tv Worldwide Exchange CNBC August 31, 2015 4:00am-5:01am EDT
a very good morning to you. this is "worldwide exchange." i'm wilfred frost. >> i'm seema mody. here are your headlines from around the world. stocks fall in europe and asia after the vice chairman says a rebound in inflation will allow the central banks to raise rates gradually. >> we've got a little over two weeks before we make the decision. and you've got time to wait were and see the incoming data and see what exactly -- what is going on now in the economy. the shanghai composite ends
a month over 12% down as reports beijing will end large-scale shares approaches in favor of a more cumulative approach. and malaysia, a sea of protesters take to the streets but the country's prime minister said he will not resign after a $700 million donation scandal. okay. so it's the final trading day of august. it has already finished for asian markets, or most of them anyway. china has closed down the best part of 1%. it's certainly pared most of the losses it's facing for the day. overall, the course of the month, it's down 12.5% and of course it is now down for the
year as a whole. having one point on june 30th, up 65% year to date, all of those gains and a little bit more have unwound over the course of the next couple of months. let's have a look at the nikkei which has suffered sharply during all of this as well. down 8.3% for the course of august. as the case for most global equity markets, a much sharper selloff, in the early part of last week, and just regaining a little bit of ground by the end of it. and down some 8.2% for the course of the month. >> and it's going to slow down in asia, particularly in china that sent european stockings lower last week. we did make up some losses toward the end of the week. and in august, the ftse on track to lose 6.7%. it is the weakness in august.
take a look at the german dax as the economy slows and investors are trying to determine how they will fare. machinery and automobiles makes about 10.5% of its sales in the country. as we, of course, learn more about weakness in china, investors selling stocks. it's down 9.6% in the month of august. we should point out it's out of bear territory since the recent high pitch back in april. >> that's minute to be one of the safe havens in europe, due to volatility, highlighting relative outperformance for today. down the best part of 10%. now, u.s. also declined over the course of this month. the dow down 5.8%. you can see as seema was pointing out, all of these equity markets, a very sharp decline toward the end of august. a little rally towards the end.
a similar sign towards all the u.s. equities. let's have a look at the nasdaq as well. the nasdaq down, a little bit more, down the best part of 6%. just one trading day left for most of these. >> and the fed is the big part of the discussion. it remains, quote, too early to tell whether last week's market moves have impacted the fed's decision on the september rate hike. that's the deal stanley fisher told cnbc conclusively that there was still time to assess the domestic data. >> i think it's early to tell, the change in the circumstances which began with chinese devaluation is relatively new. and we're still watching how it unfolds. so, i wouldn't -- i wouldn't want to go ahead and decide right now, what the claims -- what the case is more compelling, less compelling. >> joining us now to discuss further live from paris is the
chief economist. thank you for joining us. just a week ago, we saw the likes of the euro and the yen rally sharply on the thought that a september rate hike was off the table. bit end of last week, over the weekend, with the comments from stanley fischer, now the most likely outcome. what's your expectation? >> well, since the beginning, we felt that september would be too early for any rate hike for many reasons. must have been the domestic. the u.s. economy strength is not formal yet. in research, we outlined there are several countries around the world, brazil, russia, nigeria, are actually extremely exposed to an abrupt rate hike towards the end of the year. i think what happened in china, and a perfect storm, some of the u.s. main trade partners,
internationalized, is something that the fed have in mind thinking about the next rate hike. so i'm not surprised that stanley fischer is actually talking about the impact of the chinese stock options, i would say, on to the probability, the likelihood of the fed rate hike before the end of the year. so we expect it to be later this year or maybe even into 2016 because of the vulnerabilities happening today. >> let me talk about the moves we saw in the euro last week. do you think mario drachma will be wrapping his hand because it makes his job a lot easier? >> with the weaker euro and the recovery in europe is not that strong. it's actually the cheaper oil prices so when talking about the next wave in the european monetary union, i don't believe
