tv Worldwide Exchange CNBC December 12, 2013 4:00am-6:01am EST
hilton's ipo, the second biggest offering this year. and facebook is joining the big boys' club. the s&p taps the newest member of the s&p 500. display you're watching "worldwide exchange," bringing you business news from around the globe. >> it's thursday, the 12th of december. you're watching "worldwide exchange" and it's good to talk. well, not always. coming up on the show a little bit later, 10:40, you've got to tune in as we talk to a car pooling company who puts commuters together based on how much they want to chat. how that works out, i have no idea, but we'll find out. stocks in the u.s. have had their worst day in more than a month ahead of next week's fed meeting. are we at a tipping point? has santa disappeared? we'll be over in boston for a
view on what happens next at 11:30 cet. ten minutes later, we take you for an interview with michelin, north america's ceo, pete sellick. hilton worldwide is making its debut during 2013. but first, russian president vladimir putin is currently delivering his russian state of address. so far, putin says he sees no reason to abandon the spending he made last year. he's also blamed the economic downturn on domestic causes. joining us for the first part of the program today, charlie morris. also with us is melenko,
emerging markets economist at capital economics. charlie, welcome. nice to see you. is putin right to say that despite the downturn, we shouldn't revise economic priorities or is he wrong? >> well, it's an interesting question because it's russia. it's like the economy has slowed for reasons, it seems spending more is not going to solve the situation. but at the same time, zasz the fiscal policy would be completely impotent. there are ways he can use his policy to help the economy pick up. but it could be much, much more difficult than when the government and the economy helped. it's going to be much, much more difficult this time around. >> the economics reports, down to 2.5% from an original 4%
mark. are they don't that to put pressure on other parts of the government? and what sort of reforms are necessary? >> i think it's a combination. on one hand, you have the fed and the economy wants to draw attention to the fed that the economy has slowed. it's not going to -- anytime soon. at the same time, i think it's a growing acknowledgement within government circles that we are now to get used to slow growth in russia. and aside from the concerns, it's because the economy is there. it's going to be much more difficult this time around and if you look at that, investment is very, very weak. so what you need to do to this investment and website the business environment and the things we need to do to improve that.
>> the problem is breaking through that wall. when they succeed. it seems me that that's really the government of the nation, isn't it? what recommendations would you make to the policymakers? >> well, you're exactly right. russia does have a great potential. the only limitation is that the environment is so difficult. so you need to look at things like investment. that's whyvestors are so weak. structuring protection for investors, property rights. so to make the investments more -- to encourage businesses and companies to invest.
>> and do you feel they're going in the right direction? >> it's difficult to say. on the other hand, of course, it's yet to be seen whether they're going to do something about it. we've seen this in the past when the government says, yes, we need to change things, we need to structure property rights. so it is yet to be seen whether this is going to happen the. >> just on this side, the president intends to sign an eu deal. president putin said he hopes ukraine finds a political solution to the current crisis in the country. and we've heard from mr. azaroff that ukraine will be in the next negotiations. they are negotiate with putin, as well. it's important to get that information. >> i think the key is nobody really knows what's going to
happen because ukraine is in a difficult position. the economy is very weak. they have a very large growing deficit. they need to do something soon, otherwise -- >> you would sign a joint eu/russian deal, wouldn't you? >> the eu doesn't want it and russia doesn't want it. >> difficult spot. rock and a hard place. thank you very much. it was nice to see you, joining us from capital economics. now, a fight has erupted in georgia's parliament this after lawmakers were urged to adopt a resolution in support of ukraine's opposition. a member of the party stood up forcefully from his seat and kicking the other member of parliament in the legs. a violent brawl ensued. it's not quite like the house of parliament, charlie.
