation of a buyout but then fell back more than 14% in after hours trade after denying that story but we'll continue to watch shares of blackberry as well as the turn around strategy. let's stick with tech. xiaomi unveiled a new phone said to be thinner and larger than the iphone plus. he wants to be the biggest smartphone maker within ten
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years years. eunice is live with the latest. >> they're heating up. xiaomi is taking aim at apple. they unveiled the latest phone which is going to be a direct competitor to the iphone 6 plus. today the ceo went on the stage in front of hundreds of people and went speck for speck taking on the iphone 6 plus saying there's going to be two models. the base model is going to come in black and white and you can get a proversion in gold but the phones are going to have a 13 megapixel camera and hifi quality sound which is something that the iphone doesn't have and the main selling point is these phones are going to be thinner, lighter, as well as shorter than the iphone 6 plus. it's going to be a bit of a departure from what the company is really known for. they've become the third largest
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hand set maker in the world because it sells budget smartphones. the base model does come in line with that at $367 a pop but but the one with all the trimmings is going to come in at $540 a piece and though that's still cheaper than where the iphone 6 plus is selling in china now it's still on the high end for this company. we're seeing a bit of a departure in terms of strategy as they look overseas. >> thank you for bringing us that report. we have been talking about the swiss national bank scrapping it's cap on the swiss franc. we have been looking at equity markets move lower but now higher. ubs is a big mover in today's trade. down double digits. there you go. the swiss franc strengthening against the euro.
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it is the chart of the day or of the morning i should say. the swiss franc strengthening against the euro after the snb scrapped it's cap on the swiss franc sending it crashing below 120 per the euro and that's
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sparked a little bit of panic in the currency market. take a look at the euro dollar trade. trading at fresh lows against the us. dollar. it was at a 9 year low yesterday at 117. it broke the level once we got the news but it steadied a little bit. recovered over the past 20 minutes. >> absolutely. it did touch an 11 year low as you just said as the swiss national bank removed that currency flaw of 120 and deciding it's too expensive to maintain the competitiveness of the currency. quite interesting to see how vie lenly markets have reacted to not just the currency pairs that are directly effected but markets across the board and u.s. few turs pointing more significantly. they recovered as well in line with u.s. markets. they were down about half an hour ago and now it's mixed with the s&p up one point.
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down four points in the nasdaq to open up about 1.6 points. if we look at european markets as well they open today in the green ahead of any decision by the swiss national bank. that was because they missed out late in u. s. trade yesterday and the decision came out. the surprise nature of the decision lead european equity targets down and we have seen them bounce back as well. germany is up .6% and germany up almost 1%. >> a market analyst saying initial reaction is that if this is the move from the swiss national bank is a sign that the european central bank is about to do something which makes it odd that the reaction has been so negative across european stocks. so clearly in today's move and going forward ahead of the january 22nd meeting when mario draghi is expected to unveil quantitative easing it's central
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bank policy decisions dictating equity policies now. >> and particularly today it's the surprise nature of it. but yes that surprise nature of the swiss national bank decision today certainly reflected in the moves we've seen in currencies and equities. >> we were talking about the swiss equity market it is down. down better than 7%. take a look at the banks. one of the biggest banks of course is ubs. negative rates could prove to be costly for swiss bank which is would include ubs and you can see that's a big mover in today's trade. down about 7% in today's trade. more on that story coming up but still to come ahead of today's reports from citi and bank of america we discuss the health of the u.s. banking sector. that's coming up.
