tv Worldwide Exchange CNBC October 19, 2012 4:00am-6:00am EDT
foreign investment extends declines, but china remains on track to meet it fti target for the year. welcome to the last program of the week. 1 25 years ago on this day, the date, i started my career. >> october 19th. so anytime you start something, should investors be worried? >> probably. >> you were doing what at the time? >> i literally joined my father's business, an investment business, he was based in a private broker's office and i started as a trainee. >> and what happened there on black monday? >> everybody sat there and watched the screens all day and didn't answer the phones. that was basically it. and i thought this is a strange way to run a business.
and they all blame me, as well. it was fine until you turned up. >> starting this new york mid 2007, it was like everything was fine until you showed up. i will point out i came over here to london in may 2012, everything was fine until you came over. >> since you came, things haven't looked so good. we'll talk about the anniversary of black monday. also on today's show, we head to frankfurt, we'll hear from the finland central bank government on the future of eu banking. >> and we'll head to hong kong ahead of a slew of earnings out of asia next week. >> and suspension on wall street makes for compelling drama. we'll find out from a director as corporate intrigue is at the center of her latest film. >> and in new york, chipotle will have to spice things up to
appeal to investors after missing profit expectations. we'll look at the earning out yesterday. in the meantime, europe's troubled banks could receive funds as soon as the beginning of next year. eu leaders have been hammering out the details at a summit in brussels. julia chatterley has been there and she joins us with all of the details. and i'll just point out, it seems the only agreement is who will accept the nobel prize. >> yeah, but there's not been an agreement on how many will actually turn up to accept that prize. so that remains an open question. we did agree there would be a legal framework in place, but merkel says even that getting in place is highly ambitious.
no further talk about just which backs will be eligible to be recapitalized. so questions remain. merkel suggested that there would be differentiation between the banks. some would be directly overseen by the ecb, and some would be indirectly. so perhaps no prizes for guessing where the german savings banks will fall. but we also had discussion about the idea of a eurozone budget and it looks as though based on what germany was saying, this would be proper correct based. so a more broader stabilization than they envisioned. so perhaps a bit of negotiation going on between the german and the french there. i asked the swedish prime minister about his views. this is what he had to say. >> our worry is that we don't
think that the proposal is really answering to all the questions. for us, you need say if you find a bank in trouble, who is recapitalizing that and who is paying it. because that's what the market and taxpayers want to know. they don't want to cover other nation states banking systems. until we have the clear answers to that, proposal is not ready. and for me, there's no need to rush. only a need to do things right. >> that's definitely the perspective that we're getting that, yes, we move swiftly, but you can't rush this. perhaps some of the southern member nations would disagree, but timing serving and we have two summits left and i think what's clear today is that there is plenty of work still to do. for now, back to you you.
>> silvio, thanks for joining us. as julia was saying, lots of declaration of intent, but finance ministers have now got to work out the details. spain has said we won't have any correct recapitalizati direct recapital 6ization until the end of next year. >> we know they can't renew their recapitalization in a time frame which is quite pressing and it looks like -- isn't clear. but even most importantly, i would say there is an absolute no clarity about whether the leg
glassy will be taken in the future about any direct recapitalization. so i think at the margin is negative for spain, but i'm not sure that's a surprise, though. i think the market was looking for a time frame that they could go into next year as far as more clarity is concerned. >> back in june there was no mention of ireland. it seems like we've pushed the idea that we can fund toward the packs as you say. i suppose the question is where does it leave spain. funding costs and yields have come down. how comfortable are they going to be and for how long? >> obviously that is the key question now. i think the market is playing ecb intervention trade. but the macro story is untouched by the decisions that the
europeans have taken so far. we're sympathetic about the imf. we do expect that the economy would be substantially weaker than authorities are anticipating so far. so moving into next year we believe the contraction in the activity that we anticipate will bring back some stress as far as spain is concerned and how the market looks at it. >> you have this phrase conditionality could crash with stability. >> i think that's the main read. obviously the treaty which was put together by the europeans which includes an important element of ecb intervention is very well framed in terms of conditionality. this conditionality obviously has some fiscal targets, structural measures. implementation will be very
dependent on what's the outlook into next year. so the ecb will stop buying spanish government bonds once there is a review coming. and if the market senses the review won't be smooth, there is a threat the ecb may stop buying and i think that's a destabil e destabilizing element. maybe just a little point on what the tool tries to achieve. i think it's important to recognize that in spain, there is a real economy problem which has been extremely affected by the fact that the channel of monetary policy is broken. this means while the ecb was cutting rates, cost of funding for houses and corporates in spain was on the rise. and take process will continue well into next year if it's not solved. so what i'm trying to say is if
all these doubts about the policy response don't get cleared out, we really struggle to see how the cost of funds will come down p. >> okay. silvio, i want to bring this news to people. italy will be resting on its laurels apparently. the country's debt management chief has told class cnbc that the italian treasury will reduce the amount of debt it issues over the next two month. this after it unexpect #ly raised a record 18 billion euros in an inflation linked bond sale this week. that was the highest amount ever raised in a single debt offering in european silvio, does it exp optimism about the italian economy's future? how do you interpret this? >> i think it's a combination of various factors. on the one end, i think there is an increase in the appetites of
necessary ti domestics. but also i think that more generally that there is a very strong interest in what is something that can gefr you some protection against the increasing the cost. a combination of both, but general employee perceive the population is buying in to the story that maybe the political class is somehow looking at the serious reform agenda in a way which is much more substantial than used to be in 9 past. the margin may have helped. >> silvio, we'll still be following the arrival of many of these eu leaders including david cameron. there you can take a look at the arrivals. is that a red carpet or pink one? i can't quite tell. >> looks slightly more pink. >> it does. in any case, a classy event. plenty more on that. >> that's the olympic pink.