>> yes. it's very different than here. >> okay. >> that's democracy for you in some parts of the world. >> right. where are we with global equities? we have an hour and seven minutes into the trading day. take a look at this hot of the heat map. you can see we are weighed below the flat line. in fact, decliners outpacing advancers here by a ratio over 8 to 1 on the dow jones stoxx 600. yesterday the ftse was down 15 points. we had the biggest one-month drop in equities, as well. the ftse at the moment, down 0.4%. same with the xetra dax. the cac 40 fairly flat. fortum selling a power grid to a consortium of investors, the price, $2.5 billion.
metro shares are higher in frankfurt, up 3.13%. it said it's aiming for significant improvement in profitability, as well. ribs down 1.1%. this time to settle transactions with iran, sudan, burma and cuba. and we talked about peugeot. stock down 7.6%. one of the worst performers in europe. stephane is in to tell us why. hi, stephane. >> hey, ross. we have three announcements from puto citron. the first one is a profit warning. they're going to take a charge of 1.1 billion euros because of the negative currently effects in russia on latin america. second announcement is regarding the existing partnership with gm and peugeot have decided to scale down their alliance in
order to make room for future partnerships. they've decided to disrupt them together. although they will continue the two existing projects. as a result, the synergy results have been revised to prepare for a target of $2 billion. and last but not least, peugeot is concerned that its negotiations with a chinese carmaker, including capital hike, that should lift the share price. but there's a question mark about the price of the operation. peugeot will probably launch a capital increase of 3.5 billion euros. and according to reuters, the price should be below 7 euros per share, which is significantly lower than the lowsing price yesterday, about 40% lower. that's a reason why we have such a negative reaction on the share price. profit warning, a deal with general motors and still a
question about what's going on with dongfeng. >> stephane, thank you very much. ten-year treasury yields, 2.849%. we'll see what happens with that. a big auction on the 30-year. euro/dollar, still around 1.3781. we're not far away from the 1.3830 high of the year on euro/dollar. dollar/yen, back below 103. the recent month high is around 103.40. and sterling, just still on this 1.64 mark, as well. just off the two-year high around 1.6440. that's where we are in europe. only one person to bring in right now, here is sixuan. >> thank you, ross. the shanghai composite ended just a tad lower and the spike in november social financing
raising heightening concerns. and the china export outperformed today on reports that beijing is making plans to lift restrictions of refinancing for these tech start-ups. and do know that the index is up by about 80% so far this year. while hong kong markets slipped by 0.5% to a poor weak flow due to weakness in financial stocks. but a very different story for two pharmaceutical groups, both priced their shares at the bottom of the range and shares still down by about 6% and 19% respectively from their issued price. elsewhere, the nikkei 225 lost 1.11% today, dragged lower by future selling, while the dollar/yen was trading about 102.50 in asian trading. south korea's kospi hit a three-month low down by 0.5%.
australia's asx 200 lost 0.5% despite november jobs data. the u.s. was seen as paving the way for an early fed taper. that's where australia metals and gold miners tumbled in today's trade. down by 4.3% and bhp billiton lower by 1.7%. thanks for that, sixuan. catch you a bit later. we talked about a tax bill earlier this week which had gone from $340 million to $3.4 billion for nokia. back to the uk, royal bank of scotland has agreed to pay $1 million to settle u.s. probes into illegal transactions with iran, sudan, burma and cuba. rbs shares today, lloyds 20 odd
million, as well, for poor selling. meanwhile, the co-op group has appointed paul myners to the board. and helia is with us in the studio to talk about that. i was shocked at how much lord myners is asking to do this job. i know. it's a big paycheck for him, a whole one pound. >> relief. >> i'm not sure how he's going to invest it. >> a savings account. >> it will sit along the 30 odd million that he's already earned famously. he was citi minister, he was very critical of ethics through the banking industry throughout the crisis. and he left the government to say that he was actually leading spiritual development, he was going to study theology, going
to find god. so out with one methodist minister and in with a former citi manager who did find god. i think it is a bit of good news today. lord myners is going to lead this review into governance. >> actually, there is a new management team in place. and it is problem is one of perception rather than -- he said the hold isn't that big financially. so they just need to make sure savers keep using it, right? >> yes. they're lucky in that most of us are incredibly sticky bank account users. even when things go wrong, very few of us knew. but i think there's been a lot of reputational damage and they're going to have to convince people to stay with the co-op banks. but hopefully this is the beginning of a new chapter. >> yes. until we get all the results and
