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speculation. for those who want some high growth, i'm giving you gilead. and yes, if you want high growth and dividend, you know where to find it. that stock is bristol-myers. i like to say it's always a bull market and i'm here to find it for you on "mad money." i'm jim cramer. see you tomorrow! welcome to this morning's "worldwide exchange." i'm kelly evans and these will your headlines from around the world. cyprus scrambles to prevent a run on its banks, planning to put into place capital controls in an hour that could last for weeks, even months. uk bank shares trading lower as financial institutions prepare to find out just how much capital they'll need to keep regulators appeased about the health of their balance sheets. and closer ties for the brcs. the leaders of brazil, russia, china and south africa agree to set up their rescue fund, perhaps rivaling the imf.
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>> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. back in the saddle here at "worldwide exchange" from brussels, where there's still plenty of news and speculation about just what the euro group is up to with the region's banks. plenty going on in cyprus, too. ross westgate is away, but bill blaine is here to help me through the program. first, straight to the news. capital controls are expected to be in place within the hour in cyprus, this paving the way for banks on the island to reopen tomorrow. cypriot bank workers have taken to the streets amid worries about job losses and ongoing confusion about the extent of the hit to uninsured depositors. the country's finance minister, nicholas sarris, says capital controls should help restore balance to the financial system. >> we believe that some sort of capital controls that will moderate whatever outflows are bound to happen will restore confidence and they will be removed in a relatively short
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period of time in agreement with, as i say, the general rules of the eurozone and the european union. >> well, first of all, the rules seem to be made up as they go. secondly, a relatively short period of time? bill blaine is here, senior fixed income broker. >> good morning. >> iceland capital controls for five years now? >> yeah. and the last time the uk had capital controls, i think it lasted 40 years. i mean, these are not going to be temporary. these are going to be in place for a long, long time, and i just find it amusing listening to them tell us that they'll be there in whatever way the law says they should. well, i always thought the currency union meant you didn't have capital control. >> you didn't have laws specifying how to impose capital controls. >> but as you say, let's make the rules up as we go along. >> carolin roth is on the grounds for us in cyprus. when banks open tomorrow, it will be an interesting experiment in behavioral economics. what's the sense on the ground there? and look, we've seen this
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deadline push back several times already. are banks really going to reopen? >> reporter: you know, they're making a very good point, kelly, because a lot of people on the ground would be very doubtful as to whether banks will actually reopen. it's been pushed back so many times, and now banks have been closed by around two weeks, for around two weeks or so. but i mean, the hope is that of course within the next 24 hours, we could finally see them reopening, and we know that security is going to be in place. the mandate was given to the uk security firm g4s. they're going to prepare for the opening. they have around 750 people working on the ground to insure that everything goes smoothly to assure the public safety. their security experts are restocking atms. they will be providing guards who will be on location once the banks do reopen. but generally, kelly, i don't see a sense of panic here. over the last two weeks, the lines in front of the atms, we've only seen them on two or
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three occasions or two or three days, rather, so i don't expect that we will see a major bank run tomorrow, especially also because capital controls will be in place. >> now, carolin, it's interesting, because one thing that could potentially keep banks from reopening is if there are no workers. so, there's been also lots of talk about the role of the unions there. will workers be on the job tomorrow? will they continue to protest and strike? >> reporter: well, there certainly have been many reports, but cnbc spoke with the bank union for the bank of cyprus this morning and they told us that, no, at this point, they're telling their members not to go on strike when the bank reopens tomorrow. that is really based on a number of conditions. they must be safe-guarded and the redundancy should be voluntary. hard to say if those conditions are actually going to be met. >> that's a great point. okay, thanks for now. bill just responding to what you heard from carolin, there is a certainty irony in having g4s
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involved here. >> yeah, they were supposed to do the olympics. >> yes. >> then they never got the staff and the whole thing became a bit of a farce. >> perhaps the british army will be next. >> i sincerely hope not. you really don't want british army on the streets of cyprus trying to control cash deliveries. that wouldn't be a good thing. >> it is a reminder, though, that this really isn't all just about the russians. even though that was the way it was painted last week when cyprus was hoping for some sort of help before having to resort to these measures. there's a lot of british money here, too. >> there is. i think the british are the third most heavily foreign invested country in cyprus. but let's not get this out of proportion. let's move on to some of the other things that are happening in the markets, because cyprus is now effectively a done deal, whatever happens. we've got all this confusion. who knows what happens tomorrow. i think the most interesting thing tomorrow with cyprus will be to find out how much money actually escaped while the banks were supposedly closed, because i think that's going to turn into -- >> why do you think we'll find out tomorrow? >> well, we'll find out in the next few days, and i think
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tomorrow is when we get the first hints of how much -- there are all kinds of rumors going around the markets that billions of dollars of euros managed to get out of cyprus, mainly russian money. let's find out how true that is and how much got out. it certainly looks like it has. >> just a quick question, what's the real impact of that at this point? as you say, the market is maybe moving on from the cyprus issue. again, with the possible exception of trying to clarify just what the euro group is going to do going forward when it comes to bail-ins or bailout of banks. is that more of the issue here now, just trying to gauge this framework? >> well, i think the key thing -- i mean, these comments that dishl bloom made the other day about this is the new template. i mean, i can't decide whether that was contradictory bluster or genius. i suspect it may well have been genius, because that is exactly what the eurozone those do. it has to make it absolutely clear what will happen to banks. unfortunately, that will make banks very unattractive as investments. we can come back to that later.
