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tv   Worldwide Exchange  CNBC  July 22, 2009 4:00am-6:00am EDT

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so a pretty broad based gains here with the nikkei 225 up by more than 0.7%. remember, you did mention, ross, the strength of the yen which has put a cap on some of the exporters. the kospi, up 0.3%. the hang seng underperforming. remember, this is a market that did hit multi month highs just days ago, so giving up some of those gains now. bombay sensex having a bit of a rough day, down by 1.2%. let's stay with india because timpt t. services firm, withrow, is in focus today after reportling better than expected quarterly results. we'll be talking to the company's executive director and cfo in just a few minutes. so be sure to stick around for that interview. let's take a look at light sweet crude, $64.85 is where we are
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standing, up 1.2%. >> thanks, sri. i'll take it from here. some of that bearishness coming from api. the petroleum institute showing a build in some of the inventory numbers. sfrar as far as the futures are pointing lower, great results from apple, but mixed results when it came to yahoo! and amd after the close. and the markets have been up seven days straight on the dow, ten days on the nasdaq and that's the best performance since 1996. so we expect a bit of profit taking right now with dow futures down about 65 points or so below fair value. we're going to have ben bernanke back on the hill today. he gave a fairly good performance defending the hill yesterday. we saw yields move down on the back of that. right now we've got the ten-year bund at 3.35%. the ten-year note here in the states had moved lower, as well. this hour, it's trading at about
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3.48%. taking a look at gold, we saw a bit of a move to the upside as south african producers averted a strike coming to wage agreements there with workers this morning. we're moving down just a skosh, off 1.85. candice lash is joining us to talk about it this morning. dedia barovsky. welcome to both of you this morning. thanks for joining us. we see in the standard & poors 500, moved towards real resistance levels. can we move forward? can we see this earnings enthusiasm push us higher? >> well, thank you. if you will, the economic cycle in the united states for sure, sentiment has improved and for
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households and we expect a rebound. so there is good news in the pipeline for the u.s. economy. and to some extent, we will see a rebound in -- a rebound in earnings into southern -- a mild rebound in earnings in 2010. and that's why equity markets rebounded with lower risk aversion and the fact that ben bernanke said the federal reserve will maintain wide fed rates, also maintains long-term interest rates at the low level, all this news both on the economic front and on the financial front are good news for the economic sentiment and that is why equity ves rebounded. having said that, i think it's very important to keep in mind that this rebound may prove temporary, that we know that the
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packet of the fiscal stimulus package will become by early 2010 -- mid 2010 the main risk remains a double dip, the fact that the economy may re-enter into a recession. so i do believe that the main reason for the u.s. economy's accounting with the rebound of economic growth in the second half of this year, the risk is that as the economy reenters recession in 2010, we may have the benefit profile in equity markets. in the short-term, we should not be surprised by the fact that equity markets have reacted positively so far. >> mark, what is your thought on that? are we looking at that "w" recovery? so this is a short-term move to the upside and be prepared for the downside?
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>> that's a two-part question. i mean, the short answer is yes. i agree with didier that we're probably in a bit of a "w" pattern here to the extent that the next two quarters of gdp will look fantastic compared to what the previous two quarters were. and the next two quarters, in other words, 2q and 3q will she somewhere around flat, minus 0.5 to plus 0.5 as a result of all the stimulus. and then it will start to fade and we'll go back to the u.s. consumer being part of usgdp, etcetera, etcetera. and as far as markets go, we are going to keep staemg along here. you mentioned best performance in the dow since 1996. the second quarter was the best quarter for all major markets in the world since 1999, the fourth quarter of '99. of course, we know what happened in 2000.
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and the u.s. unemployment rate is still rising, and that really contradicts the s&p. they're inversely related, so you can't have this continuing forever unless the u.s. economy gets better. >> what impact is it going to have for investors if rates are lower for longer here, mark? >> well, the markets will keep going up, but i'll tell you, i think china is about to clamp down. there's just a real asset bubble forming in china, as we speak. yesterday, a turn over in a shares was about $50 billion u.s. dollars. despite the fact that a-share market cap is about $3 trillion. shanghai property is the higher end, the same price of property as here in hong kong. that is unprecedented. so i think the chinese realize
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they really, you know, created something here which is starting to get out of control. and i would suspect by tend of august, they will start tightening and, you know, then a shares would react severely and i think commodities have a pretty close correlation to a-shares. they would probably follow. as for the u.s., i think they'll keep rates low for the foreseeable futures. >> mark, we've seen some movement from the authorities in bay junk to try and restrain that asset price bubble from developing. do you think they're ahead of the curve here with their policies? >> no. but i thought until quite recently that the chinese would rather overdue it than underdo it. and i've only started feeling differently in the past couple of weeks watching a lot of these chinese share prices moving above their 2007 highs. the move there, there is only one way they can go, which is up.
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i think the chinese now have shifted to worrying that they're creating a bubble. and we've seen numerous signs of them attempting to massage things down at a municipal level, at a provincial level. but i think we're going to start to see it, as well, at a countrywide level. unless shares keep going up, but -- it looks like they're going to keep going up. >> we heard from mr. better fanky yesterday. a media fall in the bond market and yields fell. was that something of a lower action or a lower yield justified? >> it's an overreaction on a kay to day basis, i guess, that there is nothing new in the message from ben bernanke. the fact is that the federal reserve and the ben bernanke tried to reushering the federal reserve as the means to fight inflation in the case of a strong market rebound. so the fed tried to fight
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inflation. but in the short to medium run, there is pressure because the unemployment rate will continue to climb in the coming months. so long-term interest rates will remain low. i mean, short-term interest rates for a while, for the foreseeable future, as mark said, will remain at the current level. for sure, at some point, the federal reserve will have to tighten monetary policy to avoid inflationary consequences of its monetary policy. but it is too soon to exit from very -- monetary policy. while it is true on the monetary side, it is true on the fiscal side, for sure. the current fiscal policy is not sustainable in the short run. but at the same time, there is a risk of a double dip in the u.s. i guess that the obama
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administration would want to -- the new fiscal package. >> thank you very much, didier. mark matthews, thank you, as well. to some of the corporate news here in europe, porsche is not confirming or deny reports that its ceo is likely to resign. we're told the board had reached an agreement with the ceo and the announcement could come tomorrow. volkswagen and porsche would announce a deal, as well. the ceo of porsche opposes the plan. he favors the investment from the government of qatar. profit software has climbed 7% in the last quarter. the german business software group says it can beat growth targets after it completes
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insolvency of sheer. the cfo says he sees further opportunities down the line. >> i think it is likely that in another two years or three years that we will be prepared to make the next step. but we are a very focused company. that means now we focus on this one. that is our goal. >> apple's third. quarter profits rose 13% beating estimates as the company sold more than expected iphones. apple also saw strong sales of mac and ipod. this suggests while consumers may be cutting back some spending, they're not holding back when it comes to apple. the company expects quack to school season results to top forecasts. frankfurt at this hour is up about that, as well, trading at
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$110.61. yahoo!'s second quarter profits rose about 8% thanks to cost cuts. that helped soften the month of a 13% drop in revenues. as advertisers continue to reduce spending during the recession. the ceo carol bartz says customers appear to be ready to spend more, but it's too early to tell how that will affect yahoo!. the company plans to spend more on rebranding which could cut into third quarter profits. at this hour, it's off by just about that much, as well. dwra look at frankfurt trading at $11.45. >> now, here in asia, lg electronics, the world's number three mobile phonemaker posted a large than expected second quarter profit. global operating profit rose 32% to $903 million dollars.
