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tv   Worldwide Exchange  CNBC  August 20, 2012 4:00am-6:00am EDT

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i'm ross westgate. this is "worldwide exchange". i'm kelly evans. these are your headlines from around the world. . >> no more concessions for greece. german politicians state their claim ahead of a key meeting between angela merkel and antonis samaras. >> the ecb is considering setting a trigger for sovereign bond purchases. >> the former wife has a suspended sentence. >> london shares are under pressure, workers told to return at south african mine or face
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dismissals. there's a $1 billion rights issue pure speculation. >> okay. welcome to the show. i was a little lonely on friday. >> how did it go? >> i was lonely. dublin was good? >> i was not lonely. >> no. >> you'll have time at the end of this week and a little bit next week. we'll have to make the most of it while we're together. >> for the next three days. let's tell you what's coming up. celebration is over for europe's top politician. leaders of germany, france and freese will hold a series of meetings this week. on friday the greek prime minister, antonis samaras is expected to ask for more lenient bailout terms when he meets both those leaders. top politicians refused to grant
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athens any further concessions. ahead of that the german foreign minister is holding a conference in berlin later. at the same time ecb policymaker has said a greek exit would be manageable. he made the comments in an interview with a german newspaper. he stressed he would prefer if greece did stay in the currency bloc. joining us for more is fund manager of asset management. thank you for joining us. over this period we had a melt up for equities as we had not much eurozone news in the last couple of weeks and i wonder how you view these weeks meetings and discussions. >> i think the key date seem to be the second week of september when we have the german vote if indeed the european stability fund can operate as we hope it can. i do think the news on the yield cap is actually great. some of the best strategists
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have been saying this is the only way forward. but others say who the yield cap is applied to and if greece -- >> i'm wonder if it's that different. my understanding is that the ecb would, would buy bonds, they would be unsterilized. it was because of the broken market transmission but required, you know, spain or italy asking for help from the ecb. >> first time we've seen greece wanting to step in and actually buy the bonds of these sovereigns. historically they come around the back door. i look at greece over the last 12 years as an economy that's never managed to balance its books like the eurozone where spain has managed to budget from time to time.
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it's interesting the rhetoric with greece and the eurozone is better without greece in it. this is crucially buy more time. >> german newspaper said the ecb is considering a plan to buy peripheral bonds each time yields move above a certain spread level versus german government debt. the governing council will vote on the plan at its september policy meeting. they want the european central bank to commit to an open ending debt buying plan. they said the bank shouldn't place a limit how much it will buy or how long it will intervene. i wonder if that's the point that is before spain, for example, goes ahead with a bailout effectively or request for help does it want to see this kind of scheme in place? does this scheme have to be in place? >> absolutely. it's so crucial because if you look at the finances today in
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spain relative to the deficit and the size of their debt it's incredibly unlikely their borrowing cost is 67% where the uk and u.s. is well below two. this is the crucial mechanism we would require to give these economies more time to heal. spanish borrowing costs the same as uk we're talking their budget almost half. >> what would it took like if you pencil on the back of an envelope, talk about cap and a bond buying plan. what might it took like? what levels do you think the trigger would be? >> i think the yield got above 3% relative to a german bond, that spread -- the moment it's above three. well above that here and now today. ideally what we would like to see there needs be some sort of with regard to the viability -- the eurozone for me is a lot
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more credible with greece out of it than in it because it's a country that never able to budget. >> how you manage that risk or if greece leaves and redominates that makes people in spain and italy protect their currency. >> some of the best of what we've seen is actually -- they put together the prize, 250 pound how does a country within the eurozone leave the zone. it has to happen very quickly, arguably over the weekend. the drachma has devaluation. >> what do you do for other countries who immediately then say how do we know we're not going to face the exact same risk? >> as i said, i think that with regards to the suitability of the economies, spain has proved its worth within the eurozone. yes it's difficult. here and now its debt levels
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aren't as scary as tuck or u.s. it needs time to heal itself. italy has been a break even from a budget prospective. their borrowing costs is six to seven with regard to its debt. also the wealth. >> mario monti certainly agrees. speaking sunday, he called on other eurozone leader not to allow a rift to develop. one hour into the trading day. bonds very low indeed. the ftse 100 has been up is flat last week. flat this morning. not a huge amount of action. central dax up one-third. cac has been up 1.5% over the last week. it is flat today.
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ibex best run, currently up .2%. terms of those bond markets, with spanish yield they are lower again today on the ecb report. they are having a desired impact. ten year yield, 6.251%. gilts yielding 1.7%. plenty of speculation reports about whether the government needs to adopt more plans. not big gains. dollar/yen, sorry dollar aussie just below 80. bund is quiet. vix is down at a relative low. let's find out what's happening in asia.
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hi. >> asian markets mostly finished lower. taking a breather from last week's gains. investors are gearing up for upcoming pmi numbers to see if any weakening signs could prompt action. is shanghai composite lost. beijing is ready to push forward its reform to property tax scheme. the hong kong market fared better. ahead of another round of earnings reports from 300 companies this week. financials and developsawayed it down. the nikkei continued to be the bright spot of the region. exporters extended gains on the softening yen. the kospi finished flat. gains in consumers were offset by losers by tech giants such as samsung electronics. aussie market retreated from three month highs heavy with stocks and commonwealth bank were among the biggest losers.
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back to you. we've been traveling all over greece and spain in the past few months covering the eurozone crisis. but is the next hot spot actually portugal? citi cautioning portugal may be under pressure and seeing an extension ever its bailout package. we want to know is that nation next in the front and center of the financial crisis. what do you think and do that by e-mail at worldwide@cnbc.com. tweet us at cnbcwex.com or ross you can reach us directly, @kelly_evans or @rosswestgate. >> china's murder trial has come to a close. will political scandal taint the communist party? we'll talk about it when we come back.
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. welcome back to the program. well one of china's most sensational murder trials in history is over. the wife of a once rising political star has been sentenced after being found guilty of murdering british businessman neil haywood. >> the crime is serious in circumstances and its consequences.
