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tv   Worldwide Exchange  CNBC  August 4, 2015 4:00am-5:01am EDT

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a very warm welcome. this is worldwide exchange. >> these are your headlines from around the world. >> crude claws back gains after falling to lows for the year yesterday but the sharp slide hits european oil and gas stocks today. prices will stay subdued in the short-term. >> the decline in oil production has not yet occurred and i'm not sure it will occur. prices will probably be soft for a little bit. >> chinese stocks swing higher after the regulator takes more action to stem the volatility but the emerging
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market investor tells cnbc intervention is not the solution. >> they are desperate to try to keep this market up and they're trying every rule in the book to do that. unfortunately as we know the more they do the more uncertainty is imposed on the market. >> putting the brakes on profits at major auto maker. bmw warns of slowing sales. >> analysts worry they're stalling on reforms. this despite delivering better than expected second quarter earnings. >> hi everyone i'm seema mody. coming up on the show he's a man with a plan. a clean power plan as obama talks tough on climate change we're asking you what would you
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give the president for his birthday, which by the way is today. the numbers are in and it's not looking good for hillary clinton. we unveil the results of the latest nbc wall street journal poll. plus angry bird produces angry gamers. find out why the app ruffled some feathers later in the show. let's show you what greek banking stocks are doing and they're open now for a second day after they were closed for five weeks. that's for the entire stock exchange and the plunge continues. national bank of greece is down 29% after dropping 30% yesterday and that 30% will slow it down so the banks would have been down even more. alpha bank off by a similar percentage. euro bank off by 30% as well. yesterday greek stocks dropped 16% at the start of the trading day they were down by some 20% so limiting some of their declines but obviously that was
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a huge drop. >> so essentially two limit down days of 30% declines for the banks. yesterday the rest of tin dex was down around 20% at the open. today the rest of athens stock exchange only down 4% so clearly the banks baring the brunltts of these declines. oil prices grabbed attention yesterday as well. a significant decline particularly at the moment of u.s. trade opening delining some 4%. there is a little bit of stabilization today. a little bit of a bounce back as you can see but we are in and around the lowest levels of 2015 for oil prices. brent 49.9. wti 45.7. where do oil prices head from here? earlier our colleagues on squawk box asked co-founder and co-ceo of carlyle group. >> in time prices will come back. in time demand will catch up with supply and in time i believe that carbon related energy will be one of the best
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investments in the world. the consumption of energy is something we need to do to make the world go forward and a renewable energy has not proven to be as efficient or cost effective or as widespread as people would like or as i would like and carbon energy is going to be the principle type of energy that the world uses. >> the march-april rebound in the oil price and then stability for 4 to 6 weeks, people starting to think we got past the last year or so of demand supply and balances. is it more of a sell off in the way we've seen china come off and other commodities related to china come off or a revisiting of the demand supply dynamics we were questioning at the back end of last year? >> i don't think anyone knows. there's so many experts out there. mark telling our colleagues in asia in the morning he sits on so many boards and everyone is making forecasts but no one really knows. even the experts are way off in terms of their price forecast
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and what's behind the price drops and what's really stunning here is we saw in the month of july that was the biggest drop for commodities since october 2008. what happened then lehman. so why is it so bad now? there must be a lot of leverage behind it. otherwise you can't explain what's going on. >> crude oil down 20% from the highs in 2014. the big question is what does this mean for other asset classes like equities. there have been five times when crude dropped 50% or more since 1986. in the following year stocks are positive 80% of the time. perhaps this could be a bullish indicator for stocks. that doesn't seem to be the case. energy now the worse performing sector on the s&p 500. >> the economy can benefit from cheaper oil prices although that never fed through in the first half of the year as people expected. the other issue to bear in mind here is a lot of risk assets
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have been selling off recently but equityies have been strong performers. we say that relative to everything else they look attractive. they still have a little yield when bonds don't and earnings growth within reason and there's monetary easing but bearing that in mind that we've seen lots of asset sell offs and risk off sentiment in the bond markets and yields compressed on safe havens and equities in july were strong. certainly in europe. and equities are the last risk asset still holding up. relatively they might be valuable. >> that's a superficial level but they're quite resilient but if you dig deeper and look at the dow, 13 stocks trading in collection territory and most of those are in the oil and gas sector. >> it's really limited to the oil and gas sector but as wilf
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is saying the european markets are up double digit percentages for this year. thanks to qe and mr. draghi of course. is that warranted? i don't know. but it's where investors are going. earnings have been better and so from a fundamental perspective there's something to be said for the strength of equities. because they have seen the best earnings season in europe since 2009 so maybe it's justified after all. >> europe and japan are seeing much better earnings relative to 12 months ago than the u.s. that's why i'm more concerned about the u.s. because earnings have been a little poorer. they're still mixed and all right but expectations have been lowered and when you think nasdaq is up 8% year to date. you have the s&p up about 2 or 3%. the dow is down but only fractionally and i don't think we're seeing earnings positive enough to justify these equity markets.