>> that is olympic pink. not so subtle. >> 2012 pink. >> more red i'm afraid for google than pink. the talk of the financial world of course. and not for the right reasons. company's earnings released hours earlier than expected and the numbers themselves as bad as that trading glitch. julia boorstin has more. >> it was a bad day for google pl not only within the earnings accidentally released four hours early, but the results fell far short of expectations. google shares plunge more than 10% and google issued a statement blaming rr donnelly and sons for releasing the results early. they did pull back slightly. the company reported revenue of over $14 billion from google's search business and its up 45% from a year earlier, but net
income fell on losses from motorola and a slow down in parts of its advertising business. one cause of the shortfall is that consumers are migrating to mobile devices where google doesn't generate as much ad revenue takes does from the desktop. on google's earnings call, larry page expressed the huge potential in mobile saying the company now has an $8 billion mobile run rate. though the vast majority will be ad ads this throughs apps and devices. page struck an upbeat note saying google is uniquely positioned to take advantage of that shift to mobile. from cnbc in los angeles, i'm julia boorstin. >> you you can see samsung electronics down 2.6%.
other tech majors also all down. microsoft's frosts also fell 22% missing forecasts. it deferred revenue from windows 8 which launches next friday. microsoft also felt the impact of the general slump in pc sales and of course europe's economic woes weighed on results. shed buildiding 1.3%. and one analyst says the jury is still out on the latest microsoft software and that will be at 5:45 a.m. eastern time. chipotle's third quarter profits rose 30% as it opened new stores, but results missed forecasts. same store sales came in shy of expectations. the company says the impact of the summer drought is already hitting food costs and it may consider raising menu prices.
shares down 13% after hours. >> we've had four days of gains so far for european stocks. just weighted on on the down side this morning around about 6:3. ibex down around 0.8%. but keep our eyes on yields. they continued to decline during the session yesterday. and it's happened today. ten year 5.31%. back to levels we haven't seen really since march last year. ten year italian, 4 pmt 73.
7 1/2 month low for italy. and aid by the 18 billion they raised in those entex liindex l. gilts has risen. and latest numbers on public borrowing today, as well. row tail sales have been stronger than expected show you where we stand on the currency markets, weaker today. dollar-yen still making gains. 79.35. is this the start of a trend higher? aussie dollar still at 1.03, sterling been looking pretty strong against both the dollar and the euro. can that be maintained. let's get more out of sync pore. >> finished on a mixed note.
commerce ministry warned september's trade figures are not yet enough to confirm a recovery latest fde numbers signaled more cooling. more on that later in the show. the shanghai composite pulled back a bit today after yesterday's rally, but still managed to post it third weekly gain. gold miners left the losses while infrastructure plays continued its outperform. mainly banks lent support ahead of next week's earnings, but losses in property developers and telecoms weighed on the index. still that's not enough to stop the hang seng from posting its seventh weekly gain in a row. china related stocks extending their rally. tech guy apt sony announced it's cutting 2,000 jobs to save costs. but the news came after the market closed. miners continued their winning
tree streak, meanwhile green corp shares halted after u.s. food giant bought a 10% stake in the grain's handler. the index higher by a quarter of a percent. and the sensex lower by 0.7%. ross, back to you. >> thanks for that. we'll catch you a little bit later. now as we were saying at the top of the show, 25 years since black monday. what are your memories of that day? worldwide at cnbc.com, at cnbc @cnbcwex. my moem other is everybody just looking at each wondering what was going on. >> my memories a a little foggier, but interested to read everybody else's. coming up later, india's tcht
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sony announced its announceg to let go of 2,000 jobs. it's not expected to affect earnings. shares have lost almost a third of value this year. on oil giant will back off an offer from rosneff. it could give bp as much as 20 billion in cash plus a stake of 10% to 20% in rosneff. >> bp and the coast guard say a sheen on the gulf of mexico isn't from the sealed mccondo well which was the site of the 2010 oil spill. they say it's likely from oil seeking out of a piece of
discarded equipment that tried to fail to continue the spill. relief well isn't leaking either. it's the third time since 2010 that bp has confirmed the mccondo well isn't leaking. and president obama and mitt romney will face off yet once more debate style on monday. but the two were in the same room thursday night for the annual al smith charity dinner, a traditional appearance for politicians during election season. dressed in their white tie best, they greeted each other warmly, traded jokes and yet took a couple digs at each other's expense. >> this is the third time that governor romney and i have met recently. as you may have noticed, i had a lot more energy in our second debate, i felt well rested after the nice nap i had in the first debate. >> i'm glad to be able to join in this venerable from a decision. of course i'm pleased that the president's here.
we were chatting pleasantly this evening as if tuesday night never happened. >> i think after the rhetoric of the debates aunt all of the cable news cycle, to hear them just taking a bit of a breather -- >> made for fresh humor. >> i much prefer that than the debate. >> we should just ask them to trade jokes monday. what a great way to choose the world's next leader. >> when we come back, plenty more to talk about. we'll have more on sony's restructuring plans. will it be enough to convince investors they can return back it play.
the worst may be over. european leaders sound confident after reaching a compromise. questions over the day to day oversight of recapitalization plans remain. >> it was a double whammy day for google. earnings released hours ahead of skum aschedule and results miss forecasts. and microsoft gets set to
launch windows 8. >> and sony plans to cut 2,000 jobs in japan through an early retirement program. the firm hopes that will save $380 million annually through its restructuring plans starting next year. >> european stocks slightly weaker this morning. down a third of a percent. ibex down 1.3. at lower for ftse 100. bond yields down at 7 1/2 month lows. >> if you want to know why there's been an up draft around the world, ten year in spain yielding 5.34% and it was just a couple weeks ago we were almost kissing that 6% level once again. both spain and italy are continuing to move down. the bund taking on the chin
moving up a little bit to 1.61%. but inflationary outcomes, at least those would suggest bund fair value at more than 1.61%. gilts have made a move of late although the yield is coming in a little late. >> as far as currency markets are concerned, euro-dollar moving away from the one month high that we were at this time yesterday. currently at 1:3053. we'll see how we trade through the borrowing numbers that come out this morning. it's tax receipts that will be very much in focus with this number, as well. we're looking for in a 14 1/2. it was 13.4 billion last september. >> and it comes at an interesting time because in britain, there's a lot of focus
on whether continued cut backs are the right move, but also the question as to whether and what britain's role should be in the european union as those rules as to what the eu might look like going forward start to take shape. >> the eu as we know it will cease to exist. so therefore it's not about staying in this eu, it's about relation we have with the new one. let's get the borrowing figures and we'll continue the discussion. up 12.88 billion. actually a better than expected number. lowest since 2008. that means revised down by 6.7 billion. just trying to see if there's any statement on where the slightly better number has come
from you have to remember they got a boost from taking over the pension assets from the royal mail which is a strange way to account for things, but it did happen. borrowing number is a little bit better than expected on psnb. >> and beat wait for people to dig to these figures, but if there is some better fwloe from tax receipts, it jives more with the employment side than with the gdp figures. >> just talking about the role in the eu, as well he. >> as you start to look at britain's economic strength and what it can to going forward. how many schemes have we seen?