all the reviews. >> also, you mentioned numbers. it's not clear that co-op bank is heading for a very easy 2014. >> we all have to pay our christmas bills in 2014. for now, helia, thank you. china mobile is beginning to take preorders. but a deal between the company hasn't yet been announced. what on earth is going on? we'll head over to beijing to find out. [ male announcer ] the new new york is open. open to innovation. open to ambition. open to bold ideas. that's why new york has a new plan --
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unfreezing nokia's assets through india, it's come with a demand. they've been requested to pay around $160 million. the indian court says nokia would be jointly lible for its taxes that are due. nokia is down 1.25% at the moment. to china and china mobile has apparently started taking preorders. apple's iphone 5s on its
website. but as yet, a deal between the carrier and the smartphonemaker hasn't been announced. after being contacted by cnbc, the website offerings has mysteriously changed. eunice is with us in beijing. does anybody think is deal is being discussed, being negotiated? we've made the calles and you've done your best. what is going on with this website today? >> i know, ross, it is very, very curious that china mobile on its website said it's taking preorders for iphone 5ss today. customers were able to get online, get a deal on data now that china mobile has a fast speed 4g service. also on the website itself, there are pictures of golden apple, pictures of what appears to be iphone 5ss and what was interesting was the link. because the website link actually specifically says iphone 5s. now, we contacted the company,
china mobile, and after we talked to them, the link changed. it changed to a generic term. so the company itself says officially they're still in negotiations with apple, but a deal is not done. it's a very curious situation, ross. >> yes. so look, i mean, what do we think is going to happen, eunice? what do your analysts say? i mean, is a deal a certainty or how much of a ratings certainty is it? >> i think it's very close. that's what a lot of people have been telling me. a deal is going to happen. all the signs are pointing in that direction. and this particular situation with the website is the latest sign. we've had some other -- we had another situation in shanghai where we saw one of the websites for china mobile.
we are talking about preorders for the iphone as of today. and because of all of this chatter, some believe that a deal between apple and china mobile is very close coming. the question is how many sales for apple will be generated once this deal is done. so far today from the preorders, it's looking pretty good. already, there are over 14,000 preorders. >> that's okay. it would be deeply disappointing if we don't get something. eunice, that's about the clearest shot i've ever seen behind you. i mean, i can actually see something in the background. no smog today. >> i know. it's miracle of miracles. it's finally looking quite crisp. i was checking the beijing air
monitor and it said that it's double the amount that the w.h.o. -- pollution that the w.h.o. actually -- not recommends, but says is a limit for most people. most maces would be upset at that level of pollution, but here in beijing, it's like blue skies, sort of. >> thanks for that, eunice. the iphone market share in china has soared. head to cnbc.com for more on how apple could its market share in mainland china. follow us on twitter, as well. as the holiday season continues, one company which is expecting its busiest festive period, it's long sharing service blah, blah car. the company expects to transport 1 million people over the holiday season.
but the business pairs drivers and passengers based on how talkative they are or aren't, as the case may be, i'm get guessing. frederick manuella joins us at 10:40 cet. so we want to know what drives you mad? do you get enranled with a chatty back seat driver or is there something else that makes you want to slam on the brakes? meanwhile, it's down over 25% this year and some believe gold could dip further in 2014. what is your view now? >> well, the bull market ended in 2011-12. there was a very clear top in late '11 in dollars. it was a sort of double top. it happened again the following year.
we're now in a very clear bear market. we continue to believe that gold is going down. i think the last five gold bond markets, the average correction is 48%. so that takes us down to the 950,000 level quite easily. but the average time is about two years, just a little over two years. in fact, late next year, late 2014, $1,000 is approximately the time fresh target. is this sort of evidence to -- it up? >> last night, we saw the first big outflow. actually, the gold is seeing many institutional rather than priorityist investors selling. it is by working that slowly they start to sell. so i think etf outflows are very
important. physical demand on the coincide is down significantly. and yes, china is very strong. but the shanghai premium is interesting to watch there. the difference is the price of shanghai and here is very low. and it's finished 30 or so. that's usually a short-term. >> maybe some people who were buying global are selling. and switching over to bitcoin. i don't know. what do you think of bitcoin? >> if you think about bitcoi bitcoibitcoin -- >> you think about bitcoin in the market. >> gold is not money. the currency is designed to depreciate. gold is not designed to depreciate. there is bitcoin, for that matter. it has more in gold than anything else you can compare it to. it's a very interesting space.