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that's way above forecasts. sales rose to 14.5 trillion yuan. that's in line with estimates. shares of lg ended 1.1% lower, as you can see. sri, still cocome on today's program, it's kwaubt tafb easing. china's government says it will use its foreign reserve to help businesses expand globally. in about an hour's thyme, we'll hear from pascal lamy.
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india's third largest i.t. services team withrow beats forecasts of a first quarter rise in profits. i.t. revenue weakened for the third straight quarter with the company giving a cautious guidance for the current quarter. still, we're seeing signs of stability in its business. shares in the mumbai-based company are looking like this. they are off by 176%. let's now head live to bangalor and speak to the executive director and cfo at withrow.
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sir, good to see you. let me ask you, how is your orders pipeline looking? >> i think so far quarter one was concerned, we're in a strong quarter with all kinds of operational excellence delivered on guidance numbers, improved operating parameters and we are guiding based on the fundamentals we have, which looks better than when we started the quarter or started the financial year. therefore, we have given a guidance which is about $2,035 million which is 0.2%, despite the fact that the economic environment is still a little cautious in terms of what the outlook is looking like. >> now, like everybody else in the sector, you have been restructuring to respond to these challenging circumstances in your business. you cut costs by freezing pay for almost 100,000 employees. are there other areas that you can identify in the business where you can make further
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savings or has this belt tightening run its course right now? >> i think two things. a, on the operational performance, we have fairly the many number of drivers which are already industry leading. there are quite a few still. we are not the best and we will be working towards it. cher driving to protect costs for the customer and in the end protect our margin. we're looking at out outcome pricing. and the other thing is go to market. we are investing significantly the go to market. we are trying to have a lot of our sales force local. we are trying to have a lot of specialists and getting into a higher level of consulting to be able to help us in winning more deals. so go to market, operational excellence, that is what we are trying to deal with going to market in the next few quarters. >> we've seen stability in the financial services sector.
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you do mention that. telecom technology has remained weak. when do you see those two areas picking up and turning around? >> we think this will come back and we will benefit out of it. some of the acquisition that has happened will mean a lot of i.t. expense and we are best positioned to be able to take that fortunately. as far as the technology area is concerned, there are a lot of rationalezation. a lot of stability in terms of some of the margins and the mergers that have happened. therefore, they are cutting down on their r&d. however, considering that they won't take out some of that i.t. work is being subject to debate and we are participating in that and hopefully part of the
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negativism that we're seeing will get made up to the i.t. side that we're getting with them. >> all right, sir, thank you very much, that's suresh senapath at wipro. we'll start off with our equity markets and kick off with becky in london. >> seven strong days so far and today dropping back by just about 0.5%. we've got nins from the bank of england coming out shortly. maybe that will make a difference to the markets when we get that news coming through. we're expecting results, too, from glaxosmithkline coming out at 12:30 local time. in the meantime, we are seeing some declines, particularly amongst the basic resources stocks. likes of kazakhmy's of london falling hard at the moment.
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bhp billiton is down by 2.3%, 2.4% almost. we have heard that they see mixed outlook, rather, in terms of commodity command. they believe that the restocking in china could just about come to an end. but that could be replaced by restocking in other companies. but certainly a bit of a decline going on that basis. now out to annette to find out what the picture looks like in germany. >> it's pretty much the same picture here. the dax has changed direction, as well. it's down by 0.5%. all cyclical shares are down. immune itch re is down by 2%. and today is a bad day for the steelmakers. on the other side, we have pharma companies such as merck up and s.a.p., the biggest
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gainer today, analysts are saying s.a.p. must increase their profit margin. now to stephane. >> the consumer related stocks are trading a bit higher or they are outperforming the french markets starting with carrefour, danone after spending was higher in june. the average forecast was 0.3% increase. also in focus today, the employees will meet with new fabris, a car parts supplier. they are asking for compensation for each employee after the company went bruft. they're asking for renault and peugeot to pay for the bill. michelin, the tiremaker is outperforming the market today
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after four managers of the company were taken out by employees overnight and have been released this morning after local representatives of the french government agreed to start negotiation with the workers of this factory. let's have a look now at the asian market with sri in singapore. >> stephane, thank you very much for that. in japan, shares rode to a two-week high boosted by stocks on higher of export prices. the nikkei ending 0.7% higher at 9,723. over in south korea, lg electronics shares were lower, despite reporting better than expected quarterly earnings. as for the kospi, the south korean index ended 0.3% higher. shanghai was the outperformer in the region thanks to a jump in
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oil examine coal shares on hopes of upbeat earnings for those two sectors. the shanghai composite up to close at 3,296. bertha wa bertha. >> in the states, earnings will be front and center. investors will also be paying attention to ben bernanke. pharmaceuticals and financials are in the spotlight today, start, fiedzer, eli lilly, morgan stanley, wells fargo and boeing. other earnings out include bank of new york mellon, sun trust, u.s. bancorp. and after the bell, we'll get results from ebay, qualcomm and
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e-trade. president obama will hold a conference this evening. the bulk of the remarks are expected to focus on health care reform. the approximated spending a lot of capital to try to get a bill passed this summer. that's your global stock watch. coming up on "worldwide exchange," the chinese have expansion plans. plus, the bank of england believes its quantitative easing policies are working. we'll get insight after this with minutes from last month's policy meeting. $$$$$$$$$