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she played the main role in the crime. therefore she's the main culprit and should be sentenced to death according to her crime. >> but the execution has been suspended, she's likely to face life in prison provided she doesn't offend in the next two years. she admitted to poisoning haywood but only did it because her son's life was threatened. joining us now for more is frank cheng. frank, thanks for joining us. what are the political implications of this decision? >> well, it's still very puzzling. one thing is that bo xilai and her husband's name has been attached to hers. this is very unusual. in china women don't change their names when they get
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married. the fact they are calling her bo xilai seems to associate her with her and her doings. there was some speculation she had a foreign minister and in that passport she used bo xilai. it didn't come out in trial so this may not be a fact. >> what is the implication for the political career and beyond that for the chinese communist party whose handling of this is a key convenient or key challenge of the leadership challenge in the fall? >> yeah. well, i think bo's political career is over. the only question whether he'll go on trial like his wife. there's speculation the party will handle it like an internal party matter. he'll be charged with violating party discipline. i think this is highly unlikely
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especially with reports that millions of dollars have been transferred from china into overseas bank accounts. so, by his wife into the u.s. so it's not possible that he did not know what his wife of doing. the party is so concerned about corruption, i do not see how they can let a member of the politburo get away with siphoning off millions of dollars and taking it out of the country. i think simply disciplining him according to party rules will not satisfy the chinese public. i think they will have to have a trial and he'll go to jail as well. the emphasis is on the polal transition in china. every ten years now there's a transition in leadership, ten
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years ago the leader stepped down and gave way to the new prime minister. now it's time for the current prime minister to step down. speculation is hu jintao will be succeeded by chen ping. the head of state position. and the head of the central ministry commission. the military commander. >> as this transition takes place, frank, does it come with a major change in emphasis on policy? >> well, this is not just a single transition. that is at the top of the party is a body called the standing committee of the politburo with nine members and currently seven of the nine members are set to retire. so only two will stay on and the
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question is who will replace these seven other members on the politburo. the party's most powerful body. and bo had been working on getting one of those top nine position. i think if it was not about his wife and former police chief he would have gotten it. now that that is no longer possible the question is who are the people to get these seven positions. the chinese government now is largely a collective leadership, so hu jintao is first among equals and chen ping will be first among equals. who the other equals are is a question everybody is interested in. some of them are very clear. i think that one will become premier succeeding hu jintao.
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those two are clear. after that, after that it's a matter of guesswork but it's quite possible that the first woman will actually go into the standing committee post lit bu o -- politburo this year. >> whatever happens with the political transition it has caused people to wonder whether it causes an extra slow down in growth as we wait for investment plans to be succeed. how does china play into your investment thesis at the moment? i presume you're investing in european or uk china plays. >> clearly the key sector there is the mining sector. we look at the uk market this year it's only been the mining and oil shares. the rest of the market has been strong. we have in recent weeks seen the mining sector start to show signs of life. it's bouncing over a very low level to get earnings matrix.
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we like to look at times when the earnings picture is difficult. we think most of the sector is trending below. i think obviously the mining sector is trying to tell us there's something in the foompl stimulus by year end and we have a slow down from here. they wanted a slow down. they have been very successful. maybe too successful. i see signs of life with regards to commodity price and the mining shares. >> all right. there are other reasons as well why political tensions in china are running high. massive anti-japanese rallies have been running in china. tax on japanese cars and businesses. japanese nationalists landed on disputed islands claimed by both countries. we'll have more on the deteriorating relations between china and japan during the anybody case business report. >> meanwhile over here, uk lawmakers into the libor scandal has claimed barclays had very
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weak internal governance leading to a scandal that's done great damage to the uk's reputation. andrew tyree claimed bob diamond had been selective in the evidence he gave to the inquiry. diamond said he was disappointed by the findings and disagreed with the member of select committee's comments. were your surprised by at the tenure of this report? what do you make of it? >> i just think it's been really poorly explained to the general public and it seems to be a huge subject. there's two episode. there was fixing at high and now i do think he's wrong criminally and morally. then there was very obviously a fixing down of libor in '08 and '09 during the financial crises which is understandable and something the authorities want. very poorly explained.
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we need to concentrate on the '04 to '07 when it was fixed up rather than fixed down. i don't believe every bank was complicit in fixing it up. >> what's interesting is this report and the way it's been said is basically what you're talking about it focus on the activity '04 to '07 period when traders were doing it effectively to make more money than they should have. this is getting plenty of attention. is it really that '07 to '09 period that's receded from the headlines but that is more troubling perhaps from just sort of a top down, what does this rate mean, why are we trusting libor so much point of view more broadly? >> the whole mechanism of setting libor, the whole libor itself has been called into question. we have to stand back and where there are opportunities if you like to manipulate a rate, such as libor, it will happen. we need to look at the
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mechanisms behind that and come up with remedies. >> we got a chart here. your 18% in financials in the fund. how much are those banks >> the only bank holding is ecb. specialty financials is huge amount of cash, particularly between the fund manager sector. so i think that's where we like to spend our money in the financials and the banks i still is still a tricky period for them coming up. having said that i do believe that there is, if you like in pure retail banking the model is exceptional. lending 3.5% to 4%. >> but that's not effectively how its working. banks are struggling. it's not actually the most benefit that they are capturing.
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>> the difficulty comes like the back book and if you like the troubled assets, private equity, very liquid, commercial property loans. if you get back to mortgage bank lending, peregrine in the uk trading above book value, that's really benefiting from the low funding, and quite -- >> more on this point. >> when i was watching the olympic diving i thought it's just like libor. the judgarks you take two highest and two lowest get taken away. the treasury secretary, should the fsa be investigating the way they judge the diving. surely there's an open way. open to manipulation. talking about banks, deutsche is the later lender to come under scrutiny. "new york times" claims deutsche is one of several other banks
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being investigated over dealings with nations such as iran. shares are lower. patricia has more for us from frankfurt. what are the details in this report? >> good to see you too, ross. no real comment from deutsche bank so far on this particular report. however we heard also from one of the spokes people something i would like to read out. deutsche bank decided in 2007 already it would not quote engaging new business with counterparts in countries such as iran, syria, sudan, north korea and to exit existing business to the extent legally possible. now, of course the allegations stand as follows. early stage of investigation said there has been basically billions of euro dollars channelled through the u.s. that belonged to iranian clients. also deutsche bank. on the other hand there has not been confirmed, of course. as i said investigations are in
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the early stage. when we have a case like standard and charter admitting to it and paying a fine and paying a settlement in the first stage that's something that does encourage a lot of investigators to dig further in these kind of issues. money laundering something that people we look at and continue to look at more on detail. deutsche bank is reacting to it. ate sentiment because as i said nothing has been confirmed. the stock is down almost 2%, 1.8%. other financials under pressure down 1.1%. it's a shame because you look at the way the deutsche bank stock has trade, the dax stock up about 10%. we've been there up more or less 20% over the last month alone. so a little bit of buffer to the down side is probable. >> always like a nice bit of
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context. thanks. still to come on the program, france may have lost its aaa rating but the country enjoys low borrowing costs. our next guest says the country is nothing but a lucky peripheral. we'll find out why. we'll be right back. hey baby goat... no that's not yours... [ hikers whispering ] ...that's not yours. [ goat bleats ] na, na, na -- no! [ male announcer ] now you can take a photo right from video, so you'll never miss the perfect shot. [ hikers laughing, commenting ] at&t introduces the htc one x. now $99.99. rethink possible. i would not say i'm into it, but let's see where this goes. [ buzzer ] do you like to travel? i'm all about "free travel," babe. that's what i do. [ buzzer ] balance transfers -- you up for that? well... too soon?