if you mention the genetic engineers created a new species and it's in the amazon jungle, this species has in no time thrived and become the king of the jungle and it's there to stay. >> really? i would expect a painful readjustment at some point. >> i'm not going to get into the price because i couldn't have a clue. but i think the concept is a done deal. >> charlie, stick around. more to come from you. still to come, no change from the snb. we'll discuss it against currency markets in just a few moments.
>> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> announce headlines from around the globe, russian president vladimir putin insists he'll not pull back on spending plans despite a bleak outlook for the economy. an indian court order has ordered nokia to pay a $360 million down payment in response
to a tax bill. peugeot citron has been downgraded from the gm partnership and plans for a capital increase all weighing on investors. hilton worldwide returns as a public company after pricing its ipo, the second biggest offering this year. european equities are down. we had the worst day for months for u.s. equities last night. the ftse 1100 down 0.5%. the xetra dax down 0.3%. cac 40 is fairly flat and the ftse mib is down 0.2%. the ten-year auctions yesterday, treasury down 2.84%. and on the currency markets, euro/dollar, not far away from the highs of the year at the moment at around 1.3774. the high for the year just around 1.3830. at the same time, the swiss
national bank has decided to keep its cap on its currency at 1 euro 20 francs. it maintains rates near zero as analysts expecteded. joining us, paul robson. no surprise from the snp. how long do you think they'll have to keep this peg in place for? >> well, i think while growth in the euro area remains weaker and it's all about nominal growth and the problems about repaying and servicing debt in the periphery and also in the semi core, there's always renews in switzerland. i think from the snb's point of view, they would have hoped swiss would be higher by now. the fact that it isn't, i think,
means that it's very watchful and very -- not wanting to move away for the foreseeable future. >> what does this tell us, bearing in mind that euro -- you're not far away from the year high against the dollar. it's up near five-year highs against the yen. what does it tell us when the euro is doing okay against the other g-10, that it's seriously under pressure against the swissy? >> i think the theme during the second half of 2013 with all european currencies doing a little bit better and i'm sure that the swiss bank has just benefited as much as elsewhere in the euro area. i think it's underlying concerns. i think people have been very reluctant to give up on their long held view. ultimately, the ecb will be easing policy. that might have come a little slower than the market had expected. but with inflation very weak and the recent data in europe fairly weak, as well, i think people
are right to think that 2014 will see easier policy in the euro area and, therefore, reluctant to get out of the swiss franc into the euro. >> how do you see the safe havens now? if we were to go into another problem at some point in the next couple of years, like 2008, but i'm not making that forecast. i'm saying if we were to have a problem. where do you see the safe havens in the currency markets these days? >> well, i think the ones still that benefited earlier in the year and in sort of 2012. i'm sure the swiss franc will do relatively well. given the market positions in the dollar/yen market, i'm sure the yen does pretty well. the currencies that may not do quite as well as they have done in the past, maybe the nordic currencies where their domestic economies are slowing now and the interest rates are going
lower, they still tick all the right boxes. i just wonder whether people will be reluctant to go into those again. we talk about the swiss franc, the dollar and the yen at this point. >> and on the other side of that question, where would you really not want to be if there was stress inspect market? >> well, i think the euro might come under quite a lot of pressure. i think it's also, you know, the currencies of asia where they benefit or have taken advantage of very low monetary policy rates in the states and maybe not as reformed as quickly as the market had hoped where the current account imbalances have been wisening because domestic demand has been kept high because of loose monetary