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>> exactly. >> but what happens to the rest of europe if all these countries face it? now, the problem is, we don't know until the middle of next month how much money is going to be pulled out of spain. it's even later that we find out how much money potentially gets pulled out of italy because people are concerned. >> right. >> now, i think there is a lot of overreaction in the press and the analyst pages about -- >> overreaction in the press? >> oh, yes, oh, yes. occasionally. occasionally. i know that, credentiertainly, analysts, what did they used to call us? teenage scribblers. i'm no longer a teenage, but sometimes we would overreact and say this is the end of the world, whereas, in fact, it's just another step forward. you have me quoted there saying the eurozone situation remains critical. you know what? the eurozone situation is always critical. >> well put. and northwest be especially so for now. >> but the markets shouldn't overreact. i think it's very interesting what's happening in cyprus. it will be fascinating what comes out next, but the key issues are what happens in the bigger countries. >> well, and speaking of some of
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those bigger countries, in fact, asia is one of the places, too, we probably haven't been paying enough attention amid all this. let's go to the market check with lee sichuan in singapore. good to see you. >> good to see you, kelly. asia wanted a slice of the action. new zealand and indonesia and the philippines, we're not showing that on the wall. as for the big vortices, the nikkei finished in the green. word is the central bank will start its open-ended buying program immediately, this instead of waiting for next january as originally planned. but gazing property counter's boosted by the reflationry hopes were capped by losses in transportation stocks and insurers. shares of sharp also lost over 4% today after taiwan's hoe hi missed the deadline to inject capital into the cash-strapped lcd maker. earnings news dominated trading
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in china and hong kong. chinese banks were mostly higher today after adbank and bank of china reported double-digit growth in earnings, although the a-share listings were a bit mixed ahead of results from the top lender, icbc. china's automakers also drove higher as china will cut retail fuel prices starting tomorrow. beijing has adopted a more flexible fuel pricing system to track the global market more closely. elsewhere, south korean automakers also lent their support to the kospi, ending higher by about 0.5%. australia's asx 200 climbed to nearly 1%. financial gained ground after the rba said all the banks were in pretty good shape. back to you. >> lee six yawn, thank you very much. we'll return to southeast asia in particular in a couple minutes. first, in the u.s., futures are looking slightly higher. a couple of points to the nasdaq, maybe a point or two on the s&p. the dow did hit another fresh high yesterday. european markets, had they picked up the same tone?
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well, actually, we're starting off in the red this morning. the ftse mib in italy giving up 0.25%, down 0.8% for the ibex 35 in spain. this will be a gauge for if futures hold their small gains. the top gainers and losers across europe early in the streng session. telecouldn't, autos and banks down, but banks down only about 0.4%, so relatively contained. the bond markets, looking at the sovereign debt we've been watching. obviously, the key paper, spain and italy in particular. today we're seeing the rotation out of those countries, out of the periphery into the relative safety of guilds and bunds, 1.13%. doesn't that say it all on the ten-year german bund yield? the euro/dollar is giving up about 0.1%, down $1.29 this morning and its euro weakness predicated on economic underperformance more than anything that analysts keep
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pointing to an even weaker euro in the year ahead. now, the bank of england's financial policy committee is expected to reveal the extent of the funding gap at uk banks, but just how will they decide to tackle it? find out at 10:30 cet. we'll be right back. zap technology. departure. hertz gold plus rewards also offers ereturn-- our fastest way to return your car. just note your mileage and zap ! you're outta there ! we'll e-mail your receipt in a flash, too. it's just another way you'll be traveling at the speed of hertz.