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and these are the headlines.
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no more concessions for greece. german politicians stake their claim ahead of a meeting between angela merkel and the greek prime minister. >> gu kailai the wife of former chinese party boss gets a suspended sentence for murdering a british businessman. >> workers are told to return to work at a south african mine or face dismissal. all right. we've been talking about mortgage lending and the uk's july mortgage lending figures are out. they show a total lending of 12.7 billion ponds. this was more than seen in jun. 12.7 billion versus 11.7 billion. nice pick up in july. >> this is in contrasting to house prices posted their biggest august drop on record
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this month including the right move survey. said house prices were down 2.4% in august compared to last month. new sellers was higher than last august. at the same time british house builder expects growth to continue. bovis completed 944 foems in the fiscal first half. speaking first on cnbc earlier this morning the ceo said he was capitalizing on the uk where they've seen house prices strengthen. >> things are generally stable across the areas we operate in. slightly weaker in the north but over the last 12 months prices generally for us have been quite stable. >> we'll get into a housing chat in a second. first we want to mention some news on the wire. 27% of its miners have returned
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to work. unclear if striking miners are among them. lonmin saying 27%, over a quarter of its mining shift has returned to work but still unclear if the strike being workers are among them. >> let's bring hugo back in. just on the housing sector. any exposure, bovis numbers are quite good. it ties in with a lot of other surveys. >> i think we've been slightly better. but if you like, we've seen the big discounts that existed six weeks ago. typically i could buy about point seven and rated quite sharply. to my mind they are trading slightly towards the top end of their range.
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>> the scene is the same in u.s. stocks. they've become quite rich. if you don't want to get exposure here but still like the story are there other ways to play that? >> probably now the construction sector than house builders. the margin has been under a lot of pressure. what i like is where we see competition if you like falling by the wayside and strong get stronger. that's where i rather spend my money. >> there's so much focus now in terms of -- we might get something today the government talking about whether they will come out with some measures to boost construction, let's talk about whether the council should be selling homes. is that story -- do you think there's a play there? is that going to turn some reality? >> absolutely. there's enough money if you like from a borrowing cost reallocate money to construction it's so
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stimulative. >> maybe it's just this sort of echos or reminders of the housing boom but all of the policies meant to encourage housing in the first place do we want to go through that all over again? >> i rather construction than housing. if you have this big housing stimulative boom it tends to bring down house. with construction i think that's -- >> wonder if there's a reason why there isn't more demand. i know there are more supply side issues in britain than in america but if we're not pushing on a string, risking more distortions down the road. >> i agree. i look at house prices in the uk and i think they do look expensive. you rightly said the u.s. house builders have been very much better and high rated. but i would look at u.s. housing it's fallen by two-thirds, where the uk is hardly off the top, actually. that's a big disparity there.
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>> good point. this week we're looking at those countries here in europe that still have their aaa rating. but we'll start with perhaps the biggest one that doesn't have a aaa rating, which of course is france. it lost its aaa from standard & poor back on january 13, 2012. but interesting when you compare to it some of the other ones that are aaa like germany and netherlands it hasn't done too badly as far as performance is concerned. take a look at the yield. this is the performance since early january when they got downgrade. around 3.4%. we're yielding now 2.18. we have seen actually compression since they lost the aaa between france and germany. in fact even more noticeable against holland of course and the netherlands, along with germany talking about
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conditionality for any more bailout loans for the peripheral and here we go. much greater spread compression, again 3.4% with france and netherlands was yielding just around 2%. now you can see with 2.18 and 1.86%. so as we have potentially seen with the u.s. and japan since they got the downgrade, french yields have performed better than both germany and the netherlands who have retain that aaa. >> makes you wonder how much downgrades really matter. the french finance minister says he'll stoic a plan to cut the country's deficit to 3% of gdp. france's national auditor has told the government it will need to make savings of about 33 billion euros if the target is to be achieved. it's based on gdp growth of 1% in 2013. most economists think even that is too optimistic.
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m nicholas, you called france a lucky peripheral. is that overstating it? >> no. i think it's important to stress that first of all ratings are obviously a relative game and that there are not many prestige shirts left in the wardrobe of the core and semi core of the eurozone. having said that france still is to be fair one of the least dirty. i think france is certainly a tale of two halves really. it's a remarkable rally in the bond market but it's also an economy that is woefully uncompetitive vis-a-vis germany and is now flirting with, you know, recession. and certainly as far as some very important fiscal and structural indicators are
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concerned, france does actually fare less well relative to some of its southern european theaters and it's a country that has been put on guard. french yields were in fact veering forward 4%. >> we've seen, i just pointed out the out perform. why do you think they've been treated the way they have since? >> well the french finance minister would certainly like to claim that this is because france is fiscally credible. i think the jury is still very much on france's fiscal credibility. i think it's fairly clear why yields have fallen dramatically. like i said, everything is relative now so there's been a dash into relative safety or what is -- >> better value four months ago
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than you did in germany. >> that's true. also the i diefrance's debt mar. during the rally in the first several months of this year you saw a lot of, a lot of selling by french banks. all of that came back into france. that's when we saw yields falling. also because of the ecb's grievanaggressive monetary easit has had -- >> but if you look at the french debt dynamics in the uk there's not a lot of huge difference between the two. france is in the single currency and can't print, can't effectively print their own money without the ecb doing it. so, look, what happens now. if the ecb is pledging itself
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to, you know, to be able to develop this plan to buy debt unlimited say in spain and that gets there there's a lot of ifs there and france benefits what about everybody else? >> french debt has entered a bit of a sweet spot. in the sense that it basically, it actually benefits and has benefitted from the renewed risk appetite or at least a, you know, certainly a more, a more positive turn in the market. but also if, in fact, we see this fiscal, fiscal backstop or this interim fiscal backstop, ecb backed which is not going to be credible and which is not going to be effective that's going to buoyed the french market further.
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the french debt market is deep enough, liquid enough and relatively safe enough in order to act as a second best alternative to german paper. >> a good point. there are other countries who might have better profiles but whose debt markets are not big and liquid enough to handle that diversification. >> that's key. >> you can make promises in an election and french history is full of tlifrg them. >> certainly made quite a few of them. to be fair, i mean he's sticking to his 3%, 3% target, which is worrying enough considering that the fremnch economy is basicall flat on its back. france's hands are tied. the jury still very much out. so far he's taxed the economy to
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death. and he clearly needs to, to attack the spending side of the, of the budget. >> the hardest -- >> which is the hardest. i sense that the president is committed to some kind of labor market reform, it may be a rather mild version. the question is whether he's going to get that through parliament. >> good to see you. thanks for joining us. and head to cnbc.com to find out why economist think why strong export numbers both france and germany will be in recession next year. moving on an overall of diplomatic relations japan plan to replace their ambassadors to china, south korea and u.s. we have the story on what's behind this move. >> thank you. the reshuffle comes amid series
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of wrappingles including territorial disputes. the ambassador for china will be replaced as early as october. niwa a former chairman of a trading house. u.s. tenure has been marked by deteriorating relations between the two countries. it follows contentious remarks he made on the japanese minister senkaku islands. japan ties and south korea ties have worsened. it's expected that japan will promote a deputy foreign minister to replace its currents ambassador to south korea. the u.s. ambassador is also set to be replaced. japan and u.s. have resolved issues including the u.s. military's plan to deploy the controversial osprey transport aircraft based in okinawa.
