Skip to main content

tv   Worldwide Exchange  CNBC  April 8, 2013 4:00am-6:00am EDT

4:00 am
hello and welcome to "worldwide exchange." i'm ross westgate. u.s. treasury secretary jack lew is expected to press europeans to do more to boost demand. he will talk to leaders in brussels on the first leg of his european tour. chinese airline stocks have been hit despite assurances that
4:01 am
there's no reason to panic. the taiwanese posting its first ever lowest profit for the first quarter. plus, earnings season kicks off today with alcoa. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. welcome to the start of a brand new week on "worldwide exchange." kelly is not with me on set. we'll be joining us later on the show. plenty to get through on today's program. the troika is back in greece this weekend for austerity talks. we'll hear why new proposals risk driving fresh backlash in athens. we'll be in seoul as reports are that north korea is preparing for a fourth nuclear test. we'll have the latest analysis.
4:02 am
and brussels is breaking ground on a new $6 of 00 million assembly line. phil lebeau will weigh in on what this means for airbus's position versus boeing. that at 11:40 cet. and japanese stocks are trading up near five-year highs after the bank of japan kicks off its fresh bond buying program. we'll have the latest from tokyo in just over 30 minutes' time. first, germany is stepping up pressure on por tu gal to find new savings measures after its constitutional court on friday wage to pension cuts were unlawful. the german finance minister said in a radio interview earlier today that lisbon must find new way toes meet its budget goals. those comments came after the portugal minister said those decisions had serious intenses. he insisted it would still meet
4:03 am
the bailout, but rule out further tax hikes. >> the alternative to the fulfillment of the rescue program would be another bailout extending the hard sacrifices. and that's what we have avoided. this is the reason for our political decision today. we will do everything to avoid a second rescue. and there are new concerns about portugal, as jack lew lands in portugal for his first visit since taking office. he's holding talks as we speak at a round table in brussels. and the reason kelly is not with me is because that is where she is. hey, kel, good to see you. look, is there going to be any change in message? >> well, ross, the question is what is the message? we know when timothy geithner came here last year, he said they needed to be more creative, more forceful in calming markets. they certainly got more
4:04 am
creative. i'm not sure investors liked it when they tried to figure out how to calm investors. so what europe really needs to come up with, and you can expect jack lew to make this point, what they need to come up with is a clear mechanism for how to deal with these countries struggling to find growth, but also how to send the right message to investors with regard to who is going to be on the hook and how in these future bailouts or bail-ins. now, the portugal issue is raising questions. there's reports even that one way that they might have to introduce methods of paying their civil servant sess by using the government's own t-bills. at the same time we've questioned whether a cypriot is the same as a german you euro.
4:05 am
now germany is devaluing its own internal currency because it simply can't afford to stay on the project at these current levels. the country is still shrinking. the real question for portugal and the reason why markets are concerned is suddenly this raises questions about whether they'll be able to return to market. they were supposed to get some kind of agreement from the euro group potentially to this weekend in dublin that would allow them to length continue maturity of their existing bailout loans in order to get back to markets. now they have a massive budget hole. a big step back for their program and one that is going to, again, cast doubt on how the eurozone is going to deal with these issues going forward. >> yeah, kelly, it's interesting. over the summer, last summer, there was a vie that maybe actions were softening, there's a recognition that the fiscal multipliers were mott welcome, they were worse than we thought and, therefore, the countries were going to need more time,
4:06 am
they were going to need more growth. and we heard these comments last week. he said growth is the answer. but then at the same time with cypress clearly attitudes have hardened saying stick with the program, do what you have to do. there will be no relaxation. i don't -- there seems to be a problem at the heart of the plan. >> exactly. how many officials are talking out of both sides of their mouth because they're saying while we acknowledge that growth is important and we can't damage that, at the same time, if you look at the european commission on portugal, it says they must stick to their program. it's the best way to sustain sustainable growth. the fact that civil servant hedges are the same as private pension hedges, of course. but at the same time, you can argue there needs to be either fnk fiscal or monetary stimulus in place to blunt the impact of those reforms and the opposite of that has been happening.
4:07 am
>> kel, we'll catch you a little later. things are warmer than the last time you were on the road, right? >> a little bit, but the wind is cold. >> kel, we'll catch you later. meanwhile, secretary lew will fly to frankfurt for a meeting tonight with ecb president mario draghi. tomorrow, the treasury secretary will be in germany to see the german finance minister. then over to paris while he'll meet his french counterpart. david cameron is on a bit of a tour, as well. the british prime minister trying to garner support for his new vision over europe. in a joint interview with five newspapers from france, germany, italy, spain and poland, cameron defended his pledge to hold a national referendum saying ignoring uk concerns would create greater uncertainty and .that the european union is right for reform.
4:08 am
mr. cameron is in spain today and then will travel to france and he meets angela merkel after that. at the same time, tens of thousands have been in the streets over the weekend protesting unemployment. unemployment has risen to record highs in recent years as mother than 5 million people out of work. as recession deepens and the economy contracts, yucker workers have been hit the hardest with spain's youth unemployment soaring to over 50%. in spain, we have reese baiting of profites from santander. they've restated their 2012 net profit at 2.295 billion euros versus the 2.205 previously reported. so that's actually stated them slightly higher.
4:09 am
i'll just remind you we've got a number of earnings to focus on. alcoa kicking off the first quarter earnings season. the company forecast to earn 8 cents a share. that's revenue of around $5.9 billion. it's expected to be the seventh straight quarter of flat or falling prices for raw aluminum. other companies reporting this week include jpmorgan, wells fargo, bed, bath & beyond and peer 1 imports. earnings are forecast to rise 1.6% in the first quarter. this according to thompson residers. joining us for more, patrick spencer. patrick, thanks for joining us. how do you think we'll travel through this q1 season? >> i think it's important to just back up by way of background before we start the earnings to see what's happening around the world. four months ago, you got an
4:10 am
election in the u.s. three months ago, you had the fiscal cliff issues. two months ago, we had tax krss. we've actually also had -- one month ago, you've had some delays in tax payments. you've had some bad weather. you've also had some fx issues and you've also had some general concerns as we've just alluded to about europe. i think the outlook for earnings this quarter is somewhat different as you've alerted to. you've seen earnings come down from 120 to 112. >> the s&p is up 9%. the dow is up 11% this year. >> earnings will come as no surprise. the market is telling you things are going to get better as we get past these issues in the second half of next year.