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you're watching "worldwide exchange" and these are your headlines. cyprus readies capital controls as its banks prepare to reopen tomorrow. the bank of england will tell uk banks just how much capital they need to be deemed healthy, that in less than 20 minutes time. and brics' leaders agree to create a $100 billion contingency fund, perhaps aimed at rivaling the ims. the philippines secured its first investment-grade rating from fitch. we'll speak to the country's finance minister on the likely impact on growth and investment. and indonesian shares hit all-time record highs today. why? stay tuned to find out who the man is with such an influence on the market, when we come back. ♪ ♪ [ male announcer ] help brazil reduce its overall reliance on foreign imports with the launch of the country's
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♪ after all, what's the point of talking if you don't have something important to say? ♪ now, we're hearing just out of italy that they have ruled out a grand coalition deal for a new government there. keep in mind, the president napolitano, hoped to get a new government in place before easter, but bersani saying coalition governments remove accountability. he is meeting with five star movement members and says the country is in a mess, has a difficult year ahead, telling us what we already know, of course, but not necessarily indicating that a government there will be formed. markets are taking it relatively well at this point, you have to say. in the meantime, talking
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about southeast asia, indonesian shares hit an all-time high as the country's new central bank chief was approved today. making a move from his position of finance minister, ardoji says they will maintain a stable rate and keep inflation low. last month, it accelerated to a 20-month high. let's hear from mark fookes. mark, great to see you. it looks like markets think that the central bank governor will cure all evils, cancer, perhaps, and keep inflation from running high. what's your own view? >> i'll be happy with any of the above, all of the above would be great. i think that indonesia as a market still looks very interesting, certainly as an economy, if not a market. you know, just to recap, essentially the fourth largest country in the world by population, 200 million people. you've got over half of them under the age of 30, so
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demographically attractive. on a real growth rate, you've got at least 6% gdp growth, and you also have a situation where it's a domestic economy, so whatever the problems that may be going on in g-3, this is more domestically oriented. so, while they are impacted to the extent that they do have exports, as a percentage of their overall economy, it's far less. and now having this new central bank governor is certainly a positive to the extent that he is probably a little bit more of an inflationary hawk, and therefore, some of the concerns that had been present in the currency may be a little less present immediately, at least. >> i wonder, though, if capital controls are part of the problem here, as investors like the story as much as you say and are just desperate for growth in fact, i wonder if it's not a lot of pension funds putting money to work on these trying to hit their return targets, but if the story is as good as you say, that will encourage more capital flows. what further measures might
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indonesia have to take to help longer-term sustainability? >> well, i think in indonesia's case, unlike some of its neighbors, they do have a current account deficit. and so, to the extent that they need to have that offset by portfolio inflows, they're very happy to have a balance of payment surplus. and unlike some of the other neighbors, again, you take the tibd or the philippine peso, which has been appreciating sharply over the last several kbau quarters, the indonesian rupe has been one of the lowest. so inflows to mitigate the weakness is probably not a bad thing. to the extent that you have inflows not just into the bond market, but into the equity market, that's actually interesting and durable for an equity investor, because one of the interesting things that you may or may not know is that indonesia, unlike most other asian economies, has seen net
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foreign inflows in the equity market every year since '07, including '08 and' 11, where these two difficult years for equities actually saw most other markets net foreign outflow. so, while you're right that they may have an issue with capital coming in, at this point, given their current account deficit, i don't think that's going to be front and center for concern. >> well, it's an interesting point, bill. what's your own take? sitting here in london, how important, how much are clients talking about southeast asia and the growth rate, because the philippines meanwhile was also just upgraded? >> yeah, this is an interesting point. i wanted to ask mark, if i may. mark, i'm intrigued as to what could possibly happen in all of the asian economies, especially indonesia, if we start seeing the growth we're expecting maybe later this year in the u.s. and the kind of, say japan succeeds in creating growth as well. what is that going to mean in terms of cash then moving out of
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all the emerging markets and into these core markets? how badly could that damage the indonesian situation? >> i think, to be honest, that's probably less of a concern than a tail risk event where if it was generalized eristoff as a result of further acceleration and problems in europe, for example, and money that's worked its way into most of the bond markets that you allude to in much of southeast asia would come out in a risk-off environment. but if errs talking about a resurgence of growth in g-3, if not g-1 out of the states, to the extent that you've actually got yield differentials that are very, very considerable where rating at the short end in europe, in the states are almost non-existent, you're still going to be in an environment where you can pick up 300, 400, 500 basis points in countries that are now or about to be investment-grade credit.