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back to you. >> thanks for that. >> meanwhile shares of heineken are trading are higher. the deal would give heineken an 82% stake in the beer maker. >> sticking with spirits, mexican tequila brand jose kuervo could be part of the diageo portfolio. diageo is due to release quarterly results on thursday and has not commented on the report. >> diageo is one of those companies in the uk very cash rich, getting majority of sales from emerging markets. very well covered dividends. so is it just with these companies a question of working
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out the entry point and valuations. >> they are very keen to capitalies on the strong bond market and in many cases they can issue five year bonds. so, i think many stories here is the bond market is too strong and corporate taking a lead there issuing bonds, buying back their own shares or doing acquisitions. riding the tide of m and a. here to say because growth slow and they want to buy. >> do you buy it now or not? >> we've held it in the past. diageo is expensive but what we're looking for is businesses that can be the next diageo in the next five years. what we'll demand from businesses is if they can go that dividend in the next five years. that's where you make your
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money. >> lonmin said 27% of miners returned to work. unclear how many workers were part of the strike. lonmin shares are still under pressure after a violent strike that left 40 people dead and forced the company to halt operations. the "sunday times" is reporting lonmin can launch a rights iraq next month. the miners dismiss that report as speculation. miners, henry, they operate in politically difficult environments. you have to take that on board. what is this story with lonmin. for investing miners in that country in particular? >> always been incredibly difficult place to operate. and in more recent months you've had a political disruption which is very unfortunate, indeed. i think with regards to lonmin, they do need some money.
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as i say perhaps billion isn't the right tag and it allows the company to say that's pure splax. there will be some cash injection in that company. here and now with two-thirds of platinum miners below losing money, if you like, i actually think we'll see quite an interesting dynamic where we expect platinum to be quite strong. get some sort of reset to allow these companies to make some money. so i think the platinum base is not for us right now. it's a cathartic moment. it's right 0 time to spend your money in the platinum sector in south africa. >> good to see you henry. a little bit more after this. company specific which i love. >> weekly trades is up next. this week we look at how one organization is helping to create a more sustainable trade environment for producers. trade links when we come back.
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and in today's trade links fair trade san organization to help farmers build a more transparent and sustainable trading environment.
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i caught up with the deputy director and asked him what makes the organization so you anybody. >> fair trade is unashamededly about working for farmers in developing countries, small producers at the rough end of the supply chain. and in these times when economies are stalling, the market is really difficult, it's most particularly difficult for farmers, farmers in mawabi, sugar farmers, 85% of them run out of food at a certain point during the year. the kind of mechanisms that fair trade is a basic principle, a minimum price, a guarantee that farmers can guarantee they can get for their produce makes all the difference. >> we're in still a recession really in the uk, very weak economic growth elsewhere around the world yet we've got foot shortages, resources are very
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scarce. what additional pressures is that to get broughts in the united states and pressure on supply of other commodities. >> farmers around the world are having a tough time. we know this. it's particularly true of developing country farmers, they are facing a triple whammy, if you like, global economic downturn. then those climate change. a long history of poor pricing, leading to under investment in their farms. in fair trade we're seeing something of a huge problem now in sustainability of supply in some of the key tropical agricultural commodities that we take for granted like coffee and tea and sugar and cocoa. where unless serious investment is undertaken by the key players in these global agricultural commodities we can't guarantee we'll get these in the future.
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>> who would you describe as the key players? >> partnerships work. we have wonderful partnerships with some of the major brand owners and retailers in some of the big commodities in could coin the uk three out of the top five confection buyers are working with us in fair trade and together this means that we can assure the farmer get a fair deal, get a good price, they can invest in narms, they can put their kids in school and food on the table and adapt to climate change, shifting harvest patterns and secure supply. it works for the farmers. it works for the brand owners. that fair trade. and this means that it works for brand owners and shoppers. >> there's always been associated with a market like fair trade as a consumer you have to pay a premium for that because obviously you're guaranteeing minimum prices back to the farmers. as it becomes more widespread
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does that premium narrow, you know, will it impact that? >> when fair trade started because the volumes are so tiny sometimes people had to pay a bit more on their products to guarantee returns to farmers. as companies have engaged with tissues more seriously and engaged in fair trade more seriously so they committed greater volumes and prices have come down. so way back in 2007, in the uk converted all of its bananas to fair trade with no addition enamel premium to consumer and that's a trend ever since. >> you have still quite ambitious growth targets. a number of products around the world and the uk as well. because there are big squeezes on the consumer in the west, does that slow down that growth because obviously you're not going to buy organic and go for the cheapest possible options. >> half the world's hungriest are farmers in developing countries. and most of them live on less
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than $2 a day. fair trade as much as it's growing fast despite the recission it's a drop in the ocean. he want to reach farmers and workers in very hard to reach parts of the world. but we're growing and growing well. so this year we're looking at 12% growth which where the uk economy is flat lining it's pretty good. we're starting to be able to make the benefits of global trade come alive for people in really difficult situations, recently we started working with farmers in afghanistan to bring raisins. we're work with palestinian oil producers. we're working with coffee growers in the democratic republic of the congo. it's hugely supported by the public. >> that was mike gindy. for more on our trade link series goes to our website tr e
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tradelin tradelinks.cnbc.com. >> let's get a final thoughts from henry dixon. we covered a lot of ground already this morning. setting up for the week's position what are you screening now? what are your top ideas? >> we've been very much on certain and cash balance is within the fund is into double digits. that's definitely for us we believe probably as we sat down we felt a range where we obtained march 2011 values of 500 and because there's so much cash within the market actually it's such low return upside to some extent we feel is 6450. we're in the middle of that range. where we wait, like most people from european politicians i still believe the correct asset a location call today is
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equities and cash. that's the way to play it at the moment and question you have to be very active on the correct days. we've been a better seller than buyer. >> waiting then sounds like for a lot of the decisions that will come at the end of the month into september. henry dixon, thanks very much for your time. good to see you this morning. still to come on the schork greece's prime minister hits the road this week to try to win over top eurozone leaders. will athens get the lifeline it's looking for. we'll discuss that coming up. ♪ ♪
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hello and welcome to today's edition of worldwide exchange." i'm kelly evans. >> i'm ross westgate. these are your headlines from around the world. . >> no more concessions for greece. german politicians stake their claim ahead of a key meeting between angela merkel and antonis samaras. >> a report in the german magazine says ecb is considering setting a trigger for sovereign bond purchase. it lifted the euro a little bit. >> multibillion dollar deal on the u.s. health care sector. eat no is buying coventry health. >> lonmin says 27% of its workers have returned to the troubled platinum mine in south
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africa while executives talk about a $1 billion bond buying, pure speculation. well this is looking familiar. even though we know mondays generally speaking haven't gone that well, we've seen this move to markets where we're looking higher by a couple of points. same thing we're seeing this morning. dow jones industrials average pointed to open higher by three points. same thing for nasdaq and s&p 500. don't let a few points here and there fool you. take a look at the ftse. overnight tone is generally positive. shanghai at or near three year loss. other markets have been more positive. ftse 100 is marginally down but central dax up a quarter of a
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percent. the cac up .2%. ibex up more than half a percent. talking about, if you add a few points here or there and you're up 27% on the ibex in four weeks, almost 15% for the euro stoxx 600. >> banks have been the major performer of that as well. take a look at yields as well. we continue to get a boost. flat performers. ten year spanish yields 6.21%. now getting down towards the low 6% ratio. this is yields in the u.s. 1.84%. uk ten year yields at the moment around 1.7%. euro/dollar a bit of a boost, 1.2354. but we did hit these levels last week. dollar/yen fairly steady. that's where we are. what about in asia? we have more for us.