4:11 am
the reason the market is trading this high is earnings this year are 10% above record peaks. and look at valuations. i was just looking this morning before i came. i looked at the sep over 30 years. and on trailing numbers, the s&p on pe is trading 20% below its average number over that time. it's basically priced to book is 20% below and price to sales are just at that trailing number. so the market is -- the market is not expensive and it's pricing in a recovery. and there's been some interesting moves in the first quarter because the moves in the market has really benefited the defenses stocks whereas gdp, at the beginning of the year, everybody was raiding gdp from 1% to 3%. that easy raises an interesting question. why are the staples doing quite well with the risk on stocks should be better. >> why do you think that is? >> well, i think it's because
4:12 am
everybody is looking for this big rotation. i don't think it's happened yet. equity ownership is still chronically low in the rest of the world. and i think what's happening is cash because as you've seen the growth in the u.s. -- because the u.s. pmi, despite being disappointing is still up and there's some very good indicators. so there's good growth in the u.s. and people want to participate in that. so they've been getting out of cash. but they're looking -- rather than going to cyclical, the tale, the risk on, they're looking for companies with bond-like exposure where they're going to get their capital back, where they've got visibility and they've got total return. and i think qe is forcing people back into the market, the equity market, so they're looking for total return. so its bond-like equivalent. that's why they've gone into the market and that's why you've seen that divergence. but on earnings, i don't think you're going to see any big surprises. >> and the forecast -- the interesting thing is we come at this, we're looking for our traditional spring swoon here. we've done it three years in a
4:13 am
row and right now it looks like we're going to do it for four. >> well, sell in may, you're right, hasn't been broken yet. that's still traditionally held up. but you've got to remember that bernanke's talked down unemployment to 657%. he's going to continue with 85 billion of asset purchase and -- >> is that going to leak out? >> definitely. >> are we going to put the carry trade back in? >> definitely. you've seen what the uk is doing, you've seen what the u.s. is doing, u.s. what japan is doing. it's an intrimt, but the intrimt is working. you've got record earnings in the u.s. i think japan, even ahead of the u.s. now, looks very exciting. you saw what for the japanese market overnight? now i'm very, very optimistic about equities generally and our work, particularly in the states indicates that on a relative basis the stocks that look the most exciting are things like
4:14 am
health care, things like the tech companies and also energy. those are the areas where we see tremendous opportunity. >> have a good weeks. thanks very much. now, the chairman and ceo collide seinfeld will be joining cnbc at 2200 cet tonight. also, joining squawk box for a first on cnbc, james bullard, federal reserve of st. louis. we want you to give us the streak on the first quarter earnings season. will it be a hit, a miss or something surprising? e-mail us or tweet us. meanwhile, world health officials are trying to calm outbreak fears of a new strain
4:15 am
of bird flu was confirmed in china. china says the situation is under control. it's watching hundreds of people who have been in contact with those affected. the government has ordered tens of thousands of birds to be k l culled as a precaution. china was down as much as 7% today before paring back losses. tensions on the front remain high. south korea is warning of another nuclear missile launch within days. china's demands for an end to provocation appear to be falling on deaf ears. chery is in seoul and she joins us for more. hi, chery. >> hi, ross. it looks like this wednesday is going to be a crucial point in this week-long standoff between north korea versus other countries. so over the weekend, south
4:16 am
korea's presidential office said that pyongyang might make additional provocations sometime around wednesday. plus, wednesday is the deadline that north korea has reportedly set for foreign embassies in pyongyang to clear out. although this is just according to the embassies of britain, rush ya and china at this point. and, of course, over the weekend, north korea did not stop there. it revealed footage of its leader kim jong unvisiting some military training session and we see soldiers putting dogs on to the pictures of south korean defense minister kim guang in tearing it apart into pieces. very not photo message there as you can see right there. something that i was watching today over here is that a senior north korean official visit today joint industrial xrex where north korea is banning
4:17 am
south korea from entering. although not much details are out about that sudden visit. ross, watch for it sometime around wednesday and no sign of letting up in terms of north korea's tough talk at this point. >> we'll keep watching it, chery. thanks for that. that's the latest from seoul. meanwhile, we are firmer on the dow jones stoxx 600. the ftse euro first 300 down around 1.6% last week. we had negative declines. the worst week for u.s. stocks, as well. the s&p down about 1% on the week. here we are, just over an hour and 17 minutes into trade in europe. the ftse 100 up is 0.4%, as you can see. the xetra dax up around 0.25%. the ibex up around 0.67% and the ftse mib is up 0.9%, as well. yields are higher today, but we did get down to the highs -- the lows, sorry, for the year on
4:18 am
yield. 1.67% on friday. japanese yields have been flying around all over the place right now, 0.5% is where we stand right now. we'll be keeping an eye on portugal. 4.3%, as well, so no real spillover effect from that. as far as currency markets are concerned, the euro/dollar, just hit the session high 1.3003. that is the session high. aussie/dollar, 1.0378. weakness down across the board. dollar/yen at the moment, 98.82 is where you can see where we stand. we're up to the highest level since june 2009. and the pound is up against the dollar, about 1.53. that's where we stand right now. in european trade, let's recap that session in asia with a focus on japan, as well. sixuan joins us for the first time today, as well. hi, sixuan. >> japan is once again outshi
4:19 am
outshining its boj peers. the nikkei added another 2.8% after gaining over 7% during the past three sessions. exporters cheered that the weaker yen after the boj launched its very first government bond buying operations later today. securities and financial stocks floored, developers rallied nearly 6% after a 12% jump last friday on reflationary policies. but elsewhere, a mixed day of trade for the rest of asia with sluggish u.s. jobs data weighing on sentiment. in china, the shanghai composite came back from a four-day weekend ending lower by 0.6%. it's really about market jitters on the bird flu situation with airliners taking a beating. but drugmakers rallied on hopes. pharma stocks light and natural added another 3.6% after soaring 30% last week. but property plays came under
4:20 am
pressure as beijing may raise its down payment requirement for second home loans. meanwhile, property shares underperformed in hong kong on disappointing secondary housing sales. but a rebound lent support to the hang seng which finished just a few below the line. in south korea, the kospi ended down about -- excuse me, i couldn't find the kospi here, but it's down 0.4% on worries over a potential missile launch on the north. but australia's asx 200 managed to finish in the green with the sensex an hour before close is trading along the line at the moment. investors are becoming picky when it comes to emerging markets. down in the first quarter to 4.6 billion dollars. it's 27 billion in the previously quarter. check out why on plus, alcoa, as we've been
4:21 am
mentioning, officially kicking off the earnings season today in the first quarter. could it trigger a correction on wall street? some analysts say given friday's weak employment data, earnings are now key. read that. and remember, you can follow us on twitter, @cnbcwex, as well. we'll hear from a member of the opposition party in athens when we come back. welcnew york state, where cutting taxes for families and businesses is our business. we've reduced taxes and lowered costs to save businesses more than two billion dollars to grow jobs, cut middle class income taxes to the lowest rate in sixty years, and we're creating tax free zones for business startups. the new new york is working creating tens of thousands of new businesses, and we're just getting started.
4:22 am
to grow or start your business visit
4:23 am
4:24 am
i have some news out of north korea. it's pulling out all of its workers from the industrial zone. north korea suspending all operations in the kaesong industrial zone. we'll keep our eyes on that. at the same time, big bank losses in eu bailouts. although cyprus's case was exceptional, the planned bank failure law could include deposits on over 100,000 euros. at the same time, a planned merger between greece's biggest banks has been suspended prompting nationalization fierce. the deal collapsed amid concerns
4:25 am
the banks would not raise the necessary capital by tend of april. that's as much expected for us bank recapitalization which is now due by more than a year. the country's central bank said this will be completed by the end of next month and separately for each bank. a hint in this statement that the merger will not be happening, at least until then. and it's all happening as the troika expressed concerns over the banks, too, according to sources to reuters. representatives of the ecb, the commission and the backing effort back in the ecb to rescue new plans to rescue the debt history. 25,000 civil servant res on the table. these have turned into a stumbling block in the location. in agreement was reached and the finance minister samaras has resumed talks. joining us now is janis mileos. thanks very much, indeed, for joining us.
4:26 am
are we heading into another standoff with greece or not? >>el well, you know the situation is not becoming better in greece. we still have a very big recession for a fifth year. the recession is going to be more than 4 many 5%. some people say that it will be more than 5% and this cannot go on. and what we see from the side of the troika and the greek government is the continuation of the same policy which creates this negative cycle of recession, more in-depthness, more recession and more cuts which, of course, fuel the recession. so what we are saying is that we need a change of policy. we must come to a new era and
4:27 am
try to boost growth. >> what's the alternative? >> the alternative is to stop this austerity, to stop this wage cuts, to stop the overtaxation of the vast majority of the people to have a more just tax system. because you know many people -- many newspapers, even, abroad have realized now that the wealthy households are being undertaxed and the medium and low incomes are overtaxed in this creates problems even to the state revenues and this is a major problem of our budget, the state revenues. the unemployment is right now
4:28 am
officially 28% of the workforce and this is something that hasn't happened in this country since the second world war. so we have to have programs that contain unemployment and that boost growth by working also on the demand side. >> but if the troika, say, this is the plan you need to stick to it, there isn't much of a choice, is there, for athens? and we've blipged before. it's either stick to the plan or get out of the euro, isn't it? there isn't much of a middle way. >> i think this is wrong. that this is a blackmail to the greek people. we can't achieve the targets that constantly fail when these wage cuts are going on by using other means. if we change policy, if we
4:29 am
change the government, i don't -- i don't see the reason why we will not be allowed to balance the budget by means of a more just system and by protecting the people who are now at the limit of poverty or even below that. i don't think this is a limit. the troika has realized that the targets have failed constantly and a change must take place. >> thanks for your time, yiannis milios, joining us on the telephone from athens. we're going to go to break. let's just remind you where if bond yields are trading today. in italy, they are lower. we got down to the low for the year on friday, 1.67.