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so, i think that the money which has worked its way into both the equity and the bond market wouldn't necessarily need to reverse trend. in fact, there's a structural trend going on concurrently, which is domestic money which had been in banks, would probably work its way further into its own domestic market. so, i think that may be able to mitigate in a positive growth environment, notwithstanding the risk scenarios i talked about. >> it suddenly sounds like indonesia. mark fuchs, appreciate your thoughts this morning. and a shot in the arm for another emerging economy in the southeast asian islands, the philippines. fitch just raised the credit rating of the country from bb-plus to bb-minus, meaning that's its first investment grade rating. the move is a big vote of confidence for the government's recent drive to reach gdp growth of 8.5%, attract more foreign capital and perhaps stamp out corruption, too. the pse composite surged to a new record high on the news today.
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cesar purisima is finance minister of the philippines and is joining us on the phone from prague. do you expect celebrations at home? >> actually, we're quite pleased that the credit rating agencies have finally affirmed what the market has been saying for a long time. as you know, the market rate is too much above the investment grade, but we consider this as a non-market treatment of the situation and confirms our focus on good government. >> at the same time, though, there are pleasannty of hurdles guess, towards the kinds of development that would launch the philippines into the more developed economy ranks of the world. for example, infrastructure, for example, inflation. in your view, what are some of the biggest challenges you still face? >> well, we need to continue to focus on the things we can control, which is the fundamentals of the philippine economy. so, we need to continue to invest in infrastructure, and
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that's one of our big priorities. we need to continue to create fiscal space so we can invest in our people, our biggest asset. and we need to continue to open up our economy so that we're connected to the supply chains of the world. >> it's also interesting, this news comes as nearby indonesia is also having a pretty good run of things lately, some successful ipos, stronger growth. what is it about the southeast asia story that you think is working right now? >> well, economies are about people, and the philippines has the youngest average age people in population in asia, 22 years old. as a whole, there's an average age of 27 and we're about to hit our demographic sweet spot. countries that have gone through that have seen an acceleration in their gdp growth rate. >> and what do you think europe can learn from your own experience, having been through the asian financial crisis in the late '90s? >> well, you just have to deal
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with the problems head on. we cannot deploy solutions. the more you deploy solutions, the more complicated it gets. obviously, we're not in a position to provide advice to others in europe, but we're here hoping that the economy recovers because they're the world's largest economic zone and a healthier europe will be better for all of us. >> we'll leap it there. that's cesar purisima, finance secretary of the philippines, calling in on the news that the country is now investment grade, according to fitch. thank you, sir. stick with us, because straight ahead on the program, we are just minutes away from finding out if uk banks will have to undertake major capital raising under the bank of england. we'll have details next. we leave you with a look at futures. the dow looking to shed about 16 points at the open as italy struggles to form a government. we'll be right back
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welcome back to "worldwide exchange." i'm kelly evans and these are your headlines from around the world. cyprus scrambling to prevent a run on its banks. capital controls are due to be put in place within the half hour. uk bank shares trade lower ahead of the bank of england statement on the extent of additional capital requirements. those figures due to hit the tape any second now. and closer ties for the brics. the leaders of brazil, russia, india, china and south africa agree to set up a $100 billion
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rescue fund to rival the imf. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. well, even as we've been covering the news out of cyprus, we've known all along that italy is perhaps the bigger threat to markets, and on that point, italy's bersani is saying he doesn't think he's going to be able to form a grand coalition government and that you would have to be insane to govern italy right now. that sent markets lower a couple of points off the dow as well. so, we'll keep an eye on the market reaction, because at the same time, we're getting news out of the uk when we're talking about banks and the health or lack thereof. we'll try to bring you those figures as well. first, a point about the gdp figures and industrial production data, if we can. just let you know the gdp was unrevised at 0.3% contraction in the fourth quarter. that's the same as what we learned out of france this morning and also that industrial production fell 2.1%, which was
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its steepest drop since the first quarter of 2009. so, not a pretty picture there for the economy in britain. and now, the bank of england is out with some news with regards to capital levels at uk banks. and the headline is that bank loan losses could exceed provisions by about 30 billion pounds. the bank cost could exceed provisions by 10 billion pounds, that more prudent risk weights would leave a shortfall 12rks bi12 billion, and aggregate shortfall at uk banks is 25 billion pounds. so, first it's talking through a couple of adjustments. i mentioned the bank conduct, loan losses and more prudent risk weights. the bank of england saying those cut capital from current levels by about 50 billion pounds, meaning an aggregate shortfall of about 25 billion pounds. the point being we knew that would fall somewhere in the 25 to maybe 50 or 65 billion point range that ey set last year.