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i'm sri jegarajah. in asia, companies may now tap into the government's reserve for overseas acquisitions. i'm ross westgate. in europe, markets in their earnings streak. i'm bertha coombs. in the u.s., no halo effect from apple's rosy results and forecasts for the market. futures are pointing lower. we just got minutes out from
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the bank of england's last meeting. they showed key issues were whether an immediate change was required. but there had not been enough evidence to justify this and the forecast prepared for the august inflation will provide an opportunity to reassess the stock for asset purchase. and they noted it was the stock of quantitative easing that was important for determining the degree of stimulus rather than the flow. it judges the medium term for the economy had not changed since may though the nearside the had diminished and the immediate inflation outlook was higher. the fall of gdp in second quarter data due on friday would be smaller than it thought two months ago and surveys suggested that there was more momentum going into the second half of the year. but a lack of bank lending was weighing on the economy. sterling has perked up after
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that. it's bouncing off the session lows. jim o'neill is head of economic research and joining us now, your reaction to that statement. what does it mean? >> i think it has people a bit concerned as to whether it's a positive motive or they don't think qe is working. so what's buried in the depths of these minutes will be pretty important. >> what's pretty clear is as they said at the time, they're going to wait for the august inflationary report. do you think it's a judgment on the economy? >> i think if you look at the government recently, it seems to be quite clear that he's being influenced by the monetary data. but maybe qe isn't working that well and it's not obvious where that's a shared view across the board there. what surprises us a little bit
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is why they haven't been more at the previous meeting. it's a bit of a mystery here. >> obviously, we had the data out on monday which shows that lending to businesses and the consumer were still sort of declining effectively. >> yeah. >> and if they move away from quantitative easing, how do they solve that. >> there is a notion flying around about knowings. that's what some people have been thinking of since these minutes, is that might be what the bank is up to. what strikes me as being a bit over the top in terms of some of the better turn of what's going on all over the place. but you can't dismiss that. and so i think that's why the markets are a bit nervous this morning and it's probably circulated across beyond just the uk. >> okay. jim, stick around. we're going to look at what mr.
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bernanke had to say. the ftse cnbc 300, we're a little weaker this morning. european stock markets had about 0.5% of losses. the ftse down 0.5%. xetra dax and cac 40, smi down similar amounts. on the currency markets, the yen tried to crawl back a little bit. just saw sterling springing up from low 160s. the dollar, there won't be much more quantitative easing and euro/sterling is firmer. sri. >> ross, thanks here. we saw resilience in most of our major markets here in the asia pacific regions. really in this upbeat earnings picture that we are looking at. we were up by 0.7%. the underperformers, as you can
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see, up by 1.3%. we hit multi month highs a couple of days ago. the bombay sensex underperforming, too, up by 1.4%. bertha. >> sri, the big news today will be earnings once again. we've got down components boeing and pfizer before the open. we've had a pretty nice run and it looks like we've got some profit taking ahead this morning. the dow up 7 straight. the nasdaq has been up 10 straight. that's the best record since 1999 in a winning streak and the s&p is poised to break through real resistance to the tomside. taking a loot at yield, ben bernanke yesterday telling congress, the house, that yields will stay low at least as far as the fed is concerned for some time. but they have an exit strategy. we saw the yield come down. let's bring back in jim o'neill.
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he's the head of global economic research over at goldman sachs. i understand why stocks rallied on the bernanke news, but you would have thought the bond market would have taken more solace in what you had to say. >> it's what the bond market reacted to and his comments. but i guess if you look at it altogether, what bernanke is saying is something we believed in a long time. the fed is not taking away any of its friendliness for quite some time. the markets are going to use the idea the fed is going to be friendly for a long time. i guess that is the heart of it. but it did seem to be a big reaction, you're right. >> the other thing that was interesting is that bernanke in many respects seemed to be campaigning. it's his strongest defense yet for the fed's action, given that
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he's come under such criticism, if you will, in congress. is that something that allays the market or is that something that makes the market think maybe he does protest too much? >> i think both is the answer. that's partly why the markets are so choppy. i think ben did a pretty good job outlining the difficult alternative x-rays. there is a lot of dilemmas about how they exit from this strategy if and when the time is right. as he pointed out himself, and i admire him for doing so, at the end of the day, the key issue is timing. the issue is when do they decide to take some of this back, which is going to depend on the assessment of the economy being very accurate? it's tough. >> jim, last week we got those forecasts beating second quarter gdp numbers out of the mainland. but what happens when all the stimulus led tailwinds start
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running out of steam and dying down? is there enough momentum to sustain an annual growth of 18%? >> i love hearing this question. take a look at china retail sales versus u.s. retail sales. the idea that it's purely because of the stimulus is crazy in my view. since the start of '02, the increase in the value of chinese sales has been as strong as the decline in the u.s. there is plenty of growing momentum in the chinese economy and at the core of it, the chinese authorities realize the shock from post lehman was potentially traumatic and they came up with a whole new strategy to have domestic demand leading the economy. we are in the early stages of it. it's a story with very long legs. >> jim, that begs the question, then, at what point will the pboc have to start putting their foot on the brakes? >> certainly if you look at
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chinese financials, we have an index and monitors many countries around the world. chinese index in our world is over 600 basis points since november. clearly they're not going to hang on to that forever. then they're going to start taking some of it away. >> okay. we're going to have a follow-up here. what happens in the euro zone? >> i think generally speaking, it remains as lifeless as always. europe is going to get bounced around by the world trade cycle. i think the german election is pretty important. it would be nice to see a post election china get on with its own economy and its own demands. there's no great evidence of that.