4:30 am
we'll have more from pimco when we come back in a few minutes.
4:31 am
4:32 am
these are the headlines. european stocks trading higher. portugal fall eggs as fears
4:33 am
about its bailout program resurface. germany urging lisbon to find fresh austerity measure pes. u.s. treasury secretary jack lew is expected to encourage -- to do more as he heads to brussels. fears of a bird outbreak hits china despite assurance from health inspectors that there's no reason to panic. plus, product delays htc posting its lowest profit ever for the first quarter. after the declines last week, european stock res up this morning. the ftse 1100 up 0.4%. the xetra dax up 0.3%. the cac 40 and ftse mib outperforming as it did last week around 0.8%. we had the latest eurozone sentiment numbers out, as well. eurozone sentiment down for a second consecutive month in
4:34 am
april because of concerns over the cypress bailout. this according to the sensex research group. its monthly index tracking investor sentiment down to minus 17.3, lowest level since last november and the weaker than the reuters consensus forecast of minus 13. bond yields, as you can see, low in italy. 4.3%. nudging up elsewhere. japanese yields steady at 0.52%. on the currency market, dollar/yen, 98.83. pretty much at the highest we've seen since june 2009. 1100 firmly in the sites os dollar/yen cross. right. germany, meanwhile, stepping up pressure on portugal to find new savings measure after its constitutional court ruled on friday that wage and pension cuts to public sector employees
4:35 am
were unlawful. the german finance minister said in a radio interview earlier that lisbon must find new ways to meet its budget goals. the comments came after portugal's prime minister said the decision had serious consequences for the country. he's insisted that the government was committed to meeting the terms of its 78 billion euro bailout, but has ruled out further tax hikes. >> the alternative to the fulfillment of the rescue program would be another bailout, extending the hard sacrifices. and that's what we have avoided. this is the reason for our political decision today. we will do everything to avoid a second rescue. >> joining us for more, andrew bowles at pimco. good to see you. despite what's happened in portugal, it doesn't seem to have had much impact on price reaction. >> this is an important issue in portugal, another example of how
4:36 am
difficult it's going to be for a country like portugal to do this kind of program and particularly the social/political problems in china implemented. but a relatively small part of the overall budget cuts and something where it looks likely they will find other ways to do that that's not going to offend the constitutional court. so important, but for now, at least, relatively contained. >> yes. this happens, we've just been speaking as the economics still don't get any better. in fact, economics are worse than many people would have forecast six months ago. and yet, you know, we seem to be fairly relaxed about that because the core of the project seems to be holding together. so how does it play out for now? >> if you look at the whole of the eurozone, not just portugal, we have seen deterioration in the outlook. pimco has long had a pessimistic
4:37 am
economic outlook. so coming into line with the way we see things. the european central bank has pledged to be very powerful and i think that's an impormpor reason with lots of disappointment. italy, big uncertainties out of cyprus and markets have been relatively well contained. but there's clearly uncertainties about what the ecb will do at the time about banking union, fiscal union, and as you mentioned, i think, you know, in some ways the most important issue is growth. if the eurozone is not going to be able to move to more reasonable economic growth, we see recession again this year. if we can't get beyond that to decent nominal growth, then all of these pressures and all of these political problems look more and more difficult. >> yeah. i mean, what has been striking about the numbers, particularly
4:38 am
the pmis, there's been a decline in france. what pressure does that bring? >> well, it's very interesting. two things. first you see differentiation in the core countries. france doing significantly worse in germany based upon forward looking indicators. but also looking at the credit indicators for lending in france. and you see the relative weakness. so that's important. secondly, if the slowdown impacts the core countries, we expect negative growth in france this year, very little growth in germany. does that then foresee the european central bank to move towards perhaps credit easing, buying credit az assets, the bank of japan announced a big plan last week. the federal reserve, the bank of england clearly is doing quantitative easing because of the political problems, the coordination problems, the ecb has held back. but it does clear weakness in the france in the core means that the ecb often with a lag,
4:39 am
but the ecb has to move to using its balance sheet to buy credit assetes and try and impact the growth situation and the clear problems in european credit markets. >> yeah. there was a suggestion last week, of course, that they might do, you know, nonstandard measures. what would the they be? >> so in terms of sequencing, they still haven't cut interest rates. it's hard to understand why, but they still have the cut the mro. they could cut another 50 basis points, 25 basis points. they could do more in terms of easing collateral standards and that may come soon. but what we would anticipate over time is probably going to take several months for maybe for draghi to build a political constituency. but to buy a broad range of credit as es, so credit loans, abs covered bonds, in order to try and impact credit conditions
4:40 am
across europe right now companies can borrow very reasonable levels in germany, but they can't in spain, italy, portugal. so trying to address the fact that the transmission mechanism isn't working, i think, is something that the ecb will do over time. but that the politics are very difficult. maybe it takes the further coring of inflation falling below target to allow mr. draghi to do that. >> okay. stay with us, andrew. we'll come back to you in just a second. meanwhile, the bank of japan officially kicked off its long-term budget cuts. makeiko has the latest on the story from tokyo. >> hi, ross. the bank of japan kicked off its new bond buying operation today. it's a core element of the new monetary easing plan announced last week. the central bank offer to buy 2 trillion yen worth of japanese
4:41 am
government funds maturing in 5 to 10 years. it waits the first time the boj bought bonds with over three years of remaining maturity. that equals roughly 70% of government bond issued every month. the aim is to double the amount of its longer term jgb holdings to 190 trillion yen in two years. tun expected massive easing measures continue to have an impact on the yen market where the currency fell to its lowest against the dollar since june 2009. it gave export urs a boost on the stock market and the nikkei rose nearly 3% hitting a four year and eight-month high on heavy volume. the weaker yen led to japan posting its first current account surplus in february with a 13% net rise in income. back to you, ross. >> thanks for that. andrew, what's going to
4:42 am
happen to jgb? it's such a volatile session we saw last week. there is a view we're going to boost equity markets and take the opportunity to get out. >> so the size of what the japanese central bank is going to do is very large. and i think the uncertainty about the impact is large. you can clearly see investors who were short, scrambling to cover positions. then also in europe, it's been interesting and more globally, but particularly in europe you've seen fast moving investors anticipating flows out of japan to other markets. so you've seen the tightening in france. in terms of, you know, high convictions you might -- my highest conviction view is that the yen should continue to weaken. if you look at the logic of what the bank of japan is trying to do these very large actions, you
4:43 am
know, it's been a long time coming. but to try and address the embedded deflationary dynamics, the clearest way for it to work is via the exchange rate channel, trying to weaken the exchange rate channel and boost export competitiveness. so i think the highest conviction view is to be short the yen currency in terms of jgbs, the levels clearly are very low across the curve, but with the japanese central bank being so aggressive, you know, don't probably fight the boj too much, as well, in terms of jgbs. >> andrew, thanks for that. have a good day and week, andrew bowles from pimco. the chinese leader has said he doesn't think china can sustain super high or ultimate a ra high growth. mr. xi expressed the need to balance economic growth with other issues. he also said the slowdown in the country's growth last year was
4:44 am
as a result of effort to control the speed of growth. profit has plunged at htc. it's been hit by-product delays and fierce competition. the taiwanese hand setmaker fell in the first quarter. a 92% drop from a year ago. it missed expectations. the htc-1, its new flagship smartphone has been hit by delays that have put a severe dent in the revenue projections. march sales down 49% a year ago. and a reminder of what's on the agenda in asia tomorrow, we've got data out of china, cpi and ppi, we've got china's beige book first quarter report. on the corporate funds, japan's sakamaie are set to report on earnings. tesco faces an 18 billion euro
4:45 am
write-down. the company's ceo phillip clark is expected to concern the wind down along the group's full year result next week. analysts are reacted favorably to the reaction. jeffries said shareholders could look forward to a return to e he ps growth and is stronger cash flow. they've placed a buy on the stock. tesco stock up at 0.9%. u.p.s. is appealing a decision to block its merger with tnt express. it says the appeal so to make sure there's no precedent to block its acquisitions. mitsubishi ufj is in financial talk toes buy commercial property loans assets from deutsche bank. the report suggested the acquisition was around $3.7 billion, would be made by a ufj
4:46 am
u.s. subsidiary union bank. and a nice one for the -- section, city roads trader nick gleason is joining ireland's gdp partnership. he's developed an infamous reputation. now he's effectively his own consultancy practitioner. in a statement, leeson said his experiences make him the right man for the job. get more on that story at still to come, russia's putin arrives in the netherlands with the aim of striking oil exploration deals. will warmer ties impact the european markets? we'll talk about it when we come back. [ male announcer ] let's say you pay your guy around 2% to manage your money.