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bill blain is with us. sounds like these are on the lower end of the potential range. >> that looks like a fairly sensible number. had they been much higher, we'd be talking about a major issue for all the uk banks, trying to raise capital at a time when all the recent news makes capital raising more difficult. who loves banks at the moment? nobody. and of course, you've also got the thing that having too much capital is even worse than having not enough, because it means you're not doing anything with it, and that's another problem. >> well, try telling that to regulators at this point when across europe they're actually saying we need to have more capital at the ready so we can bail people in if we need to. >> i think bankers and analysts are going to be quite pleased with these numbers on the basis that they don't put too big a burden on it and that the regulators have stepped back from inflicting too high a target. >> the real trouble is that it comes against the back drop of weak data, although to be fair, mining -- >> well, let's talk about that data for a second. >> look, mining fell almost 11%, its steepest fall on record. are these figures that show weak production potential lay a one-off? >> that's interesting because
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that's something -- i'm not sure what the background of these numbers is, but it may be weather-related. but i think the first takeaway for me would be how come manufacturing has collapsed nearly 3% at a time when sterling's supposed to be so weak? that would -- >> and weakening further on the back of this news. >> exactly. so, it highlights the inability of the uk economy to start producing and exporting even when sterling's weak, and that is the big worry. >> well, the concern too, being, as goldman rightly pointed out a while ago, part of the export weakness is due to the fact that a lot of the exports were financial services. those in structural decline aren't that sensitive to changes in the pound, and probably more sensitive to changes in the regulatory environment. >> that's right, and we're talking about a very small manufacturing sector, if there is a manufacturing sector anywhere outside the london zone. >> by the way, can we turn our attention back to italy here? as we mentioned, the pound's taking a hit on this, but markets really are reacting more across europe to the fact that there is no growth. and by the way, in italy, there
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is no government, and it looks like there may not be -- >> isn't that a fantastic statement? you'd have to be insane to want the job. who is bersani recommending? grillo or berlusconi. >> berlusconi. >> the fact is, we're going to see another italian election. and one of these two characters -- let's not call them politicians -- one of these two characters is going to win. both of them are antiausterity and to a lesser extent anti-euro. >> and is this not the real risk from the cypriot situation, which is, isn't it easy for them now to make the argument to the public, why do we want to stay in the euro when germany and when brussels can tell us what to do in our country? >> you have a massive political risk rising in italy and you've hit it on the head. the risk is that someone's going to turn around and say no to brussels. and certainly, that will be a rising threat today. >> well, and the weak backdrop across europe is making the developing world look much more attractive to investors at this point. and now, brics leaders are flexing their muscles.