in it, you know, because the impact of the euro is extremely eager on most of the countries in europe because most of the trade has been between the countries in europe. but it is true, though, i think mario draghi actually know, the impact in europe, but we also know it will stress the financing in dollar available to agents in europe. so we certainly hope for a later fed hike, than a sooner and maybe more abrupt rate hike than what has been announced, that is for sure. but i'm not sure that the anticipation in the euro dollar, i think this is a secondary problem to recovery, which is basically to unleash the famous investment factor that has been missing in action for the past six years. >> good morning to you. lower oil prices and the quantitative easing, of course, has been a boon for the european
economy. i guess the question is given the recent international developments, do you think the ecb extending farther than 2016? >> i think it's discussible. i don't see a larger qe before that. and i'm actually expecting it to be longer than expected. i think the tightening by the fed will be expected when the ecb starts tightening. i think it will be later than february 2016. but it will depend on what japan does and to some extent what the people's bank of china does. i think today, we cannot avert to talk about the fact that the u.s. economy with the international currency is a factor. even if it's not the international currency. so i think there are many factors hide the decision. if i were the central bank, i'd decide to extend it for many reasons. the first is it happen the too
late. and to a certain extent there are 2,000 billion euros missing today. if you look at all the savings, plus all the lack of money that has happened over the past six year, because we were were late to the qe game. we want and need more than promised so far to make sure we recuperate the pricing power. again, companies and households are not investing to the full potential. and the reason is just because of inflation and it's easier to keep the cash on hold. >> the recent bank data is suggesting that bank holders to beginning to spend more. let's update on what markets are doing here in europe. the ftse 100 is closed. the rest of the europe declined
just under 1%. the ibex down. we're looking about 10% for all of the august. the individual movers today. ageas announced the sale of gd capital for $1.4 billion. that's a lift of 2.5%. and eni we discussed, doing well 1.9%. at the top of the overall market after what could be finding the biggest gas well in the mediterranean. and the atomic energy giant said the discovery will help meet egypt's energy needs in the coming years. speaking on cnbc he tells of the
logists of bringing up the market. >> this is not a key aspect because very, very fast to drill, in just one month to drill a well. and with the facilities, it will be very good. and the government, of course, will be very, very eager. that's is in fact the strategy to insist we continue to do exploration. and we can take advantage of our facilities. and that will make the cost, the unit cost in terms of capital, very, very positive. so i think actually there's a lot of positive sides. >> now, maersk is up 0.6%.
in the north sea, it says it's big enough for 5% of uk demand and will production in 2016 for 13 years. iliad, that's up 3.56%. it offers cheap contracts for mobile plans has widened its network coverage to increase its market share. but clearly the market not taking those results well done. 3.8%. berkshire hathaway has the score at nearly a 10% stake in phillips 66. berkshire once held a large position in the u.s. oil refinery, sold nearly two-thirds of its sales last year. berkshire did mention phillips 66 in its stock holdingers. if you quietly buy a large amount of stock, phillips 66, if
we have the chart report up here, you can see up 1% in frankfurt. coming up on "worldwide exchange," a sea is of yellow, anti-government protesters take the streets but the prime minister stands defiant. more details coming up. and ashley madison hackers release details about who wanted to break it off with the infidelity website. and the kremlin released vladimir putin getting a sweat on in the gym. find out how many he can lift after this break. this just in: 50 million customers' data was not compromised this morning in a security breach that didn't happen. wall street. not rattled. at all. no. not at all. not at all. i mean, look at the day.