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if you don't get that, europe is stuck in a pretty miserable growth environment, as always. >> i was there a few weeks back and i came back thinking it's not going to be a major event. they're obviously going to try and come up with more fiscal stimulus. but you need the population to want to do the government to do some things. and it doesn't look to me behind the headlines there's that much difference between the ldp and the democrats, to be honest. >> jim, thanks to see you. and we discovered we only live a few streets away from each other, sri. >> it's nice to know it's a small world, isn't it? stay with the china theme. let's get more on beijing's move
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now to encourage overseas investments by chinese companies by offering monies from its reserves. >> this is one of our top stories today. largest reserves in the world. where is this money going to be deployed? is it going to be the natural resources sector where china has been more active overseas? >> i think we need to -- if we look at, as a starting point, if we look at it as china's external asset competition, we see two imbalances. one is that the government is a large part of it. the second imbalance is that
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china's assets are mostly instruments, whereas external liabilities are mostly in equity forms. one way for diversification is to encourage the chinese corporations to invest abroad. and in that way, you know, on one hand, you'll reduce the holdings of china's asset. at the same time, you correct this debt equity imbalance in china and china's external assets. now, it's an area that they were invest, if we look at -- as i mentioned earlier, look at the broader context of
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diversification of china's assets, then clearly this should not be restrifted to areas. it's a broad range of areas that they would encourage areas to invest. also at the same time, to secure overseas markets. >> does that mean that if they buy viewer u.s. bonds, for example, less u.s. debt, they might actually deploy and invest here in the u.s. so it might be a wash in terms of their investments in the united states? >> i think by diversification away from u.s. treasuries, it is
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unlikely to be large in the near term. but in terms of incremental increase, the government encourages corporations to invest abroad. what was happening is that these corporations were needed to buy in the market u.s. dollar and, therefore, they were to reduce the pressure for the central banks to accumulate first research in the future. >> it's ross here in london. we saw china investment corporate welt fund take a 1.1% stake in diagio yesterday. just what sort of industries -- i mean, that's a drinks, that's a spirits company. what sort of understand tris will be at the forefronts here of their diversification and acquisition plan.
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>> i think this is a broad diversification of seconder holdings and risk asset or equity form of foreign investment. so it's difficult to say in what area they will concentrate. resource supply is one area, but i think it is a much -- should be much wider than that. >> all right. we're going to have to leave it there. thank you very much for joining us. >> ayesha faridi joins us now for the india business report. >> holding on to that 1,400 mark and notching the gain, it's been quite a reversal. down about 54 odd points and that's over 1% for the sensex
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and the nifty at this point in time. even the broader markets which were relatively outperforming some now gone soft. remember, after tata consultancy services results, i.t. has run up pretty hard. so you are seeing a fair bit of profit taking. first, the management, that is in the i.t. services guided front. the company does expect about a 4% decline in the pricing going forward. so a little disappointed. you are seeing a fair amount of profit taking. meantime, the media rush continues. that counter is looking at freezing.
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>> ayesha faridi, thank you very much. lg electronics, this is the world's number three mobile phonemaker hosted a larger than expected second quarter profit thanks to strong demand for cell phones. global operating profit rose 32% to $1.1 trillion yuan, which is way above forecasts. sales rose to 14.5 trillion yuan in line with estimates. take a look at solaris of lg electronics. they nded 1.1% lower. and bhp billiton says restocking of commodities in china may have ended. bhp asks that prices will be included by supply responses which could have an impact on earnings. breaking down its fourth quarter production reports, iron outputs
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fell 10% after the country's corporations were hit with mining and flooding. aluminum slipped 4%. let's take a look at bhp shares in sydney. they had a pretty good day, up by 2% in sydney and -- excuse me, this is what they're trading at the moment, down by 3% in london. >> sri, porsche is not confirming or denying reports that the ceo is going to resign. the ceo and board had reached an agreement according to reports and the announcement will be coming tomorrow. porsche may announce a merger deal, as well, with volkswagen. >> amd reported a narrower second quarter loss. gross margins fell sharply. the chipmaker blames lower
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selling prices for pcs and an inventory sell-off. the company says revenues will rise marginally in the current quarter. that compares to what intel had to say last week. starbucks rose to a third quarter profit thanks to price cuts and promotions. analysts thought a marketing blitz by mcdonald's would hurt star bucks sales, but the ceo says all that add attention on coffee has helped business. amd and starbucks are trading in different directions. amd down 8%, although shares have changed a lot since last week and starbucks up just about 7.5%. an indicted credit suisse broker who fled the u.s. more than a month ago is expected to face charges today. damian scott. their case is the only prosecution related to the
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cratering of that market in the summer of 2007. they allegedly tried to get higher commissions by selling riskier securities backed by mortgages when clients wanted to buy lower risked assets backed by student loans. >> coming up on "worldwide exchange," with around 70% of the earnings reports komgs coming in above expectations, is this because expectations are so low? >> and with slightly softer stock markets in europe, we have seen euro and sterling coming back a little bit against the dollar.
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i'll see you at 3:00! announcer: captioned telephone - enjoy the phone again! with the mr. clean magic eraser. okay. it's time to focus in on the currency markets. stocks are trying to find the heart to gain on seven days of gains. as a result, the yen has climbed back. euro has just come back against the dollar. sterling was below 1.6. a short while ago, we had minutes out from the bank of england which suggested they were less dovish and that they hadn't asked for more asset purchases beyond the 150 billion out.
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does it mean that quantitative easing didn't need that or we had a knee-jerk reaction to the bound? >> when we jump back a few weeks, the market seemed to conclude that we're about to end quantitative easing. you then had charlie beeb come out and say, look, although the bank didn't step up their purchases, you couldn't say that means qe was going to end. so i think the market thinks we're likely to get a dovish overset. so i think the data, the evolution of the economy and how the markets perform between now and the next bank of england rates meeting will be the bigger picture. bigger picture for sterling, regardless of whether or not
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they keep qe extended or en, uk rates are likely to remain low and the price is in the uk economy already. so i don't think we're likely to see a big game changer for bound and certainly i would be bearish on the pound. >> what about against the euro? >> i think we can move -- i think euro/sterling can move higher. again, if you look at the way u.s./sterling has performed over this year so far, the pound strengthened a bit. but really, here at these levels, given the die vergence between the euro zone and the uk economy, given how loose policy in the uk is likely to be and the size of the fiscal deficit is likely to be, we continue that drift higher that we have seen over the past few weeks. >> adam, it's bertha here in the u.s. we've got the dollar/euro trade fairly strong at $1.41 this morning, more or less.