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europe and japan is systemcoming off a low base and they have qe. >> and then you have the stronger which is a whole separate conversation and the impact that's having on multinationals. >> let's focus on one company in particular. toyota. record profits announced earlier. beating on the bottom line in the first quarter thanks to cost savings and a weaker yen. we're joined live from tokyo. >> thanks wilf. for the third year in a row, first quarter profits at toyota hit a record. there are two factors for these numbers. one is is the currency factor. as you mentioned the weaker yen helping japanese auto makers across the board. the second factor is the strength of the u.s. market so profits were up 10%. this is much better than expected. 5.2 billion u.s. dollars and operating profits were up 9% but here's what the cfo had to say
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in summary. >> the u.s. has been strong but the domestic market in asia were weak. on top of that demand in the middle east declined due to the sharp decline in oil prices. but when you look beyond the headlines overall sales in the quarter are actually down. one, the factor that's pushing the sales figures down the most is the uncertainty in the russian market. the collapse of that market. the collapse of the ruble. toyota says they can't give a forecast for that market for this business year and there's softness in traditionally very strong markets like thailand and indonesia and in china this is where the worry is. for toyota these are january to march quarter numbers for the market in china. they say sales haven't actually been hit by this lower economic growth story but it sounds like they're having to pay more incentives to move product. here's what they had to say on that front. >> in china sales are robust but
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we can't be optimistic about profitability. costs are going up and price points are coming down. it's a very difficult sales environment. >> so their strategy in china is they say they need to raise the brand awareness and the brand value of toyota and they just have to better optimize their production base there and i think this move by toyota to make hybrid cars produce them in china for the first time later this year is a clear strategy in that direction. so all in all better than expected number but a lot of that has to do with the currency guys. >> thank you so much for that. let's stick with autos. china weighing on bmw second quarter results. reporting a 3% decline in profits despite a double digit jump in revenue. the company also blaming ever fiercer competition. shares in bmw off by 1.9%. let's get to nancy who joins us now around the desk. is there any visibility on how long the slow down in china
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could last? last time we talked about the w, no one knows. >> the targets have been very vague and this is not new is it? we heard from bmw there's been warning on the china market for years now but they have seen improvement in china for the most recent quarter, but this could be as good as it gets. what was really key here is they did mex if the conditions on the chinese markets become more challenging they can't rule out a change to the outlook. that was crucial. there was opt mifl thatimism that they could maintain the outlook. they beat on the top and bottom line and it's not all bad news. the assumption is they could deteriorate quite dramatically. >> bmw also has a new ceo. do we expect change in direction. >> we expect for the guidance to stay the say.