the shanghai composite has closed down 12.5% for the month of august its third straight month of declines. this as chinese authorities are reportedly putting an end to large scale share purchases. let's get out to eunice yoon for an update out of beijing. eunice. >> thanks so much. well, there's very little confidence right now in the market. the investors here generally have been investing based on where policy is going in terms
of beijing. these days, beijing's policy is very clear. last week, we've had interest rate cuts, triple eight cuts. and we've had delays where the authorities here have done nothing and allowed the markets to fall. also, in the past couple of days there's been a lot of discussion about howauthorities are cranking up their investigations into speculators. and they're looking at people who are manipulating stocks or allegedly manipulating stocks, as well as those who are reporting ton. so, today, on state tv, there was a confession of one financial journalist who agreed and confessed on national television that he was involved in creating fake news. and also apologized for it. there was another regulator who was taken into custody as well. and the government has also said that they're stepping up investigations into four senior executives in the top brokerage
firm sittic. so that has been creating an uncertain environment in traders who are involved who aren't sure what they're doing with their portfolios very incredibly unnerved. also financial journalists as well are nervous about what this means about reporting in the future. so this has created a very negative environment. in which case, we're seeing national volatile swings. now the focus has been on the manufacturing data that's coming out tomorrow. the manufacturing pmi is coming out. and we're still expecting to see the overall sentiment here as far as the factory sector coming in as a low. guys. >> thank you for that eunice. let's discuss that further, still with us from paris, the chief economic at capital. thanks for staying with us.
let's talk about the policy action and the way the chinese authorities have tried to deal with this. have they had less credibility in your eyes over the course of 2015? >> you have to look at it in perspective. before, china was used to five-year master plans. and today, they're actually using it in terms of fiscal and monitoring and actually trying to navigate economy sentiment, credibility. so what has happened in 'a14 and then '14, is a decrease in interest rate levels. they also announced they will stop increasing the large subsidies to the economy. and they reported also on further devaluation on the national publicly owned company with access to foreign capital. and the different steps that the
leadership has taken in china is actually very reassuring because it shows defensiveness and volatility. but it also shows the need to communicate clearly about what they do. what has happened over the past, you know, past couple weeks almost, between the further rate decrease and the weaker rate, the 18% announced at the banks. and now further boost by the crediting on the banks, things are going in the right direction. and further, it actually shows that they have the money and they have the will to do things. they just are trial and error process, you know, they're trying with what they're experiencing that are not necessarily seen good by investors. when it comes to the financial market, when it comes to the needs of the financing of the economy, when it comes to the
structuring between the regulator, and how it's functioned and run, it shows there is an emerging layer to it that makes the move extremely erratic. remember, that the stock market in china is only 26% of gdp when it's above 50% in europe. what you're seeing are very familiar to companies and this is something that shows that china needs the condition because it doesn't want it to be seen by the rest of the world which is the lack of trust over the past couple of weeks and a contagion to the other markets. >> let's talk about that, the contagion, if there is a sharper slowdown in asia, who in asia suffers most? >> when you combine basically the financing flow happening in china to the rest of southeast asia and the trade. because the dissolation in
growth means in demand. and products of china to be reexported to the rest of the world. the first countries with collateral damage would be indonesia and malaysia because they're dependent on china, also for manufacturing trade relationships. then comes countries like vietnam and taiwan. to some extent australia which is the biggest exposed to china. but you see most of the hub, the contagion is actually in asia and southeast asia. because these are the countries building the block with china over the last few years. and also japan, and the western part of the world, people are thinking about the u.s. and germany. because now the countries have the biggest links with china when you look at trade and demand and imports. not to forget that some countries are extremely linked to commodities and oil to
financing. and african countries, countries like angora using that as currency. and countries like iran that have been actually trading oil in china for the past six years. it's actually not looking good when it looks to be a florida ke placebo contagion effect. it must actually be acted on. >> thank you so much for that. a series of steps being taken by the people's bank of china, but when do those steps actually go into the real economy? are they actually running out of options here? just last week when you were on vacation, wilf -- >> doing research in spain. >> -- yeah, $30 billion of liquidity into the markets. they've done a lot. the question is, does it