the question becomes what is britain's role as the economic engine that it traditionally has been of the euro bloc in or not in a new ire pea an union. and again we're seeing talk europe loses patience with british exceptionalism. you can see that article here even as martin wolf is talking. >> david cameron in the leaders photo was way down the end on the back right side. i don't know what you read into leaders photos, but he was back down on the right. the key is that you still want to have single market compliant goods and services. you still want to sell goods and services into whatever the single market is. >> without having to accept their -- >> without having to accept
rules on banking regulations. >> financial transaction taxes. >> it is the uk's just about biggest important consumer market for german and french goods. so i think there's a barb gaining chip. meanwhile, the french retailer has been offered $2.5 billion to purchase assets. for more, stefane is in paris. what's going on? >> not a big surprise it was one of the first decisions taken by the new ceo of the french retailer. basically pulling out from all the countries where it's not in the leading position. this includes singapore and greece. it sold it columbian assets to a retail group from chile for $2.6 billion. the deal should be completed by the end of the rear.
it will give 72 hyper markets, 16 continents and four cash and carry stores. this is a good deal because market expectations was that the company would sell between 1.3 and 1.4 billion euros. and that explains why the stock is trading 8% higher on the french market this morning. carrefour saying it will focus on key markets and improve market shares s ifrance. it announced 600 job cuts in august and the country will continue to focus on brazil and china, but, yes, it will leave columbia very shortly. back to you. >> all right. stefane, thanks very much. the latest on carrefour. india's tata group has big plans to expand it luxury hotel business.
it's willing to pay $1.9 billion for orient express hotels. ektra has t rchl tchlt ekta has the details. >> they made an offer to the board of directors to orient express hotel chain where they plan to acquire the entire 100%. they currently own around 6.9% and the intention is to increase to 100%. it seems like it's basically a hostile takeover bid at this point in time because in the past, there were talks that indian hotels had approached orient express, but that was actually shot down. they also we do understand in 2012 had some amount of talks with regard to strategic acquisition or strategic alliance rather with orient
express hotel, but that, too, was denied and shot down. so there is expectations that possibly endian hotels is now going to make a bit of a hostile bid for that 100%, which is a 40% premium to the closing price of last evening for orient hotels. around $12.63 per share. and values orient at around $1.9 billion. the entire funding will be by three banks and will is some at of concern coming in with regards to the leverage and that's exactly why the stock is down around 5.0%. so let's see if it comes through. back to you. >> ekta, thanks very much. the 22% jump is pretty remarkable in or yept shares. sticking with cross border m&a, archer daniels midland has confirmed it bought a 10% stake
in grain corp. adm says it's also seeking talks on a takeover that will give america'sing a gra business a stronger supply base to asia. they have until next tuesday to study the proposal. and china's direct foreign investment slipped again in september. extending the longest run of declines. and for the first nine months of the year, fde strank to roughly $83.5 billion. there were positive bits of news. china remains on course to meet its targets. outbound rose almost 29% year on year. joining us now for more is managing director and head of research at reorient financial markets. is it around the positive today as it was in the past is th.
>> not by any means. k45 china is becoming a normal large economy. when there is m akdnd&a cross b across into united states and japan, they're asking themselves was there a good investment to make by softbank in sprint nextel and i think in china, the same thing is happening. our company is very much involved in these foreign invegsmentes in china and many of these foreign invested joint ventures are co-invested by large private equity funds which are operating on the same scale of business as the biggest international pe group. so bottom line, this number is not going to be very meaningful and fewer and fewer people are really paying a whole lot of attention to it.
it does have one component that is significant. it's a confidence measure of some sort. >> certainly there's always degree to which the currency plays in here or at least it will respond to cross border flows. we're seeing the renminbi strengthening sort of day to day. and so how do you square that? >> again, the renminbi is at the moment no longer one currency. you have the cny part of it which is the on shore trade and the cnh component which is the offshore traded renminbi. right now the two are pretty much in line with each other. the offshore traded one reflects probably fair value. so china has been allowing the occurrences city to appreciate again recently and there by the
premium that sometimes we've seen on the cnh has actually disappeared. so i think in terms of the actual issues such as fdi and so on, the currency issue is no longer very significant one except to some u.s. senators and presidential candidates. >> that's for sure. when you say china is more and more like a big normal economy, that leaves a rebalancing away from a pure export led model, but certainly we haven't seen the kind of consumer strength that people have been anticipating. and how much longer before we really need to see that flow through here or else it will leave china vulnerable? >> china will remain vulnerable for quite some time. these kind of strategic shifts from export whether he had growth to domestic demand led growth take time. this is a matter of something
that will take five years to work out. it's the biggest task for new incoming leadership. and i think that's what they will focus on. so i think the time between the party congress in november and the time when these guys actually the new party leaders take over the government next march, that time will be spent to map out a reform agenda which will push that ahead. you're absolutely right, right now the september to which consumption has really closed the gap that's been left by exports is very, very limited. however condition assumptisum c continuing to go up. retail proxy is a good number. if we see some of that happening going forward, we'll get there.. retail proxy is a good number. if we see some of that happening going forward, we'll get there. it will just take time.
>> want to turn to japan where the consumer electronics giant sony is pushing ahead with it cost cutting measures. the company has announced it will cut 2,000 i don't thinks in the year to march 2013 and says its restructuring moves are not expected to impact earnings next year. sony shares have lost almost a third of their value so far this year. and on that note, the significance of these cuts, does it tell us something more broadly about what's going on in japan? not really about japan. it's telling us a lot about what's going on in sony. they're still not really managed to restructure the company the way they set out to do several years ago. and their foreign competition is just becoming better and bigger. samsung is running sicircles
around sony. so sony is not that much of a japanese company. it does not reflect very much on what's happening in japan itself. earnings and the well, if you will, of domestic oriented japanese companies are quite okay. it's the exporters that have been suffering from the strong yen and sony is one of the biggest one of those. so that's where the problem lies. >> great. thank you for your time this morning. >> and let's take a quick peek. singapore hosts a week long national energy conference. cnbc will be on the ground for that and talking to some of the world's top experts. japan posts september trade numbers and taiwan will release it september jobs report. china mobile wiwill report thir figures.