4:47 am
that's not much, you think. except it's 2% every year. go to e-trade and find out how much our advice and guidance costs. spoiler alert: it's low. it's guidance on your terms, not ours. e-trade. less for more for you. friday night, buddy.
4:48 am
you are gonna need a wingman. and my cash back keeps the party going. but my airline miles take it worldwide. [ male announcer ] it shouldn't be this hard. with, it's easy to search hundreds of cards online.
4:49 am
we've got a bit of news out of hungary to spring you. karaly resigned effective april the 22nd. this is the central bank vice governor. she's resigning because she sees
4:50 am
bank disparity in doubt. she says the resignation signal tess gravity of the situation. there you go. now, the german chancellor appearing la merkel has held talk wes vladimir putin last night on the sidelines. reports say merkel voiced her concerns over human rights and democratic development in hush ya, but stressed the economic ties between the two nations. mr. putin is heading to the netherlands for further trade talks. this as the united states secretary of state john kerry has expressed concerns over the nuclear program that suggest it could be go on forever.
4:51 am
as a result, industry sources expect uranium crude exports to rebound in april to the lowest level since u.s. sanctions kicked in last year. according to the reuters forecast, iran will ship 1.08 million barrels today of crude this month compared to 810,000 barrels in march. how does it all play in for oil and commodity investors? harry is head of bnp paribas. a slight rebound in raining production. what is the long-term forecast for the oil we get out of iran? and what is the wider impact? >> well, i think that iran remains the wild card in the oil market from a geopolitical perspective, but also from a fundamental perspective. we're going to have tensions, which naturally can grow over the course of the summer as negotiations, like you indicated, some sold around its nuclear program. but at the same time, the sanctions on its own production will pursue and they will go in
4:52 am
ra growing manner. so in effect, we'll have to replace lost uranium's oil on the market and that, of course, is bullish for the oil price. >> possibilities for geopolitical flare-ups, what sort of faith is it putting in in oil prices? we have seen oil decline in the last week or so. >> indeed. i think iran has been off the screen. notably, the u.s. dollar has been keeping the price of oil and other commodities at bay as we have further concerns in the eurozone. but i think in the en, over the course of this year, iran is going to be a prominent feature. and we're going to be seeing how long israeli patience is going to last with these negotiations keep being stalled. what i understand from israel is that their patience may be running quite thin. >> yeah. at the same time, away from what's going on there, we have putin on this trip going to the neitherer left hand sides, as
4:53 am
well. doing oil business deals in russia hasn't exactly gone very well, but there's a willingness to want to tap into that market. >> i think, well, from russia's perspective and in particular from the from the russian government perspective, the rent they derive from oil is quite important in the finances. trying to look at means of being able to develop russian production as it comes to a -- i guess as it plateaus is not entirely surprising. the question is how willing are foreign oil companies to invest in russia given the tnk/bp venture or what has happened in eastern siberia. so while it may be inviting foreign participation, i think foreign oil companies are going to be quite cautious relative to the terms and what the russian going is going to offer. but in the end, this is a long-term development and it's not going to be affecting oil prices in the short-term. >> yeah. europe -- i mean, europe
4:54 am
security and supply of oil and gas, of course, is -- and it seems to be getting worse, is russia going to become an even more important player? >> well, i think, you know, from a perspective of global supply, what's going to be interesting is whether or not, you know, the u.s. becomes really that autonomous in terms of its oil needs as a result of domestic growth and shale production. i think it's going to take some time before the u.s. imports less and frees up oil to the rest of the world. putting that into perspective alongside the iranian issue, we're going to be looking at having europe, like other countries, seek alternative sources of crude oil and it's going to be a difficult proposition in terms of meeting the demand because we have relatively low spare production capacity in producing companies. >> we had a guest on earlier today, as well. you mentioned u.s. and shale production. we had reports at the beginning of the year that we would see wider spreads between brent and
4:55 am
nymex. those spreads will be narrowing up before they widen again. what do you think will happen? >> yes, indeed. if we look at the wti brent spread, what we believe here at bnp paribas is there has been a narrowing that's come too fast too soon. in effect, what we've seen is a narrowing of the spread as brent essentially got sold quite heavily for a number of reasons, including concerns over demand by korea ya for crude, european refinery maintenance and a few other factors. because moving the spread was brent driven, we expect brent to pick up because seasonal field maintenance is around the corner and coming up in may/june, european refiners will be again reproducing their refinery of crude. we see a widening of the brent crude spread before it narrows over the course of the year as we debottleneck curbing. >> harry, good to see you. thanks for that.
4:56 am
earnings season is off to a start today. alcoa will be reporting. carolin has the details. >> first of all, it was investments the. to grow, obviously, the company needs to invest. second of all, we're increasingly seeing costs related to the acquisition of petra foods. this is the company which barry calibaut is buying. to finance that, it's going to raise cash from shareholders and analysts says that's going to put a lot of pressure on shares in the coming months. apart from that, the company did confirm its targets for the next three years. it sees improved profitability in the second half of the year and volumes didn't look too bad in the first half. they're up by 7.8%, more or less in line with expectations. but for this year, the company still sees somewhat subdued
4:57 am
chocolate demand. cocoa prices are expected to trade sideways. global chocolate volumes are expected to grow between 1% .2%. barry callebaut is expected to grow. a very sweet set of numbers. still to come on the show, u.s. treasury secretary jack lew has landed in europe for his first official visit. we'll be back with kelly in brussels in just a few moments. "worldwide exchange" continues. welcnew york state, . where cutting taxes for families and businesses is our business. we've reduced taxes and lowered costs to save businesses more than two billion dollars to grow jobs, cut middle class income taxes to the lowest rate in sixty years,
4:58 am
and we're creating tax free zones for business startups. the new new york is working creating tens of thousands of new businesses, and we're just getting started. to grow or start your business visit
4:59 am
5:00 am
european stocks trade higher. portugal falls as concerns about its bailout program surface. u.s. treasury secretary jack lew begins talks with leaders in brussels. concerns about bird flu outbreak have hit chinese airline stocks. and product delays hit htc hard. posting its lowest ever profit
5:01 am
in the first quarter. plus, alcoa kicking off u.s. ings season. analysts are tempering expectations for the aluminum giant with prices still under pressure. if you've just joined us stateside, welcome to "worldwide exchange." u.s. futures are pointing higher after the worst week in 2013. the s&p down about 1%. the dow fairly flat, the nasdaq down 1.9% right now. we are culled higher up around 30 points for the dow. the nasdaq is called up 6.5 points. the s&p 500 currently k lly cal some 2 points, as well. that's the future. the ftse mib is the best up.