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>> most asian boards ended in negative territory. investors are gearing up for pmi numbers to see if any weakening signs could prompt action from global banks. shanghai finished down by .4%. developers tumbled as housing prices -- and bay ying is ready to push forward its reform. shares over hong kong fared slightly better. markets are now bracing for a slew of earnings reports from over 300 companies. telecoms and develops weigh down the benchmark hang seng. exporters extended gains on softening yen. kospi finished flat, gains in consumers were offset by losses in index giant samsung electronics. offshore players samsung sold
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off shares. back to you. >> thank you. >> couple of quick news items out of greece this morning. more about the economy there. the june current account deficit shrank. tourism receipts fell 7.1% in june from a year earlier pap bit better news on the current account deficit. meantime the june tourism receipts down 7% year-on-year for key industry that's pretty troubling or at least a challenge. >> yeah. it's interesting, we've had this melt up in stocks, no real damaging politics in the last couple of weeks at the olympics. no politics. this towards the end of this week we start seeing maybe flickers of political embers coming back to life. summer break may be over for
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eurozone's top politicians. leaders of germany, france and greece will be holding meetings later this week. on thursday merkel and francois hollande will be meeting. on friday, greek is expected to ask for more lenient bailout terms. it's a number of weekend press reports suggesting berlin's top politicians will refuse to grant athens any further concessions. german foreign minister will hold a news conference with his counter part in berlin. >> german newspaper saying the ecb is considering a plan to buy peripheral bonds each time yields move above a certain spread. the paper says the ecb governing council will vote on the plan at its september policy mighting. the spanish government wants the ecb to commit. he said the bank should not place a limit on how much it should buy or express how long
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it will intervene. and rothschild has demonstrated a lack of faith in the euro. a roirnt the uk's daietaiaily telegraph made a bit against it. with all the news on the european front i imagine you're watching pretty closely this plan of the ecb to potentially buy sovereign spread of sovereign debt once they reach above a certain level? >> watching that very closely. i'm fascinated by germany's telegraphing what they do with greece. if they let greece leave the euro that could be interesting for the hasht. if greece leaves in an orderly way that could be breath for the market. >> how is it possible in the first place for greece to leave in an orderly way. secondly why would that being a great for the market if
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everybody in portugal and spain sees the immediate devaluation risk that their assets potentially face? >> well, i think it shows that they are going to stand tough on the euro, that if you don't really, you know, pay the piper, if you don't do what you said you'll do, if you don't cutback on yourbudgets, impose austerity on your economies then you're going to be gone. it's kind of creative destruction if you will. if you let greece out, if they can get out in an orderly way and the key here is orderly this makes us believe a little more they are serious about -- >> but, michael, everyone would love, i'm sure at this point for the euro to move forward without a weak link like greece but unfortunately that's not the reality of the situation. how do you, given the circumstances that, you know, that you're confronting today, you know, manage and exit and one that isn't going to immediately create financial distress across the rest of the
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eurozone. >> well, you see, i'm not sure it would create financial distress. perhaps it would. perhaps it would in portugal. italy stems have turned the concern. spain is doing the right things. france and germany are okay. so i'm not sure it's going to create the kind of disruption you're expecting. however, again the word is orallor l orderly. they got to have a plan. >> i'm presuming, michael, that this report about ecb considering unlimited bond buys is part of that plan. the question has been is w do we cauterrize the rest of europe from a greek exit. >> i would agree. if that can happen, if they can get everybody on board with that and don't get the bond vigilante disrupting that by continuing to test the limits of that policy, then i think you can let greece go and i think it solidifies the
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perception that europe is serious about righting the ship and in a very strange way very good for the market. >> what it does, of course, means it's a lie to say the eurozone is irreversible. there should be no policymaker out there saying the euro is reversible if you do allow one country to leave? >> i agree. they can't say the euro is irreversible. i never thought that it was. but i do think this will instill a discipline in the remaining participants coupled with the ebc signalling they will have unlimited ability to buy bonds if they break with outside spread range. this is all very good for the euro. nothing sir revers is irreversi. it makes a stronger currency longer term. >> you'll stick around with us.
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>> we've been crisscrossing over greece and spain. should we be turning our attention to portugal. citi cautions that country might be under pressure soon and need an extension of its bailout package. we want to know is portugal going to be front and center is that one to watch for the headline moments in the next couple of weeks. where should tension be focused now. let us know what you think at worldwide@cnbc.com, tweet us at cnbcwex.com. >> still to come groupon's early investors are running for the hills. enthusiasm is waning. we'll get more when we come back. at bank of america, we're continuing to lend and invest in communities across the country. whether it's supporting a delaware nonprofit that's providing training and employment opportunities, investing in the revitalization of a neighborhood in the bronx,
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or providing the financing to help a beloved san diego bakery expand, what's important to communities across the country is important to us. and we're proud to work with all of those who are creating a stronger future for everyone. [ male announcer ] it's a golden opportunity to experience the ultimate expression of power... control. [ engine revs ] during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection.
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you are watching "worldwide exchange". these are your headlines. german politicians say no more concessions for greece ahead of a key meeting between angela merkel and the greek prime minister. >> ecb is considering setting a trigger for bone purchases. >> lonmin said 27% of its workers returned to the mine in south africa. in some merger monday news for you, aetna has struck a deal to buy coventry health.