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all right. 5:30 in new york. welcome in. >> here's your headlines from around the world. >> we'll start with switzerland because the swiss franc soaring 40% after they ditch the cap on the euro. >> move sends stocks on a roller coaster ride. european markets swinging between gains and losses. u.s. futures making a u-turn into the red. >> bank of america and citi
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group reporting before the bell. >> no deal on the line. blackberry shares reverse course after jumping as much as 30% after the phone maker and samsung deny a report of the $7.5 billion deal. you're watching worldwide exchange bringing you business news from around the globe. >> our top story the swiss frank soared rising sharply against the euro. you can see the move is now 13% to the upside for the swiss frank. it had been even further but has just paired some of the gains it's seen. this also has seen the u.s. dollar after the swiss bank dropped the minimum exchange rate with the euro of 120 francs. the move is now also about 13% to the upside and it was more than that and has just paired
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some of the gains. the move marks a dramatic reversal of strategy for the swiss national bank which has had the cap in place for three years in order to keep the currency strength in check in particular of course against the euro. central bank surprised the market by cutting it's deposit rate. it's lowering the 3 month target range to minus 1.25% to minus 0.25% to a range of minus 0.75% to 0.25%. with immediate effect that change is taking place. >> we don't see charts like this this often do we? the swiss franc up about 13% against the u.s. dollar. that was a surprise move cutting that rate. swiss stocks have sold off aggressively. analysts call the move extremely violent and totally unexpected in reaction to what the snb announced. some traders are citing panic selling and deleveraging across the board. about 45 minutes ago a currency
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strategist at ubs cautioned that markets are just running through technical levels. he added that the announcement means the swiss national bank thinks quantitative easing is almost a given. let's take a look at how european markets are responding. of course we have been seeing a little bit of volatility this morning. at first we were higher across the board thanks to german gdp data but we got the swiss national bank decision or announcement. that stirs a little bit of move in european markets. we're floating between gains and losses. a mixed picture when you look at stocks. the ftse 100 down. the cac 40 down 9 and a gain of around 125 points so investors are still trying to figure out how to play markets given the surprise move by the swiss national bank. what does this all mean for u.s. fau tours? after yesterday's disappointing u.s. retail sales which did weigh on stocks right now we're
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looking at u.s. futures lower, dow jones industrial down about 31 points in premarket but the nasdaq up about 1 point. s&p 500 indicating a higher open by around 1 but we're seeing a lot of fluctuate so keep an eye on u.s. markets as we move forward. earnings will also be a focal point. it's another busy day for u.s. earnings. let's look at the winners and losers so far. alcoa kicked off the season on monday reporting a beat on the top and bottom line. what was the best year since 2008. now csx also beat it and wells fargo was among the first u.s. banks posting results yesterday. revenue came in just above consensus. so that gives you an idea of some of the winners so far this earnings season. >> absolutely. time to focus in on the losers so far.
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i feel like an earnings goalkeeper. they shot and missed it wide on j.p. morgan. 7% drop in quarterly profit. missing estimates as legal costs jumped above 1 billion on the quarter. kb homes also missed. we'll continue throughout earnings season to give us a gauge of whether earnings are beating expectations or not. citi and bank of america report before the open. the vice president of equity research and financial sector analyst joins us now from tampa florida. i want to kick off with j.p. morgan results yesterday because diamond reportedly said banks are under assault from regulators saying five or six regulators are coming at them with every single issue. is that the big issue to look at throughout earnings season and
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indeed for 2015? >> i think what he said is exactly correct. people don't realize that the banks in the united states have effectively been nationalized. you take a look at the regulations that are now in effect they tell banks how big the bank is allowed to grow and if the bank grows faster than that the bank will be penalized as jp morgan is. they tell what percentage of their assets should be in liquid forms and what should be in loans and what they should be owning and not be owning. what is high quality and what should not. they say we want you to lend money in this area and we'll give you incentives to do so. don't lend money into leverage lending and we'll penalize you if you do it. we have something called operation choke point ifs which they tell the bank you can't
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lend money to this industry even though the industry is a legal industry and they go on. the other side of the balance street, they say we don't want you to borrow money in the short-term markets because that creates systemic rest. we want you to borrow money in the long-term markets and they literally put a couple of hundred people inside the bank and those people are employees of the u.s. government but they're paid for by the bank. so, you know, in every way that you can think of the u.s. government has clamped down and is controlling the banking industry in the united states. so when jamie dimon says he's under attack that's a fair statement. >> let's talk about traditional banking and retail banking as well. what did we learn from wells fargo's results yesterday about the outlook for lending in general for the rest of the year in the u.s.? >> the outlook is pretty much tied to where the economy goes. one would assume all forms of
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consumer lend willing do well. credit cards, auto loans, consumer loans are likely to do well. the commercial side of the u.s. economy is doing better and you'll see more lending in the commercial industrial space and commercial real estate and there's a real problem in getting money to the mortgage markets so that the loans toward residential housing whether it's a traditional mortgage or home equity loan are likely to do poorly. when you net it all out probably bank loans in the united states will be somewhere between 4 and 6% in 2015 which is obviously a plus. >> i want to bring us back to the top story at this house which of course is the swiss national bank scrapping it's cap on the swiss frank. it lowered to negative.75%. of course negative rates could prove to be costly for banks. how do you expect the financials?