policy. we still think the data like turkey, south africa, india is the currencies that will come under most pressure. also the liquid emerging markets and sometimes people sell what they can sell, not necessarily what they want to sell. and those currencies, also, it's called quite highly on the ability to sell them in terms of the crisis. >> paul, thank you. good to see you. have a good day. now, ready, set, hold. no fewer than four central banks in asia today didn't do anything with rates as policymakers contemplate the rising odds of the u.s. fed tapering sooner rather than later. bank of on indonesia upped rates 175 basis points since june to shore off its currency. but indonesia's trade balance
has since stabilized. the kiwi today, dollar, signaled a rate hike may be on the card for the first half of 2014. china's cinda shares are down currently. the offerings is the biggest in asia since november last year. bodes well for other potential floats in the sector. anti-government demonstrators in thailand are trying to sway those in uniform to their cause. the protest leader is asking military and police to meet him tonight to pick sides. so far, the army has promised only to mediate while staying clear of politics. tensions are running high as the protest leader was indicted on murder charges. and the latest round of sam
slung versus apple goes to apple. south korea's court has topped out psalm sung's bid to ban sales of older iphones and ipads in the country. apple career spokesman said the allegations had been ridiculous in the first mace. and in indian court has order nokia to pay a $366 million down payment for disputed back tax bill but has an exchange release froesen assets from the company. what does that mean? joining us is malvika payne. thank you, malvika, for joining us. what does this mean in terms of the size of the bill? >> well, basically, the total tax liability of nokia is still at issue.
what the court has said today is -- and it's something that is going to impact the nokia/microsoft deal. nokia india will be able to transfer its plant to microsoft and with regards to these terms and conditions when the court has laid down, one being that nokia will have to deposit $225 rupees in an escrow account. once the deal with microsoft goes through, if the sales proceeds are higher than that, that amount will have to be deposited in an escrow amount because the tax authorities have been claiming that nokia's tax claim, that the liability, could exceed 20,000 rupees in those terms. and finland's tax liability as far as claims against nokia, india will be confined to 3,500 rupees. this is a dividend amount. as far as microsoft is
concerned, the court has decided microsoft will not have to pay any tax in finland as far as the tax liability res concerned. but if at all in future there is a default by nokia and nokia finland, then that i.t. department will be able to approach the court and seek an appropriate order. >> thanks so much indeed for that. japanese prime minister shinzo abe holds a meeting tomorrow. meanwhile, october's revised industrial output will be out. we have more now from the japanese capital. hi, yukako. >> hi, ross. following yesterday's closing bell, it warned net profits for 2013 are expected to fall 6%
year on year, a big decline from its previous forecast of a 28% net increase. this is the second downward revision in just six weeks. market players are dumping the stock on brokerage houses. nitto denko shares finished the day down 20%. opponents are falling on oversupply of lcd panels in the chinese market. this also sent shares of other lcd related firms tumbling today. nitto chum kal dropped 4% and fuji fell more than 2%. that's all from the nikkei business report. back to you, ross. >> thank you for that. we'll take a short break. still to come, if you feel there aren't many things worse than a taxi driver, stay tuned for our next guest. [ male announcer ] the new new york is open.
that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses... we're open to it. start a tax-free business at startup-ny.com. yep. got all the cozies. [ grandma ] with new fedex one rate, i could fill a box and ship it for one flat rate. so i knit until it was full. you'd be crazy not to. is that nana? [ male announcer ] fedex one rate. simple, flat rate shipping th the reliability of fedex.