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did bernanke help? >> i don't think bernanke changed the big picture as far as euro/dollar is concerned. sure, he has an exit strategy. what was more important, i thought, was he went to great lengths to make it clear he didn't intend to use that exit strategy any time soon. so i've got the fed clearly on hold. no desire to raise rates for a long period of time. that means u.s. yields aren't going to climb above. and that should keep the dollar under pressure. i also think the size of the fiscal deficit in the u.s. means that euro/dollar can continue to climb higher. here, i think we can see as high at 1.50 over the summer. >> adam, thanks very much for that. we're going to leave it on that note.
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>> coming up in the next hour of "worldwide exchange," the director general says we're not out of the woods yet and prevents a further significant contraction in the world of trade. stay tued with a interview with pascal in the next few minutes.
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welcome to "worldwide exchange." the world's third largestmaker of lcd tvs hosts better than expectsed profits thanks to sales. and i'm ross westgate. the bank of england is not yet pumping more money into the economy. >> and i'm bertha coombs in the u.s. futures are pointing lower. >> hello. welcome to your day with "worldwide exchange." thank you for joining us. in the u.s. this morning, after what's been a spectacular winning streak for the dow and the nasdaq, the do i up seven days in a row, the nasdaq up ten, we're looking at a pullback this morning. futures right now on the dow are off by about 85 points or so below fair value.
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the nasdaq sinking lower. apple's results were great, amd's not so hot. yahoo!'s kind of mixed. the s&p 500 is looking at resistance. we may not push past that today. taking a look at the bond situation, ben bernanke is going to be back on the hill. he's going to be testifying before the senate finance committee today. we've got the ten-year bund yield right now at 3.37%. we saw a sharp move in yields to the downside as bonds rallied right along with stocks. yesterday right now, we have the ten-year yielding 3.49%. ross, how is it looking in europe? >> no surprise to see we're a little bit on the downside today. the cnbc 300 is off 13 points. european markets two hours into the trading day, off 0.5%. the cac 40 down 0.8%. the smi off 0.3%. that just means the stocks are
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weaker but we have seen the yen trying to claw back from losses for the week. and they've not yet made any decision about quantitative easing. it doesn't appear yet that they've asked the chancellor for permission to go beyond the currently agreed 150 billion. so that issue is still undecided. sri. >> ross, thanks for that. let me ask you where we picked up with the yen. we mentioned currencies. let's look at the board you how the nikkei and topix both closed. positive, up by 0.7% to the good for the nikkei. the kospi up 0.3%.
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but the big theme in the japanese markets, as i said, is that the strength of the yen took the gains off some of the gains in the exporter stocks. the outperformer, shanghai composite up by 2.6%. the hang seng, the hong kong benchmark has had a very good run. it did earlier hit a ten-month high, so some of the steam coming off that rally down by 1.3%. similarly negative for the bombay sensex, off by almost 1%. let's take a look at the energy markets and nymex light sweet crude. this is how we are trading at the moment. we are really consolidating around that 64$64.5 a barrel ma. and brent, flip the boards, $66.12 a barrel, off and looking weaker down by 1.1%. ross. >> joining us for more, sonia
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schroeder. no one is forecasting seven straight days of gains and the level of performance we had can't keep going. what do you make of the rally that we've seen and where do we go? >> that is obviously a question for the crystal ball, as always. obviously, the question from here always will relate to how strong will the earnings recovery be. this is where when you look at the earnings results at the moment, we see that yes, there is a very significant beat on the bottom line, but the top line is still very weak and most companies have missed the top line, but beat on the bottom line. which means it's all down on cost cutting and mostly down to head count reductions. why i'm referring to this is when we want to assess demand in the futures, it's all about the consumer. if we see unemployment rising, this will not bode well for
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earnings. >> we talked about that and yet prices are still reacting because we've beaten on the bottom line. what does that tell us about sentiment? >> obviously, if you do get a beat, and don't get me wrong, there were quality companies out that that presented decent results. but obviously, it's always worse to have a second look what the beat is comprised of. particularly in the industrial space, the headline numbers only look good on the bottom line and mostly it's referring to cost cutting, lower tax rates and hedging gains and so forth. it's not getting worse on low volume to have the markets higher. >> sonia, a lot of folks are saying that the markets will be higher before they fall again. they're talking about a so-called w-shape to the market that by the beginning of next year will be moving to the down side. are you positioning for that? and how do you position for that? >> very, very difficult,
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obviously, because what we've seen in terms of sector rotation is very interesting because it's happening pretty much on a weekly basis. so i'm not sure whether, you know, if you're a long-term investor you can position for a w-shaped recovery. i think the most important thing, really, is to get the stock picking right. there will be a lot of noise in particular when it comes to the third quarter of economic data. so the likelihood of a positive surprise in the third quarter is pretty high. but as i said earlier, when referring to the quality of earnings we're getting at the moment, it will be all about the sustainability of earnings into 2010 and when you look at the consensus or the s&p for 2009, we're talking about $55 for the s&p and expectations are for $72
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in 2010. and i think we all agree to get from 55 to 72 based on cost cutting, this might be tricky. so we need to see a decent recovery this is where i would put my question mark whether this is us stainable or not. >> we've been seeing a wide valuation gap between asia and equities. are we perhaps overextended in asia and would you advise your start position for a correction. >> i think that the valuation -- again, i'm a global fund manager. so when i look at the global valuation picture, i think of the stark contrast we have between europe and the u.s. when you look at underlying growth, fundamentals and dynamics. i think here a 35 discount between europe and the u.s. might be too much. obviously, in asia, as well, we have similar dynamics, but undoubtedly, we have the better dynamics in terms of growth and better prospects in terms of
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recovery. so from that point of view, i think from a positioning point of view and a global portfolio, i would harbor europe and asia at this point over the europe. but this obviously, sitting in europe, is currency related, as well. >> sow nia, you're going to sti around. so plenty more to come from sonia. and coming up next, find out why it's thought the next round of doha talks can reach a consensus there year.
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traitd trade businesses are wrapping up in singapore. members said an agreement aimed at helping poorer companies prosper through trade would be the best way to fight off the biggest economic downturn since the great depression. pascal lamy was present at the summit and i caught up with him and asked him if the worse is over for the global economy. >> i couldn't go that far, looking at my trade numbers. world trade this year should contract by 10%.