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how do you expect the banking sector to respond to the surprise move from the snb. >> banks in the united states have already, those that have international, if you will operations like bmy melon, they put interest rates on major deposits. if it's above a certain level the depositor has to pay the bank to deposit the money. interest rates are so low it's not possible for the banks to really make money by taking in deposits so they're doing everything possible to tell the deposits to go somewhere else. think about what i just said. if a bank is forced to borrow money in the long-term market which is the government says they must do then they must invest that money into highly qualified liquid asset which is is cash at the federal reserve, every dime the bank takes in
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they're losing money on. and therefore negative interest rates is something that will become more at the level we currently have. >> there's an active discussion of whether banks are too big to fail if they split up. what are your thoughts on that? do you think bank of america and city group could face questions around splitting up their banks in today's earnings call. >> the issue is how badly do you want to hurt the consumer? is the whole concept that you want to drag the price of every banking product up as high as it will go and provide less and less services to the consumer. if you take a look at what's happened since all the regulation versus been put into effect the first thing you know right off is that the cost of all banking services in the united states have gone up to replace some cost. the second thing you know is you
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created a value in tern markets so if you want to borrow money as a specific example banks are being frowned upon that do that so the borrower has to go second to the banking market. now there's a couple in that market and their average interest rate is 53%. 53% a year. so what these people who want to break up the banks want to do is take the industry so it's most inefficient level and charge the highest prices possible to the consumer whether it's a corporation or an individual and then at the same time reduce the amount of banking service which is are being provided. and that of course is exactly what's happening in the u.s. banking system. lending club is another example. you can get a mortgage from a bank at 4% and go to lending club. they'll give you one at 12%. >> we'll leave it there.
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vice president of equity research and financial sector analyst. thank you for your time. >> let's look at the other top stories today very quickly. carlos slim is now the largest shareholder in the new york times. he got the warrants in 2009 when he loaned the company $250 million during the financial crisis. while he's the largest individual shareholder. they hold the majority of the shares. let's have a look down about 1.95%. >> the big story has been the swiss national bank. surprising markets by abandoning the 120 ceiling versus the euro. swiss franc seeing a move to the upside. strengthening versus the euro by around 13%. the euro-dollar is weakening in response to the move against the swiss bank.
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euro trading at 116. it did break the 117 threshold. at one point earlier this morning it was at an 11 year low against the u.s. dollar. >> also coming up the state of denial. samsung and blackberry say there's nothing behind reports they're getting connected. we have the latest on the supposed telecon take over after the break.
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deny deny deny that's the stance taken by samsung and blackberry amidpoints they could be looking to merge. let's get to landon dowdy standing by. >> samsung and blackberry both issue statements throwing cold water on a reuters report that samsung offered to buy it's smaller rival. representatives from the company met last week to discuss a possible transaction and samsung offered to pay $7.2 billion or more than $15 a share. that would be a 60% premium to blackberry's current trading price. a samsung spokesperson says those are groundless. they shunned a number of take over offers in recent months and they think the restructuring plan will deliver greater
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shareholder value. a potential tie up would require the blessing of prem watsa. he helped refund debt restructuring and samsung is the world's top smartphone maker but makes devices for the consumer market. blackberry could help it push into the corporate market. they e-mail traffic of thousands of companies as well as governments across the globe and holds more than 40,000 patents. any bid would face scrutiny from u.s. and canadian regulators. the canadian government told blackberry a sell to them would have security concerns. following the denials by blackberry and samsung. they fell nearly 1% today in
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south korea and is up 14% in germany this morning. back over to you. >> thank you very much for that. now to our top story, the swiss frank soreared in the last hour rising against the euro having paired some of its earlier gains. so it was up even more against the euro and the u.s. dollar has also fallen against the swiss franc. the move marks a dramatic reversal for strategy for the snb which had the cap in place for three years to keep the currency's strength in check. they also surprised the market by cutting it's deposit rate. for more reaction we're joined by jane foley. some of the words used to describe this move have been dumbfounded, surprised, shocked. if they were deciding to abandon their three year standing currency flaw against the euro surely they would have done it
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in a more managed fashion. the moves in the markets highlight the surprise with this decision. >> you might think so. if they hinted at doing it then the market would have just pushed the franc down anyway or the value down anyway. it was a very difficult decision to manage but we must look to see whether or not the writing was on the wall and those at a tried to defend this flaw was becoming more difficult and the reason was the balance sheet. we look at the snb's balance sheet and what we see in currency terms is its becoming increasingly top heavy with the euros and over the last few weeks and months and look to see what the ecb have been doing, well draghi has been successful in pushing down the value of the euro and as the value of the jurors regoes down there's more definite to be done to protect that 120 flaw. so at the ecb is very aggressive or draghi's very aggressive
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language in recent weeks has been making the the job more difficult for the snb. you get on top of that and put on extra safe haven demand. we've seen that move the yen this week. so maintaining that law is difficult for the snb to do given the unbalanced look at their balance sheet. >> it's increasingly difficult for them to maintain the flaw. the timing of this decision. do you think that means that the snb is very confident the ecb is about to make it harder for them to maintain that flaw? >> that's possibly the case. yesterday we had aggressive language too. all of these european central banks are playing second fiddle. they're trying to defend themselves in the wake of this weakening euro. now they have the benefit of seeing the exchange rate relatively weak right now.