25 years since black monday, so we want to know, what are your memories of that day? a number of people have written in. you can e-mail us email@example.com, tweet @cnbcwex or at kelly underscore evans or @rosswestgate. i'm figuring you weren't doing an awful lot. >> no. which is all the more reason i need to hear your experiences. and if the french had their way, troubled banks could receive funds as soon as the beginning of next year. germany still appears to be eyeing a longer time frame, however. speaking on the sidelines of the summit morning, knsupervision
isn't necessarily regulation. silvia caught up with a governing council member and began asking help about the role of the ecb in any banking supervision. >> i think in practice it's very important that monetary policy remains i sandependent and inta. supervisory is separate. >> in terms of banking reform, we have started into this crisis which before we had the eurozone debt crisis was called a subprime crisis. some reforms have been implemented, some have been not implemented or pushed into team space. do you think we've come far enough with getting our banks fitter, leaner, meaner, more efficient? >> there has been progress in
the area of capital. the liquidity requirements, leverage ratios, also means they can better weather the storm. so it's all positive. the two areas we need to go forward is recapitalization schemes and we must have legal systems which allow quick he resolve the banks because bankruptcies don't give much time. on the other hand, you need in the market products, debt which has shares, what does it mean that when the bank goes to a crisis of course first defense is with the shareholders. their equity, it should be with debt holders because they have interest to follow the bank. but what needs to be done there is that it needs to be defined beforehand what instruments and
to what september can have this kind of krablgt. and then when it's transparent, it's clear, they can be priced. equity shareholders and then debt holders and taxpayers should be left out of the hook. it's been very rare exception if ever that we need taxpayers. bail ins would be the rule, bailouts will be exceptional. >> banks are trying to make us believe that a bank should not go bankrupt. everybody got that we're saving out of security, too many banks that should not be served but should be worn down or closed down eventually, should we not get more of let's say bankruptcy or closure procedure that we have for any other industrial company. gm can check tomorrow and five years later they're back this business.
with banks, that doesn't seem possible. >> quite a difference. banks don't have time. banks must be resolved very fast. is we need new regulation so they can be sold very fast. but we also need more equity these together, better buffers should allow it that we have more bank restructuring so that shareholder, at the tidebt holdd carry the risk, not taxpayers. europe should move forward. there are many proposals on the table which more than fix it. >> and new the new film the reluctant fundamentalist, based on a book focusing on a brilliant wall street analyst who moves back to his homeland of pakistan after 9/11. it's airing at the bfi london film festival and here's a quick
look. >> i was coming to see you. i'm not going to fire him in fact, i'm not going to do anymore valuations. i'm quitting the firm. >> you accepted the position of associate less than three months ago. you leave now, you'll be giving up all hope of doing any kind of this work again. you'd be committing professional suicide. >> i know i let you down. and i'm deeply sorry for that. but i have to tell you that i'm through. >> you don't tell me -- you think you're the only person who has experienced injustice firsthand? throw a rock out there anywhere in the city and it will land on someone who has seen worse than you. maybe you're having some kind of a break down. i will see to it that you will get some rest after this is done. but you will treat my commitment to you with the respect that it deserves. >> to myself, as well, i have a
commitment to myself. >> that may resonate with a few of our viewers. joining us now is the director. i know you were at the showing last night so getting up today to join us nevertheless. and you've never shied away from social commentary. why do you focus on wall street and why does 9/11 in particular? >> the film is based on the wonderful book the reluctant fundamentalist and what the fundamentalist really in the title is not just what we assume is the fundamentalist of today which is to do with terror or religion, but at the heart is the antagonism.
as he brilliantly ruthless in becoming an analyst who goes all over the world, shutting down companies, with the stroke of his pen, shutting down millions of -- hundreds of employment, people employed, he begins to -- he likes it, but then as 9/11 happens and as american dream that he has so far achieved begins to look at him, he questions his role in that world and returns home ward. >> so you're questioning globalization? >> at that moment it's mostly a crisis of belonging. where should i belong, where should i matter. and he understands as a pakistani young man in new york city after 9/11, he will always be looked at asscans and he feels betrayed and returns. but when he returns to pakistan and sees the other sorts of fundamentalism and even gets wooed by them, he begins to see
the connection between the two fundamentalisms, between economics and between even religions. and realizes that both systems, the human being, is subordinate to a belief system that does not favor the human being. >> and the success of this book certainly suggests that that struck a chord, the core message of this message struck a chord. but what's interesting is it doesn't just stop at the crisis of belief in sort of the economic structure which could border on cliché. we've heard this theme now for a while. but at the same time, you sort of figure out just sort of about you are sue a different structure and still not find that that is able to give him -- to legitamize him. >>nd also to understand the sort of pen any dropping at the parallel of -- of that this both systems, the human being is not the interests of us, it's in the interests of money and in this case terrorism.
a lot of the inner mccamachinat are true in this film. >> do we resolve between the two or not? is there some kind of resolution? >> there is definitely a resolution. you have to pay a good solid $10 or $13 to find it. but -- >> how easy was to finance this film and make it bearing in mind you have essentially a pakistani muslim -- i know you have keither zkeith keither kiefer sutherland. >> we had stars really from across the worl d in the film. it's a human thriller.iefer sut. >> we had stars really from across the world in the film. it's a human thriller. a man who finds his voice or does he. so it was very tough.
i have a decent track record and fantastic cast, but it took almost two years to put the financing together. but we had people who were saying to us they would offer us a pittance to make it very global big movie and that was not to be. and then one guy was a little tip city, a producer financeer, and you said you this is what you get. but where he proved him wrong and we had great support. >> and this comes out in april. >> april next year. >> thank you so much for stopping by. director of the reluctant fu fundamentalist. still to come, we'll take a look at google and whether there are any reasons to be optimistic.
usual pea an leaders sound confident after reaching a compromise to create a single banking supervise or. questions over the day to day recapitalization remain. google continues to move lower after losing $22 billion in market cap on wall street. the search engine shocks investors as earnings are released hours ahead of schedule and miss forecasts. and sony will cut 2,000 jobs through an early retirement program.