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volume turn, which is a huge drop, and what i see is that maybe the decrease is starting to slow a bit, notably in the asian region. but to answer frankly your question, we're not out of the woods yet. >> when will we be? >> not for me to say because that depends a lot of the stimulation of demand so that supply readjusts and so that this transmission day between demand and supply with trading keeps going up. that is the macroeconomics. in the world trade organization, we have no influence on that. what we can do is make sure in the meantime we don't make  things worse through protecting
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trade which is called protectionism. >> will this be lightened up a notch during this economic crisis? >> yes, it has. as was to be expected, people ask for protection. now, there are many ways of protecting, but we all know that protecting trade is the worst way of offering protection. so the demand for protection is there. >> and where would you say, director general, these protectist sentiments are most pronounced in the world? >> it's basically everywhere. and this stems from the fact that this crisis is global. some have resisted better than others, including, for instance, in keeping trade open. this region, country like malaysia, for instance, has been
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stepping forward in opening trade during the crisis.ñc >> director general, ñc realistically, can we expect to make much head way in not only c jump starting, but successfully implementing the round of trade liberalization talks? >> again, i think the answer is yes. i think the mood, the politics have gone much better in recent months. we have a new u.s. administration. we have a new indian administration and you know that last year it was a bit of a problem between u.s. and india to unlock the negotiations. >> there are a lot of disagreements between those two countries about the extent of rolling back the agricultural -- sdwh correct there is more common ground now and i think what is already on the table, getting the 20% remaining done
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is easier with trong winds blowing. >> that was pascas lamy, speaking to me here yesterday in singapore. bertha. >> thanks, sri. apple's first quarter profits in the state rose 13%. that beat estimates. the new iphone 3gs was on sale for less than two weeks during the quarter, yet still contributed. the the upbeat results suggest while consumers may be cutting back on spending, they're not holding back when it comes to lucrative apple products. the company expects the next quarter results to top analyst shares, as well. frankfurt at this hour, shares are up about 4 points or so.
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yahoo!'s profits, not quite as rosy. that will soften the blow of what was a 0.% drop in revenues. the ceo says customers appear to be ready to spin more. the company plans to spend more on products and a rebranding campaign which could end up cutting into third quarter profits. that sent shares down about 3% in after hours and in frankfurt at this our, yahoo! is still down 3%. ross. >> bertha, the bank of england says there's not enough evidence to extend its quantitative easing program yet. minutes from last month's policy meeting voted unanimously in favor of keeping its asset at its current level. >> ross, india's third largest i.t. services phone wipro beat
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the first kwavt quarter profits. i.t. previous views cautious guidance. still, we're pro cfo. >> got to go and therefore we think the bare blujts come back and we will benefit from the regulatory changes that have happened and that will mean a lot of i.t. expense. we are fortunate to take this opportunity. >> they're up by 1.5% despite the better than expected first quarter numbers. >> too much pop ewe ligz amonged nation where millions of people
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we'll bring you up to speed with what's happening in equity markets. >> on the ftse 100, we're looking at declines of about 12 points or so. we're coming off the lows of earlier in the session, with you trading down a little bit. we have minutes coming through from the bank of dwlnd. when the bank of england last came out with their interest rate decision, members of the upc were unanimous and to take a pause in the quantitative easing program while they wait until the next meeting to decide which is the best course of action. we have earnings still to come today from glaxosmithkline. it will put an emphasis on how the trading day shapes up. group sales have been up by 14%. profits are seeing higher by about 15% or so. this will mask the extent to which competition is
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approaching. we are sieeing many of the basi resources stocks trading to the downside. plus, also on the down side, ka zacksmy's, xstrata, bhp billiton all lower by about 3% or so. now over to germany. >> the situation here is not really different. we have the dax lower by almost 0.5% at this point. mainly on cyclical stocks on saf. if you look at the biggest losers as well as commodity producer, k plus s which is down by almost 1% and allianz is burdened. the ceo said 2010 might be a worse year than 2009 and that is the reason at least traders are saying here that the insurance sector in general is quiet down he here. allianz has a negative of 3%.
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also profiting from increasing rumors. we have software this morning which is the k second producer in germany. the market didn't like the number numbers and now we're going to paris. stephane. >> and it's a similar picture in europe. the cac 40 is losing ground after gaining more than 11% over the last several sessions. the consumer related stocks are doing well today, include carrefo carrefour as well as danone. better unanimous expected in france, up 1.4%. that was much higher than the average forecast. apart from that, the car sector
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is weaker a few hours before the meeting between the industry minister and employees of new fabris. they are asking for compensation after the company went bankrupt and they are asking the main customer to. also in the car sector, michelin, the tiremaker, taken off stage last night by angry workers protesting about the job cuts within the company. 1,093 job cuts in france, including 477 in their factory. they've been released early this morning. michelin is almost flat. let's have a look now at the asian market with sri in singapore. >> stephane, thank you for that. over here, most of the markets
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did have optimism about the corporate earnings season in the u.s. in japan, shares rose to a two-week high. semi conductors? >> that caps the gains in relationship to the yen. the nikkei higher 9,723. lg electronics shares received better than expected cooperate earnings last quarter. the shanghai was the outperformer in our region thanks to a jump in oil and coal shares on hopes of upbeat earnings from that sector. the shanghai composite up 2.6% to close at 3,296. that's for australia, shares rallied there for the seventh straight day on optimism about the economy.
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bertha. >> it's quiet as far as economic data. we will get the energy inventory numbers at 6:30. the big news investors will be paying attention. back on capitol hill for part two of his semi-annual testimony. this time he's in front of the senate banking committee. that starts at 10:00 a.m. new york time. ahead of the open, we've got lots of earnings. pharmaceuticals and financials are the earnings theme of the day. morgan stanley, wells fargo, pfizer and eli lilly will be reporting before the opening bell. other notables include bank of new york mellon, sun trust, u.s. bancorp, altria and pepsico. after the bell, we'll get numbers from ebay, e-trade, and qualcomm. president obama will be holding
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a news conference this evening and the theme is expected to be on health care reform. that is your global stock watch. >> yeah. still to come on the program, our next guest thinks the recent market rally is a concern. is it sustainable? tell us what you think.