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many central banks have interest rates on the floor and they have been looking at the currency as hoping the currency can stay weak but we have seen over the past three years that this experiment that the snb have been using with this flaw has been worked either. so the very aggressive language from the ecb certainly making policy much more difficult for some of these other central banks in europe. >> and of course you are a strategist, a currency strategist. how does this surprise move from this swiss national bank change your consensus on the swiss franc going forward. >> we certainly we have a stronger swiss franc in our sights. what the snb have said one of the things at a made it possible is we've had the stronger dollar and the dollar strengthening against the swiss franc and if we have a repricing of fed interest rate hike expectations that trend may flatten down too
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but for now the swiss authorities have to probably just put one the fact that the swiss franc is going to be stronger for now until there's signs that the ecb is winning at their deflationary battle. >> perhaps more clarity on january 22nd. thank you for your time and market perspective. we have been seeing the swiss equity market drop sharply in today's trade. down 7.7%. some of the big movers in the financial space. the ceo says the swiss national bank action is a tsunami for the export and tourism. that stock better than 14% in today's trade. more on this developing story after this break.
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welcome back to worldwide
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exchange. let's get an update on what to look for. of course the big story here in europe is the swiss national bank slashing it's cap on the franc. how close will u.s. investors be watching this news? >> well my cell phone has been ringing off the hook off morning. so we're definitely focused on it. i think that the dollar strength once again globally the dollar is essentially a wrecking ball globally. it's disrupting many many things and this is another measure that potentially forces the fed's hand to review the dollar's strength here. >> but interesting that the swiss equity market suffering so highly off the bank of a strong swiss frank so are you saying that a strong u.s. dollar which is the general trade should be weighing on equity markets domestically more than it is? >> no it's more about there's
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so much debt globally tied to oil. the dollar strength is putting pressure on oil. you look at russia five year cds. this was the 8th largest economy on planet earth a year ago and you're seeing substantial credit risk there. as a result the dollar has a hand in that so the fed i think is extremely concerned behind the scenes about the strength in the dollar. >> thank you for joining us. larry mcdonald at new hedge usa. the big story as we leave you today the swiss national bank abandoning it's 120 floor for the franc and seeing the swiss franc strengthen off the back of that. >> negative rates could prove to be costly for swiss banks. others trading to the down side and heat map, swiss equity market the underperformer. >> that's all we have time for.
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i'm wilfred frost. >> "squawk box" is next.
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good morning breaking news. a major currency move. we've never seen one this big before. the swiss frank soaring beyond
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parody with the euro. the swiss franc being held artificially low and sharply higher today after the swiss bank surprised everyone. roaring on wall street and stocks down on a four day losing streak. futures had been sharply higher but they're pointing to more of the same now after this move. deal talks? what deal talks? samsung and blackberry denying a report of a potential blackberry. i can't believe blackberry would take over samsung. and shares of the canadian device maker. plus the world's third biggest smartphone maker unveils it's answer to the iphone 6 plus overnight. it's thursday january 15th you might remember this day. squawk box begins right now. >> live from new york where business never sleeps this is
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"squawk box." >> good morning everybody. i'm becky quick. if you thought trading has been volatile so far this year you have not seen anything yet. check this out. marketing swinging sharply in early trading this morning. at about 4:30 a.m. you were looking at the futures indicated up by over 100 points. the dow futures up by over 100 points then the crazy


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