5:02 am
the spanish and italian market continuing to outperform. the ftse is up 0.5%. the fits fits 100 last week down around 11 is.6%. on the currency market, euro/dollar, near the best levels of the session, just above 1.30, 1.3012. aussie/dollar, 1.038el 3. dollar/yen, 98.89. this is now at the highest level since june 2009. sterling/cable, steady, but up from the levels we saw this time last week, 1.532037 the yen is down across the board. this as the bank of japan has continued or started its new bond buying program. talking of bond, let's recap where we stand here. ten-year treasury yields, higher today, nearly 1.72%. we've got down to 1.67% on friday, which is the low for 2013. japanese yields a little lower -- a little higher at 5.2%. italian yields still declining 4.33%.
5:03 am
that's where we stand here in europe. let's recap that trading day. the focus on japan. sixuan rejoins us. >> indeed, thank you, ross. japan once again outperformed its asian peers after the boj began its aggressive rush. the nikkei added another 2.8% after gaining over 7% during the past three sessions. exporters cheered as the weaker yen after the boj launched its very first government bond buying operations. securities and financial stocks forged today and developers rallied to nearly 6% after a 12% jump last friday on reflationary policy ones. but elsewhere, it's a mixed day of trade for the rest of rash ya with the sluggish u.s. jobs data waiting on sentiment. in china, the shanghai composite ended lower by 0.6%. it's really about market jitters on the bird flu situation with airliners taking a beating, but drugmakers rallying on hopes.
5:04 am
look at pharma stock, added another 3 much 6% after soaring 30% last week. the chinese property plays came under pressure as beijing may raise its down payment requirement for second home loans. meantime, developers underperformed in hong kong after an underwomening secondary housing sales report, but a rebound in industrials leapt support to the hang seng finishing lower just by a touch. and south korea's kospi extended a six-day losing streak, ending lower by 0.4%. in australia, the asx 200 gaineded a modest 0.3% and india's sensex is now trading lower by a modest 0.1%. back to you. >> all right. thanks very much for that, sixuan. profit, meanwhile, has plunged today for htc. it's been hit by-product delays and competition issues. a 92% drop from a year ago,
5:05 am
missing expectations. the htc-1, the new flagship smartphone has been hit by a series of delays. for more, we're joined on the line tr taipei by dennis. report quarterly low profits, how much is down to that delay in that smartphone? >> hi. thank you, ross. well, for first quarter, the sales was 43 billion, about 20% lower than company guidance of 50 to 60 billion. and most of that is due to component shortage in camera sensor and vcm or voice coyle motors, which is capping the -- for htc-1 which is their reflection model. >> why has it gotten all these shortages? >> well, for the new camera, most of the components have to be customized. so for a sensor and the vcm or voice cleo motor, right now, the
5:06 am
production is more than expected. so that's why the shimt hasn't been very, very smooth for htc. >> yeah. they did that deal with the facebook phone. what impact does that have, if any? >> well, for a facebook phone, i think the impact is minimal because for facebook phone, facebook home is more like an app rather than a phone. so for other brands, such as zte, lenovo, sony, etcetera, samsung, they will all come out with their phone that supports this app. so essentially, everyone else will all have their own facebook phone. >> yeah. also, they're trying to establish their brand image with this important flagship phone. what is their place in the market? >> well, i think -- i think they have a relatively good product. the problem is that they're losing the window of opportunity
5:07 am
because of all those components shortages. right now, sony xprzs are pretty strong and samsung has just launched and is we're going to mass production by end of april. so i think the shortest right now is really hurting their initiative to establish their brand equity. >> all right. dennis, thanks for that. good to speak to you. dennis chan at uenta securities. meanwhile, germany is stepping up the pressure to po or tu gal to find new savings measures after its constitutional court on friday that wage and pension cuts to private sector employees were unlawful. the german finance minister said in a radio interview earlier today that lisbon must find new ways to meet its budget goals. those comments come after portugal's prime minister aim to target new cuts. he insisted that the government would still meet returns of its 78 billion euro bailout, but ruled out further tax hikes.
5:08 am
>> in the alternative to the fulfillment of the rescue program would be another bailout extending the hard sacrifices. and that is what we have avoided. this is the reason for our political decision today. we will do everything to avoid a second rescue. >> and those are new concerns about portugal come as u.s. treasury secretary jack lew landed in europe. he wrapped up talks with european commission president jose manuel rosso just a few minutes ago at a round table in brussels. the reason i'm on my own today is because kelly is in brussels looking ahead on that. kel, do we know sort of the message that he's going to bring? >> well, ross, we have a sense of the message he wanted to bring, and it hits on a couple different themes, none of which will be entirely surprising. one of course is generally boosting growth .making sure the financial markets stay functioning. no small feat, by the way. we also know they're likely to
5:09 am
discuss this transatlantic free trade agreement and the prospects for that. regulation, as well, that's obviously a concern. especially the financial transaction tax. you can expect when he turns his discussion to barney in a couple minutes time, that's likely to be one area of focus. now, ollie rehn, that's who he has meetings with currently that he should be wrapping up, this goes back to an issue that is not just a concern for the u.s., but frankly for bondholders around the world, for investors around the world. and that is how is europe when it comes to resolving its bank going to handle the issue going forward? was cyprus unique snt was it not? just what's going to happen, for example, from here when there's a bank that needs to be wound down? are bond holders going to take the hit? what's the plan? what's the plan that may, ross, turn out to be something of a refrain in these discussions? moving on from that, later this evening, he'll then, of course, leave talk toes mario draghi.
