Skip to main content

tv   Worldwide Exchange  CNBC  March 8, 2013 4:00am-6:00am EST

4:00 am
4:01 am
4:02 am
hello and welcome to today's "worldwide exchange." i'm kelly evans examine these are your headlines from around if world. steady as she goes. the u.s. economy is expected to have added another modest number of jobs last month, not enough to have significantly lowered the unemployment rate. china added to the upside as numbers surge 20%. the world's biggest economy bottomed out as the fourth quarter number comes in flat with the minus 1% estimate. and passing grade, the fed says all but one of the biggest u.s. banks met capital thresholds in its latest round of stress tests.
4:03 am
>> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> ross and i are together sort of today. 50i78 here on set in london. ross, it looks like you're in upstate new york. >> yeah. do you like it? i think it's a little nicer than upstate new york, even on a gloomy, dreek, damp day in italy. if you're wondering where i am -- >> there is something to be said for being there on the coast of the eitalian shores, is it not? >> yes. lake como. >> tell us a little bit. there was some back and forth with nouriel, with jim o'neill. what have you learned so far? >> well, look, jim automatically says whatever nouriel says i'm going to disagree with him
4:04 am
because he's far too gloomy. nouriel was far too upbeat on the u.s. economy. says we're getting great delivery from the boom and shale of gas, housing market is looking better, job creation, economic growth steady if unspectacular. he was slightly nervous about the fiscal drag. that made his slightly nervous about where we stand on equity markets. >> sometimes the stock market gives you the wrong signal. the u.s. stock market could correct somehow. >> says you, kelly. fiscal drag is going to be worth around 1.5% and so, therefore, he's looking for forecasts this year of around 1.5%. you can see the politics in his mind are going to have a big impact and he also thinks that we're underplaying that a little bit. now, jim, on the other hand, said, look, i disagree with that. he's getting -- he said there is generally quite a lot of excitement about where we stand with the level of equity
4:05 am
markets. and that may be rather justified because apart from lack of economic growth here in likes of italy and spain, germany doing well, chinese economic growth doing well. japan is now trying something finally that they haven't tried in the last 10 or 15 years. apart from what's going on in the politics and the fiscal drag, the u.s. economy is looking fairly healthy. j jim's view was maybe equity price res justified. >> ross, what i can't wait to hear is the view from richard cou. these are the questions i would love to get his view on, as well. >> richard queue is, of course, the chief economist for knew murrah. i was speaking to him last night, really amazing views about how he thinks, perhaps, investors in japanese equities are being slightly overly bullish on how much the bank of japan can deliver. they're underplaying the risk from what politicians may be
4:06 am
able to deliver. he's got some f views, kelly, on how what's happened in japan is behind a lot of the thoughts of the bernanke fed. so he said he's going to come on out so i have to go and grab him when his session finishes. literally, i think i'm going to have to bring him here. but he's agreed to come on, we just have to work out the logistics of it. >> and we'll recommend in the meantime that viewers go check out his book. the holy grail of macroeconomics." it's a personal favorite. ross, we hope the weather improves in the meantime. ross will also speak with gill marcus. ross, the currency is at session highs. so this now is certainly in focus with her. >> yeah. look, and it's great to have her on. she'll be joining us in about 17 minutes. we'll be looking at the impact of the strikes and the long-term impact that's going on with the strikes and the unions in south africa. >> ross, thanks very much.
4:07 am
now, also coming up on today's program, as we approach the second anniversary of the fukushima disaster, we'll speak with the former u.s. energy secretary to find out why he's bullish on the future of nuclear power in japan and thinks uranium price res at a tipping point. denn dennis gartman will call in later. we'll ask him about food prices, too. and show me the money. how is the music industry dealing with falling album sales and traditional revenue streams. and at 11:30 cet, i think i know this guy, we'll talk to david russell to get his view on unemployment in the u.s. and how much of an impact he thinks the sequester will have. all that and more. if you want to put questions to these guests throughout the show, if you want to respond to anything you've heard so far, send in your thoughts.
4:08 am
e-mail, who wouldwide@cnbc.com, tweet us, @cnbcwex and what not. now it's 12:30 out of the u.s. forecasts calling for an increase of 160,000 in nonfarm payrolls. it's just about what we saw in january. construction manufacturing expected to see gains. the number could be skewed because of the snowstorm that buried the east coast could have kept some workers at home. the unemployment rate expected to tick down to 7.8%. patrick buried is joining me on set now. we could maybe reverse the uptick we saw in unemployment last month. what do you expect to see from the jobs report today? >> we're reasonably optimistic. we tend to look at a blend of the three of the indices, which is the adp, the household and the headline figure. and that indicates to us -- because if you look at the adp
4:09 am
figure which came out earlier in the week, they talked about 198,000 jobs, which is a very strong number. >> do you think adp is worth listening to? >> i do. and it was upgraded from the previous month. these governments do tend to be volatile. we do tend to pay a lot of attention to. so given that it's 198,000 consensus is 160,000 today, we would suspect most probably being brave looking for 170,000, 180,000. >> i just wonder if the whisper number is much higher because after the strong adp report, jobless claims out at 143,000 and look what's happening with the stock market. you can't look at that and say there's not a lot of good news priced in. if anything, there appears to be a risk to the down side. >> certainly the lite leading indicators are indicating what the market is telling you, that the employment situation is getting better. and you must remember, bernanke is very keen on getting that number down to 7.5% -- 6.5%. >> 7.5% first, 6.5% ultimately.
4:10 am
what do you think the nonfarm payroll numbers should be? we want you to send in your estimates. there will be a prize to whomever gets it right. you said your is 170? >> 170,000 to 180,000. send us your views and we'll come up with a prize for the winner. the fed says the biggest u.s. banks have enough capital to with stand the severe economic show. all but one bank passed the stress test. bofa, wells fargo and citi saw the most improvement in their tier one capital ratios. goldman had one of the lowest outcomes. the fed said it would suffer big losses related to counter party risks. banks have until the end of march to publish their own tests and after the results, citi announced its capital plans saying it has asked to launch a $1.2 billion share buyback program. shares of citi responding to the
4:11 am
up side by adding 2%. this, by the way, in frankfurt trade. elsewhere, jpm taking lows, goldman holding up reasonably well. patrick, your thoughts on these stress tests? >> they don't come as a surprise. >> surely the goldman mirg must have come as a surprise. >> the goldman figure was a little on the low side. but that's probably one of the best investment banks on the street. they're chock-full of m&a business at the moment. i don't think it's a surprise. if you look at the bossel 3, which is more strict in terms of damage weighted assets, they highlighted a lot of risk in the european banks but not risk in the u.s. banks which have improved that capital. and this is the dodd frank rule which says basically in a really bad scenario, like back in 2008, you're going to see these capital levels fall to half of what they are. in reality, they've got twice the capital on the balance sheets at the moment. the u.s. banks are fixed.