inflows to reaches like the uae. it's about strength within the sector. the global islamic economy summit in dubai. and joining us now. yusef. >> good to see you, ross. remember, dubai is still the top regional safe haven. if you look at dubai's benchmark stock exchange, it's almost doubled so far this year. remember, as well, that when dubai won the right to hold the world 30 expo 2020, all it did was boost the ongoing rally even further. now dubai has its eyes set on becoming the center of what it call tess global islamic economy. i sat down with mark mobius from franklin templeton investments to get some perspective as to where dubai figures in comparison to the rest of the region. >> saudi arabia is the biggest market. and if they open, they could
become a real breakout nation. but right now, obviously, the uae is the place to be. >> earlier in the week, a report was published shoed showing that dubai's property market was still the fastest growing in the world outpacing hong kong, china. but mobius was confident the situation was under control. the government has been inducing regulatory changes to try to cap the exuberance and to avoid the bubble bust that we had back in 2009. now, remember, as much as the united arab emirates was upgraded, you have countries like greece that happen downgraded to emerging market status. mobius says it may not really be a downgrade. >> injury seeing them begin -- and i say begin to grasp the reform agenda. i told all the greeks that they've been upgraded to
emerging markets. >> that is just a little bit of a preview, ross. i'm fought going to give it all away. it's a fascinating conversation and you can catch it on access middle east tonight. we talked pretty much about the entire world, all the opportunities out there. this is a man who overseas $53 billion in assets under management, also known as the indiana jones of emerging markets. we get down to the details in egypt, the outlook there and also perhaps some exotic more adventurous markets in sub-saharan africa. so definitely worth your time, ross. i know you for one will make it. >> oh, yes. i have it on permanent.
access middle east tonight at 2300 cet. mario draghi says he sees no deflation in the eurozone. the situation is different from japan in the 1990s. but they're aware of the downside risks that low inflation poses and we have plenty of instruments. we're in the middle of a modest gradual recovery. do you think the ecb will do more next year? >> you know, i can't comment on that. >> fair enough. now, when is it not good to talk? that would work here. one travel business has realized when some love a conversation on a long call, many people can think of nothing worse than a chatty back seat driver. blahblahcar is now up and running in ten countries in
europe. it's a ride sharing business. it pairs up drivers and passengers based, on other things, on how much me like to talk on a jurn journey. it has revved up to several more than 1 million europeans over the festive period. frederick is joining us from paris. do you really pair people up based on their social conversations or is it not based on tomorrow i'm driving from leon to paris, do you want to join me? >> yeah. the first is obviously the travel you want to do and at what time you want to do it and for what price. but also the fact that you can say if you are blah, blah or blah, blah, blah, improves the experience you will have on the trip. so it's more for social figures than for selection. >> how do you work out what the
price is? >> the driver says how much they want to get. based on that was the passengers will choose that trade and say i want to depart from this point and be arriving at this point. so it's really based on the price, the people you will meet. you have all the criteria you have to choose and then you get in contact with the driver. >> what is the average hour for that? >> the average, like how much chatty the people are? >> right. for a journey. >> the average price is in between 20 and 25 euros, so that will be 15, 20 pounds. it depends on the distance and it can depend on the type of car. when you have a luxury car, the price may be more expensive and so this is a -- and the average car is, what, 2.8 people.
so the average trip is generating 40 pounds of something per -- per dreefr. >> yeah. per driver, takes about two passengers, then he will be roughly 20 pounds per -- so it's 40 pounds per trade. and the average is 213 miles. and the car occupancy is nearly 2.8 people compared to 1.7 without ride sharing. >> so it strikes me this is a long distance thing and also is it led by the car and the driver or is it led by the person that wants to go somewhere? what i'm asking is are taxi drivers jumping on the bandwagon and making money or is it about car sharing? >> it's really about car sharing because it's for long distances, as you said, so we are not at
all competing with any taxi service. it's on a long distance basis so it's to go from london to manchester or to go from paris, it will be trips from 200 to 500 miles. so it's not competing with the taxes. >> okay. and you have to have real people, i know you authenticate them and trust so there's this feedback measure on people that give you a lift. i suppose that you don't want to get into a stranger's car and have bad experiences. i suppose that's very important. what do you want to do with this business, frederick? are you going to grow it and sell it? what's the plan? >> for now, the plan is really to grow it. the service started in france and it's working very, very well. the population in the community right now is in europe and it's growing very, very fast. right now, the service has been