5:10 am
tomorrow he's meeting with france and is spain. but the issue of portugal highlights the whole tension belying these meetings which is to say the periphery is weak, the austerity measures are not working and while government bond yields may be jumping, there's no sense that we're actually resolving these issues across europe. and that remains one of the real problems. and you have to look back at timothy geithner's visits here in the last couple of years where he kept saying to them, you node to make sure this doesn't become a broader crisis and everyone said, yeah, yeah, get your own house in order first. it's harder and ha h for europe to argue that at this point. kel, stay there. we'll come back to you. >> just a second. following that meeting today, u.s. treasury secretary will fly to frankfurt for a meeting tomorrow. in paris, he'll be meeting with his french counterpart pierre
5:11 am
mosovici. for more on that, sam, good to see you today. look, you know, we have cyprus, now we've got portugal. asset markets don't seem to be reacting a whole heap here, but clearly, we're not getting any growth going. >> yeah. i mean, when you talk to clients here in the u.s., there's a sense that we've seen very little reaction in certainly u.s. equity markets if not global equity markets from the italian elections, from the cypriot troubles. and so this weekend, when news of what's going on in portugal broke, my conversations with clients were both limited and unconcerned. there really isn't a sense that this is the proverbial straw across the camel's back. >> yeah. so where does that sort of -- where does that lead to u.s. view of europe in terms of how it's -- i mean, how is it impacting their asset allocation? >> to be completely honest,
5:12 am
people just don't care. the entire story is based around japan. people aren't talking at least to me or their asian counter parts about china. they aren't talking to me about europe. it's literally almost every conversation right now is based around japan and the prospect for further asset gains and currency weakness. >> ask, dan, if i can jump in here, guys, the real irony is, k, if you look at what the bank of japan has done, if anything, it's the liquidity there helping to support, for example, europe, the attractiveness of european sovereign debt, frankly, the euro itself. if you want to go back and argue who has had the influence when it comes to calming market, it goes back to mario draghi's whatever it takes last year. it has something to do with the walkback of comments about how banks will be treated going forward when there needs to be a bail-in and it has a lot to do with what the bank of japan is up to at the moment. >> yeah. the funny thing is, it wasn't
5:13 am
mario draghi, but it was the bank of japan that launched the omv program that has benefited peripheral yields. and you see that this morning, the spread between spanish two year and german two year is at the lowest level in two or three years, i believe. ten-year yields are coming down nearly across the curve. it's been really quite striking. >> and i just -- final point here, as well. you mentioned that there's not necessarily this imminent concern in markets and yet we are seeing a bit of pressure on portugal. we're seeing yields creep back up a little bit. and, dan, if you're an investor here and you want to at some point look for what that catalyst might be for renewed tension across the eurozone, do you see it in portugal? >> we don't. and that is not necessarily entirely reflective of my view so much as it is reflective of the quote/unquote market's view. people have decide that the periphery, at least for right now doesn't matter. and i don't want to be -- i don't want the be the old guy on the porch screaming get off my
5:14 am
lawn when everyone else isn't caring. from a trade perspective, your more attractive returns have been on the long side of the periphery, not on the short side. i don't know that portugal is necessarily, again, to repeat myself, the straw across the camel's back. >> we'll leave it there. kel, good to see you. catch you a little bit later. stick around, we have plenty more to come from you, as well. the u.n. has issued a fresh warning amid reports of another nuclear test in north korea in the works. zap technology. departure. hertz gold plus rewards also offers ereturn-- our fastest way to return your car. just note your mileage and zap ! you're outta there ! we'll e-mail your receipt in a flash, too. it's just another way you'll be traveling at the speed of hertz.
5:15 am
welcnew york state, where cutting taxes for families and businesses is our business. we've reduced taxes and lowered costs to save businesses more than two billion dollars to grow jobs, cut middle class income taxes to the lowest rate in sixty years, and we're creating tax free zones for business startups. the new new york is working creating tens of thousands of new businesses, and we're just getting started. to grow or start your business visit
5:16 am
5:17 am
and a recap of the headlines the you're just joining us, fresh fears over portugal threaten to put a cloud over jack lew's first official visit to europe. htc stumbles as profits to date report low on product delays. and as alcoa kicks off earnings season, we ask whether corporate results will be a hit or a miss. at the same time, tensions on the korean peninsula remain high after a fresh washing from the u.n. after reports of another nuclear test in the works.
5:18 am
germany's angela merkel is speaking out saying she agreed with russia that north korea must seek provocation. jim metheda is joining us now. what's going on? >> hi, ross. the latest is that the south korean defense ministry now has backed off from that earlier statement you were alluding to in your lead from another official who had said that north korea was preparing for its fourth nuclear test. the ministry now is denying that, saying that, in fact, there's no indication that north korea is preparing such a test at its test site up north, obviously trying to tamp down tension here, already high, as south korea and the whole region, really, is waiting now to see when the north korean leader kim jong unwill test fire another missile. that's expected as early as wednesday. but south korea now has admitted -- >> all right. unfortunately we seem to have lost connection to jim in seoul.
5:19 am
dan, look, one question here, geopolitical risk is always fairly hard to quantify. would you say we're low geophysical risk, high, or we just don't know? >> i apologize, i missed the intro there. no, i think we're very high. the korean peninsula right now introduced a new level of uncertainty. certainly nobody thinks that a war is going to break out anytime soon, but it's taken tension awayfrom europe and china and a number of other regions. but, yeah, i think -- and thomas freedman in the "new york times" wrote an interesting article about how this period of relative global calm has been squandered and perhaps we're entering a period that's less calm, to say the least. dan, stick around. coming up, we'll speak to a
5:20 am
guest who thinks there's a return of confidence, even in europe's peripheral. find out why right after this.
5:21 am
5:22 am
hello. we were just talking about north korea. we have a moment going on between vladimir putin and
5:23 am
angela merkel. putin saying he's concerned about the north korea escalation. angela merkel is saying europe must settle the root cause of the crisis, as well. tlg, angela merkel is currently speaking. it's still good to be the king. the typical perks package for the 1100 highest paid ceos rose 90% last year to roughly 320,000. this includes things like the use of the corporate jet. cash bonuses were up 25%. total average pay rose modestly is up around 3% to more than 14 million. there's also another bullish
5:24 am
sign for corporations. global open mist is at its highest. firms are tapping into cash reserves and investing again. joining us for more is ed, global ceo at grant sortum. now, you concluded at the end of the february. >> yes. >> so it didn't take into account anything to do with cyprus. would that have made much different? >> it might have caused some concerns in europe. but i think germany would remain strong even with the cyprus situation. it's a fairly strong economy. >> and what's underpinning this? >> yes. confidence in the marketplace. i think what we're seeing is the various stimulus programs in the u.s., japan and other markets are taking effect. and we're seeing some growth and maybe it's just build up. a lot of cash sitting in the reserves. so it's the confidence in the marketplace.
5:25 am
>> it's a funny quality, because you say we've got a bit of confidence in the euro area, of course. the defense economy on the pmis is getting worse. there's certainly no economic pick up anywhere else. it's interesting that businesses are saying they want to invest more when the actual macro picture isn't getting any better over here. >> well, it's certainly not within the uk and certainly as you point out, france is down. the uk is slightly up, but still relatively flat. but big strength in germany driving the european marketplace way up over the previous quarter. and i think it's driven by an intertwined global economy. we still see growth in india and china, big investments, huge stimulus packages in japan, driving growth there. and, of course, the united states is way up over the previous quarter. >> the u.s. is an interesting point. disappointing jobs number last week. but this investment they're going to make, plant machine, is it going to go into creating jobs or not? >> well, it's hard to tell. but that's certainly the intent.
5:26 am
jobs drives the economy. certainly what we see in japan, they're trying to create 600,000 jobs in japan. all of the stimulus in the u.s. is intended to create jobs. and if manufacturing is coming back to the u.s. a little bit, at least, that will certainly create some jobs. >> yeah. full economic health, clearly some way off. what would be the -- where you think we'llby in the next six months? the economic swooned a little whit. we seem to be in the same sort again today. do you think we are overall on a stronger footing than where we were last year? >> i certainly believe that. business leaders that we talk to believe that. but it's fragile. in the u.s., for example, the fiscal cliff resolution resulted in higher payroll taxes. they don't seem to be having much of an impact yet. but you never know going
5:27 am
forward. and the japanese stimulus program, still uncertain. china noo, growth is better than expectations were, it's still somewhat fragile. it's hard to tell, but my personal expectations are that we're seeing a turn around, business confidence, and it should be strong over the next six months. >> ed, good to see you. thanks very much, indeed. global ceo at grant thornton. we'll take a short break. still to come, u.s. stocks have rallied to new highs in recent weeks, but they had the worst week of the year last week. so was going to happen now with the earnings season? we'll preview the first quarter when we come back. [ driver ] today, my ambulance knew all about a bike accident, just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's. wiggle your toes. and it got his okay on treatment from miles away.