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he may put more emphasis on the electric cars. it will be interesting to see what he says about the higher margin cars. particularly rolls-royce and now that's a segment with weakness especially in the u.s. sales figures yesterday. it will be interesting to see what he has to say about bmw both in the high end luxury sector and that aspirational luxury market that's been so key for them. >> bmw didn't fair well. is that a concern for investors. >> it's 2% overall but when you look at the whole group it was about 2%. but the whole group many cars saw weakness. they were down about 10%. that brought the entire number down just about 0.2% which was not as good as some of the domestic auto makers we saw and that's a bit of a concern because so much success hinges on the suv market facing more and more competition as the days
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go by. plenty of competition ahead there. >> all right nancy, thank you for that. still to come on the show day 2 of a rough return to the markets for athens. banks leading the losses once again. we analyze the fall out from the greek market slump, next.
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chinese stocks close higher after the shanghai and shenzhen cut short selling by traders. this is to prevent a further market sell off. speaking to our colleagues in asia mark expressed doubt about the effectiveness of the chinese government's attempts to control the market moves. >> they are desperate to try to keep this market up and they're trying every rule in the book to do that. unfortunately, as you know, the more they do the more uncertainty is imposed on the market. it will work temporarily but over the longer term it will not because people will take the opportunity to take advantage of these rules and regulations because the market will move in the opposite direction is what the government intends. >> how did asian markets fair
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today? let's get out to sri live in singapore. >> i'm inclined to agree. i think the broader risk that all of thisention that creates for the beijing authorities is moshlral hazard. they keep continuing. every time we see a reaction to the down side of the market it begs the question are we going to see more government intervention. the government does have considerable fire power. that narrative is set to continue. it was a narrative today with beijing short selling the market like that move and we popped by almost 4% toward the close. that's where we stand up by 3.7%. now the longer term issue is what happened to the longer term capital market reforms. they seem to have taken a backseat because the government is distracted by the volatility over the course of july and june as well. some of the credibility in the capital markets bear that in
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mind as well. elsewhere, i do want to highlight australia because we did see pretty solid retail sales numbers just ahead of the rba decision. incidentally leaving the rates on hold at 2% but they seem to be backing away in the statement away from verbal intervention. remember we seem to be approaching fair value in the aussie dollar so perhaps they don't see any more reason to intervene. so we did see a bit of a pop carolyn in the aussie dollar after that decision by the rba to keep rates on hold at 2%. some believe they're shifting into a more neutral bias because some of the indicators domestically seem to be getting a little bit better. that's where we stand. back to you now. >> sri, thank you for that. meantime i want to show you what's happening with european equity markets. we are just a touch lower but well off the session lows. the stoxx europe 600 is off by less than 0.1%. greece is not helping with that index down by 4%. we also had disappointing
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earnings earnings. let's show you the markets. the dax higher. weighing on that index yesterday. and it's off by roughly 1%. but the athens index down roughly 4% this morning with banking stocks once again limit down by 30%. in the bond markets, obviously you've got risk aversion and bad data hitting these markets and the ten year german yield at a two months low and same applies to the ten year u.s. yield at 2.16. 2.15 yesterday after that disappointing manufacturing print. the dollar is seeing a little bit of weakness today against the euro and that follows on from yesterday's softness on the back of that data that i just mentioned. we're currently at 10974 for euro dollar and keep an eye on
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cable. up by 1%. but in a few we get the european construction pmi. >> athens and it's creditors agreed proposed pension reforms only effect those retired after the end of june. this according to greek labor ministry officials. they're hoping to ratify it's bailout up to 86 billion euros before a debt repayment is due to the ecb later this month as carolyn pointed out earlier greek banks off sharply once again today all essentially close to the limit down amount of 30% declines. the broader athens index off just over 4% of course. only opening after five weeks of closure yesterday. joining us is the fixed income strategist. good morning to you. thank you very much for joining us. just quickly how important are these declines in the stock market in your eyes as an indicator for where greece is today. >> obviously the greek stock