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the "wall street journal" saying aetna is paying about $42 a share for coventry, about a 20% premium to friday's closing price. the deal to be announced today creates one of the largest u.s. health insurers and a major provider of medicare health plans. eat no expects the deal to add 2013 and 2014 earnings. aetna and coventry shares in frankfurt trade you can see the acquirer down 2%, the acquiree if i may, up 20%. although apparently that tells us that's the low of the morning, ross. >> yeah. that's the way it should be. groupon's backers are throwing in the towel. "wall street journal" suggests four pre-ipo investors have sold or significantly cut their stakes in recent months. since its ipo in june groupon
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lost 75% of its value. this is interesting, because we got a report now of what investors on facebook do. by and large private equity investors in ipos to sell their shares, don't they when lockups end on the basis that, you know, they've taken to it market and they get the returns and go and fine something else. >> i wonder how many do sell. i'm not sure it's that significant versus how many hold for a longer period of time. in the case of groupon, clearly made the right move at least earlier they sold in this case. >> michael, what's your own view of the lack of success of tech ipos? >> well, it's an interesting phenomenon. these tech ipos are more on the social, in the social space. even groupon is a commerce site really but there's a social aspect to it and it's really hard to monetize these concepts. until somebody comes up with a
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formula that can properly monetize that's pretty good ideas it's hard for these stocks to get any traction. >> you like the tech sector more broadly then, michael? >> i do. i like the tech sector a lot particularly the more, the hardware and software side of the cloud. i think there's a lot of compelling values, microsoft being one of them. microsoft is really poised to do creamily well. >> okay. moving on to the violence now. caterpillar's ceo warns global economic outlook is more uncertain than in 2008. he said it could take another five years for europe's economy to start growing. there's never been a more unpredictable set of tea leaves. barring europe most big economies look unlikely to contract. >> china's most sensational murder trials in history is over. the wife of a once rising political star has been sentenced after being found of
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guilty of murdering the british businessman, neil haywood. >> translator: gu kailai's part in the crime is serious. she should be sentenced to death. >> gu kailai's execution has been suspended. she's likely to spend life in prison provided she doesn't offend in the next two years. sentencing helps close the door on a political scandal that has rocked the communist party ahead of its leadership transition. >> still to come on the show the iaea the pouring cold water on speculation that president obama could tap emergency oil reserves. find out why just after this. ♪ la la la la la la la
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. welcome back to the program. let's check in on markets as we gear up for the open of markets in the u.s.. dow jones industrials implied to open higher. a point or two for the nasdaq and s&p 500. a little bit of a creep higher you turn around and you're up 10%. >> they add up. we'll turn into the resource sector. lonmin said 27% of miners returned network after workers were told to report today or
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face dismissal. lonmin shares still under pressure after the violent strike after it left 40 people dead last week and forced the company to halt operations. the "sunday times" in london is reporting lonmin could lunch a $1 billion emergency rights but the miner has dismissed that report as pure speculation. >> speaking of lonmin, it has reported this morning 27% of its workers were back, not clear how many of those if any were the striking workers and now lonmin saying despite that it does not have enough workers yet to resume production and i want has not made a final decision to dismiss the striking workers that didn't show. so the saga continues. brent crude prices moving higher after iaea and some countries spoke out against speculation that president obama may tap emergency stockpiles in a bid to ease u.s. gas prices. the agency, japan and south korea all said there was no need for the white house to release strategic reserves.
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joining us now for more is senior oil strategist at bp. do you expect brent nymex spread to keep widening and is it just this spr release that's feeding in to that? >> starting with the suggested stock release, in essence, the iaea only recommends a release of stocks if there's a supply disruption which technically there isn't, there's just high price. the iaea encourages collective actions that's why it's disapproving against any potential release of u.s. crude stocks. in terms of brent versus wti the issues affecting both crews are separate and in the u.s. wti is land locked crude, essentially a cushion and has been affected by light shale production, oil production. brent is affected by a lot of maintenance and been affected by more international rate of
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thing. we expect the differential to not close but remain wide at $13 or $14. >> how much does mid east tension feed into that. >> it feed into the brent side of the equation it reduce -- although saudi arabia is offsetting the reduction, the amount of arabian crude removed from the market it affects europe because europe does take a lot of arabian crude and affects the crude that gets bought and run through its refineries. brent is going to be outperforming wti. >> if that's the case and wti isn't as much underupward pressure doing anything on the spr would be the right move? >> you could repeat that? >> there's not a ton of pressure on wti then why release reserves? >> yes. i think wti is a number of
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crudes that the u.s. use. if they raise stocks it's in the form of crude. this crude would come in to the market and run by oil refineries on the gulf coast. refiners are running hard. increase of availability of e wouldn't lead to higher crude runs. that want alone wouldn't lead toni lowering of the price of gasoline. what will lower the price of it was line is that the u.s. is approaching its peak demand period and also demand will soon to start to decline seasonally and that might lead to reduction in gasoline prices. >> let's bring in our guest. michael, you still like energy stocks, yes? >> i love energy stocks. i think that particularly energy stocks that have a domestic orientation here in the united states, because of the middle
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ea eastern concerns. i'm interested in his comments on the strategic petroleum reserve. the threat to release those reserves is more political than anything else and the comment that we're through the peak trying season lend credence to that. >> yeah. i just want to bring you back in on while we focus on that i'm noticing the invade between wti and brent expanding. we've seen this before. does there come a point when we get to a point where they get so wide revert back and that provides a pair trading opportunity. >> what's is going to bring it back into historical line for $3 or $4 is the ability of the land locked dollar in the u.s. to come to market on the gulf coast. so construction new pipelines will help that. en masse suggests that new
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additional volumes coming in to the midwest is equal to or dpeegd new pipeline capacity to export this sort of to the gulf coast. so we don't see an immediate end to this differential but it will emerge. we're seeing relative price weakness. >> we'll leave it there. still to come on "worldwide exchange," i'll tell you why i don't like mondays because wall street isn't very fond of them either. we'll look at whether the dow will break out of its down trend on the first day of the week when we come back.