actually help? >> right. and i think with the rate cuts that we've been pointing out for the last years, the london figures don't improve. it's one thing that china does boost credit, but in the short term, they're cutting rates. so that's the tricky situation. as opposed to anything else. >> it's amazing, i think you wrote a piece, within two weeks, we saw the stocks fall. >> extraordinary. right now, we'll switch focus and talk about something more light-hearted. it gives new meaning to the term political heavyweight. vladimir putin and prime minister dmitri medved pumping iron in the gym and sharing breakfast. showing off in a t-shirt and sweat pants. reminiscent of bare-chested horse ride and fly-fishing a few years ago. do you want to see your national leader or your boss even work
out at home, or where else do you think they get up to in their private side? i have to say, this is completely absurd, this video. >> no, it's not. >> it's ridiculous. >> no, it's not. >> it's quite nice to see what your leader is up to. it's quite amusing. >> i think it's amusing. i just wonder what motivated medved and putin to post a video. was it to illustrate the fact that their friendship extends outside the boardroom that they like to sweat and take tea together. perhaps another interesting point, whether other leaders should also share intimate details about how they spend their time outside the boardroom. >> i think it looks pretty false. and medved is not joining it as much as putin. clearly he's told he has to come along. this is so fake. it's not really to carry an
empty siuitcase to make it look like they're carrying something heavy. over the past week, we've seen what david cameron has been up to. body boarding. >> you there go. >> it has done well to help give an image of what these people are like at home but i don't think this is what it's actually like at home. >> we saw the prime minister of india, modi doing yoga with 10,000 people. >> he likes a selfie, doesn't he? >> he does like a selfie. he's a big fan of social media. that was a big part of his campaign in the runup to the campaign. >> see us on cnbc. let us know what you thought of the putin video, if you want to see similar videos of other worldarch anchors.
says a rebound in inflation will allow the central banks to raise rates gradually. >> we've got a little over two weeks before we make the decision. and we've got time to wait and see the incoming data, to see what exactly -- what is going on now in the economy. the shanghai composite ends a month over 12% lower. in favor of a more punitive approach. hitting the motherlode. shares in eni rally as they discover the mediterranean's biggest gas bill. a sea of yellow, thousands of protesters take to the streets in india. but the country's prime minister said he will not resign after a $700 million donation scandal. and you are indeed watching "worldwide exchange" on this monday morning. and the event of the global markets always open. we're looking at the ftse mib
right now lower. last day of august, 0.8%. it's been the uncertainty around fed policy as well as weakness in asia that has been sending stocks lower. we came back a bit but here on monday, starting the week on a down note with french, spanish and portugal markets trading lower in today as trade. let's take' look at the euro stocks across the eurozone. last week there was a lot of interesting moves with the you're low lab hitting 117 against the u.s. dollar. signaling fears whether the exporters are going to get hit. then it came back to the 1.12, 1.13 handle. >> let's look at stocks, the u.s. ten-year dipped below 2% at one point even though we're getting closer to a fed rate hike. by the end of the week, that had had moved back to where it was trading within the last two weeks in or around 2.15%.
the german also saw some moves just back about 0.7% as we look at things. this morning, let's look at the likes of the likes of the euro and the yen that rallied sharply at the start of last week when thoughts of the february hike were to suspend. by the end of the week that abated and came back. 1.12 on the euro and the yerngs 121.27. malaysia's former leader has called for a people's movement in the prime minister. this as around 25,000 people took to the streets for a second day in a row in protests. martin singh with this report. >> is 58 years of freedom from british colonial rule, a time usually for celebration. but a political crisis is also gripping this country as well in economic and also marketplaces, all centered on the leadership
of the embattled prime minister here najib rezak, over the weekend we had a public display of discontent. thousands calling for najib's head. now, it's just a call to power where basically political loyalty is paid for and pushed the line of patronage is very deep and very strong still. but time events to watch. october is when the parliament in malaysia reconvenes and there are already no confirmed reports that weakened across both sides of the aisle, we have the opposition, as well as dissatisfied elements of his own party working together to ensure no confidence to get najib out. if it does happen, it will be the first time in mod malaysia politics, the prime minister has gone down in that kind of vote.