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they've backed plans for a development on day two in south africa, agreeing to set up a $100 billion imf-style contiguongency fund, china contributing the bulk of the fund $41 billion, but they have yet to agree on the size or location of the new bank. joining us with the latest from the summit in south africa is our own samantha loring from cnbc africa. samantha, it's great to see you. it sounds like big headlines, but the details matter here, and they're still being worked out. >> reporter: certainly still being worked out. and i'm not quite sure whether we'll have anything by the end of this summit, in fact. we spoke to the finance minister of south africa, gordon, yesterday. he said it's going to be germany. it's not an event, the development of the brics development bank talking about issues ironing around governance and of course capitalization of the banks. you have the contingency fund. we know that china will be committing the bulk to it, but so far to date, we only have almost an mou in place, an
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understanding that they have an intention to launch it. that's being said. no details on that. but what we have details on is bilateral agreements between many of the brics nations, for example, between south africa and russia, nine bilateral agreements being signed. south africa, big intention with its nuclear power plants and russia saying it will be extending credit lines to fund that. some of the developments also relating to the technology space. aeronautical space. russia, of course, the least significant partner for south africa when it comes to trade, only around $1 billion in trade last year, and that's a paltry amount compared to the $200 billion that was traded between south africa and china. just to take a look at some of the other initiatives that had been launched, we've been talking about the brics business council launched by all the heads of state this morning. speaking to the brazilian head of the brics business council, their counterpart. his company called marco polo is
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based in all the brics nations. talking about seeing opportunities for collaboration, skills and manufacturing bases in these brics nations and also talking about the developments in south africa, manufacturing here to export their buses into africa. so, there are a lot of business deals being made at this brics summit, so that's of course a step forward, but when it comes to time lines and issues around the brics development bank, we only have an intention right now and we are still waiting for comment on that. that's all i can give you now, but we'll give you update when they come through. >> perfect. samantha loring from south africa. thank you very much. we turn our attention to u.s. futures, now with an uphill battle if the s&p wants to take on fresh nominal highs because we have weak data across europe and more evidence that italy is struggling to form a government. overnight it gave up about 0.1%, but really you can watch this move here in the last couple of minutes as that data hit. again, the point here, europe
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needs growth, does not have growth. here's how european markets are digesting the news this morning. the ftse 100 has flipped negative, just barely, though. the xetra dax is giving up 0.7%, which is a pretty big move there. the cac weak as well. the ibex 45 is now down 1.5%. it has not taken much for this intex to turn sharply lower. the word out of italy that bersani will not form a coalition government suggests there will be much political trouble in that country, perhaps unnerving investors much more so than the cypriot issue right now. so, how do you make money in these markets? here's what we've heard all morning. >> japan throwing all it has to try to keep the yen very, very weak. we certainly don't think the chinese will be inflating any time soon. this is kind of the foreseeable future that we can see. you know, other countries, the south korean yuan, the malaysian, they're going to struggle, especially if their
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currencies appreciate too much. >> there is a greater richness attached to u.s. treasury paper relative to fundamentals there compared to bonds. so, i'd look for treasuries to underperform. i think treasuries right now are around 155 basis points, which in the ten-year, whereas in the german currency, the ten-year in germany around 50, 75 basis points rich. so, there is room for treasuries to underperform versus bonds in a bear market. >> it looks as if the spread, which has gone down, as i said, from $26 a barrel or so down to about $13, it looks as if it could be heading further down, but it's hard to see it getting much below about $10, something like that. carfirmation. 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,
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has an equally thrilling, lesser-known counterpart. conquer them with the exhilarating is 250. get great values on your favorite lexus models during the command performance sales event. this is the pursuit of perfection. >> announcer: you're watching "worldwide exchange." welcome back to "worldwide exchange." let's take a look at some of today's top stories, including news that continues to come out of italy with regard to the country's inability to form a government. bersani, first of all this morning, took risk down a notch when he said that there wouldn't be a coalition government formed. a grand coalition, of course, would be between the right and the left. it would rely, then, on him having to partner with the five-star movement led by the comedian beppe grillo, who says he will not negotiate and will only form a government with
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people who agree to all 20 points of his mandate. now crimi, who also represents the five-star movement, is out suggesting that there is never -- actually, let's take this one -- he's basically ruling out external support for a government, which bill was making the point, by ruling out external support, they're not going to support another technocrat like monte? >> that's the point. i don't know who crimi is, but that's the point of five-star. they are not a political party, they're a movement and they won't support anything unless it gives them a chance at the polls. >> you can see the reaction across the italian curve today. yields are up, although we should say that's also ahead of an election due out in about 15 minutes time. that election just got -- or that auction just got a lot more interesting. >> it certainly did. but where i think the market, you were talking earlier about the way that italian bonds have come up today. i think that was in preparation for the auction this morning. so, i'd be intrigued to see where they are now. >> and it turns out vito crimi
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is head of the five star movement, so we're learning more about these politicians. if this is headed towards fresh elections, they will play a bigger role. >> look at the rise of five star, which is basically local politics pushed up to a national level. that could happen over the rest of europe. as i think we were saying last week, if i see the pirate party on an election ballot, they will get my vote. >> all right. let's look at some of together's other top stories now. walmart says it's probable it will incur losses stemming from probes involving bribery allegations and from stars in mexico. last year it was reported the retailer stifled an investigation into claims that walmart de mexico executives paid bribes for years to speed their expansion. the justice department and s.e.c. are now probing the matter. and in its annual report, walmart said it incurred about $160 million in costs related to the probes and shareholder lawsuits and the tally could raise. the country's biggest retailer seeing shares down about 0.33%
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in germany this morning, which is actually out-performing the market. u.s. prosecutors are reportedly probing whether jpmorgan fully alerted authorities about suspicions on ponzi schemer bernie madoff. "the new york times" says the government believes jpm may have violated a federal law requiring banks to tell regulators with the suspicious transactions. the trustee over madoff's firm says jpm, madoff's main bank, ignored numerous warning signs. and a company spokesperson tells the "times" they believe it acted in good faith. and their shares up, in fact, today in early trade in frankfurt, even as that index is down about 0.7%. the u.s. bankruptcy court judge could approve today american airlines' plan to merge with u.s. air to create the world's biggest airline. the severance package for ceo tom horton is also on the agenda. u.s. regulators will have to sign off on the $11 billion deal. shares down about 0.5% in frankfurt. and what's in a name?