extended already in spain, italy, germany, the uk and all of our european countries. so for now, the goal is really to make this activity as a new transport network in europe. we're already transporting nearly 11 million passengers per month and transporting nearly 1 million passengers ahead of the period. so the goal fund is to grow the activity because we have a very successful model. >> frederick, thanks for joining us. i am actually -- the one thin about that is you get rated after every trip. >> isn't that a brilliant idea. hitch hiking. i used to hitch hike when i was about 14 or something. i don't think you're allowed to do it any more. >> hitch hiking is free. >> but this is sort of an electronic version of this. >> it is. i'm just worried about -- you
know, it might make everybody better drivers, right? if you know you're going to get rated -- >> you're going to get another rating, aren't you? >> well, there is that. >> i'd be in all sorts of problems on that one. so we've been asking you what drooifs you mad. john tweeted passengers who changes radio and air-conditioning to their liking without asking. absolutely. don't do it. now, it's been a tough season meanwhile on the pitch manchester united. but its shares are taking a hit from the david moyes effect. the head manager has taken a $22 million short approximation on the devils stock. shares in the club are still up 20% over the last year. at the same time, english premier league footballs are paid well, 28-year-old
manchester united striker wayne rooney to be the wealthiest english born player. he could help you out with that charity deal. >> he could. the invitation that i'm offering to you for next tuesday, it's very simple. the operation smile is my favorite charity. and they had a carol service last night, very successful, lots of celebrities turn up. and there's one on tuesday in the city. if anyone would like to buy a ticket, it's operationsmile.org. we've got lucy kelerway, we've got sir clive woodward and michelle usain. >> that's your chance. >> and ross westgate, as well. >> yeah. can't say what i'll be doing,
but anyway, you never know. that's good, charlie. leave us with a couple of investment sorts. how are you viewing going into next year? >> yeah, well, i think the stock markets had a phenomenal years. america is clearly the most extensive market, but they have the best story. >> better than japan? >> sure. but with japan, most of that money -- you've got the currency hedge. so it's a slightly different story. it hasn't really been about the alpha or the outperformance. and, you know, the european markets have had a good rally. japan has been really cheap and recovered. you can see the daily flows. and it's all going into the good stories in the u.s. but i think what we're starting to see just now for the first time is a good story and a bad story. we've got the cloud computing and all the other exciting things that are happening.
so i think if you're a hedge fund manager, there's plenty of bad things going on. and you just pointed out, i'm sure there are probably easier for hedge fund managers to find a short idea now than 20 years ago. >> charlie, good to see you. >> thank you very much. >> i will try and pop along if i can. thanks very much. charlie morris, head of equities return at hsbc global asset management. still to come, is good news actually bad news once again? market dragged negatively to the u.s. budget agreement. we analyze how fixed income investors should be reviewed. and ahead of the fed next week. the second hour of "worldwide exchange" is coming up right after this.
you're watching "worldwide exchange." the headlines, hilton worldwide returns as a public company today, the second biggest offering in the u.s. this year. facebook joining the big boys club, the social networking giant has to be the newest member of the s&p 500. an indian court orders nokia to pay $366 million in down payment for the suited back tax bill. in return, it's unfreezing its
assets. and hold the look, russian president vladimir putin insists he'll not pull back on spending plans despite a mreek outlook for the economy. and if you've just joined us in north america, a very good morning to you. u.s. equities had their worst day in a month wednesday. the s&p closing down some 20 odd points, the dow down 129. right now, the dow is currently up around 8 points. the nasdaq is up 8 points above fair value. the nasdaq is currently up 5 points above fair value. the s&p 500 at the moment is around 2.5 points above fair value. the ftse cnbc global 300 has been down around 0.2%, as you can see. yesterday, the ftse 100 is down