>> microsofts profits dropped as they get set to launch microsoft 8 next week. that low to our u.s. viewers. dow jones industrial average looking to shed about 16 points at the open. s&p and nasdaq lower, too. nasdaq fell about 1% yesterday on the big drop in google. would have wiped several hundred points off the index. dow and s&p faired better, closing lower, but not so much of a drop. global 300, pretty flat trading this morning. it's friday. down 0.2% generally speaking.
and the european bourses for the most part are showing a bit of a mixed bag to the negative, though, for the most part. 0.1 shedding the ftse 100. cac 40 losing about a third. ibex 35 which has been on steady pace of gains in recent days now down 1.3%. >> yields looking an awful lot better than they were. ten year spanish yields still lower. 5.31%. italian yields 4.72, the lowest for 7 1/2 months. italy borrowing 1 billion euros in an index linker auction which basically means they're now going to reduce the amount they planned to raise next year. ten year gilts doing slightly
better. expected to be 13.9 billion. local government borrowing and corporations owned by the government were rowed less money, but at the moment chancellor still set to miss fiscal targets. so a long way to go. end of the year is march in terms of financial terms. currency markets, euro-dollar nudging away from the one month high. dollar-yen stronger. aussie dollar a little weaker. sterling did get a slight boost from t were rborrowing figures. let's recap asia for you. >> asian bourses ended the week on a mixed note following the negative fleet from the wall street. asian teches in particular were under pressure following google's disappointing results. shanghai composite failed to
hold on to gains. the country's congress ministry also warned it may be premature to call for a bona fide rebound based solely on september's positive trade data. but mainly banks lent support to the hang seng ahead of next week's earning. but losses in telecoms weighed on the index. still the hang seng registered its seventh straight weekly gain. the nikkei had its best weekly showing this year with china related stocks extending gains. tech giant sony announced it will cut 2,000 jobs to save costs, but the news came after the bell. south korean kospi was weighed down by techs, auto makers and ship builders. banks lost steam for q4. grain corp shares were halted after u.s. food giant bought a 10% stake in the grain's
handler. sensex extended lots lower at the moment. >> that's how asias has wrapped up the week. >> and whether it's asia, europe, the u.s., google, this move yesterday, early earnings release, disappointing figures. now it's having an impact across the globe. but google did become the talk of the town after earnings were released more than three hours early due to a human error at rr donnelly which is the firm that prints their results. and profits did fall 20% missing forecasts. revenues including motorola rose 45%, but growth slowed from previous quarters and motorola had a bigger than expected operating loss. ad sales rose 15%, but that was down from 39% a year earlier. google shares were down #% thursday and that wiped $22 billion in market cap from the
company. i believe it also pushed google below microsoft in terms of total value. and frankfurt, microsoft -- i'm sorry, there's microsoft shares down about 1% in frankfurt shares. google shares also continue to slide. >> do we have the google board? >> here is what google is doing, down another 5.7%. shedding 7% over the past week there. joining us now is james dicks media analyst. good morning. so we saw an 8% move yesterday. worse at times as investors tried to digest what was happening. having now slept on it, do you think that there is anything investors will find in here that's slightly more positive? >> you can always find i guess a silver lining to the clouds. i think one thing that really drove the results was europe slowed down more than expected
for them and that really hurt the rest of the world results. given the macro conditions, that's not necessarily the biggest surprise, but when it actually shows up in the top line, then investors will react. a lot of it was currency. so if you strip out the currency, the miss wasn't quite as bad. but that said, google operates on a global basis, so currency is part of their business. >> just to talk about google's business model going forward, revenue generation, when you dig through its latest results, how significantly is your outlook or the fundamental story for the company changed? >> in terms of the business between the search business and the rest of the business, the search business slowed down a little bit more than i expected. on the other hand, the company talked about having an $8 billion gross revenue run rate now in mobile. most of that is from
advertising. so i think right now mobile loves search. that helps google. that's the easiest way to reach consumers with their smartphones and smartphone usage is going up a lot. the problem is that people don't buy as much with their smartphones. so the cost per click that google gets was down 15% on a reported basis, 8% if you exclude foreign exchange. so that will be something which they continue to try to work on to try to improve the monetization of mobile because mobile is enevidentable both for google as well as the rest of the online industry. >> you talk about longer term the economics of paid search advertising could suffer from what you call paid attention market. what do you mean by that? >> i guess kind of one thing i'm talking about there is that over time, the most -- google talks about search being the most
monetizable moment on the web. that's because consumers are actually indicating through a query that they're in the market for a product. at take points consumers are valuable. right now the only value they get is free searches and free advertising through a search engine. but over time, it may well be that through advanced use of coupon and discounts, marketers will actually be willing tos pass on some of the incentive which they pay to google now to the consumer directly when they show that they're in the market for a product. >> are there fingerprints here from increased competition with apple some do you see that as a factor in perhaps some of the disappointment? >> yeah, i mean, when you think about the mobile growth, it's pretty strong. i mean, they had a $2.5 billion run rate a year ago on mobile. it's now $8 billion. admittedly they're including
some more content related revenue in there. but i don't think that's a big part of that increase. so at the moment, i don't think apple is having a big impact in terms of the overall growth of the company. it's more something down the road in terms of, you know, how much share android will be able to maintain of the platforms in the market. but, you know, i think one thing that's helping google especially with the android platform is it's very well penetrated overseas. and some of the rest of world markets where the iphone doesn't have as much penetration. so i think that's one of the things that's helping their growth outside of europe and the developed markets. >> what do you do with the stock right now? >> i think it's hard to step in after a company misses by $1.50 on earnings.