4:12 am
so there's not a problem. no surprise. markets worked it out and -- >> look, if u.s. banks are fixed, why are we hearing eric holder and the like talking about essentially breaking them up? >> sure. that's because of, obviously, the investment bank and the retail banks, in fact, obviously being broken up. they're still working, so irrespective of whether they do get broken up, the banks themselves as the lender of the first resort -- i mean, the banks really are the economy today. certainly the -- if you look at the pmi figure, if you look at the employment situation, if you look at housing, the banks are really behind all that. so whether you break up those indices, it doesn't matter. the banks are out there lending, they're open for business, and they will continue to do well. >> it's just interesting because we've seen this rally in banks share prices. you know, we've seen them do relatively better. we're basically seeing everyone party in this equity rebound. and you could point to fundamentals and say that that is just fine, but there's also
4:13 am
people out there saying one of the reasons why performance has been to strong in the stock market is companies are shrinking. and i wonder if citi with this latest byeback is an example of that. >> sure. we look at the valuations of the banks. if you look at them on a historic basis, banks on book value have been tangible value, have designed nearly 4.5 times. banks are trading on nearly 1.3 times. i agree with you, banks have doubled their trouble from where they've traded from. from history, these banks are still extremely cheap. even though we're cautious short-term like everybody else, we think there's a huge runway left in these banks longer term. >> stay there. barclay's is reportedly looking to shed around 30% of its works force in a bid to create a leaner bank. more of its customers are turn to go online banking. after the group's earnings update last month that the lender could potentially update
4:14 am
with around 40,000 fewer staff in the future. jenkins did replace do many bob dimon last summer. you can see shares are adding about 0.75%. what's that? this morning. yeah. u.s. stocks pushing modestly higher in thursday trade. the dow hit its third consecutive record high as we were just discussing with patrick adding another 0.23% to 14,329. is the stock market shrinking, a, because of all the buybacks and private equity influence and whatnot? b, does that matter? >> buybacks are important. it's part of precious capital allocation. but i think it's important just to see why the markets run as high as it has done. there's a lot of skeptics out there. in fact, just this week i've been talking to some senior portfolio managers in establish
4:15 am
institutions and they're telling me they're increasing their weighting to the u.s. the market is basically showing that earnings are 10% above previous peaks. basically, if you look at gdp, it's 10% above previous peaks. so there's real justification for the market trading where it is. and i was just looking yesterday at ratios that if you look over the last 30 years, pes are 20% below where they've traded in the state, basically priced to book 30%, price to sales are basically flat. >> so you say this is a stop on the road to 15,000? >> yes. >> dow 16,000? dow 20,000? >> maybe not as bullish of that, but i'm certainly very bullish. >> i was going to say, you are in the equities business. you would hope that you believed in the product you're selling. >> the market is up 20% since
4:16 am
last june. i just worry about the people who are going to get exposure now since we've done the doubling at the bottom. is the retail guy go get going to get burned again? >> the average pe is 15 times at the moment on the u.s. .that's been -- that's down 20% from where it's been in the past, which is 18 times. >> as the market gets higher, it gets more mature so you are to be more selective and you have to be stopped. you have to be stock specific. you have to be careful what you buy. our work indicates that health care and technology, cisco, intel on 12 times earnings with 44% yield. that to me is not risk and that's the place where i would recommend retail money goes. >> we'll leave it there. patrick spencer from buried's. thank you so much for your time. >> thank you. >> meantime, investors are sounding alarms over this rally. societiee generale's edwards
4:17 am
says the dow feels erie similar to 2007. there's more of his thoughts on the website, cnbc.com. >> change na's february trade figures have caught the markets by stries. on the other hand, imports were down much more than expected, a 15% year on year drop. that was about twice as much as expected. the results was a trade surplus of $15 billion for february. still, economyists are cautioning against reading too much into the data as it's skewed by the timing of the lunar new year holiday. we'll get more china figures tomorrow. inflation and retail sales and industry output on task. if you thought you would have a quiet weekend, forget about it. you have to go through those figures. meanwhile, a ray of home for the japanese economy as it bounced back from its third recession in a decade. it grew 0.2% in the fourth
4:18 am
quarter. but it's not all good news. data also showed a shortfall in japan's current account for the third straight month. that's the country's trade balance worsened. partly the result of a weaker yen, which drives up the cost of on japan's energy imports. let's get a check to how markets have reacted. li sixuan joins us from singapore. >> thank you, kelly. positive u.s. data helped boost sentiment here in asia while the nikkei jumped 3.6% to a new 53-month high and rallied nearly 6% on the week. japan's data as you just mentioned showed the economy bounced back from the third recession in ten years. there's a rule change for short telling as the reflationary story is helping sentiment. the yen weakened to a 3 1/2 year low against the greenback dropping exporter stocks. retailing jumped another 10% and has soared over 20% on the week this after unit clo announced
4:19 am
february strong sales earlier in the week. in china, imports lagged, but exports first and the shanghai composite he'sed up 0.25% ahead of the second batch of data coming out tomorrow. authorities may resume ipo approvals over the next few months. meanwhile, the hang seng added 1.4% today and ended the week in positive territory as we see strong gains in energy majors and telcos. south korea's kospi ended just above par as the jitters about north korea headed to the upside. samsung electronics remained week. australia's asx 200 inched out a modest 0.28% gain.
4:20 am
>> we're receive some green on the map behind her. adding about 0.5% for the stoxx 600 on this friday as we wait for the u.s. jobs report. the ftse mib is rallying, adding almost % today. the ibex is similarly participating. the ftse over here, which is rivaling u.s. indexes and being up almost 10% this year. it's more in the range of 4 had% or 5% for germany's index. banks are the sector that is the top gainer today. take a look across the board. in fact, there's only one sector in the red and that's travel and leisure up here. up 1.5% nearly and you have to wonder whether that is reflecting what we heard out of the u.s. with regard to the stress tests yesterday, indicating for the most part banks would pass an adverse scenario in the economy. a different story is whether they're going to be as fundamentally profitable as they
4:21 am
are today. take a look at the bond space. this has been so interesting in the last couple of days. look at what we're seeing yet again. i wonder how many days we've seen a winning streak for spanish and italian debt. italy, 4.5%. spain 4.87%. a differential staying relatively constant. about 30 basis points. despite signs, initially stress after the eye trillionan elections, we've seep that decree creeding. tore yex, meanwhile, so much of the story lately and we'll have dennis gartman on in the show to talk about his favorite pairs. sterling back over 1.50. following the bank of decision's not to do anything yet.
4:22 am
euro/dollar is slightly weaker this morning. is south african rand hitting a four-year high versus the dollar yesterday. take a look there at wa we've been seeing. it's also at session highs today. on that note, ross is out at the ambrosetti workshop. what's happening out there? >> we're going to talk south africa in a few moments. when we come back, we'll be joined by gill marcus. we'll get her views on the rand. if it has weakened any more, it will be interesting to see what that does for inflation. still more to come on "worldwide exchange." ♪ ♪ [ male announcer ] help brazil reduce its overall reliance on foreign imports with the launch of the country's largest petrochemical operation. ♪
4:23 am
when emerson takes up the challenge, "it's never been done before" simply becomes consider it solved. emerson. ♪
4:24 am
4:25 am
we're down here at the shores of lake como. it's all smaller, more intimate gathering. now, we've been focusing on lots of things in europe. time to turn our attention to africa. joining us now is the governor of the reserve bank of south africa, gill marcus. thanks very much, indeed, governor for joining us. >> good morning. >> kelly was talking earlier about the rand just appreciating a little bit this morning. but it's been down before today, nearly 7% against the dollar. how concerned are you by the rand's weakness?
4:26 am
>> look, obviously, it's a concern. it's both the level and the volatility. it just had impacts on the way. people look at the currency and the opportunities around it. we think it's overdone at the moment. but as you know, it does move in fairly large bands. it has been consistently over reasonable period between 8 rand and 8 rand 50. it moved to the 8.59 rand and we think it could be traced over the medium term back to better levels. but obviously, it has the benefit in terms of addressing the appreciation that we have had for some as you know, the rapped has been overvalued for considerable periods of time. and if it can stabilize between 8 rand, 8 rand 50, 9 rand, in that area, obviously it's good for the manufacturing sector and our exports. we do not target the level of the rand and we do not -- given this is an open currency, very highly traded, the daily stock
4:27 am
market up 17, $18 billion, so, you know, it is a level that fifinds itself, but at the mome, we think it's a bit overdone. >> yes. talk about inflation. you've got interest rates, borrowing costs at the lowest they've been for 30 years. growth last year was 2.5%. if the rand weakened more and there was more inflation, what would that do in terms of pressure on keeping those rates at these levels? >> well, obviously, we -- the question for sus a balance that you strike. our primary responsibility is price stability and we would address that without any hesitation should the need arise. but at the moment, as you know, we are a flexible inflation targeting country. the government sits the band, which is 3% to 6 of%. inflation at the moment is around 5.5%. real interest rates are slightly negative, given that the rate -- our policy rate is at 5%.