martin singh, cnbc, kuala lumpur. switching focus to the bank of india governor has warned the feds to not raise rates while, quote, world is in turmoil. in an interview, we asked if the stronger dollar caused problems for the indian economy. >> it does cause some fragilities. but then it can export to the united states and pick up their own economies on that basis. so there are positives and negatives. absolutely the fact that a lot of debt has dominated dollars, certainly a lot of debt around the world does create fragility. >> you're not arguing not to raise rates you don't have a strong opinion on that? >> well, i think my position over time has been don't do it
when the world is in turmoil. because it's a long-anticipated event. it has to happen sometime. everybody knows it has to happen but take your time. and i think if the volatility that we've seen comes down, as it seems to be, you know, it could happen sooner rather than later. i don't think people would have a problem with that. it has to happen at some point. >> let's talk about some of the recent news. among the things, you are right neighbors with china, a huge trading partner with china. how has the chinese devaluation affected you? >> well, we are big trading partners with china but typically, we export to us. we export relatively little to them. so if in fact there is a greater chinese slowdown an anticipated it wouldn't affect us as much as other countries around the world. to some extent, we're at most the least affected. >> do you think they're doing the right thing to get their economy going? >> well, i think the longer-term
transition they're looking at to move to a more conventional economy is absolutely the right thing. you have to do it. of course, the transition part can be a loittle fraught with uncertainty. >> not only are you alone inside there. back in india you have criticism. you're running with a 7.25% discount rate. and team say it's time to cut. how do you defend that kind of interest rate when there are people around the world with zero? >> well, we also have inflation which other people don't have. we have to look at the difference and make a judgment. we've cut interest rates three times this year. and we're in accommodative mode. we'll look at the data. and we've not said we're finished. we said we're looking at the data and we'll take it as the data allows it. >> india continues to grow at
7.4%. a slight slowdown for the first three months of the year. however, some economists are speculative about the new way of affidavit gusting the gdp. let's discuss the economy with the senior economist. good morning to you. >> thank you for having me. >> a slowdown in china, do you see that as a challenge or opportunity for india? some say a slowdown in china allows india to shine? others say to devalue the currency creates a more competitive environment looking at exports? >> i think for any economy, it creates and it gives time for policymakers to look back and think about what are the things that can influence it. and also a bit of politicking, especially when the government finances are in trouble. it gives for investors an opportunity to step in and provide expertise, whether it is
money or technical know-how. but also we've seen where the economy is making sure that the sector of difference are open for the foreign investors and that creates for the foreign investors to make sure that the economy is back on the track of growth. >> do you think high interest rates as we're just seeing in that interview of 7% is too high and will actually provide a headwind for india's story going forward? >> i think what they've been trying for the last quarter is to give people a message to the lending agencies to lower the interest rate. although for the last two time, he has lowered the interest rate, we don't see that happening in the lending side. the lending meaning they're still running in double digits. where else, the policy rate is hovering around 7% and 7.5%.
so that say bigger challenge. because the bankers still do not feel that they're yet at the point where they can lower the lending. which is very crucial when it comes to india. and unless the people feel confident about spending and investing, although the inflation is slowing down, but if you ask the people on the streets, they can say, yes, still spending the same amount of money as last year. so it hasn't much realized in terms by the country. >> let's talk about the long-term structural forums promise d by modi. is it fair to say those haven't come forward or is he making progress? >> i think last year when he won the election there was high optimism surrounding it about the economy. forgetting the fact that there is a whole amount of politics
involved, state politics involved, in making sure what he wanted to do is done. and therefore, we see a policy pattern here, the goods and services factors, for instance, which we see looking at that here, it's still in turmoil. >> but if you take a step back and the boards are pointing to strong demographics the consumption and the increasingly important adoption of technology by consumers will this continue if the fed raises rates? >> i think that it will take time. perhaps beginning with the next year, before the stocks. and that means a good place for countries like india to make sure that their economies are
strong. and also itting out to give chance for one more rate cut before the end of this year. therefore that could have -- >> socie the investors would respond to that, losing 6% in the month of august. thank yous for joining us. we're getting some flashes coming out of toshiba. they already delays their earnings report once. and a further delay towards september of to provide their annual results. they will submit their results by september 7th if request for existing extension is accepted and a need for further investigation of cancelling of units below the top level. so, there we go now, applying for a delay until september 7th. let's move on, egypt will hold two-stage parliamentary
elections in october and november. the first round of polls has been delayed since march. and the court ruled that part of the election is unconstitutional. the vote will be the first since elected in may 2014. >> this comes as britain's ambassador to egypt john castle has been summoned to the nation's foreign ministry after what has been labeled as, quote, unacceptable interference. the summit comes after he was shocked around concerned about the jailing of the al jazeera journalist for three years on saturday. and more than 2,500 migrants have died since the beginning of the year trying to escape war and poverty in the middle east and africa. many enter europe through hungary, where the government is set to complete a fence along its border with serbia to stop the flow into the country. nbc's richard engel is on the round and has filed this report.