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apparently, not enough for hewlett-packard. it's reported they want to pull the plug on its deal for the sports arena in san jose, california, as you see it there. the hp pavilion hosted ncaa basketball games this past weekend and is home to the san jose sharks, but reports say ceo meg whitman wants out of the 15-year, almost $50 million deal, due to end in 2016. the move is part of hp's re-evaluation of its marketing and sponsorship efforts. s.a.p. is said to be interested in taking over the arena's naming rights. founder and chairman haso plattner is the majority owner of the sharks. i was going to make a shark joke there, but can't quite make it happen. instead, we'll give you some headlines. cyprus readying capital controls as banks get set to reopen tomorrow. the bank of england says uk banks will still need to recapitalize as a result of a 25 billion pound funding shortfall. and "only an insane person would want to govern now." these the words from italy's
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center-left leader hitting european stocks. and straight ahead, we'll talk debt and deficits on both sides of the atlantic with the latest news from cyprus and as u.s. lawmakers try to rein in their own spending. we'll be right back.
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delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ welcome back to the show this morning. just want to show you european markets, because we have had comments out of italy indicating the country won't necessarily be forming a government, at least not in time for easter sunday, as president napolitano had hoped. bersani, you can see the quote there, says only an insane person would want to governn no, which i'll steal bill's point on this, effectively endorses what berlusconi or grillo here? >> i can't decipher which one he's supporting. they're both insane. >> it will take time for us to get a sense of who will be
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running the country. you can see markets getting hit on that. the ibex 35 is down about 1.5%. here's a look at what's on the agenda today in the u.s. february pending home sales will be out at 10:00 a.m. eastern. they are expected to show a small decline. also, a trio of fed officials speak throughout the day, including boston fed president eric rosengren, cleveland's sandra pianalto and minnesota's narayana kocherlakotpa. also, earnings, paychex, pvh, red hat, five below and texas industries. and we have gone down in the last half hour, along with markets globally on the back of what's happening in italy. but anyway, looking to shed about 35 points at the open. so, if the s&p wants to claim new highs, it will have to come down perhaps with some of the data flow out of the u.s. today. the white house says president obama signed the continuing resolution into law tuesday, which funds the u.s. government through september. the bill which was passed by congress last week removes the threat of an immediate government shutdown. the measure keeps overall
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spending at levels mandated by the sequester. the $85 billion in spending cuts that went into effect this month. for more on what this means, jared bernstein joins us now, senior fellow at the center on budget and policy priorities and former chief economist and policy adviser to vice president biden. also a cnbc contributor, and bill blain still with us. jared, look, we've avoided a government shutdown for another six months now, and what was -- at the same time, we saw the u.s. consumer confidence figures extremely weak yesterday. is there a link here in your mind? >> i don't think so. i think if anything, keeping the government open for another six months was actually these days a pretty rare sign of bipartisan cooperation. so, i would argue that the consumer confidence had to do with other things. it looked like it was mostly the forward-looking expectations index. there may be nervousness about europe. just listening to the two of you talk for the last minute, i've been getting nervous, so i don't think that has to do with the
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government. >> and i guess that was my point, which is that at a time when we've actually seen fiscal issues receding from the headlines to some extent, it's interesting that that hasn't done more to bolster sentiment. is it because this is maybe the lagged effects of that fiscal cliff coming through? >> you know what, i think what keeps happening with these self-imposed deadlines is that, eventually, you get imeasured to them. the public, even the markets start to say listen, at the end of the day, these guys will eventually figure it out. when it came to the debt ceiling, threatening default, which is really a cataclysmic thing to fool around with, last-minute agreement. fiscal cliff, last-minute agreement. the continuing resolution solved a week before the deadline hit. so, i think the public thinks here goes washington again fooling around with the debt limits. the problem is, that doesn't help in terms of creating a sense of confidence about the government's fiscal stance in the economy.