5:28 am
it even pulled strings with the stoplights. my ambulance talks with smoke alarms and pilots and stadiums. but, of course, it's a good listener too. [ female announcer ] today cisco is connecting the internet of everything. so everything works like never before. bjorn earns unlimited rewards for his small business. take these bags to room 12 please. [ garth ] bjorn's small business earns double miles on every purchase every day. produce delivery. [ bjorn ] just put it on my spark card. [ garth ] why settle for less? ahh, oh! [ garth ] great businesses deserve unlimited rewards. here's your wake up call. [ male announcer ] get the spark business card from capital one and earn unlimited rewards. choose double miles or 2% cash back on every purchase every day. what's in your wallet? [ crows ] now where's the snooze button?
5:29 am
5:30 am
this is "worldwide exchange." a reminder of the headlines today, european stock res trading higher. portugal has fallen as fears about the bailout program resurface. germany urging lisbon to find fresh austerity measures after a court rulings against spending cuts. budget treasury secretary jack lew is expected to do more to boost demand. delays hit htc pretty hard. the taiwanese posting its lowest ever profit for the fist quarter.
5:31 am
and alcoa is getting set to kick off the earnings season for the first rt quarter. prices still under pressure. sfla you're watching "worldwide exchange," bringing you business news from around the globe. if you've just joined us stateside, a very good morning. welcome to the start of your glaebl day here on cnbc. the s&p right now is trading 2.25% above fair value. the nasdaq is indicated about 3 points above fair vaut and the dow is about 20 points above fair value. those futures are lower than they were half an hour or so ago. the cnbc ftse global 300 is up 0.2%. european stocks, the ftse euro
5:32 am
300 is down. the ibex is up about 0.3%. the xetra dax up 0.3%. the cac 40 in paris up about 0.7%. the ftse 100 is up about 0.3%. here is a recap of what some of the experts have told us on cnbc this morning. this core paper, which is highly correlated to oet but has not been part of the trade because it's not been liquid such as austrian or dutch paper. so i think the attractive part of the curve is the five-year and the seven-year. so that can be spread out of germany or just outright, if you believe that core yields are going to go down. >> i think in near term, we could still see wti. brent recapital further, the wti benefits are improving. but i think, you know, you want
5:33 am
to look through that and outwardly sell into that. i think by the end of this year and 2014 you will again see a lighter wti spread. >> we want to have only staples and consumer plays in countries where there is a sustainable for domestic demand growth. so you don't want to be in countries where there's widening current account deficits or rising on the portfolio inflows like, for instance, south africa or at some point perhaps italy, turkey. >> sew alcoa reports results after the bell today. it's expected to see the seventh straight quarter of flat or falling prices for raw aluminum. so how is the rest of earnings season shaping up for the s&p 500? moody's at cnbc hq in the states and joins us now, siema, hi.
5:34 am
what are we looking for? >> yeah well, you know, a couple of warning signs that analyst res watching. first, the impact of a weaker consumer and the know due to higher payroll taxes and price ones at the gas pump. the slower than expected recovery in europe and here is the big one, a high amount of negative earnings preannouncements. within the s&p 500 there have been 107 negative eps preannouncements issued by corporations compared to the 23 positive eps preannouncements which comes out to a ratio of nearly five, which according to reuters will have the most negative gietance since q3 of 2001. keep in mind, analysts may be low balling estimates. earnings growth was begged at 2.9%. actual growth ended up being 3.6%. however, in ever market, there
5:35 am
are high achievers, ross, companies that are still able to deliver strong top and is bottom line growth even during periods of anemic growth. these companies, which are all in the energy space are expected to see more than a 20% uptick in revenue and earnings growth in q11. ross. >> that's what we're looking out for. thanks for that, siema. dan, how do you see it panning out? >> listen, consensus has been repeatedly bearish. we've seen earnings to drop or to come this on the weaker side. by the time earnings season is done, some aren't that bad. they haven't been nearly as bad aspectations. while the consensus is looking for a drop of anywhere from 1%, 1.5%, 2%, we're probably going to end up seeing and can we expect growth of somewhere around 1% to 3%. >> earnings growth is slowing.
5:36 am
so was going to happen? are we -- are we going to see multiple expansion to offset some of that or not? >> well, earnings growth does slow at this point of the cycle. it wouldn't be unusual. and what you've seen historically is this is the named mid cycle slowdown. where after a number of quarters during an expansion, earnings grow to double digit space. something more normal takes hold. you tend to see two things. one of which is was,s as you know theed, multiple expansion tends to pick up the slack. secondly and arguably, much more importantly, after you get that earnings slowdown, earnings reaccelerates and then that's probably what you're going to see again. i mean, obviously, the cycle is different, the federal reserve, the exit strategy and global uncertainty, but no, i mean, earnings growth slowing on its own is not a reason by itself to be pessimistic about the stock prices. >> yeah. we've had this now three years
5:37 am
in a row. now looks like we're at the 14 down where we've hit the high for the first half the of the year in march or the beginning in april and then we've seen quite a big correction. is the same thing going to happen now? what is the size correction would it be? >> yeah. i saw that you just threw up my chart that shows how relatively weak asset returns have been in the second quarter in relation to the others. i'm fond of pointing out to people, especially here in the united states, we talk about how robust the year has been to start, how great things have been. the s&p 500 in the first quarter of this year was up 10%. just last year, it was up 12%. so we had an even better gain in 2012 than we've had in 2013. now, that said, just because something happens once doesn't mean it's going to happen again. but we have now seen for three years asset returns in the second quarter being relatively weak. given how strong the year has been to start, given the nervousness about earnings and
5:38 am
the growing concern coming out of europe, whether it's cyprus, italy, obviously now portugal, i think a pause at best is probably to be expected. >> yeah. so look, a pause at best, does that mean you go defensive, then, dan? >> well, we've been positioned defensively for some time now. i mean, at least in the united states, the defensive sectors from a top down vmt have done fantastic. the two best performing sectors, as everybody knows bws bnow, is health care and consumer staples. admittedly, i'm somewhat different from what everybody else is saying in that those sectors are not leading for defensive reasons, they're leading for offensive reasons. but that's an interesting story right now. traditionally what you would do at this point in time if you were nervous would be to rotate in sectors traditionally classified as defensive. you can't really do that because valuations are looking stretched
5:39 am
and on a nominal absolute basis they're leading the charge. quite frankly, i think you just stick with what's worng r working if you're nervous about the near term. >> dan, stay there. we'll talk about banks in just a second. with that countdown of alcoa on the way, find out why analysts are saying werings are becoming more important. follow us on twitter or on the window, two u.s. senators are draft ago bill to require the biggest u.s. banks to hold a lot more capital. the measure from republicans david vitter and democrat shared brown would also reportedly toss out the basul 3 rules. banks with more than $400 billion in assets would have to hold 15%. under basul 3, some regulators have called too complicated. dan, if this gets any traction,
5:40 am
what does it mean for bank investors? >> well, the first thing you said there is the optist sentence, which is if this gets traction. we're -- i'm not under the impression right now that this is a bill that we should be particularly worried about. it's obviously something to pay attention to, but i don't think that this becomes the force of last right now. but taking a step back from this particular piece of legislation, for financial investors and bank investors more generally, we're living in a period of time or greater fiscal and can government intrusion into their operations. and one thing that we've seen quite clearly is ledgit laters around the world forcing banks to hold more capital and derisk their balance sheets. and whether this particular bill in its current incarnation passes or not doesn't really matter to me. the general trend towards, for lack of a better word, safety is going to continue. >> dan, have a good day. have a great week. thanks for joining us this morning to kick it all off.
5:41 am
>> thank you. still to come on "worldwide exchange," the battle of the skies takes flight in mobile, alabama, today as airbus breaks down on an assembly line in the home country. phil lebeau joins us with the story when we come back. acceler-rental. at a hertz expressrent kiosk, you can rent a car without a reservation... and without a line.
5:42 am
now that's a fast car. it's just another way you'll be traveling at the speed of hertz.