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exchange is is very small and given that the banks are going to have to have some restructure which presumably involve a big hit to equity holders it's been shut for a long period of time. this doesn't come as a surprise to us and it's not something that we view as hugely significant in terms of wider ramifications. >> the overall situation in greece not fully solved yet. we're in a much better position than four or five or six weeks ago but there's still an agreement that needs to be reached. will it be reached easily now? has the main political differences between the two parties been dealt with now? >> it could still be a relatively sort of painful process and we wouldn't be entirely surprise first degree they need more bridge financing to make that ecb payment for mid august but we still see the path of least resistance is where they do come to a deal within the next month or so. >> is the banks that are really leading the sell off when you look at the greek stock market prompting the question of whether they'll get bank
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recapitalizations in the coming months? there's talks of understanding passing august 11th. do you foresee that happening? >> there will be some form of recapitalizations of the banks. it depends on the size. almost the hit to their economy, the negotiations in some respects is worse. but it seems there will be a big recap. in terms of the deal i could easily see it going further out than the 11th of august but we ultimately see a deal being reached. >> how much did that greek manufacturing pmi yesterday weigh on investor's sentiment. >> i don't think it came as a huge surprise. it's unsurprising when you have capital controls severely limiting manufacturing or buying a will the of raw materials. limiting their business and emphasize the impact of this controls. >> we saw that rally in treasury
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yesterday and rally in bunds but treasuries rallied more than bunds. wouldn't you expect much more of a safe haven bid in this scenario. >> it's potentially more related to the u.s. data than greece what was going on yesterday. not too surprising. >> but you do -- if you want to be invested in bonds you still want to be invested in the long end of the curve because the short end of the curve is sensitive to the rate expectations. >> yeah. it seems the path of least resistance given what's going on in the u.s. >> what's your top trade then? >> we remain long five year spain versus australia. we've had it on for awhile. probably a little bit further to go on that though not huge amounts. >> when do they stop stepping in when looking at the greek stock index. >> i was thinking about this while i was on the show. it gets to technical things on how you model the restructure of it. you've got to think in the next day or so there will be some
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value because what you're restructured into will have some sort of tangible value and if you're quite bullish on the economic prospects for greece then the banks all go there ultimately. >> thank you for joining us. >> the single most important step america has ever taken in the fight against global climate change. that's how u.s. president obama described the revised clean power plan in a white house address monday evening. the plan requires states to cut carbon dioxide emissions by 232% over the next 15 years compared to 2005 levels. >> by combining this with investment in our booming clean energy sector and energy efficiency and working with the world to achieve a climate agreement by the end of this year we can do more to slow and maybe even eventually stop the carbon pollution doing so much harm to our climate.
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>> happy birthday mr. president. today is barrack obama's 54th birthday. he looks pretty good for 54. and to mark the occasion we're asking you what would you give the president of the united states today for his birthday? if you want to join the conversation here on worldwide exchange get in touch with us by e-mail worldwide@cnbc.com or twitter @cnbcwex. what would you give him? i have come up with one idea. maybe a private jet because he's going to miss not having air force one or maybe free credit on ryan air. either way he's going to really struggle i think. must be tough. >> he's going to make so much on speaking engagements and any books he publishes he can buy a private jet. have you seen how much money clinton made after he was president. >> i don't know exactly but sure. >> a lot. >> a lot. >> i would probably give him the ttp just to come back to his legacy because that's one of the
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very elusive things that he's still missing and doesn't look like we'll get it. >> maybe immigration reform as well. maybe sunscreen. have you been looking at the heat wave hitting the east coast right now. 91 degrees in washington d.c. tomorrow. 95 for all of those with celsius that's 33 today, 39 tomorrow. >> perhaps private health care insurance as well because public health care isn't that efficient. >> do you think he signed up? >> i don't know but i'm sure he gets it for free as president. but when he steps down he probably won't. and the other thing i was going to say is maybe lots and lots of red bull. he's lacked energy in the last year or two. >> he's a lame duck. >> he's a lame duck. >> of course he lacks energy. >> but push on. it's going to be a bit disappointed in himself if he says i could have gotten more done. >> maybe we should give him a third term for his birthday. >> change the constitution. might be tricky. there's gridlock on just getting
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51%. >> so no third term then. >> i don't know. we'll see. the other thing i wonder if he could wind back the clock and would draw his endorsement for hillary clinton. if joe biden stands i bet he wishes he hadn't already endorsed clinton. do get in touch with us. what would you give him today? >> and still to come on worldwide exchange as continental raises it's sales expectations for the second time this year we're speaking to the company's cfo about the direction for the european car market right after this break. don't go away.