>> reporter: the mass exodus continues. thousands of desperate migrants, mostly from syria, iraq and afghanistan are seeking refuge in europe. in serbia we met this man, from aleppo, a syrian city, devastated by the war. a pharmacist's shop was destroyed in an air strike. he left home two weeks ago and is now trying to get into hungary, a member of the european union. but it could be the biggest challenge yet. europe's borders have largely been reduced to reminders of a different era. the migration crisis is changing that. hungary was the first country to start to tear down the iron curtain. now, a quarter century later, it's taking the most extreme measures in europe to put up razor wire border fences, again.
hungary is building a fence along its entire border with serbia. when finished it will be miles long. for now, hungarian police seem happy to pick up those who are willing to cooperate, load them on to bus and encourage them to move on to the next country. the locals are watching all of this with great concern. at the sunday dirt track race, hungarians said they want the fence and more. before, soldiers used to shoot at anything that moved at the border, he says. once in hungary, many of the migrants wander the streets, hoping to be smuggled to wealthier countries in europe. we don't know if he made it. it's getting more difficult every day. richard engel, nbc news, on the hungarian border. >> all right. some breaking news here on china, the china central bank is
at it again injecting 140 billion via lending operations, this, of course, after last week the china central bank cut interest rates and lowered the amount of reserves banks must hold for the second time in two months. of course last month, we also saw the china central bank inject further liquidity into the market and they're going to continue to do the same injecting 130 billion uwan. and for reaction for how the story is unfolding in france. let's go out live to paris. >> yes, this morning, we have numbers from illiad posteded e rise. and trying to win clients in the
first half. year with 820,000 additional customer us. only three years after it started operating in the country. the company has almost 11 million subscribers, that's 16% of market share in france. and has confidence in terms of outlook the company confirmed this target for a 10% increase in operating profit. ism illiad deeply increased in the market in the last three year, it slashed prices, forcing them to lower the prices and to enter a price war. although for others, tried to reduce the number of operators within the country in order to end the price war. iliad for the time being is one of the chief companies in france that really benefitted from the difficult economic environments. the stock today in price is a
reaction to this. and it was slightly lower after the dealing of the session because of the expectation that nothing more than what they expected to be. back to you. >> stefan, thank you for that. still to come on "worldwide exchange" -- investing in iran. president rouhani looks for foreign capital as president obama continues to push for support on the deal. we're going live to tehran for the latest on that. don't go away.
u.s. president barack obama has come one step closer to winning over enough senators to ensure that a nuclear deal with iran gets approved. senator jeff merkley from oregon has taken back with $34 need to secure a congressional vote on september 17th. meanwhile, iran's president has addressed it. let's get out to nbc's ali azi who joins us from iran.