4:28 am
and you do expect it's to rise somewhat possibly going through the 6% level. then retracing back within the band. obviously, things are difficult to predict long-term and, therefore, we do think that the weakened currently will impact. but we will have to see for what period of time, what are the counter factuals, all of those things which you would take. yes, rising inflationary situation that we're not comfortable with, but at this point in time, watching carefully and really to act in whichever way is required. >> hopefinvestors are clearly wd with what's going on in the mining strikes and the divisions amongst unions. how much damage is it going to do to the economy? >> there's no question that these -- the question of labor disputes and the role and relationships between unions needs to be addressed. we are concerned.
4:29 am
but i think eats a bigger issue. it's about policy cohesion and the steps taken between government, business and labor. this isn't just a labor issue. business has a very key role to play and a key responsibility to exercise in relation to the real conditions that workers live in. so it's a combination and coordination between government, business and labor to address very real issues and we certainly sees it as a challenge going forward, but are convinced measures are taken at the moment to interact between those key roles and that is the wagz must be addressed. there is no doubt about impact. you could see our exports were affected. therefore, very serious as far as we can --
4:30 am
you're pessimistic about the near terms in terms of trying to come to the sort of agreement you're talking about. >> i'm always optimistic. otherwise, you can't survive in this world. i think they are very real issues. as long as everyone can come together, and i think part of that coming together is a recognition of the longer term vision. the national development plan, as you know, has been adopted by all parties in parliament. and has been built up in the budget. but it's hard work. everyone has to sit down and recognize the global environment in which this is happening. >> governor, good to talk to you. thank you very much, indeed, for that. one of the few female central bankers. there's only, what, two or three? >> there are not many globally, but if south avenue kwab both
4:31 am
the governor and the south africa are all women. >> that's a good start. >> absolutely. >> thank you that's a good start. thank you very much, governor. thank you. we'll take a short break. don't forget, you told us last night he was going to join us. i'm hopeful he will. richard koo, has some fascinating things to say about what's driving fed policy at the moment. >> a perfect day to have him, as well. we have japan gdp figures to get through. is it really on the road to recovery? we'll discuss that when we come back.
4:32 am
4:33 am
4:34 am
welcome back to "worldwide exchange." steady eddy, the u.s. economy is expected to add another modest number of jobs last no, no enough, though, to bring down the unemployment rate. china's trade data surprises with exports surging 22%, but imports raise questions about demand. plus, passing grade, the fed says all but one of the biggest u.s. banks met capital thresholds in the latest round of stress tests.
4:35 am
european markets are trading towards the start of today's session. it is the periphery leading the way. the mib is up 1%. the cac 40 is strong, as well. xetra dax, ftse adding about 0.5% and 0.3% respectively. the ftse up almost 10% this year. in china, though, february trade figures catch investors by surprise. exports were up nearly 22% from a year ago. but on the other hand, imports fell about twice as much as expected, down 15%. still, you have to read -- you have to take it with a grain of salt, i should say. it's skewed in the first of the year because of the china new year holiday. for a sense of what we're learning so far about strength at this point in the years, joining us now is singapore's
4:36 am
fraea loomish. given some of the distortions that can happen during this time of year, what do you think is really going on in china's economy in the first part of 2013? >> the export data is a big boost. so i think what we have to do is there is to break down where the demand is coming from and where where whether it's sustainable. it's coming from across the board, coming from the u.s., coming from europe and it's coming from -- so far, we only have -- from asia and there is a lot of strength in the exports. and then is it sustainable, i think the answer has to be no and that's backed up by the pmi orders which went into contraction in february, as well. if we take it kind of step by step, if we look at the u.s. first, the fiscal consolidation
4:37 am
is likely to have a bigger impact in q2 up until now it seems to have had more of an impact on household saflgs and there's been that cushion there in q2. that's likes lick to mean the u.s. isn't likely a driver for china. europe we don't have to spend too much time on. asean is the interesting one in that we have to start to try and make a differentiation between is this domestic demand boom cyclical or is it an ongoing driver for china. overall, i think it's becoming very clear the external demand in 2013 won't be as strong, anywhere near as strong as what we've seen in january and february so far. the import data is actually very interesting because it's the first glimpse that we have of domestic demand in china, so as i said on the face of that, if you only look at february, then
4:38 am
it's not great. >> so here is the issue if i can just jump in for one second. >> sure. >> what you're basically staying that the traditional drivers aren't there for china now. the u.s. is there, but not enough to play the role it's played in the past. elsewhere, there's not a lot of strength. so it's up to china to domestically drive if it wants to hit a 7.5% growth rate. tim port figures for that reason season worrisome. if you average out january/february and they're showing only 5% growth, does that suggest that, a, china's domestic demand isn't that strong or does it just suggest they're less reliant on imports than in the past? >> i think if we look at the see subsequentially, so quarter on quarter, then it's a better picture for imports and then also if you strip out commodities, what's quite interesting is that the import story is stronger. so there's perhaps evidence there that the private consumption is holding up on the back of real wages having held
4:39 am
up. not the nominal side of wages, but inflation having come down quite quickly and food price inflation globally is likely to take some of that heat out for china. perhaps private consumption for now is holding up, but those profit squeezed positions do remain in place. there's only so long that the labor market can remain immune to that. >> what do you think -- >> the other driver for china -- >> what do you think china is going to do? if we've seen these property measures trying to offer relief there, if household demand is going under more pressure as you suggest, what else might chiena do in response? >> that is the big question. we don't have enough data going into tomorrow and we need the march data, as well, to make a concrete decision. i think what we can say clearly is that the authorities are in a very difficult position. so they've -- their chosen model
4:40 am
of development has left them with very little wiggle room between growth and inflation. if they tried to stimulate the economy, they get inflation very, very quickly. we had a cyclical hard landing at the beginning of last year and that wasn't enough. to see property prices as you said picking up. so that tradeoff between growth and inflation has left them with very little few options. if they do decide to take their foot off the gas or to even go as far as tightening, growth is going to peter out very, very quickly. on the other hand, if they carry on stimulating, then we're going to see inflation rising pretty quickly, as well. so that they're not in a good position right now. >> that is a great point. that hard landing didn't do enough to help the liquidity. thank you for joining us this morning as we try the the and figure out what's going on in the world's second biggest economy. in the meantime, there's better
4:41 am
news for the third biggest economy as the japanese appeared to have put in a better growth phase last year. gdp figures turned positive with revisions which beat expectations of a contraction. with all that data out of japan, will the road to recovery away smooth one? the nikkei is up 276%, as you can see there. hi, fushiko. >> hi, kelly. tokyo stocks soared today with the nikkei 225 up 276%. it was the highest closing level since september 12th, 2008, the last trading day before lehman brothers filed for bankruptcy. tin decks rose 5.8% this week, which is the biggest weekly gain since december 2011. these gains are helped by u.s. data and a weakening yen. the yen was sold due to expectations of the boj taking bold easing measures by the new leadership which takes over later this month. the yen drops to a 95 yen level
4:42 am
today, hitting a 3 1/2 year low. asia's largest company pass retailing was one of the biggest gainers in today's rally climbed almost 10%. major exporters have advanced, as well. heavy industries rose 7.6%. revised fourth quarter gdp figure helped showing the economy returning to growth faster than expected. the government said gdp grew, revised 0.2% in the quarter up from the initial calculation over 3.4% contraction. we have data is showing a shortfall for the third month in a row as the country's trade balance worsened. it's partly because of a weaker yen which drives up costs of japan's energy imports. but economist res now saying japan is headed to a recovery backed by government spending and improving corporate profits
4:43 am
the. >> it's amazing, if you look at the yen right now, we're looking at roughly 3 1/2 year lows against the dollar in today's session. for more, joining me now on the phone, dennis gartman. dennis, great to have you on the program. we're looking at 95.5 here on the yen against the dollar. 3 1/2 year low, are you still short? >> i'm still short, kelly, and i have every reason to continue to be short. i've been short since october. i've been short of yen against canada, short of yen against aussie, short of yen against kiwi, short of yen against the u.s. dollar and i see no reason to be anything other than that. now, you know, we have gotten a business sporty on the upside in dollar/yen in the course of the past 48 hours. and with nonfarm payrolls coming out, it's probably wise for a trader to reduce some of his or her exposure. but are we going to be higher dollar/yen a month from now than we are now? no question. are we going to be materially
4:44 am
higher a year from now than we are now? absolutely. so it just depends on one's perspective that it's been a very bullish move for the dollars against the yen and that's going to continue. >> dennis, do you see a hundred here? and how quickly? >> oh, kelly, we'll see more than a hundred. you have to remember, i've been trading foreign exchange since the early 1970s. i remember dollar lsh yen trading 285 to the dollar. so for me to imagine par is very simple, very easy, very attainable. i think we're going to see 11.25 over the course of the next two years or so. so the fact that par is only 4 1/2 yen away, that's easily attainable. are we going to get there today? to, i think not. are we going to get there this month? probably not. will we get there sometime this year? quite certainly will. >> that's amazing. i want to ask you, too, about some of the commodities. how are they reacting?