fundamentally that wasn't really any part of the business except maybe the u.s. a little bit in terms of core revenue growth excluding foreign exchange which surprised. and the macro problems that theyed a they theyed a had in europe, it's hard to see that it will improve in the fourth quarter. i have a neutral rating on it, so i'd hold it, but i wouldn't step in. >> james, thank you for joining us bright and early. hollande says european leaders are on track to solve the eurozone debt crisis and that the worst is over. following a summit in brussel respect member states have put together a legal framework for a single banking union in place by the he said of the year. julia, some sort of broad agreement here but nothing in terms of details. and i'm not quite sure whether german savings banks are going
to be regulated or supervised by the ecb or not. >> exactly. it's very interesting to look at how the press have taken this and the focus on hollande's positivity coming out of the talks. but the german media saying merkel triumphs. so you have to cut through the eu summit speak. plenty of questions remain unanswered. we have the legal framework, but that's the easy part. we have no idea of just how the mechanism will work for the ecb to oversee these banks. merkel was rather coy saying who would be overseen by this. and of course the esm, we have no details on just what the esm
will do in order to recapitalize these banks, which banks can even be allowed to recapitalize. and that will be left to the finance minister. so plenty of open questions. hollande suggested recapitalizations could start as early as the first quarter of 2013 but german officials said that's highly unlikely. even merkel suggested that this legal framework is highly ambitious. there are questions that need to be asked before the next summit. >> all right, julia, thanks very much. and let's take a look at what's on the agenda in the u.s. september existing home sales out at 10:00 a.m. expected on drop by 1.5% to an am rate of 4.75 million homes. as for earning, we'll get results from ge, mcdonald's,
schlumberg schlumberger, honeywell. a busy one. >> and kelly won't remember this, but it's 25 years since black monday even though it's a friday. so we want to know what are your memories of that particular day? 4r50es jo please join the conversation. firstname.lastname@example.org, at@cnbcwex. it was my first day on a new job in the city. and not a lot happened i can tell you apart from people just looked at each other in amazement. they didn't answer the phones either. yeah, an interesting day all around. and what a great buying opportunity. we learned it was probably the buying opportunity of the century. >> ross, that's for sure. stick around, because still to come on the show, as eu banking policy inches closer to getting
google continues to move lower in european trade after losing $22 billion in market cap on wall street. >> and microsoft's profits drop falling short of forecasts as the company gets set to launch its new windows 8 software. >> europe's troubled banks could receive funds as soon as the beginning of next year. germany still appears to be eyeing a longer time frame, however. eu leaders have been hammering out the details of a banking union at a summit in brussels. and speaking this morning, ecb policy maker know vat any says it must happen in a serious way.
>> everyone must be responsible for it own pasts. talk about our responsibility. so member states must run fiscal policy so that they have primary surplus. they must do restructure all reforms which creates growth. that's one part. secondly member states must together with imf have the framework which can act, set up conditions if crisis occur. because we need programs and conditions. third, if all this is taking place, then the ecb can act. i hope part of this is more clarity and second part due to the fact that ecb has been quite clearly how we're able to act if
these conditions are being null filled. that clarity of communication and credit amount of ecb has helped there. but we can't re place something which is not done in member states. so everybody must take their own part. >> smexplain something to me because i lad a problem with getting my head around that. the omt is a purely monetary measure that is meant to fix dysfunctional markets. is that right, is that the line of argue mentation? >> we have fixed the rules which apply to all countries in the same way. >> you're clearly going out beyond the ordinary as the crisis demands.
is there anything else which you haven't explored yet which you could throw into the bucket? >> since this all started, it's actually now more than five years ago, five years section weeks ago, they had to act in up chartered worries. the interbank market has not been operated. it's not at our will. several banks globally have done more than they ever thought to do. and of course we have -- i think there is -- i expect the focus that what we have done guarantee that what we say, we hold. >> can you foresee any situation where you say, okay, this doesn't work, we have to side
step the banking system and give money straight to industry? >> i wouldn't go that far. it's very important in europe that we work full banking system. that's been the roll of central banks. banks borrow from us against collateral. in some areas we have had outright purchases which complement the picture, but the main route is always through the banks. >> i try to figure out what books there are. i think he had one on string theory. in any case, still to come, romney and obama were dressed to impress last night. we'll bring you the highlights. bob... oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs.
welcome back. president obama and mitt romney will face off once more debate style on monday. but the two were in the same room last night for the annual al smith charity dinner. traditional experience for politicians during election season. dressed in their formal white tie best, they greeted each other warmly and traded jokes at each other's expense. >> this is the third time that governor romney and i have met recently. i had a lot more energy in our second debate.
i felt well rested after the nice long nap i had in the first debate. >> people seem to be curious as to how we prepare for the debates. first, refrain from alcohol for 65 years before the debate. second, find the biggest available straw man and then just mercily attack. big bird didn't see it coming. >> of course world affairs are a challenge for every candidate. after some of you guys remember after my foreign trip in 2008, i was attacked as a celebrity because i was popular with our allies and i'm impressed with how governor romney has avoided that problem. >> campaigns can be grueling. we're each lucky to have one person who is always in our corner, someone who we can lean on and someone who is a comfortable presence. i have my beautiful wife, ann,
he has bill clinton. >> tonight's not about the disagreements we may have. it's what we have in common beginning with our unusual names. actually mitt is his middle name. i wish i could use my middle name. >> thought banot bad. >> a lot better than the high lights of the debate. >> debate was equally entertaining, but this was slightly less painful. i like the joke about clinton because obama does get a lot of grief for that. and i think that was katie couric that could yyou could gln the corner. monday is the next debate and i'll be state side. so i'll be there.
exchange." these are your headlines. worst may be over.come to "worl exchange." these are your headlines. worst may be over. leaders sounding confident but still lots of questions of oversight and recapitalization. >> and google continues to move lower in european trade after looking $22 billion in market cap on wall street. the search engine shocks investors are earnings are released hours ahead of schedule. and missed forecasts. microsoft gets set to launch windows 8. >> and sony plans to cut 2,000 jobs in japan through an early retirement program.
not a ton of movement. dow looking to shed about 8. nasdaq one to keep an eye on, it's not showing too much of a rebound. opening down perhaps ten points. and this following of course a 1% loss yesterday really weighed down by what was going on with google. dow, s&p, theirs los much smaller, but still s&p joining the dow in the red for the open so far this morning. take a look at the ftse global 300. good thifs you a sen gives you mood. google weighed on asian shares. and you are pea european markets broadly in the red. >> here's a recap of what the experts have told us today. >> we believe the japanese
currency is significantly overvalued and the boj and mof combined force will continue to try to appreciate the yen at every turn. so we are relatively bearish on the yen, we just need risk sentiment to improve significantly. >> i would probably stop buying some of the core. we will get to the point where we realize that the off loading of defensive positions that we've seen over the past couple of days is probably the wrong thing to do because we haven't solved anything. >> the dirty staples trade is all about the more controversial stuff. it's about the cheaper stuff. so dann non is an example of that. karlsburg is a favorite of mine.