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>> here are your headlines from around the world. >> the sharp slide hits european oil and gas stocks. he says prices will stay subdued in the short-term. >> the decline in oil production that was anticipated has not yet occurred and i'm not sure it will occur so prices will probably be soft for a little bit. >> chinese stocks swing higher after the country's regulator takes more action to stem the volatility but the emerging market investor tells cnbc intervention is not the
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solution. >> they are desperate to try to keep this market up. and they're trying every rule in the book to do that. >> bmw warns of slowing sales. >> their worst day in over three years as they worry they're stalling on reforms. this despite the french bank delivering better than expected second quarter earnings. u.k. construction pmi is hitting the wires for july. coming in at 57.1. june had been 58.1 and reuters
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was expected 58.4. the reading for july 57.1 coming in below expectations. softer house building and engineering being cited as the reasons for this. sterling has just fallen a tad off the back of this. it had been up slightly on the day. it is now flat on the day. 15586. of course sterling relatively flat throughout july having rallied may and june post the u.k. results. >> we're softer today after we held on well during yesterday's trading session despite the slump in the greek equity markets. the ftse 100 is higher. resources bouncing back after yesterday's weakness but oil and gas still very weak. also we have the banking stocks underperforming and the dax is up by 0.2%. really good earnings. we'll get you that in just a second. >> the second day of trade for five years in greece and the
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athens stock exchange down 2.5% but the banks still down significantly more than that. the second day in a row 30% declines as you can see. matching similarly large declines yesterday for the banks as well. >> a drop in the greek stock market did put the euro under some pressure yesterday. let's take a look at how currencies are fairing today. slightly higher for the euro against the u.s. dollar holding on to that 109 level. sterling higher against the u. s. dollar. a lot of economic data coming out today as well as over the next couple of days in the u.s. that could change the consensus on the u. s. dollar. >> let's have a look at big individual movers today. reuters is reporting that the german's chemical's company secured a loan package for a bid for syngenta. they'll submit an offer if monsanto makes a formal offer according to the report but it's moving fractionally higher.