4:45 am
nomura turned bearish on gold, slashing its 2014 forecast to almost 2,000. it says an improving economic recovery, heavier interest rates denied inflation in the west, the reason for the kal and it follows similar moves from goldman last week. more on that story on cnbc.com. but, dennis, where do you stand at this point? are you a gold bull or a gold bear? >> it's interesting. i'm agnostic to gold in dollar terms. i really don't care where gold goes in dollar terms. i've been bullish of gold in yen terms for a long period of time and i continue to be bullish in gold in terms of yen. but in terms of dollars, i can make you the case with spot gold trading right now as we speak right at 1580. i can make you the case that spot gold can go to 1650. in dollar terms, i can make you the case that spot gold goes to 1450 in dollar terms. i'm agnostic to it in dollars. in yen terms, it's still going quite a good deal higher.
4:46 am
in yen terms, it's made a new all-time high this morning. it's likely to continue. gold should be only seen as nothing more than another currency, something that be cost one currency against another and in that case, golden yen very bullish of the. golden dollars, agnostic of. >> to turn now to some of the softer commodities, we've seen this have an impact on frankly the geopolitical landscape over the last couple of years. is there finally some relief, though, on the way? are some now starting to suggest we're going to see food prices head starnlly lower? >> we're going to put a huge corn crop in the ground this year. already you can see the difference between old crop corn at 7.50 a bushel and new crop corn at 5.70 a bushel. and if we get any kind of decent weather -- and we're probably
4:47 am
going to, my guess is we'll get better weather this year. if we do, we're going to see corn prices going down to $3 a bushel. that will be extremely helpful to the livestock producers. we may see downward pressure on livestock, but their profit margins will escalate and they'll increase their herd sizes if they can see corn prices are going down. we're going to put a huge crop in the ground this year and there's no reason to think corn is going to do anything other than weaken the. >> and rain equals grain and snow equals grow. also when we come back from a quick break, we're going to take a look at the future of uranium. it's actually at a tipping point. oh this is lame, investors could lose tens of thousands of dollars
4:48 am
on their 401(k) to hidden fees. is that what you're looking for, like a hidden fee in your giant mom bag? maybe i have them... oh that's right i don't because i rolled my account over to e-trade where... woah. okay... they don't have hidden fees... hey fern. the junk drawer? why would they... is that my gerbil? you said he moved to a tiny farm. that's it, i'm running away. no, no you can't come! [ male announcer ] e-trade. less for us. more for you.
4:49 am
4:50 am
welcome back to the show. the february jobs report is out at 8:30 eastern. the forecast is for steady growth, about 160,000 added to the payroll forecast webs just about in line with what we saw in january. the unemployment rate is seen
4:51 am
ticking slightly lower to 7.8%. that would reverse what we saw on the increase in january. all but one bank, ally financial, passed the fed's annual stress tests meeting the threshold of the 5% capital buffer. bofa, wells fargo saw the most improvement. goldman says had the lowest outcome. dennis gartman is still on the line with us. dennis, just to start with the jobs report coming up here and because we've been speaking about currency webs you know, i know it's all relative, but how strong is the dollar expected to be here? >> well, the dollar is extremely strong relative to yen. it's not very strong relative to anything else, actually, but i suspect today's report, all things being equal and knowing what i think we're going to see the jobs number come and i actually think, kelly, it will be above 200, that will be
4:52 am
supportive of the dollar, no ifs, ands or buts. and it will be clearly most supportive to the japanese yen, but all things being otherwise equal, a number above 2 thun,000 will give you a strong response relative to sterling and even perhaps relative to the euro. >> dennis, given all that, why are you more bullish on stocks? >> kelly, i -- very good question. i was bullish in october, bullish in november, bullish in december and i became agnostic two weeks ago. it is disconcerting. i've broken one of the most important rules of trading which is when you have a winning trade, do more of it. but it seems to me an awful lot of smart guys were getting to the sidelines and a great good deal of the public was suddenly getting in. conversations at the country club were more and more bullish of stocks. and when the public starts to get in, i tend to get to the
4:53 am
sidelines. i wish i hadn't. i made a mistake. >> what is your favorite call at the moment, last word? >> favorite call continues to be buying dollars, canada, kiwi, aussie, u.s. and selling japanese yen. that will continue to be the trade for the next several years. >> dennis, we'll leave it there. thank you so much for calling in dark and early in the states in the gartman letter will be out in auto couple of hours' time. as the two-year anniversary of the fukushima disaster approaches, the japanese government is looking set to revive the country's atomic energy industry. nuclear energy provided 30% of jap japan's energy prior to the disaster. today, all but two of the nuclear plants remain closed. joining us now, the u.s. energy secretary from 2001 to 2055 and form every senator in mypy.
4:54 am
good morning. >> glad to be with you. >> how do you wind up in this business and how are you bullish on their future? >> i did a lot of work on pneumonia leeshg chairman issues and it's a natural way in the private sector to continue my involvement. right now, i think it's a very interesting almost tipping point period for the puck here industry. and what i see on the horizon are a lot of bullish signs that nuclear is going to have a strong period ahead. >> it's interesting because, as you say, after fukushima, there was just -- we saw germany's reaction, which was basically, each as an example in europe, this knee jerk response to say maybe we don't want nuclear to be part of our future. at that moment, it seemed like that was it for the industry. what's changed? >> i think everybody took a step back, took a long, deep breath and re-examined things thinking that the evens in fukushima weren't likely to be repeated on
4:55 am
a wide basis, but nuclear reactor designs would probably prevent those things from happening somewhere else. so i think what you're seeing is very encouraging signs. first in china, is he have large nuclear builds on the way. they're right in japan, the government is now reconsidering the idea of curtailing nuclear as a major user of nuclear power. i think that will change the marketplace if they move back into operations again. and then you have other things going on in the market i think in many other parts of the world. from finland to the united arab emirates where new plants are being built or designed today. >> in the case of japan, as its currency continues to weaken, it's reliance on importing oil is a real problem for them. so it's almost a case of can we afford to go without? >> i think if they can conclude that they can meet the safety tests from a public policy point of view, that that is by far their best way of addressing
4:56 am
their energy equation. and so i think if all these things happen, you're going to have the market for nuclear improve. that's going to translate into the materials that support that market. >> i was just going to say, what does it mean for uranium and what are the materials projected? >> the uranium market has been hit by two price shocks, the fukushima disaster, but i think it's ready to surge, frankly, if these events that we've talked about, china, japan and so on happen, it also is going to get a boost because for many years, the united states has purchased most of its uranium for the plants used in the united states from the russians under an agreement that was entered into after the end of the cold war where the russians were down blending the weapons grade uranium and making it available to the united states to purchase. but when that agreement is over now. and when that uranium goes off the market, then the united states will become a major new consumer in the market, which --
4:57 am
>> is that why google is sending people to the moon? do they have uranium on the moon? >> i don't know. but i think people will be looking to mine it new mexico parts of the world. and that will be for the uranium market and the commodities a boost. >> final word because we're about to get the u.s. jobs report, is america back? >> i think we're seeing slow and steady ross. we still haven't seen the effects of the tax increase that went in last year. i think that could have a dampening impact. hopefully the president and congress can get together on the debt reduction. >> when you say it, it sounds so easy. >> don't worry, it's hard. >> can't we all just get together and get along? thank you so much for coming by, mr. abraham. now let's take a quick look at what's on the agenda in asia.