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we are coming up on half past the hour. here are the top business stories from around the world. until the u.s., no halo effect from apple's results. futures are pointing to a lower start. >> in europe, the bank of england is less pessimistic about the economy and is less excited about quantitative easing. and i'm sri. will lg electronics hosts better than expected third quarter profits thanks to strong sales. hello and welcome to "worldwide exchange."
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futures this morning have been pointing to a lower start, but we've had a seven-day winning streak on the dow, a teb-day winning streak on the nasdaq. we are going to have more earnings. apple's rosy earnings today not helping interest rates. now the dow futures are about 85, 86 points below fair value. nasdaq and s&p futures pointing to the downside. ben bernanke will be testifying for a second time on capitol hill. yesterday his message that he would be keeping rates down low seems to send bond yields lower and we are higher right now. we are at 3.51%, crossing that 3.5% mark. ross, we've gotten data from the uk and the bank of england today. >> yeah. minutes out from the last meeting when obviously they just kept rates on hold, it's all about quantitative eeszing. they've given no firm commitment about whether they're going to extend it.
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and it doesn't appear yet that they've asked the government for permission to spend more. sterling, rebounded a little bit from its session lows. meanwhile, as far as stock markets are concerned, we're off. the ftse 100 down 0.3%. a little more for the xetra dax and smi. a little bit of strength in the defensive end this morning. utilities, telecoms, food and beverage. and because stocks are weaker, so the yen ditched up against the dollar, 93.45. and the dollar has gained a bit of ground against the euro. the pound was down below 1.63 until those minutes came out, sri. >> ross, thanks. we're broadly just really still seeing the field. so it was really that recovery theme that continued to gain traction here in the markets.
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still having a reasonable day, all things considered. the kospi has had a pretty good day, though. it was over 2% at the close. here you see it up by 0.3%. some of that rally running out. similar story for the hang seng. this is another market that has gotten ahead of itself. we're still trading comfortably over that 19,000 threshold. but remember that we did crack a ten-month high earlier in the week. some of the steam coming out with that rally on the hang seng. but the outperformer here, the shanghai composite up by 2.6%. a lot of confidence in the chinese markets. let's take a look at the energy markets and nymex light sweet crude. this is how things are shaping up. we're trading around the 64.5% handle. you got the inventories coming out. that's always going to be market
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movers for the crude oil space. now back to bertha. >> thanks, sri. we are checking to see a build in inventories which has a lot of people worried about demand and the consumer. let's talk about it with robert pavlik and still wis is sunny ya se . we're seeing fundamentals, bob, that show the consumer is weak. and yet we're seeing the market move to new highs for the year. is this market just getting too far ahead of itself? >> no. i think what you're seeing today -- this is not unnormal. the market is up over the last several trading sessions. we got there based on stronger earnings reports and better guidance going forward and i think that trend is going to
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continue. but you know, when you're up over 9% at the last seven trading sessions, i think it's a normal court for the course for the markets to take. it's going to allow investors an opportunity to feel comfortable about getting back into the market. and i think the market can have a real potential to move up from here. obviously, we're still in a contraction phase as far as the economy is concerned, but the economic reports are indicating stabilization and they're indicating that things are starting to improve slowly. and i think the market will go through periods of euphoria and periods of, you know, pull back. so if user a long-term investor, i think you want to concentrate on eventual return to positive
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gdp. that will happen as early as this year. >> and that's been positive to the stock markets, sent it? >> me. and obviously, it always depends on whether you want to although at q2 sddz q3. right now in terms of the profitability, they do reflect peak margins already. >> well, agree. there is concern about the earnings. but what we're carrying is $67.67. markets trading at around 13.8 times its current price here right now. if you take a look at 13.8, that's not an expensive market historically. that's below the normal trend.
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so you look at some of these economic reports, look at some of the retail sales reports and we're getting off of very low levels. people are saying, you know, this is not a manufacturing-led recession. this is more of a credit-led resession. that's true. however, credit is available for those companies that have good credit o'hare and that have the opportunity to get loans. i think if you -- gagain, thing are start to go improve. you look at some of those expensive areas and you want to be focusing on the areas of the market that are going to improve as the know improves. that's the early cyclical. things like technology, basic
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materials, industrials and the financials. i think if you're focus on those areas, you'll be a present happy investor. >> i agrees. but for me, it's not a credit-led desire. for me, it's all about the demand. i'm not used to having this credit-based consumption. this is why i'm still struggling with the consumer in the united states and in the uk here being so indebted that we all agree that they to deleverage. would the cut counting and the emphasis will continue to make the bottom line. >> i'm worried that the demand line ahead of us might be weak.
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we all know to finance debt, taxes have to go up pretty much everywhere around the world. we will potentially see unemployment rising and we might see additional drag on consumer spending based on higher taxes. and this is why i'm not necessarily very bearish for the equity market, but i think expectations are too high based on what might be in -- >> my story in twoep between 2010. for 2010, i'm more on the pessimistic side. >> well, you may a good point. i don't think anybody was expecting or anticipating the growth we saw because of the availability of credit. but i don't think that's what's going to be leading us out. i think, you know, with the government stimulus twhb billion dollar plus stim ewe plus package here in the united states and around the world, i think that's what's going to
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eventually out. now, people can argue that the stimulus package wasn't decide that well. if you spend some of the bone on border guards or protection against kwem with and others. however, those companies have employees and those employees are going do go shopping. yaes what's twenl going to lead the recovery efforts. and again, i'm -- you know, i'm cautiously optimistic and i do believe that the economy will continue to improve. but it's going to be gradual. and i think if you are having very high expectations for growth next year, you're a little bit off the mark. but i would be focusing on those areas that i mentioned.
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>> all right, robert, thank you very much. and joining us from london, sonia shafferman. next stop, let's check live on the trading day with ken moriyasu. >> thanks, sri. in hong kong, people were thrilled the first. tokyo stocks will mark the sixth consecutive of grain for the first time in two weeks. the yen, again, encouraged buying. real estate transactions nationwide rose in the june period compared to the previous quarter, giving an indication that the market may be
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recovering as a private research firm. meanwhile, nomura international may be handling its best takeover action yet. nomura, now goldman sachs, they tried to negotiate a better price. that was the nikkei business report from together ya. back to you three. >> ken moriyasu, thank you very ch for that. berth da. later this morning, be spite a troubling shortfall, will it tart to take effect today? >> whether we leave you, here is a loot at how the broad ir markets are expected to perform.