he told the iranian people to be patient as they would soon see a benefit of a nuclear deal. and he had tried to appease hard-liners saying it would put no limits on the defensive capabilities. and they'll do whatever is needed to defend themselves. but what he did focus on is domestic politics and domestic issues such as the environment and, of course, the economy. he said that his government has been very successful in calming a volatile business market, which he had inherited from his predecessor. he said that his goal in the next two year is to bring inflation to a single digit. and he was very keen to bring foreign investment and foreign technology to iran. saying if foreign investment came here it can be both beneficial to foreign companies and for iran in its regional market. there's a lot of room for them to make money. and in turn, iran's youthful population will find a lot of
jobs. he was very keen to push forward but careful to say that iran wasn't going to be with producing consumer goods, he said iran has to be independent and export them. the tone that he had was that this deal is done. even if congress is unable to kill this deal, iran has sailed by most of its problems they probably wouldn't secretly mind if congress killed this deal. they now it has political ties with europe. it has the backing of germany and russia and they can go ahead with this. and the only people hurt if they close this deal would be america. back to you guys. the inequities have largely trades, the shanghai composite has closed down 12.5% for the month of august.
the pboc is finally waking up to the reality they have to be, quote, more cautious to interfering with the markets. speaking to our colleagues in asia, he said he's expecting more policy action in the central bank. >> i think they're going to have to do more going forward. they're going to have to loosen up more. i think the problem in china was the government intervening in the market. that creates too much confusion. and had the opposite effect of what was expected. but i think now they're beginning to wake up to reality that they have to be more cautious in interfering with market mechanisms. >> we're going to continue that discussion in just one second. >> you absolutely should. >> but let's discuss further the professor at the university. thank you for joining us. so, china, we've seen the markets sell off sharply, of course, in the last few months
but it wasn't correlated over the last 18 months on its way up to the fundamentals of the economy. the fact that it is doesn't imply that the economy is moving sharply, does it? >> new york the chinese economy has been swelling 7, 10%, but in reality, it's actually 5% or 4%. yet the stock market is booming. and then, of course, the figures, it was on a massive prices earnings ratio, moving roughly around 50 forward earnings. that's extraordinary valuation, even showed. >> so, the stock market itself doesn't give you a huge cause for concern for the economy. but you are, in fact, bearish on the chinese economy. why is that? >> well, there's a very simple reason, after 2008, there's been a huge amount of investment by -- you know, local authorities by the central government. and there are estimates that i don't agree with saying like something like $6 trillion to $8
trillion of this has been wasted. they've got shopping malls, no one's there, there's no shops open. this is going to hurt the loans ultimately in the banking system. so there's this huge amount of nonperforming loans that we have to worry about. investment is a good thing, but not overinvestment, to the extent that we've seen china. the figurers are staggering. it's more concrete in concrete in the last six, eight years than they used in the whole 20th century in the united states. these are the kind of figures -- >> they're hard to digest, aren't they. keith, is the china-induced market turmoil something that will continue for the rest of the year? or do you think at some point, all of the weak answer that we're seeing in the chinese market and economy will be priced in? >> for the economy, i'm really pessimistic. i'm not too worried about the stock market, which will be a lot lower than it currently is. but the economy, you see, has
not yet faced -- we don't have markets yet to hate, but we know there's trouble. but i'm really worried about the economy. >> we've seen the european stock market sell off as well over the last month. whether or not the spark was china. do you think that was justified? we're going to be looking at 5: 5% to 6% declines? >> well we had 48 months for correction by 10%. so this is the third longest ever, so, we shouldn't really worry. but the good news, there are some worry in things. people forget we've got very low interest rates over a long period of time. once they start rising, the reality starts -- you know, the markets are facing with prime interest rates, the question is can the stock market put up the current interest rates, the answer is no. >> do you think interest rates go up in september? >> they don't go up in september. but they will probably by march
and welcome, everyone, to the second hour of "worldwide exchange." i'm seema mody. >> and i'm wilfred profifrost. stocks fall in europe and asia after vice chairman stanley fischer says a rebound will allow the central bank to raise rates gradually. >> we've got a little over two weeks before we make the decision, and we've got time to wait and see the incoming data and see what exactly -- what is going on in the economy.