4:58 am
as we head into the weekend, we are expect ago slew of data tomorrow, including industrial output, retail sales and inflation. japan does commemorate the anniversary of the fukushima disaster. this after taipei has removed a 6-year-old ban on some u.s. beef imports. and here is the story just referenced. google is offering $20 million to the first private company that can land a robot on the moon. to claim the cash, space entrepreneurs must move the craft along the lunar surface and send hd video back to earth. prizes are available for the second place in the competition. still ahead on the program, the countdown is on to today's u.s. jobs report. who is hiring and is who is firing? we'll preview the report with the former deputy labor
4:59 am
secretary straight ahead.
5:00 am
5:01 am
5:02 am
week welcome to "worldwide exchange." steady eddie, the u.s. economy is expected to have added jobs last month. though not enough to affect the unemployment rate. and china's february trade data surprises with exports surging 22%, but imports raising questions about demand. sdwla you're watching wls was, bri "worldwide exchange" bringing you business news from around the world.
5:03 am
and it's job friday. the u.s. jobs report is due out at 8:30 eastern. forecasts calling for 160,000 nonfarm payrolls. the number could be skewed as the snowstorm buried the east coast during that survey weekend could have kept some workers home. the unemployment rate is expected to tick down to 7.8%. what does it mean? patrick joins us. where do you fall? what's your forecast? >> net, i'm looking for about 130,000 jobs in february. 150,000 private sector jobs, but i think the fiscal cliff and the concerns about sequestration probably suppressed hiring in the public sector. so it will net out about 130,000. >> well, you're below consensus. in fact, if you were to probably ask people, you know, at the country club as dennis gartman
5:04 am
might do, they would probably put the number much higher the. >> jobless claims figures have been well behaved, but remember, they're jush a measure of layoffs. and the adp number has been robust the past couple of months. it's averaging 200,000 in the three-month basis, but you haven't seen that echo in the bls data. i think we're now marking the third anniversary of the jobs recovery. and pretty much worth settling into a pattern of about 175, 180,000 jobs in the first quarter of the year and then tailing off. but what's happened in this particular period is we had the fiscal uncertainty, the fiscal follies in washington. we had the snowstorm. we had concerns in the public sector. so when you net it all out that we're getting growth even at my low number is fairly impressive.
5:05 am
>> it's a great point that we've seen figures. maybe it's a seasonal adjustment effect, maybe it's the china new year effect. but what seems to be the real tell here? and which of the numbers in today's report matters most? >> well, yeah. i think what we still have to look for is a broadening of the gains. so this overall jobs recovery has been very, very concentrated. all of it has occurred in the public sector, within the public sector the goods producers, you mentioned manufacturing and construction, they've more or less rotated between them. manufacturing has slowed down in terms of its growth. construction is finally picking up. and then when we look at the private services sector, after health care, what you're looking at are things like the food and services and the temporary help and warehousing have been the major contributors to jobs growth. i keep asking myself, where does the impetus for an acceleration
5:06 am
comes from? certainly not in those sectors. >> and in retail, even if there's strength and hiring in the figures, are those the kind of jobs that can help the u.s. regain its world stature, its position in the world to take on these other countries? >> i think you make a very good point when you go to retail. retail despite a fair regood run from september to november is still 500,000 jobs below where it was prerecession. what we're seeing there is an increase in productivity and that increase in productivity is coming by the way of etailing so that the sticks and bricks retailers are not getting the same portion of the dollar. retail sales are up, but when you look at the breakdown, you've got gasoline prices crowding out other forms of sale. so that's why warehousing and transportation has done so well because of e-tailing. when we're talking about jobs,
5:07 am
retail has been a major underperformer during the jobs recovery. >> and we'll leave it there for the time being. patrick, stay with us. we're going to come back to us in just a couple of minutes. first, we want to give people a sense of where markets are trading this morning ahead of that jobs report. it's amazing to keep watching this index power higher. after hitting through yet another level, 14,372 is where the dow would open right now. it's about 56 points above fair value. gains seen for the nax dak, too, not sure about that s&p quote. we'll sort that one out. overnight, sweef seen european markets led by the nikkei in japan at a 3 1/2 year low against the dollar. in europe, it's been the periphery leading the way. the ibex doing strong, 111.25% in spain. the ftse adding 0.3% after it's been up almost 10% this year alone rivaling the performance that we've seen in the u.s.
5:08 am
indexes. the top sector? banks. pretty much everyone is in the green this morning, although we've had a couple more add to the down side. but banks leading the way up 1.5%. we're sooi seeing citigroup shares trading up 2.3% this morning, perhaps indicative of one bank, alley financial, failing to meet that threshold in the most severe pressure. telecoms, insurance adding to the rally. but broadly speaking, it is a green day across the index here on this friday. now, bonds, this has been a really interesting story over the last couple of sessions. and, again, we've seen spain and italy rally. yields falling to 4.85% and 4.57%. after some of the concern we initially saw play out pushing yields here up to almost 5% on the back of those indecisive italian elections, we're now continuing to see a rally in debt as people continue to pile in even though we're getting
5:09 am
headlines about fresh elections getting called in just a month's time. take a look at the euro/dollar, although still above 1.30. the sterling/dollar, a little higher today above 1.50. but it's the dollar/yen at 95.5. adding 0.75% on speculation about yet further moves by the bank of japan. that's not only sent the yen to fresh lows, also sent the nikkei up about 4%. forex is the story. coming up on the eve of the world's biggest music festival south by southwest, we'll take a look at how cloud funding sites are playing a pretty big role at helping man maybe thrive in a difficult industry.
5:10 am
5:11 am
5:12 am
welcome back to "worldwide exchange." here is a look at some of today's top stories. u.s. banks have enough capital to with stand a sufr economic shock. all but one passed the u.s. stress tests. bofa, wells, citi had one of the largest improvements. goldman had one of the weaker outcomes. banks have until the end of march to publish results of their own test using the same
5:13 am
standards as the fed. isn't that so in keeping with the theme du jour. up about 2%ty is citi. also parting, goldman, look at that, falling off by 111%. barclay's is reportedly looking to shed around 30% of its workforce over time in a bid to create a leaner bank as more customers turn to online banking. sky news has ceo anthony jenkins told investors after the earnings update last month that the lender could operate with about 40,000 fewer staff. shares adding 11.2% on the ftse today. the senate subcommittee on investigations will hold a hearing into london wales trading losses next friday. the hearing follows months of
5:14 am
interviews on top official and it's expected to focus on the risks traders were taking on complex derivatives. that's the latest in the banking business this morning. wa about the music business? austin, texas, will become the center of the music universe when the annual south by southwest music festival begin these next week. more than 25,000 artists are expected to perform in more than 100 venues. album sales have been on the decline. but many bands and singers are returning to crowd fundlinging sites to forward their career. speaking of which, melton dunbar is here provided a platform to fans to fund their favorite artists. welcome. >> that you can. nice to be here. >> how is business? how does this work? we launched the company three years ago. i think you have to look at the changing in the state of the record industry and how it's
5:15 am
come about. i mean, it's a whole consolidation in terms of the major labels. there's a lot less major labels. there's a lot less independent labels. obviously, they're all well documented following the physical sales in the slow growth in hopes of digital sales. >> it would almost seem artists are willing to cut out the -- >> that's exactly what we do. it's a platform to allow artists to engage with the fans and ask the fans for money. however, the reason that it actually happens is because the actual changing shift of the record industry with the resumption of the amount of labels that you can go to, it impacts all the artists and bands because there's less places to go, there's less artists being signed and therefore, on accounts of models -- >> i mean, it's exciting. as a listener, it almost becomes easier than ever to try and discover new artists.
5:16 am
if you go to a place like yours, you have a ton of them out there. you don't necessarily have to rely on the latest big release, for example. exactly. and what's happening, there's a whole consolidation in the business. with the advent of the internet, of the social networking, etcetera, it's so much easier to an artist to engage with the fan, build a fan base, deal direct to the fan, which is exactly what we do and actually offer the fan a berten gaugement and value for money. >> how does the model actually work? say i'm a start-up band. what do it do when it comes to your website? how do people. fund my -- >> there's two ways you can come to the platform. build a campaign, which can be anything from the download to the cd to the cd signs, a private gig, etcetera and launch the campaign. we're help in terms of actually the engagement with all their social aspects of it and then we'll launch the campaign and fund the record.