5:43 am
5:44 am
it's a pretty big day for airbus today. the company is breaking down on its assembly plant in alabama. that will make it a commercial aircraft manufacturer on u.s. soil for the first time. our very own phil lebeau is there and he joins us on the telephone. phil, how significant sh? >> it's incredibly significant, ross. for the first time, north america, it's not that they've struggled. but i think that they would look at this market and say we can do better. the gain of american airlines as a key customer buying the a-320 neoand placing that large order that we saw two years ago, that was a significant step. now they would like to go further and say we need even more orders here in north
5:45 am
america, but we need to further ramp up our production of narrow bodied jets. as a result, by putting this plant in mobile, alabama, adding about 1,000 jobs, pumping 600 million into this new plant here, they believe that it accomplishes two things. one, it gives them the production capacity that they're going to be needing over the next five to seven years and, two, it is going to help them not only in the commercial market here with north american airlines, but also when it comes to gaining military contracts in the future. remember, they pretty much had the tanker deal here in the u.s. lined up, locked in and at the last moment, it was awarding to boeing with an offer that many in washington looked at and said is that the best offer available or should we have gone with airbus? at the end of the day, because boeing manufacturers in the u.s. and was an american company, that was a key factor for them winning that contract. so airbus believes this accomplishes two goals by
5:46 am
putting this plant here in mobile. >> good to see you. plenty more to come from phil throughout the day. thanks for that, fill. catch you later. meanwhile, a recap of the headlines, as well, if you've just joined us. fresh fears over portugal threaten to cast a cloud over the u.s. treasury secretary jack lew's first official visit to europe. taiwanese smartphonemaker htc tumbles as dealing with phone delays. and we ask whether alcoa's earnings will be a hit or miss for wall street. carl icahn refuses to go away. "the wall street journal" reports the investor won't drop the option of a proxy fight with dell, forcing the company to pay a big dividend. icahn has asked dell's special boards committee to be reimbursed for the kofz of the
5:47 am
due diligence. the board says it would consider the request if icahn drops his threat. icahn told the journal he's considering a range of options. stock in frankfurt, pretty flat. macy's and jcpenney will head back to court today in their dispute over which retailer has the right to sell martha stewart products. a month ago, the judge put the dispute on hold ordering the companies into mediation. a decision in the favor of macy's could leave it woeshlly with a lot of interests in its home goods section. ib inbev and the justice department are nearing a deal to settle the company's planned $20 million takeover of mo did he lo.
5:48 am
the suit was filed in january. it was said the deal could mean higher u.s. beer prices. inbev originally proposed selling off its stake in modelo to constellation brands and has since sweetened that offer. ab inbev up 1.6%. still to come, investor must feel like they're on something of a roller coaster ride. swinging in losses in gains day-to-day and hour to hour. we'll look at what might this week's market action when we come back. all stations come over to mission a for a final go. this is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one. standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it.
5:49 am
siemens. answers. ♪
5:50 am
[ male announcer ] how could a luminous protein in jellyfish, impact life expectancy in the u.s., real estate in hong kong, and the optics industry in germany? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 75% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. european stocks up currently, the ftse 1100 up
5:51 am
0.3%. xetra dax and ibex up 0.3%, as well. the cac 40 in paris is up 0.7%. wage and pension cuts to public sector employees were deemed unlawful in portugal. portugal's prime minister vowed to target new cuts amid the court decision. those renewed concerns about portugal come as the u.s. treasury secretary jack lew lands in europe today, for his first official visit to the region since taking office. he wrapped up talks earlier this morning at a surround table in brussels. and that's where our very own kelly is. that's why she's not with me on set this morning. he's wrapping up talks today. how different is his message from what the previous treasury secretary aes message has been? >> ross, i don't think the message is any different. the difference is how it might go over with europe. back when tim geithner was doing his visits other here in 2012
5:52 am
1k3 especially late 2011, the europeans were very much on the offensive pointing to the global financial crisis and saying it was an indictment of the angelo american model and theirs was a better way forward. i think it's hardtory make that argument this time around. the message is likely to be a reiteration to address its own issues for the sake of the rest of the world. but, again, it might fall on somewhat more inclined ears, you might say. just to circle back, as well, to the comments, i know viewers have been writing in saying that it's extraordinary that shoibele is telling portugal what to do. but if germany had is holding the funds, germany ultimately has the power. it is a lack of a real strong leader, the fact that jack lew is going to four separate meetings this morning to meet with european leaders that is the real problem here. until there is one person or more centralized power in europe, this is the kind of rhetoric we're going to keep hearing and it's very possible,
5:53 am
as well, that you'll continue to see the disaffection of a lot of the population, especially across the periphery, which feels ultimately they're being told what to do. >> it's interesting because last week we had the german finance minister saying growth is what we need. at the same time, the message is you've got to stick to the austerity plan pes.we have the fiscal supplies haven't worked out like anybody expects. how do people sort of say you have to do -- you have to take the prescription and talk about getting groeth going and then what about -- where are the policies here? they seem to be colliding. >> and so what you're talking about is going to be raised at the euro group. they've already given explicit approval to many countries, including spain, including france, now probably portugal. ireland has recovered a little bit. but basically giving these countries permission to run bigger deficits than they had
5:54 am
initially said were okay. so if the policy you're running effectively is to say, well, actually, it's okay, it's okay, we'll give thaw space as long as you're making these reforms but what it really amounts to is something completely different, that's a problem. and by the way, if in the case of portugal, if they ultimately have to continue giving portugal funds without implementing some of these austerity measures that are said to be so important, wa messages does that send to those countries that have made those adjustments? this is the problem with policy making on the fly. >> kel, plenty more to come. thanks for that. our viewers have been reacting to the issues surrounding the bailout program. this may just be the bright new feature of a brave new world according to herman. secretary lew meanwhile has a pretty busy itinerary ahead of
5:55 am
him. tonight he's meeting with mario draghi. 20e78 he'll speak with the german finance minister and after paris where he meets his french counterpart. that's whag goes on with lew. meanwhile, as far as the agenda in the united states today, investors gets reports on retail sales prices. cleveland fed president sandra pianalto speaks this evening sxt tonight at 7:15 p.m. they will be speaking, as well. alcoa reports results after the closing bell today. the company is forecast to earn 8 cents a share. that's on revenue of around $5.9 billion. it's expected to see the seventh straight quarter of flat or falling prices for raw aluminum.
5:56 am
and other companies reporting this week include jpmorgan, wells fargo, bed, bath & beyond and peer 1 imports. overall, earnings for the s&p 500 are forecast to rise 1.6% in the first quarter. that according to thompson reuters. so where does that leave us with the u.s. futures? we are called higher at the time moment. the dow is currently called 25 points up, we're currently calling the nasdaq up around 4 points and the s&p 500 at the moment is currently called up around, what, 2, 2.5 points. finally, professional sporters and all it's about the money seems to be spending on the field. collector will pay a pretty piece of money for historic memorabilia. case in point is this rare wagner baseball called sold for $1.2 million at auction this weekend. it's being called the holy grail of cards. coming up next, "squawk box"
5:57 am
on the countdown of the opening to markets this week. whatever happens, have a positive positive day. interviews with clause kleinfeld a little later. we've reduced taxes and lowered costs to save businesses more than two billion dollars to grow jobs, cut middle class income taxes to the lowest rate in sixty years, and we're creating tax free zones for business startups. the new new york is working creating tens of thousands of new businesses, and we're just getting started. to grow or start your business visit
5:58 am
5:59 am
good morning. u.s. equity futures point to go a positive start on wall street amid questions that maybe, again, it's deja vu all over and the economy might be entering a soft patch. a number of key event toes watch this week, including the official start of earnings season, minutes from the last fed meeting and continuing worries over north korea. it's monday, april 8th, 2013 and "squawk box" begins right now.


info Stream Only

Uploaded by TV Archive on