today is the 25th anniversary of black plmonday. when the dow fell 22.6%, the worst one day plunge in history. >> it is a day in bold print in history books, black monday, october 19th, 1987, when the stock market went into a free fall losing more than in one day than it did on black tuesday in 1929. >> look at that tom brokaw, 25 years ago. anyway -- >> i like how he said 1929. >> that was of course black monday 25 years later, joining us now with a market retrospective is david blitzer. david, do you remember that day? >> yes, i do. it was a long time ago, but i definitely remember the whole thing from start to finish. >> we've had people sort of
writing in with their experience. what was yours? >> i don't think it was until early afternoon that we realized what was going on. and from probably 2:00 on, continuous phone calls, people in the office who probably hadn't looked at the stock market in ten years were glued to anything they could find out about the market. and i think it was about 8:00 that night, i slipped out, called home, and said i think i'm going to have dinner out so i don't have to listen to anymore phone calls for the next hour. so i met my wife someplace and we had deinner instead of going home and hearing the phone ring. >> what's fascinating about this is we still ended up for the year on -- it's amazing. it was the most amazing buying opportunity in retrospect. >> it was a buying opportunity.
it was nothing like we've seen 2007, 8, 9 recently or even like what we saw in 2000 to 2002. it was completely different. the market went straight up from january through mid august. sort of wobbled from august to a week before the crash. that week we sent volume records straight through. and then on monday morning the 19th, everybody looked around and it was like a cartoon character that runs off the cliff and then looks down. and it was thin air and we collapsed. and that was that. >> could that happen today? bearing in mind things have changed. we now have a lot more computer trading, a lot more breaks in the system. i don't know whether we've gained things worse or whether it's better. what do you think? >> well, in one sense, yeah, it could happen again. i mean, we could get to a point
where everybody looked down and decided the world was incredibly overvalued and the only thing to do was to sell. we do have circuit breakers and in theory they would work very well. but the human psychology that was around in 1987 can still be around today. and that is everybody can suddenly change their mind on some minor item and the result would be a massive collapse. even though back then we actually had specialists on the floor of the exchange, a lot if not all of the trading was floor instead of electronic, but at the end of the day, it's the human element that makes a big difference. and we weren't safe from it in october of 1987 and i don't think we're safe from it now. >> i'm worried we have the computer element. >> do you think it's more vulnerable now because there isn't that human element? >> the vulnerability is
different. we had the flash crash where everything went down and came back and round trip was about five minutes or something like that. so something can happen much more quickly than they did then. but i think the danger is still there. wall street deals in commodities that are paper and electric drop he can. they're not like building buildings that takes years to build them and they last for years. it's everything's in minutes. but what we've learned in the last four or five years is just about everything we've seen can happen again. after all, we didn't expect to see a recession like the great recession, we didn't expect to see a financial crisis like the financial crisis. but we got them. and five years ago, we all thought the great depression could never get close to happening instead of teetering on the edge in the fall of 2008.
>> what drives humans remains exactly the same. stick around. we'll talk more with you. we have been asking our viewer what is are your memories of that day. david says i was listening to the radio in the car with my mom. it was a rainy dreary day. >> and another e-mail, trade volumes were 200 to 300 million per day, not like today. and we have plenty of other thoughts, as well. the professor said didn't worry, things will be better by the time you graduate. >> and what was interesting about that was if i can find that note, it was michael boskin who went on to be chair of george h.w. bush's council of economic advisers and the student said he actually at the time gave us a, quote, crash
course in market exchange and mechanisms. said everything would be okay by the time we graduated four years later. >> now, if you want to join the conversation, email@example.com, @cnbcwex, @ kelly_evans, or @rosswestgate. president obama is holding on to leads over mitt romney in two key battle glund staround s. obama with a 6 point lead in wisconsin, 8 point edge in iowa. nationally the president has a smaller three point lead. tuesday's debate may not have changed many voters' minds. 95%s say they had already made up their mind beforehand. david, how do you feel about the move toward more and more people voting early? any impact more broadly speaking on the outcome of this election? >> very difficult to see what the impact is.
just thinking the way the patterns have gone, i suppose somebody who voted between the first and second debate arguably miffed had his opinion shifted because of the way the media treated the results of the first debate. but it's very difficult to tell. there are too many uncertainties. certainly in this election which i guess goes right down to the wire or something. p. >> and what's your view on the election on the impact it's going to have on markets and importantly for the fiscal cliff debate which is getting more attention as we move closer to getting past the election? >> i think the first few days after the election, this assumes we know who won that morning because after all, 12 years ago, we didn't know who won the next morning. but summing we do know who won the next morning, inl think the markets have a big sigh of relief. i would guess by the time we get to thanksgiving holiday toward the end of november, the fiscal
cliff will be large in everybody's minds and we'll be trying to figure out what will happen. it won't get settled until the very last moment. this is like labor union negotiations. up they stop the clock at 11:59, nobody seriously talks. so we'll have a lot 6 anxieou o through the holidays. >> so do you think they come to a temporary agreement? >> i think so. it depends a little bit on the outcome of the election, but i think we'll get a temporary agreement to sort of push everything off for two or three months, let's say into sometime in march. and that will give congress a chance to sit done and really put something together. but the other thing to recognize is whoever wins the election, whatever party controls congress, the economy will not either turn around upward or
downward overnight. if the president either romney or obama had a big impact on the economy, you're not going it see it until 2014. it's like turning around a massive tanker.see it until 201. it's like turning around a massive tanker.see it until 2014. it's like turning around a massive tanker. >> that will only make it another three months we have to talk about it. david blitzer, thanks very much for your time. we'll take a short break. still to come, will microsoft's 8 be the silver bullet the company needs?
if you're just joining us, these are your headlines. european leaders roach a compromise to create a single banking supervisor, but questions about implementation remain. going he will loses over $20 billion in market cap after earnings miss forecasts. and microsoft profits drop. and still to come, mcdonald's
and ge set to release earnings. will they buck the trend. we'll ask an expert. overmany discounts to thine customers! [old english accent] safe driver, multi-car, paid in full -- a most fulsome bounty indeed, lord jamie. thou cometh and we thy saveth! what are you doing? we doth offer so many discounts, we have some to spare. oh, you have any of those homeowners discounts? here we go. thank you. he took my shield, my lady. these are troubling times in the kingdom. more discounts than we knoweth what to do with. now that's progree.