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not too significantly. syngenta is flat today. staying in the same space shares are in the green after the dutch chemical science group reported a 12% rise in net sales. he spoke to cnbc about the possibility of m&a in the future. >> for our company at this moment we have sparked m&a and focus on operational performance. i think it's paying off because i want to counter your argument that the second quarter solid. we focus on operational improvement and not on m&a. >> investors may not be happy with the decision to reject the take over bid. a poll of investors shows investors are overwhelmingly in favor of negotiating with monsanto and deeply skeptical of the current strategy and in that
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note put out they say that there are three options now essentially. syngenta could negotiate if they call for an egm or syngenta finds a new deal or they could radically change their management or strategy. to be honest having spoken to syngenta for a long time i don't think any of the options is likely at this point. >> but isn't it inevitable at some point? >> why would it have to happen? >> if the bid is so good how could they say no? >> they always said it significantly undervalues our firm, our prospects because they say soft commodity prices are so low right now because we're no longer in the soft commodity super cycle so we have great exposure to the emerging markets. it's not reflected in the bid. >> right. >> of all the deals that we have been talking about over the last year or so with significantly increased m&a there's just so
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much opposition with but those three scenarios all seeming as unlikely as each other. >> exactly. unless they go hostile but they said two weeks ago there's no plan to go hostile at this point so unless they massively increase the price target i don't know. >> i wonder what hugh grant would say about this deal. maybe we should bring him on. >> oh, that one. >> he might have a good opinion on it. >> i'm sure. >> all right. continental raised it's profit outlook after posting better than expected earnings. they have raised sales expectations already twice this year due to the strengthening european car market. shares are trading at their highest level in 8 months and we're now joined by the cfo of continental. always a pleasure speaking with you. thank you for taking the time. look you raised your
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profitability outlook and this is very much on the back of the strengthening car market in europe but aren't you worried about what's going on in russia china and brazil? >> well obviously this has been an influence on our sales line but markets are stronger than expected and they have specifically high content of our cars so this is sufficient to compensate for weak markets in russia which we saw already in the first half of the year. weak markets in south america. specifically in brazil and as well a weakening of the growth rate. still a growth rate but a weakening of the growth rate in china. >> you have clearly got the euro dollar tail wind because we have got levels of around 110. you have previously also had a tail wind coming from commodity prices from rubber prices but we have seen a pick up there. at what point will that become a
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head wind and do you think it could be offset by higher prices? >> currency is something we're not worried about. if sales are influenced by currency positively the profits are as well. margin doesn't change and this is true for both directions. up or down but you're right we have tail wind from raw materials already in the 30 year now and we are foreseeing that this comes to an end now and as soon as raw material prices will start increasing we have to increase our prices in the market and we have done so in the past and we will do as soon as this is necessary. >> as well as the raw material cost i want to talk about another commodity, oil prices. i mean when you pair what oil prices have done this year with what the euro has done it's a pretty much perfect storm for you in your bottom line.
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how much longer can that last? do you think you'll be upgrading earnings you have done throughout the rest of the year? or is this a temporary boost for you? >> this is now what we see for this year. for many of those commodities we have some amount of pretime. for this year don't expect more to come. this is what we foresee. it should not be a risk for profitability for oil margin but obviously if markets develop
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less good than we expect at the moment, then that could be -- that will have an influence on our profitability. >> the past relatively warm winter we have seen in europe and particularly also in germany going into the next winter do you have a feeling that inventory is incredibly high? that we won't be seeing the same level of restocking that we usually see? >> inventory levels for continental and this is specifically for continental at the end of the last season so in march of this year we're quite okay. they're on the average level of the years we've seen before so it depends on the winter in 2015. if it is a good season or just an average winter tire season and obviously we hope for early snow in october to make sure that we can sell many winter tires. >> early snow in october. you're the only one hoping for that. thank you so much for that. the cfo of continental.
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wilfred. >> thanks. so overall up 4.4%. let's also have a look at the other big daily movers. down 9.3%. shares having their worst day in nearly three years after analysts cautioned on the company's reform progress. this even as the french bank beat expectations in the second quarter on the back of strong performance in it's asset management and investment banking units but sharply down today. rbs is up .5% after the british government sold 2 billion pounds worth of shares in the state owned bank. it did open down fractionally. it rallied a little bit throughout today's trade. the government is reducing it's stake by almost 5% in overnight placement continuing it's sell down of various state bank assets. axa up 0.3%. they posted a 2% increase in net profit in the first half as a fall in the value of its assets offset the positive effect of
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the weaker euro. they sounded fairly bullish on china. >> we have not seen yet china. this may come in the second half but the first half has been extremely strong. >> the reverberations of the toshiba accounting scandal has been felt throughout the group's businesses. tech reported earnings today. our correspondent is live in tokyo with more. >> hi there, yes. one of toshiba's group companies slashed it's profit forecast for the current physical year although no irregularities are found in the operations. they have retail use such as point of sale systems and cash registers and after toshiba's scandal came out they were a month later reporting it's annual earnings report due to investigations. the firm's management stressed no problems were found in it's own books and they reported
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earnings from the april to june quarter with a 2.7 yen loss falling into the red from the same quarter last year. it also slashed it's annual profit forecast to 3 billion yen or around $24 million which is less than half of its original outlook. and that's all from the nikkei. back to you. >> thank you so much. >> still to come here on worldwide exchange markets down under. australia's central bank surprises investors. we explain, after the break.