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welcome back to cnbc aes "worldwide exchange." here are some of the top stories that we're watching from around the world. here in the u.s., proctor & gamble is reportedly in talks to sell its prescription drug business. the wall street journal reporting the unit could be worth about $3 billion. interested buyers include warner
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chillcot and cerberus capital. last year, p&g said it would stop making new investments in pharmaceuticals, considering selling its health care brand and focus on over-the-counter products such as pepto-bismol. checking on p&g shares, $38.90. >> bertha, french consumers are spending again according to data from the national consumer's office. consumer spending rose by 1.4% in june. it follows positive comments from the french finance minister, christine lagarde. she condemned guaranteed bonus payments in banks saying they are an absolute waste. there are mixed earnings expectations due out from glx glaxosmithkline due out today. investors hope they'll be able
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to kavp cash new with its inclu long-term performance. bhp billiton, a restocking of commodities in china may have ended, but there is french inventory markets in other markets. bhp's prices will be influenced by reply responses to the down attorn attorney, iron ore outlit hit. aluminum was down 4 mrers. let's take a look at how bhp shashs ended the day in sydney. they're having a bit of a rough day in london, off by 2.8%. bertha. >> well, we've got pharmaceuticals and financials
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as the earnings theme of the day in the u.s. find out what the prognosis is for the day ahead. we'll take a look at what to expect on wall street right after the break.
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just over ten minutes away from squawk. let's find out what's coming up. >> good morning, ross. we have another day of quarterly results being released. we have numbers from pfizer and boeing, eli lilly and others to watch today. the drugmaker cfo is going to join us live first on cnbc. and now we have the president making a prime time pitch to the american people. but is the company buying it? health and human services secretary kathleen sebalius will make reports from the white house. and we'll get comments from ohio
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senator george voinovich, kind of a republican, as a result. and then we have david fiscal. he's one of the wall street street street's. it's a nonpart son, this peterson foundation. so he doesn't have an ax to grind on this health care issue. we'll get some real facts on what is likely, if it happens and if it doesn't. "squawk box" will start right at the top of the hour. back to you. >> joe, just on that, what is the fear? is everybody sort of preparing for higher taxes generally, or not? >> oh, yeah. yes. and i'm hoping maybe the trend is definitely up. >> i loep r hope i'm near where
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the trend is coming down. are you in the public system over there, ross? >> puck system of -- oh, what, health care? >> health care. >> yeah. everybody is in it and it's a question of whether you choose to also have a private system, as well, on top. >> and do you? yeah. you get company. i think the major differences, you still rely on the public. the private system is going for the minor things that you want done quickly. >> that you want done quickly, that's the operative term. how long does it take you to get something done through the public system? >> well, i don't know. say you had like a hernia operation. you could get that done straightaway on private. if you had to wait for that in public, it might take you
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something like six to mine months to get that done. >> e-mail me the real story, ross. you've got people behind youel watching what you say. >> all right. i'll do that. thanks, joe. >> don't you nood to do heavy lifting? apple beat estimates after turning out more iphones. it's really more of a factor coming into the next quarter. allel saw strong sales of maces and ipods. the upbeat results were that while consumers may be cutting back on a lot of their spending, they are holding back when it comes to luxuries like apple products. the company expects that fourth quarter will stop analyst forecasts.
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in frankfurt at this hour, frankfurt is ben. yahoo! pb though, we didn't ahead in the earnings, but they had a 13-month sales. the ceo says the customers appear to spend more, but it's too early to say how that would impact yahoo!. now, the company is willing to spend more and that could cut into third quarter bottom line. that sent shares down about 3% in after hours. in frankfurt this morning, shares are off by about that same amount, trading at $11.46. amd was the other sort of negative poll when it comes to tagging the nasdaq. performer sis 1996.
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revenues were flat from the grief b quarter. the company says revenues will rise marginally in the current quarter and the shares hit in the afternoon and they're getting hit today, as well. let's take a look at the day ahead with bob iachino. i think the reality has come in that the bar was set pretty low and it was easy to beat these earnings when it consider the comments that were made last quarter's earnings season. so i think it's just a leap over the bar and investors are starting to understand that. >> bob, china says it's going to
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diversify its position. he said something to worry about here in the uk? >> you know, i think the rhetoric has got knowledge stronger and stroker each time. but the reality is, it's not the gold of china to do this over a short, short-term. when you look at the short-term effect on the dollar, it's going to hurt it quite a bit. but in terms of them being able to do that in practice, i don't think there's a pass for that right now. >> bob, thanks so much. we are out of time. bob iachino, joipging from congre. >> thanks for watching "worldwide exchange." snoor tdd#: 1-800-345-2550 if i'm breathing, i'm thinking about trading.
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good morning. earnings central today, plus, apple and yahoo! shares on the move after both companies posted results after the close. bernanke is back again today. the fed chairman heads to the senate side of capitol hill, ready to face another round of congressional questions about monetary policy and the u.s. economy. seven straight, the blue chips on a roll as "squawk box" begins right now. good morning, everybody.
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i'm becky quick along with joe kernen and characteristic xk. on the market's agenda today, earnings and more earnings. we have pfizer, u.s. barges corp., wells fargo, glaxo smith line, altria, bank of new york melon and delta air lines. we have plenty of stuff happening today. shares of boeing down about 37% just in the last year even though they have rallied almost 17% since mid april. the aerospace giant is expected to post an increase in profit year over year earning $1.21 a share. revenues expected to rise by 1% to $17.2 billion. as for pfizer, it is expected to earn 47 cents a share on revenue of $11.3 billion. so how about the dow 30? >> let's go to the heat map. >> let's go to the heat map. you will see how they are performing this season. >> versus expectation peps and
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remember, a lot of these companies reported earnings down from a year ago. there have been a couple who have been a little better than a year ago. but as you can see, every single one of the dow components that have reported so far have been above expectations. so 12 so far. >> yes. dupont down 61%. caterpillar down 66%. so many are above, but -- i mean are below, but above -- >> well, the market -- whoa. what is this one? >> this is actual versus estimated revenue. so it's been cost cutting that has gotten many of these dow components to be beating expectations. they're cutting costs on the top line. that's helped them on the bottom line. alcoa, johnson & johnson, merck and intel are the four that came in with revenue better than expectations. >> the companies that r


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