5:17 am
>> do they pay you for that or -- >> we take a commission of the amount rate. and then in terms of actually the larger bands, because basically what's happening in the industry is that there's obviously more established bands. there's a much greater turnover of bands on labels, wear on labels looking for new ways to explore the market, risk the market. >> it becomes almost a marketing tool. >> it is very much. interest what are some of your success stories? >> we've had campaigns for bands such as the subways, the horizon, kate nash we just launched. so we started launching probably about two bands a week three years ago. we're now launching two bands at least a day. >> are you profitable? >> yes. >> really? so where do you go from here? >> well, we just grow.
5:18 am
to me, it's all about choice. an artist has more choice now. there was one way to do it several years ago. now an artist can decide whether they want to go the major room route, the independent route or do it yourself. >> and south by southwest is the place to see a lot of these news acts. malcolm dunbar, based here in london -- >> well, we've got office necessary new york, london, so it's global. >> "worldwide exchange," baby. thank you so much for stopping by. >> thank you. here is a quick look at what's on the agenda today. february jobs report is out at 8:30 eastern. that's going to command the bulk of the market's attention. we've got january wholesale trade at 10:00 a.m. expected to rise 0.5%. foot locker and ann taylor report results today and mcdonald's releases it's february same-restaurant sales. if you're just joining us, a reminder of the headlines, u.s. economy is expected to post
5:19 am
modest jobs growth in february. and with nearly gold stars all around as only one of the u.s. banks missed the mark on stress tests. exports surge above forecasts, but imports lag. and, ross? >> thanks, kelly. we're in lake como. we'll be speaking to richard koo. what is the right strategy for the u.s.? and is it going to work? plenty more to come on today's "worldwide exchange." ♪ [ male announcer ] how could a luminous protein in jellyfish, impact life expectancy in the u.s., real estate in hong kong, and the optics industry in germany? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 75% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence.
5:20 am
request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefull before investing.
5:21 am
5:22 am
china's trade figures saw exports rise 22%. that's about as much as expected. imports were down more than expected, by about 15% from a year ago. economists caution towards reaching too much into this figure which are skewed because of the lunar holiday. it's a ray of hope for the japanese economy as it bounced back from its third recession in a decade. the latest figures show japan did grow 0.2% over last year in the fourth quarter. that was better than the 0.4 contraction that was expected. it's not all good news.
5:23 am
we had data showing a shortfall in japan's current account for the third straight month as the country's trade balance worsened. it's partly because of a weaker yen. for more on the situation in japan and frankly around the world, ross is live in lake como, italy, with someone who can weigh in. ross. >> kelly, i'm delighted to say we're joined by richard koo, chief economist for nomura research institute. richard, thanks very much indeed for joining us. kelly was just telling us it looks like japan had timely crawled out of recession with the latest reprint of gdp. here is the thing. they're now targeting 2% inflation. is it going to work? >> well, the direction is correct, but inflation alone is not going to solve the problem. the greatest problem in the japanese economy over the last 20 years is lack of private sector borrowing. they borrowed too much during the bubble. once the bubble burst, asset
5:24 am
prices collapsed, liabilities remain. they took 15 years to repair the balance sheet. after 15 years of experience like this, no one wants to borrow. lowest interest rates in human history, very willing bankers. if there's no borrowing, the bank of japan can put all the liquidity in the system. the liquidity cannot come out of the banking system because there are no borrowers. there's enough liquidity in the jap needs banking system to increase japanese money supply by five times. >> five times. >> but it hasn't happened for the last 15 years because there's no borrowers out there. and so bankers have been talking about inflation target, all of that are fine, but how do we get there? if people are not borrowing money, money supply is not increasing, we need someone to borrow that money and that's where the second pillar of economics comes in. there are three pillars.
5:25 am
the first one is bank of japan. the second is fiscal stimulus. get the money out of the bank, spend it and get the economy moving and hopefully within the same fiscal pillar, we are still trying to encourage japanese companies to borrow by giving additional investment tax credits, the kind of package that president obama put in for 2011. if you invest in 2011, you can write everything you're doing in 20111. that's the kind of economics japan needs and this government is ready to put them in. >> if they do those things and they manage to raise inflation to 2%, which is great, what happens if wages, though, stay at the same level? >> even with all these things coming into play, it's going to take a while before things normalize. if you look at what happened during the great depression in the united states, which is exactly the same type of recession, all these people bought money before 1929, the stock market collapsed,
5:26 am
everybody -- at the same time, it took united states 30 years to bring interest rates back up to 4%. 1959. great depression started in 1929. that is worth massive stimuli in between. new deal, world war ii, economic stimulus, korean war, still took 30 years to get people off the drama. in the japanese case, we are in the 22nd year, but still no sign that interest rates will normalize anytime soon. so the effort would have to be huge to get things moving. >> does that mean investors who are pumping up the japanese stock market at the moment are perhaps being a little overexuberant about the potential success of these policies? >> i think that inflation is just around the corner, they may be disappointed. however, the second and the third pillars that are not getting much attention but they're equally important in that the government will borrow the money and is spend it, will get the economy moving, they are putting in these measures to get companies off the drama for the first time in 20 years, which is a major difference from all the previous administrations.
5:27 am
and the third pillar are structural reform. mr. abe is committed to get deregulation going. so if these things get the japanese companies excited, stop borrowing money and spending it, then we are back to the normal world. >> there is a lock way to go. how much of this plays into where we are with the united states at the moment? and the fed is targeting unemployment. the fed actually can't deliver low unemployment on its own, can they? right. >> so wa does the government need to do? >> well, i'm very encouraged by the fact that chairman bernanke of the federal reserve have been one of the forefront person warning against fiscal cliff because fiscal cliff is a government contracted contracts now when the u.s. private sector as a group -- if you put house olds, companies, u.s. households or u.s. private sector is saving smik like 6% gdp at zero interest rates. this is a crazy world. private sector is not supposed to pay money or pay down debt
5:28 am
when the interest rates are at zero. they should be borrowing and investing money. but they have a balance problem just like the japanese ten years ago. they're trying to repair the level. >> so you can't stimulate and plan fort debt construction down the road at the same time. you can't do two things at the same time. >> that's right. >> here is the thing. if the government should borrow more or has the room now to spend more, should they be spending via tax cuts or should they be writing checks in terms of infrastructure spending? >> i think infrastructure spendings are better because you get the immediate impact and you can actually end it when the project is over. but if you get more tax cuts in the current environment, a large portion that will be saved and when balance sheets on the private sector is finally repaired, it was very difficult to take the tax cuts away. and so in order to end it when the -- comes and have the maximum impact while private sector needs help, after they repay the balance sheets, i must
5:29 am
prefer to see public works expenditures. >> there will be a lot of people with reaction, richard, but we appreciate you sharing them with us. richard koo, now murrah research institute. kelly, i'm not sure that view not getting a huge amount of support. >> yes. wonder if he can change and win over hearts and minds. ross, we know you'll have more in from lake como. he is in italy, we swear. still to come on the program, the countdown to the u.s. jobs report is under way. we'll preview the report when we come back. acceler-rental. at a hertz expressrent kiosk, you can rent a car without a reservation... and without a line. now that's a fast car. it's just another way you'll be traveling at the speed of hertz.
5:30 am
5:31 am
5:32 am
welcome back to "worldwide exchange" been i'm kelly evans and these are your headlines from around the world. steady eddie, the u.s. economy expected to have added a modest number of jobs last month, but not enough to significantly lower unemployment. passing grade, the fed says all but one of the biggest u.s. banks met minute mull thresholds in its latest rounds of stress tests. and china's data jumps 22% on exports, but weaker demand brings additional questions. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. now here is a look at how markets are trading. ignore the s&p for a second.