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hello and welcome to today's edition of worldwide exchange." . if you're just tuning in i'm kelly evans. >> i'm ross westgate. >> these are your headlines from around the world. . >> ecb is considering setting a trigger for sovereign bond purchases that's hoped the thrift euro. >> multibillion dollar deal on the u.s. health care sector. aetna is buying coventry health and expanding medicare coverage. >> lonmin said 27% of its workers have returned to the
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plant. executives call talk dlafrs 1 billion rights issue pure speculation. well hello to our u.s. viewers who are waking up and joining us. futures staying positive only by a couple of point drifting higher. dow is implied to open higher by eight points. nasdaq and s&p 500 adding a couple of points as well. global markets added to that in the last four to six weeks. footprint so global 300 is about .14%. drifted higher all morning. european bourses shows gains. xetra dax up half a percent. ibex 35 now up almost .9% and
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extending its win streak over the last four weeks where it's added 27%, ross. >> thanks to that. the question of course is the thin volume markets what are your supposed to do as an investor. this is a recap of some of the thoughts we've already had today. >> the best way you can actually play the compression trade is within the core markets. so selling germany versus france, for example. you put those charts up earlier. one of the reasons why that compression has been taking place. >> selling yield or underlying? >> you sell germany you buy france. >> our trade is long. the stock has been strong in this market because of expectation of central bank action. some prediction could be possible in the next week if the central banks disappoint. >> we're now of the view that
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the dax is expensive but what we're looking for is businesses that can be the next diageo in the next five years and what we'll demand from our businesses is to grow that dividend in the next five years and be ten times and that's where you make the money. >> meanwhile garfield the cat isn't the only creature that doesn't like monday. the index closed down the end of the last 11 mondays. the case of the monday effect isn't isolated to the dow. senior analyst for s&p dow jones indices since 1928 the s&p 500 has decline 52% of the time on monday the same goes for the dow since 1900. that's an amazing stat. half the time i want goes down or up. >> what's interesting, there's a story from dow jones where 52% of the time on mondays it's higher.
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the rest of the days of the week it tends to be lower. it's barely a difference but nevertheless a difference. >> what's interesting is the other stats. we got volatility at a five year low. we've got -- we're up what? 11, 10, 12% since the june 4th loss. that's quite a significant move. can it continue? >> i actually think it can continue. you know it's been grinding higher. it's been climbing the wall of worry. the highs are still with us. they seem to be becoming less prominent. the market is susceptible ton good news or anything that can be perceived as good news because of the low volume because really there's almost a strike. not a lot of people selling so anybody who wants to buy will take it a lot higher. i'm really positioning myself
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for, you know, moderately good news trying the market higher than it should. >> which is interesting, michael because it's not as if this is a market that everyone hates, or loves but i just wonder if you look at anything from high yields to rally we've seen in the market screenly some of the measures that ross is mentioning if now is the time you add exposure. >> i think you do want to add exposure for reasons that are peculiar to the market structure. many of the portfolio managers and fund managers out there are really well behind their benchmarks, sitting on a tremendous amount of cash. and, again, we're susceptible toni good news. if something comes out of the mario draghi or mario monti or any of those guys or bernanke this week that says there's qe or plan for an orderly exit of greece that won't have an effect on the rest of the european
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participants in the euro all of those can feed into the market and have a powerful up move. there's very limited participation in this market. as it happens these portfolio man fwers decide they have to get neutral their indexes if not longer. >> what's your year end target, michael? where do you expect indexes to be by year end? >> i actually think the target is right here. we'll see some move up from here but then we'll have a pull back around election time as we get closer to the fiscal cliff which i can't imagine that will happen. if it does my fwod the market will see some really volatility. then i think it will settle in at the end the year right around these levels. we put in our highs for the year. i'm sorry. we put in our year end return. we'll see higher number at some point but get a lot of that back. >> just some comments. the german government said don't
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expect any major decisions at the francois hollande/antonis samaras meeting. so, germany sticking to the mission of the rules. laid out and when we hear we'll know which way we want to go. so we'll keep our eyes on that. michael sticks around as well. >> still to come days after the standard charter settlement another european bank under investigation by u.s. regulators for dealings with iran. all the details on that next. [ male announcer ] the perfect photo... [ man ] nice! [ male announcer ] isn't always the one you plan to take. whoa, check it out. hey baby goat... no that's not yours... [ hikers whispering ] ...that's not yours. [ goat bleats ] na, na, na -- no! [ male announcer ] now you can take a photo right from video, so you'll never miss the perfect shot. [ hikers laughing, commenting ]
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welcome back to the program. we've been crisscrossing greece and spain over the last several months covering the eurozone crisis but it is portugal where attention is turning next. new citi report cautions that country might be under pressure and soon need an extension of its bailout package. so we want to know is portugal next in terms of the headlines, in terms of the worrisome headlines. where should we be focused what do you dpoebt pressure points in the next couple of months. tweet us here or e-mail us at worldwide@cnbc.com. or cnbcwex.com. ross? >> of course while we look at what's going on with europe and the meetings we got later this
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week between germany and greece and france, we're looking at the aaas. we start off by comparing how much does a aaa matter particularly in the case of france. march 13th is when france lost the s&p aaa. and since the yield was 3.4%. germany leading yield just under 2%. you can see we've had a bit of yield compression until last friday 1.5 and 2.18. france has performed better since i want lost its aaa. helped by rto and talk of ecb support. when you compare of france with netherlands one of the eurozone's remaining aaas. you can see the stock yield compression. if we had that chart you would see a much greater yield compression. basically means aaa, i think as we already knew kelly doesn't mean an awful lot in terms of yield performance. >> we might have suspected that one.
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in any case you're watching "worldwide exchange" the you're just watching us this morning these are your headlines. german politicians said no more concessions for greece. the ecb reportedly considering setting a trigger for sovereign bond purchases. lonmin said 27% workers have returned to the mine in south africa. and an inquiry by british lawmakers into the libor scandal says barclays had poor compliance. done great damage to britain's reputation. it claims bob diamond was highly selective in the evidence he gave. bob diamond was disappointed by the findings and disagreed with number of select committee's comments. deutsche bank is the latest lender to come under scrutiny. "new york times" claims deutsche is one of several other global
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banks being investigated. deutsche shares are down. they have been down 2% in the session. patricia has got more. they rallied back after that low. patricia has more. interesting move, patricia. "new york times" comes out -- what's the detail of that report before you get into stock price reaction? >> details of the report basically says that the investigations are at an early stage. they are looking at any kind of transactions whereby iranian money was moved through the u.s., any kind of transactions. however deutsche bank made it very clear they did stop any kind of new business with internationally sanctioned countries back in 2007 and of course the allegations stem from 2008 and later. early stage however from a settlement point of view there was a bit of an impact at the beginning of the trading session so deutsche bank as you were saying ross down 2%. starting to recover rather nicely down about 0.2% as we
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speak. it's very interesting, but we have to see it in context of the entire sentiment. at the moment, though, any kind of bad news will have a definite impact on the sector. >> okay. patricia thanks. >> looking over now to the latest results from the dutch auction selling about a billion euros of short term debt for, let's see, debt at auction on the low end of what it was hoping to sell one to two billion, sold a billion dollars for a yield of 0.0004. and for the 2013, february 2013 set another billion dollars so. that went out negative yield of
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0.0021%. >> not surprising you don't get the biggest demand. >> we're continuing to see these creep lower. >> only six month. cnbc's "tonight show" laid off workers. jay leno took a pay cut going from 2520. >> just 20 million. >> trying to save some jobs. also to cut the late night talk show been operating with a higher budget since 2009 when it moved to nbc's primetime. it moved back to its long time spot 11:30 the show never pared back its budget until now. >> how big the operations are for these programs. still to come speculations of a $5.7 billion merger is firing up the health care sector. all the details on that coming
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idiosyncracy. we got a bit of a lift this morning in asset prices particularly spain low yields in spain on the speegle report suggests the ecb was planning to target bond spread and unlimited bond spread. german finance minister said he doesn't know of any ecb plans. and spanish yields, still going lower at 6.2%. so they haven't reacted to that german finance minister conversation. believed to believe the report. >> ftse was flat last week, flat
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today. they had gains of three weeks in a row. dax up 1.5%. up six weeks in row. >> eat no has struck a deal to buy coventry health for $7.5 billion in cash and stock. aetna is paying about $42 a share for coventry, about a 0% premium to friday's closing price. the deal to be announced today creates one of the largest u.s. health insurers and major provider of health care plans. aetna shares down almost 2% in frankfurt trading, coventry up almost 20%. the cme group has applied for a license to set up operations in the uk. the group, america's biggest futures exchange operator expect cme europe to be set up by mid. next year pending approval. they will begin by trading foreign exchange futures.