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welcome back. australia central bank shifts it's tone on the aussie dollar. this as the rba kept rates at a record low of 2%. another monetary policy decision in asia india kept rates on hold at 7.25% taking a pause from its easing cycle. this as food prices sent inflation to an 8 month high. earlier the legendary investor told cnbc which emerging markets were best prepared for a fed
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lift off. >> i would say china is probably in the category and india because they have drivers of their own internally that are not so much dependent upon what's happening in the u.s. we're getting into a situation where china and india will be the drivers to global growth. it's very interesting. we're now in a transition stage of that development. >> how long is that transition going to take? what do you think? >> not too long. you're talking about five years. >> let's talk more about india with the global economist at standard charter. a pleasure to have you on the show. we got the central bank policy decision and for economies like india that are so dependent on agriculture watching weather trends are so important. monsoon rains in fact so far this year held up well. how does that change india's food inflation picture? >> thank you for having me on your show. in terms of the indian outlook i think it was very obvious from
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what he said this morning. clearly the central bank is happy with the inflation program. it thinks now that the risks of inflation are more balanced. partly is because they held up better than expectations and also partly because crude oil prices are much lower. about 20% lower than they were in june. so again that has filtered through into much better inflation numbers. looking ahead you have to be more cautious about the picture. they're still saying there could be a short fall in rainfall over the next couple of months and that's something which is the reason why the governor was not more dovish in his statement. overall the tone of the statement was quite dovish compared to before but this
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monsoon factor is something that will keep it very data dependent over the next few meetings. >> the big elephant in the room is what happens when the fed does decide to raise rates and the impact on markets like india. we have been seeing them out perform many asian piers. what's happens going forward if janet yellen raises rates in september? >> definitely i think our expectation is that the overall macroeconomic picture in india improved quite substantially compared to 2013 when you have had taper tantrum and it was one of the most effected. now you have a credible monetary policy coming through. you have a little bit more confidence in the government being able to push through some reforms though that is being debated increasingly now and also the growth picture improved some what because of improving public investment and consumption profile overall. so the sentiment overall for the
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indian economy is much better and that is also reflected in the way the rupee is behaving. we expect volatility around the timing of the first rate hike which according to us will be in september and this is something the governor has been flagging for awhile. that fed policy does have an impact on emerging markets and, you know the fed needs to be cog cognizent of that so i think they'll be cautious around the time of the first rate hike because there should be some volatility but we do expect the rupee to continue to strengthen given the more favorable macroeconomic environment. >> i also wanted to ask you about the rba decision this morning. no change in their interest rate but quite a significant bounce in the aussie dollar. they're no longer talking down the dollar. do you think this is a meaningful change in sentiment or one month blip to their
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otherwise path of leaning toward easings? >> i think they have very very -- they want to remain competitive. if you look at the mining sector of australia there's need for monetary policy to remain supportive and of course unless you get signs from china, that china is picking up growth is picking up which we haven't got so far, i think the australian central bank will be quite cautious in trying to signal anything which is a major shift away from a dovish monetary policy stance. i think what happened today and the real takeaway today was so far as you already correctly pointed out they were talking down the aussie dollar and now they're saying that actually it has already adjusted quite sharply to the fallen commodity prices and that should provide some short-term support to the aussie dollar and you should see
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it strengthen but overall i think the take will be what's happening to the environment? is the china growth story picking up. what's happening to commodity prices. domestically inflation remains quite subdued. there's no real inflationary pressure. but i think the real risks that came out from the statement today was that maybe the rba is now reassessing what is the new normal for the australian economy. is it a new normal of lower growth higher unemployment? is that where we're going to stay for the rest of the coming years or go back to the historical times before the drop in commodity price and maybe now there's a little bit more debate happening internally within the rba that there's a new normal coming about. growth will be softer slightly and unemployment lightly higher.