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if anything, i'd like to see the u.s. government actually building on this kind of faceit recovery that we see, instead of setting these continuing fiscal traps. >> one of the things i think that's worrying markets is the whole thing about crisis fatigue. i know we've got something that rolls over to the end of september. how dangerous is it that we start to worry about the effects of spending downturns in the state, the sequester and such, and how easy will it be to achieve any real spending cuts that will now allow the next agreement? >> well, i think, in a sense, the u.s. congress has bought themselves six months. remember, they now have numerous budgets -- house, senate, the president in early april will come out with his budget. they actually have six months to debate a budget and implement something under what we call regular order. now, they're all calling for this regular order. what does that mean? that means, basically, let's
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stop doing continuing resolutions, just kind of patchwork budgeting month to month, and put in a budget in place that's going to drive things for the next few years. the question is can they continue the sort of bipartisan discussion that will resolve the continuing resolution over an actual budget? the next six months will show that. in terms of, bill, your question about spending cuts, as kelly mentioned, the sequester is now built into the budget baseline in the government's funding and its continuing resolution. so, in a sense, that's resolved for the near term. all the spending and tax measures that are in all the competing budgets, that will be the source of the debate over the next six months. >> oh, joy. jared, stay there, because we just want to bring people up to speed on the latest out of cyprus as well. ceo of the bank of cyprus -- this is not the central bank, it's the country's biggest bank, the so-called good bank now -- has been fired. this after the country has decided to appoint a special administrator to run the institution, and it follows the
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chairman's resignation tuesday. a u.s. treasury official, meanwhi meanwhile, saying it's too soon to draw conclusions about financial stability from the cypriot bailout or bail-in, if you will. dick berner, former morgan stanley head economist, says it's still early days when he spoke at nyu tuesday, says europe has long been identified as a threat to u.s. financial stability. and as we sort through this, denmark is to undertake a review of its banking legislation after the cypriot bail-in. the failure of denmark's own american bank back in 2011 was actually the first in the eu to see senior creditors absorb losses, but now danish officials say it would be difficult to find an alternative to a state-led rescue if one of the country's top six banks were to fail. jared, the point here being -- and by the way, this move in denmark endorsed by the imf. so, wiare we reaching a point where countries have to be more straightforward about some banks needing sovereign support if they fail? >> well, i certainly hope so. i mean, you know, we really
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shouldn't have been taken by surprise by cyprus. they were very much exposed to greece, and everyone knew that. and so, the idea that these things kind of flare up in ways that surprise investors and politicians and markets is something we would very much like to avoid. i continue to believe that we over here will sort of slog through as our recovery begins to gain strength. i don't think that europe is going to shave too much off of our growth in that regard, but i do think the kind of transparency you're talking about can only help. >> well, and bill, just a quick word? >> yeah. i think this thing about denmark's very interesting, because while the cypriot bail-ins and bank closures demonstrate how we should have bank resolution going forward, remember, the danes were closing down, bailing in senior debt-holders two years ago. now they've turned around and said -- >> now they're reversing course. >> -- that's not always appropriate. what happens when we get
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systemically important. >> systemically important, the buzz word of the day. jared bernstein, thank you very much on that note. now we hand it over to "squawk box."
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good morning. another day, another record. the bulls are going to try to close out the first quarter on a winning note. and today's economic test will be housing, a key read on mortgages and pending home sales. it is wednesday, march 27th, 2013, and "squawk box" begins right now. ♪ i like it, i love it, i want some more of it ♪ ♪ i try so hard, i can't rise above it ♪ ♪ don't know what it is good morning, everybody! welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. and there are only two trading days left in the first quarter. the s&p once again just missi

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