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some of groupon's earlier backers are throwing in the towel. four ipo investors have sold or significantly cut their stakes in recent months. since the ipo in november groupon has lost, lost more than 75% of its value. >> elsewhere best buy's founder said he's disappointed and surprised, he's offered to buy the struggling electronics retailer has been rejected. he expressed an interest in taking best buy private for more lond than $8 billion. best buy named hubert jolly as their new ceo. best buy stock price down 1.6%. >> let's turn to the agenda in
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the u.s. not much economic data. investors will get minutes from the fed's meet tomorrow. reports later this week on new and existing home sales and durable goods. take a look again at u.s. futures which are just drifting a little bit higher this morning. we're join now on the phone by ceo of bear and bull partners from chicago. jack, markets higher despite these reports. have we seen a return of the european political jitters? >> no. as a matter of fact i think we're surprised to see the markets not reacting to some of the headlines that came out of europe this weekend. i don't know how much we'll attribute it to the fact it's august and holiday time or maybe the market has become immune. maybe we'll see european news bounce off of it. >> jack, what about the u.s.
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outlook. i imagine some of the more supportive growth figures of late have helped although the fiscal cliff remains out there? >> we'll see that deferred. what's happened is a whole new tone to the market ever since the ryan vice presidential nomination i guess was brought to the forefront it's added a whole new tone to the republican campaign which really seems to have some support and footing for the overall market. >> wait a minute, jack. are you suggests that paul ryan pick is responsible for this market rally? the greater likelihood of a deficit focused republican administration would mean a greater risk to fiscal contraction going forward? >> absolutely not. the ryan/romney ticket is the reason you're seeing multiples expanding right now even with earnings staying where they are at. remember you're talking about a market that is making twice as much as it was a decade ago,
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exactly where it as far as the index goes. depressed multiple, it's the multiples that expand and this ryan nomination has helped it along. >> jack, the ryan nomination, if markets like growth i don't understand how the ryan nomination does anything to support a brighter growth outlook going forward. >> ryan is a free market supply cider. that's exactly what the market wants to hear. remember, the fact is that the only way to get out of this problem is either inflate or grow. we tried inflating. it's not going to work. we have to grow. that's what the market wants to hear the message that ryan has brought to the table. >> jack, most of the gains from the june 4th low been before ryan joined the ticket but i want to talk about those gains. we're up between 10% and 12%. the vix down five year low. that suggests to me actually we're open if we don't get delivery from the ebc and the
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fed and policymakers are we open here to a fullback, pull back? >> absolutely. in fact whenever i see the volatility index gets under 15 the first thing i do i look for buying protection. if anybody is out there that doesn't have protection at these levels they should. we're at the upper end of the trading range. remember the last two times we've seen the market break, the third time might be the charm where we see that protection go up and we see the market continue. we're just very, very close to these four year highs but even closer if you think about it in a grand scheme of things to all time highs of less than 10% away. we could see that towards the end. year. >> mike, do you think better down side protection now is a good idea? >> i actually think the markets got more legs on the cup side. i agree with jack a lot of it has to do, a lot of this recent move has to do that market perceives romney can win this election. i don't know if it's due to ryan
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or the markets just getting very tired of obama and wants to move on. but, you know, there's the statistics shows a sitting president gets exactly the same percentage of the vote as his or her approval rating. so with obama's approval rating at 48 the popular vote goes at 48. the market pricing in a romney victory. as long as that still remains a possibility the market has some support at thieves levels and will drift higher although volatility in through october as we get closer to the election. >> you would be hard pressed, michael, to fine an instance where politics matter that much to the market beyond again kind of the straightforward math on growth, on, you know, especially at a time we're talking about some stimulus versus austerity, look to europe and see quite quickly the implications from those politicians who were more supportive versus less supportive on measures to support the economy. >> this election is not about growth or anything else, it's
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about one's view of government. it will tell the story for years if not decades to come. if you're a big government person believing that the individual shouldn't be making decisions on their own vote for the current administration. if you believe in smaller government and more accountability, you know, vote for romney. that's what the market is telling us. that's what the market wants. >> jack let me come back to you. we were just speaking how the market has pretty much shrugged off these headlines. the finance minister talking to reuters, what do you need to see? >> we want to see some rhetoric come out a little bit more dovish. we got a big vote coming out or big decision coming out of german courts in the next couple of weeks which will be very important. one thing we have to keep in mind is that they are also going
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through an election process throughout europe like we are. so a lot of the rhetoric has to be taken as political rhetoric, with a little tongue in cheek and understand that everybody involved knows that unified europe is a lot stronger than one that disintegrates. >> yeah. but still so much politics to get through. it's going to take difficult. jack, what do you do with the dollar from here? >> the dollar goes down a little bit against the euro currency as we see more and more of the fear leave the eurozone. we saw so much capital actually leave spain and italy that much of that is starting to work its way back in. you've seen what happened to the spanish markets, italian markets ever since the june loss here and that will be indicative of what we see happens to the euro currency as well. >> yak, good to speak to you. michael, thank you. that's it for today's show. >> that does it for us. i'm kelly evans. this is ross westgate. both of us will be back here tomorrow. >> "squawk box" is up next.
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good morning, everybody. investors waking up to a merger monday. aetna buying up a rival to create a health insurance powerhouse. investigating the london whale that trading fiasco, jpmorgan is tapping ray lehman. why can't this market rally get any respect. we're talking about the rodney dangerfield of market rallies. it's monday, august 20, 2012. "squawk box" begins right now. ♪ looking for a little respect. good morning. welcome to "sqwk

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