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>> we'll have to see. pleasure to have you on the show. >> thank you very much. >> puerto rico is in default after paying only a fraction due on a bond payment yesterday. as cnbc's kate kelly reports the move is now raising the prospect of further trouble for the cash strapped u.s. territory and potential impact on investors. >> the week started as a nail biter where a debt payment due on saturday august 1st of $58 million was ultimately not paid. only a fraction of it. under a $1 million portion of it was paid using leftover funds that the government had as a good faith gesture but the government indicated because of its financial situation and responsibility to citizens here it was not able to pay that 60 million overall marking the first default in puerto rico ever and the first at a state level u. s. territory since 1933. general obligation bonds trading
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off on monday. they were heavily traded not showing too much of an impact so far. there's fears it will spread and the damage could spread to the high yield market as well as effecting mutual fund owners hedge funds and individual investors particularly here and puerto rico as well as on the mainland of the u.s. that invested in this debt. at the same time the bond insurers were trading off today. assured guaranty in absolute terms a little under $5 billion of its portfolio traded okay but at the same time mbia and assure guarentee which have larger exposure to puerto rico were down multiple percentage points. as things develop we'll be bringing you updates. i'm kate kelly in san juan. back to you. >> the single most important step america has ever taken in the fight against global climate change. that's how u.s. president obama described the revised clean power plant in a white house
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address yesterday evening. the plan requires states to cut carbon dioxide emissions by 32% over the next 15 years compared to 2005 levels. >> by combining this with greatest investment in our clean energy sector and smarter invest lts in energy efficiency and working with the world to achieve a climate agreement by the end of this year we can do more to slow and maybe even eventually stop the carbon pollution doing so much harm to our climate. >> following president obama's announcement our own jackie de angelsless angeles taking a look at it. >> going to help some and hurt some within the energy industry. the coal producers is going to take a hit. they've seen prices plummet and has been bleeding cash. bankruptcies on the rise. more than 25 over the last few years. the stocks to watch here some of the biggest producers,
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peabody energy also arch coal and alpha natural resources just filing bankruptcy this morning. steel producers they use a lot of energy for production. afford blt affordability and reliability could be put to risk. u.s. steel, steel dynamics and new core. on the flip side the beneficiaries could be some alternative energy companies. we love to watch the solar stocks. some of the names there, first solar, solarcity, also keep an eye out for the solar etfs. natural gas producers they could see a pop as well. that's because there's plenty of supply on hand and more innovative ways to use it are being developed every year. dominion and ultra petroleum as well but this is not the kind of bill that will pass immediately. there will be opponents to it. they're gearing up for a big fight. the industry is expecting to see litigation surrounding this
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issue. >> now of course the other big, big story in the u.s. today it's barrack obama's 54th birthday and to mark the very special occasion we have been asking you what would you like to give the president for his birthday. if you want to join the conversation here on worldwide exchange get in touch with us by e-mail worldwide@cnbc.com or twitter @cnbcwex. we'll talk more about that coming up later. >> sprinting in a new direction. the telecom company with a major manufacturement reshuffle. what does it mean for the company's turn around plan? we'll discuss after this break.
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some gains after falling to lows of the year but the sharp slide hitting european oil and gas stocks. the renowned investor tells cnbc prices will stay subdued in the short-term. >> the decline in oil production that was anticipated has not yet occurred and i'm not sure it will occur. prices will probably be soft for a little bit. >> chinese stocks swing higher after they take more action to stem the volatility but emerging market investor tells

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