5:33 am
take a look at the nasdaq and the dow. dow jones industrial average pointed 62 points above fair value this morning, 14,378. so believe it or not, we're now just 22 points from 14,400. pretty extraordinary. the index issed aing 9%, almost 10% so far this year. the same, by the way, goes for some of these global indexes. the ftse 100 is some one of the better indexes. overnight, helped in large by by strong trading is the yen, a 3 1/2 year low pushing the nikkei up by almost 3 1/2% yet again. stronger performers today are the periphery. the ftse mib in italy, strong too. february u.s. jobs report is out at 8:30 a.m. eastern. congress are looking for another month of modest job growth. 160,000 for the headlines following 150,000 in january led by construction and manufacturing jobs. that number, of course, skewed -- could be skewed, i should say, as the snowstorm did
5:34 am
bury the east coast during survey week. the unemployment rate is expected to tick down to 7.8%. although that would reverse the increase we saw in january. what does it all mean? david russell, economicest editor at the "wall street journal" joins us now. patrick o'keefe is stil with us. david, 2012 didn't turn out to be that terrible of a year for job growth. so are we just continuing this trend of kind of not great but not horrible growth? >> you know, it's dangerous to talk about what's happening to the job market three hours before the government puts up the numbers. but, yeah, that's the expectation plotting along. but it's painfully show. we're still 3 million jobs short of the peak before the crisis. we still have millions of americans who have been out of work and are still looking. that is the concern.
5:35 am
>> david, is the u.s. economy today better than it was a year ago? >> i think so. the private sector is really beginning to look much healthier. we're not out of the woods yet, but healthier. housing is coming back. we had some data yesterday from the federal reserve that home equity is up. the rising stock market makes people wealthier. there's some stirrings in home construction. auto sales has been strong. it's kind of ironic that the biggest worry in the u.s. economy right now, the biggest short-term worry is will the government commit a self-inflicted wound and destroy what's beginning to look like a decent recovery. the jennings of a decent recovery. >> well, we want to talk, too, about not just number of jobs, but, of course, earnings. this in focus because we have really seen inflation over the last couple of years reminded when i was looking back at some of the inflation numbers for the dow. anyway, a 10.5% increase on the dow since 2007. frankly, earnings haven't gone anywhere. are we at the point finally where that's going to start to
5:36 am
change? >> well, i sure hope so. i mean, it's been an extraordinary divide between corporate profits which are up and wages for most workers are flat. that's definitely holding back the economy. consumers who don't have rising wages and who are trying to pay down their debt so who are overwhelmed by their mortgages and walking away from them are not going spend. but with so much unemployment, there doesn't seem to be much pressure on wages and i don't know what that will change. eventually it will, but there's no guarantee it will be in the next several months. >> patrick, you're cautious. you mentioned your forecast is for about 130,000 jobs. what about earnings that david was just making? >> i think david is absolutely right. there really is no pricing power on the part of employers to push through any cost increases. so they will continue to restrain the rise in wages. and, in fact, productivity in the most recent quarter was very weak. so there's really no opportunity to push through higher wages at
5:37 am
this point. >> well, i have to wonder, actually, if that isn't part of the reason why, though, the u.s. has become more competitive, because the whole theme of reindustrialization is built around a u.s. workforce. it's more competitive and has been more flexible than europe. >> absolutely. >> that's right. >> sorry, patrick, go ahead. >> i think we're growth going to say the same thing. when you look at exports and the share of exports in terms of manufacturing shipment, they're up. that reflects an increase in our competitiveness. but on the other hand, given that the household sector is 70% of demand in the economy, stagnant wages means stagnant demand for goods and services. >> david. >> absolutely. most of what we make in the united states, we consume in the united states. most of what we consume is made in the united states despite all the trade we have. and so the only way the economy can be strong again is if the consumers where the wherewithal and the will to spend. that, every once in a while,
5:38 am
shows through, but they're going to be restrained until their paychecks get bigger? on the other hand, raise the jobless rate after washington failed to reach a deal on the sequester. david, they're now looking for 7.3% unemployment at year-end versus 7.1%. they think as a result the federal reserve won't taper it's qe program. they previously thought it might. and they're looking now for growth above 2%. so it doesn't seem as though at the end of the year things might look much different than they do right now. >> well, you know, it's always hard to know at this point in the year what things are going to happen. i don't think anybody in march of last year would have expected such a loud lousy fourth quarter in 2012. but i think the picture is the one that they described. they seem to be not a lot of bigger in this recovery. it's going along slowly. it's better than europe, which is not growing at all. but the question is how much impact will the sequester, the across the board spending cuts actually have if they last?
5:39 am
they will restar growth. we've had tax increases already and is it's hard to imagine that anything that's going on in washington will make businesses or consumers feel confident about the future or confident about their government. that's not the only factor in the recovery, but it certainly is one big factor. >> and are you surprised the markets have shrugged the sequester to the point they have inspect friday, we're ought dow 14,000, almost 400. >> well, you know, these fiscal foley necessary washington have become like "days of our lives" a very long running soap oprah. and i think markets have assumed that they're going to continue to muddle through. that's why we've not seen the kind of reaction. if we had a more stern reaction from wall street, maybe pennsylvania ave would get the message. >> david. >> i think that's probably right. what i suspect is going to happen is that if the sequester sticks, then we're going to
5:40 am
begin to see some real effects. it seems from that we've been told that it may be to the end of march before you see longer lines at airports and being people turned away from government offices the. we've seen some stirring scattered across the country. my sister was at a time conference yesterday where the washington people weren't allowed to come and so they spoke by video in this network and they had empty chairs for them. if traders and stockbrokers and investors discover that the government isn't muddling through, that this is starting to really hurt, then i suspect the market will reaction. but patrick is right. it does take the heat off people in washington and that may be one reason why they're moving so slowly. >> patrick o'keefe, thank you so much for your time. david, stick around. we want to get your thoughts on the fed's stress test results when we come back. u.s. banks have largely passed the u.s. street tests. but is there more ahead? and wa does it means for the role in regulating these banks? still around.
5:41 am
we'll have that discussion here on "worldwide exchange."
5:42 am
5:43 am
fed says the biggest u.s. banks have enough capital to with stand a severe economic shock. all but one, ally financial, passed the stress tests.