>>. >> it's a tough pc environment. they have a number of companies specific headwinds. so part of it is windows #, but part is just the pc and a tough macro. >> and that will only get worse, so how do they counter that. >> the hope and prayer is windows 8 and about success in tablets. for the last few year, there hasn't been any hope, but now you have potentially silver bullet products that could get growth moving especially around windows 8. that's the key in our opinion to shares over the next year along with any success that they'll see on the tablet market. p. >> how long do you give it before you can make a judgment about win did hesdows 8? >> i think six months from now
you always have some indication in terms of the trajectory. obviously it will be slow to start. rome wasn't built in a day. but especially as we did more survey work and talk to enterprises and see the ramp, i think in four to six months you'll have some indication if the trajectory is good, bad or going into a negative territory. >> i mentioned we'll have smigs indication next friday when this launches. obviously won't be anything like an apple product launch, at least i assume with lines around the block and huge run up. but how important is the initial reaction over the weekend going to be? >> well, the initial buzz is key, right, in terms of just how both consumers as well as enter prices their initial take. you never have a second chance to make first impression.ienter prices their initial take. you never have a second chance to make first impression.nter prices their initial take. you never have a second chance to make first impression.interp. you never have a second chance to make first impression.xces t. you never have a second chance to make first impression.es the.
you never have a second chance to make first impression.zes th. you never have a second chance to make first impression.ses th. you never have a second chance to make first impression.nterpr. you never have a second chance to make first impression.enterp. you never have a second chance to make first impression. it's important to get the arms around why to go to windows # and t 8 and the merits around. >> what's your price target for the shares? >> we have $32 price target.the. >> what's your price target for the shares? >> we have $32 price target.and. >> what's your price target for the shares? >> we have $32 price target.the. >> what's your price target for the shares? >> we have $32 price target.and. >> what's your price target for the shares? >> we have $32 price target. it's a wait and see story because the success of windows 8 and surface will be the key variables as to if the stock goes higher in our opinion. so again ibm and microsoft in terms of a quarter that was not exactly a home run quarter, right? but investors have overlooked that. now the focus is on how successful the ramp will be. >> all right, daniel, thanks for getting up for us this morning. staying with tech just for a second -- >> i was just kind of interesting. we'll talk about google now. interesting both companies, though, what happens in the
future and what they do with mobile oriented products. >> absolutely. it's all about mobile. but google did become talk of of the town thursday after the third quarter earnings report was mistakenly released more than three hours early. that was due to a human error at rr tdonnelly, the firm that prints their results. and revenues including motorola were up 45%, but excluding that acquisiti acquisition, growth slowed and ad sales rose 15%, but that was down from 39% a year earlier. as more customers, yes, shift to mobile where it doesn't have as big an ad presence. google shares were down 8% thursday wiping out horn $20 billion in market cap. stock looking better in after hours trade. up about 1% for the time being. frankfurt listing by the way also shows google with a drop of about 6%. it's shed a little more than since the last time we checked.
>> tadd horowitz joins us now. we saw google's impact on the nasdaq yesterday, but there's not much of a rebound this morning. >> good morning, kelly and ross. no, there's not much of a rebound, but that mistake that was made was probably a benefit to the overall market because if that would have happened after hours which is when the report is supposed to come out, google might have been down 15% and you might have had some overnight panic on light volume. so they were able to grab control of the situation during the day and take care of it and halt the stock trading and get cooler heads to prevail and then we're getting a light bounce here, but i wouldn't expect any major bounce. i think the markets are a little tired. i think the overall charts are at the upper edge and i think you're starting to get divergences with the nasdaq and
reduce serussell. and we're having trouble 3w50beg the downgrade. >> today mcdonald's and ge. what levels are you watching for to see if the breakdown continues? >> if 1470 is a key level in the s&p, if we can't take it out and close above it, the market probably will come back down at least that 1420. for the last 20 days or so, we've been range bound between 1420 and 1470. after last friday, we made a bottom at 1428, we climbed back up to close to 1470. if we can't break it out, the natural trend would be to bring it back down to the consolidation period. some of the fundamental data will start to play into the market and if we keep having struggles to beat already less
than expected earnings, you would think there might be selling pressure. we are having that divergence between the nasdaq and the russell. >> that said, earnings estimates have turneds positive. i know we still have the season to get through, but it's through that there has been some performance above what we might have expected coming in to the season. >> there's been some good reports. but remember, a lot of these reports were brought down months ago saying we're not going it make these. these are our new projections. so we're beating downgraded numbers. a lot of issues still remain saying we're not in great shape. but the market is holding up, so hard to bogattle that. >> todd, thanks for your show. >> that's it for this week. squawk box coming up next. we hope you have a profitable trading day.
>> and you're on your own next week. >> i am. bob... oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign. looks good. [ male announcer ] fedex office. save 50% on banners.
# #. today's top stories. earnings central again. quarterly results from two dow components before the bell. general electric and mcdonald's. going he wi google's big oops. shares slammed after the company reports a miss by accident during the trading session. and your money, your vote. a new nbc news poll on three key battleground states. it's friday, october 19th, 2012. 25 years to the day since black monday. "squawk box" begins right now.
>> welcome to "squawk box." i'm becky quick along with joe kernen and andrew ross sorkin. the swreyear was 1987. best selling movie was three men and a baby and the twins getted the defeated the cardinals to win the world series. and the dow dropped eye nearly 23%. to this day it is the biggest all-time percentage decline.ye 23%. to this day it is the biggest all-time percentage decline.e n 23%. to this day it is the biggest all-time percentage decline. ne. to this day it is the biggest all-time percentage decline.nea. to this day it is the biggest all-time percentage decline. there were a record 604 million shares that traded hands. and the nyse computers were only equipped to process 400 million share as day. we'll take a look back on the day in history and look ahead to where stocks go from here in the year 2012. but first, l