5:44 am
bo bofa, wells fargo and citi saw the most improvement in their tier one capital ratios. goldman sachs had among the weakest outcomes. the fed said it would suffer the biggest losses. banks have until the enof march now to publish results of their own test uses the fed's same scenarios. after the result, citi announced its capital plan saying it's not going to raise its dividend, but has asked to launch a $1.2 billion buyback. in keeps with the theme of the moment, shares up 2% with that news in frankfurt. wells fargo fractionally higher. goldman weaker by more than 1 is%. david wessel is still with us. economics editor at "the wall street journal." this perhaps is reminder of how much more oversight the fed has on these big oversized banks. does the have an agenda here? >> yeah. the agenda is to prevent us from having to go through the trauma of the last five years. the fed and other global bank regulators have decided that one
5:45 am
problem was that banks did not have enough capital rushon to absorb big losses if there was a crisis. so what the stress tests are is pretend that we have another really bad economy. do you have enough capital so you don't have to be bailed out? and as you said, under their scenario, all but ally do have enough capital, but it does suggest that they're worried about the trading institutions being a bit exposed if there's a bad turn in the economy. >> i just wonder if they're still not fighting the last battle, which is were we to see a 2008 event again, would banks be fine? that's an important question to ask. but at the same time, there's a question about the current structure of banks' period. are they too big to fail? look at the rhetoric we've seen on this in the last week or so. i guess all i'm saying is are there other big questions about banks that these stress tests don't really get at? >> that's true. if you go to the doctor and he
5:46 am
checks your heartbeat, that doesn't mean that your eyesight isn't fine. look, there is concern about the banks being too big to fail. i think what the fed is trying to say is we don't want to break up the big banks so if you don't want to break up the big banks, then they have to have a lot of capital. and guess what? if it's not economical to hold that much capital, maybe some of them will be broken up, but they'll do it on their own. that's the whole controversy over sandy wyles suggesting maybe citi is too big. but more capital is an alternative to the fed saying, huh-uh, you're too big, we're cutting you in laugh. >> and there is real pressure and a serious look at breaking up some of these banks. >> i think there will be a lot of talk, but no serious pressure. it's a big issue. i'm not dismissing the issue. but i think the politics so far suggest that there's not the will in washington to really go and start carving these things up. >> okay. and in the meantime, the results
5:47 am
of the stress test, giving them perhaps the go ahead to return capit capital. david wessel, really appreciate the time. now, a look quickly at today's other top stories. bp, apparently settlement costs related to the 2010 gulf of mexico oil spill significantly higher than $7.7 billion. the oil giant has paid out $10 billion in compensation claims and is currently facing a civil trial down in new orleans. shares just fractionally lower in the ftse trade this morning. google's motorola mobility unit has begun laying off 11200 workers, about 10% of its staff as the smartphonemaker try toes return to profitability. the movement will affect workers in china, the u.s. and india and they come on top of 4,000 cuts last summer. motorola's costs are too high. it's operating in markets where it's not competitive and it's losing money. all soindz sounds like good reason to cut staff. unfortunately google shares adding about 0.3% in frankfurt trade this morning sfp. and a judge has ordered
5:48 am
macy's and is jcpenney into settlement talks. macy and jcpenney claiming breach of contract. april 8th the trial resumes. it can still sell window covers and is other products not covered by the macy's contract. macy's and jcpenney shares, jcpenney down about 11 is% on the back of significant declines, that company as it struggles to turn around its declines and macy's adding 0.2%. we will, by the way, get results for retail same-store sales -- no, we already got thop ps today is all about mcdonald he's, in fact, totally unrelated. >> kkr has reached a deal to buy gardener denver for $3.74
5:49 am
billion. it will be the private equity firm's third acquisition in the industrial space in the past three years. both companies shares are lower in frankfurt this morning. if you're just joining us here on "worldwide exchange," a reminder that these are your headlines. the u.s. economy expected to boast decent jobs with nonfarm payrolls out in just a couple of hours time. it was nearly gold bars all around as the fed says all but one of the large banks missed its mark. and the dow jones industrial average hitting another record high. is the rally running out of steam? it doesn't look like it this morning, but we'll discuss when we come back. stay around. [ male announcer ] here's a word you should keep in mind. unbiased. some brokerage firms are. but way too many aren't. why? because selling their funds makes them more money. which makes you wonder -- isn't that a conflict? search "proprietary mutual funds." yikes! then go to e-trade. we've got over 8,000 mutual funds, and not one of them has our name on it. we're in the business of finding the right investments for you.
5:50 am
e-trade. less for us. more for you. the fund's prospectus contains its investment objectives, risks, charges, expenses, and other important information and should be read and considered carefully before investing. for a current prospectus, visit etrade.cotualfunds.
5:51 am
otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪ here is what's been happening in markets this morning. in europe, it's been green
5:52 am
pretty much across the board and strong in the case of the periphery. the spain index there up 1.5%. same for italy. the ftse, mib and xetra dax adding about 0.5% and 0.7% respectively. ross is joining us from lake como. ross, i wonder giving these rallies that we're seeing how that's affecting the conversation over where you are. >> clearly, a lot of conversation here about not only was going on in europe, but what's going on in the united states and other parts of the world as well, kelly. we had some interesting divergent view owes that this morning. surprisingly, nouriel roubini quite upbeat in the u.s. economy on the benefits of shale and gas boom, what's going on with the housing market, steady if unspectacular economic growth and job creation, as well. what he's concerned about is the fiscal drag. he thinks there will be about 1.5% of fiscal drag because of the sequester and was going on
5:53 am
with politics. although he still thinks the economy about grow 1.5% this year. but because of that, he's not so sure about whether the level of equities at the moment are justified. >> sometimes the stock market gives you the wrong signals, down the second half of the year. the u.s. stock market could correct somehow. >> yeah, ross -- >> so that was newerel this morning. >> i was going to say i think i would be worried if he wasn't bearish. then you would know it was really time to get out. >> yeah. and then we spoke to jim o'neill, goldman sachs jim o'neill shortly after that wodz, look, on principal, i disagree with what nouriel says. on principal i'm always positive. his view was actually apart from, you know, parts of europe, spain and italy and, you know, france have got recession. germany is doing very well. you look at the other parts of world, china growth is holding up. the u.s. is doing okay. japan is now trying to do
5:54 am
something they haven't attempted in the last 50 years. they are trying to change the game. he said on those views and with the central bank's biggest wide open, prices are justified. >> now, he says they're justified and jim said, look, i'm bullish. i'll give you that. you also spoke, ross, with richard koo. was interesting about this, if you want to understand the fundamentals as to why share prices are rallying, is it real? is it just nominal? is it a reaction to weaker currencies? and, you know, i thought what he had to say, too, carries some weight about what japan was doing and whether to buy these these move and believe it's going to continue. >> as far as japan, the rally in equities in japan was concerned, he said, look, what the central bank is attempting was right and they should do that. but it's one pillar. there's a lot of other pillars. a lot of that focuses on what the government can do, whether they can indeed get the private sector to start buying. and if the private sector ever
5:55 am
stops borrowing, it won't make a whole dooep heap of difference. so wa he's saying is, yes, you can rally on changes at the bank of japan, but if you don't get the private sector borrowing, it ain't going to make any difference. and they're saying that's what investors need to focus on. >> the sun may be out in japan and the u.s., but not in lake como where ross is. nevertheless, great reporting, ross. and we'll see you back here on monday, we hope. travel safely. the u.s. jobs report in february meantime out at 8:30 a.m. eastern. economists are looking for about 160,000 jobs. that's roughly the same as we saw in january. up employment rate ticking lower. that's what's expected, at least. there are a couple other things to watch for, as well. wholesale trade at 10:00 a.m. and then food locker, ann taylor and is mcdone amend's same-store sales. todd joins us now from the adam mesh trading group. todd, do you buy into this
5:56 am
rally? >> good morning, kelly. i do not buy into this rally. i think that the rally is exhausted. i don't think we're going to go down right away, but i think any up side is now limited. i think a lot will depend on this jobs number this morning, which i expect if the numbers are not north of 165 or 170, i would look for some selling pressure. i mean, these numbers are very anem anemic. at 160, we're not cutting into any of the deficit at all, anyway. if you go back to 2007, we had 7 million unemployment, now we have 14 million unemployment. so we're not doing a great job of infusing work here. the bigger companies can figure out how to work with less employees, so they're not hiring, anyway. >> after the adp report, there's a lot of good news moving into this market. todd, you have hating this market for a little while. >> yeah, you know, i had 1530. now we're brokingen out and
5:57 am
we're a never-never land. the tape is starting to weaken here. that doesn't mean it's going to go down right away, but it's saying the upside is still limited here as to how far i think we can go and it's being pointed on certain stocks. if you look at a lot of the industrial stocks, they're starting to get hit, they're starting to get hammered down a little bit. so as the numbers come out today, the spike of the numbers get good. you'll start to see selling pressure because for the health and the wealth of the market, we need some corrective action. do you see anywhere that mike break out? i guess i'm thinking about gold here. gold is in a real ka none dangerous here. it's 1550 level which is held has been extremely powerful and holing it. if it can hold this, i think it has a chance to make a move back up boot mid 1600s. but the overall chart and trend
5:58 am
looks pretty good. we go below 1550, i think it's going down into the 1400s. >> and briefly, have we seen food inflation relief on the way, do you think? >> yes. in the mean time, soybeans and wheat are what we would call bear markets now and corn is still in a down trend within a congested market. i think we're going to see some relief here, as well. >> rain means green and snow means grow. that's how dennis gartman put it. todd, thank you for joining us on the show today. as we said, ross will be back here on monday. thanks so much for tuning in. identities now time for u.s. "squawk box." in the meantime, have a great weekend, anyone. carfirmation.
5:59 am
only hertz gives you a carfirmation. hey, this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in, the moment you land. it's just another way you'll be traveling at the spef hertz.

103 Views

info Stream Only

Uploaded by TV Archive on