some 15 points. it's currently off 37, down 0.5%. as is the xetra dax. cac 40 is fairly flat. we had just drifted slightly lower over the last 30 minutes or so. a number of individual stocks we're looking at today. one of the biggest gainers in europe is fortum up 4.5%. it's selling a power distribution grid to a consortium of investors led by first state investment. the price pack, $2.5 billion. metro shares, the german retailer up 1.8% at the moment. its met it's guidance for operating the earnings for the first nine months of the year and is now looking for improvement in possibility over the next year. rbs, on the other hand, the british bank has to pay $100 million to settle u.s. probes into illegal transactions with iran, sudan, burma and cuba. it's down 2%. the biggest decliners today, though, or notable decliner is
puj peugeot citron. what on earth is going on? stephane has the details for us out of paris. stephane. >> we had this morning, ross, a couple of announcements from peugeot citron. the first one is a profit warning. another one, the carmaker is going to take a charge of 11.1 billion euros to reflect its weaker outlook and because of currency headwinds in latin america and also in russia. this is going to widen the operating loss for the automotive division, which was a possibility at 510 million euros for the first half of the year. the second announcement is regarding the alliance with general motors. the two carmakers have decided to sail down their alliance. they will cancel future development projects, although they will continue the two existing projects together. but as a result, they have lowered their synergies target to $1.2 billion for the full year down from the previous target of $2 billion. there was a third announcements, ross, the possibility to boost
the share price. peugeot confirmed that it's holding negotiations with dongfeng, the chinese carmaker. although there is no guarantee that the negotiations will be successful. but we have a report saying that the -- that dongfeng could take a 20% stake in peugeot citron. but at the very low price, we're talking about less than 7 euros per share. that's a significant discount compared to the share price of yesterday evening and that explains why the stock is nearly down 10%. over to you. >> not the best day for shareholders. >> 9%. >> stephane, thank you very much for that. let's show you where we stand with bond yields at the moment. particularly treasury yields back here. yield at the moment, 2.84%. up to 2.85% yesterday. the ten-year auction yesterday was fairly tight, but clearing some space out today for a very large 30-year auction. keep your eyes on that. on the currency markets,
euro/dollar is not that far away from the highs for the year. the high for the year just over 1.3830. dollar/yen, just below 1.03. sterling, not far away from the two-year high around 1.64 against the dollar. that european trade, sixuan rejoins us for a recap of what's going on in asia today. sixuan. >> thank you, ross. asian markets followed wall street lower ahead of the fed position. and the shanghai composite sought consolidation despite the renewed liquidity fears. and the nasdaq stock outperformed after lifting restrictions for these tech start-ups. do know the index is up about 80% so far this year. hong kong markets slipped to a four-week low due to weakness in financials. but that said, china asset
management enjoyed a 26% jump in its $2.785 billion u.s. ipo. also the biggest float in japan and asia this year. already priced at the bottom of the range. elsewhere, the nikkei 225 lost 1.1% today, dragged lower by future selling while the dollar/yen pair was trading about 102.50 in asian trading. the kospi hit a three-month low, ending down by 0.5%. and australia's asx 200 extended a six-day losing streak, ending lower by 0.8%. the u.s. budget deal was seen as paving the way for an early fed tapering. metals and gold miners tumbled in today's trade. australia's fortescue shares tumbled by 4.3% and bhp bill ton by 1.8%.
ross. >> thanks for that, sixuan. have a good evening in singapore. the u.s. house is expected to vote on the bipartisan two-year budget deal today. they're mostly falling in line behind the gop leadership. the house cleared the measure by a 9 to 3 vote, setting it up for debate and a vote on the floor of the chamber today. and president obama's reportedly expected to nominate stanley fisher to replace janet yellen as fed vice chair once she takes over for ben bernanke. fisher has held top posts at the imf and world bank. in the 1980s, his students including bernanke, mario draghi and summers. he called the upon buying program, dangerous, but a necessary move for the u.s. economy. joining us with his thoughts on credit is kevin corrigan. thanks very much, indeed, kevin,
for joining us. do you have any views on the implication of stanley fisher -- >> yeah. i think in fixed income overall, whether it's credit or sovereign ded debt, actually, we've been guided by sort of the larger hands of qe. and to that end, actually, the markets are focused on the next stage of this development turns. and i suspect that what might happen is people will focus less perhaps on tapering, clearly front and center on headlines and more on forward guidance. >> that's what the fed would like. but there is -- now this as a fisher comes. >> quite clearly, it caused confusion. largely. but what i want to -- what i think will happen is that unlike in the summer of this year, that first stage process and the
management of that process was largely articulated rather poorly. i think that's largely behind us. we're cognizant of the fact that we're still in a world where nominal debt in the sector and in the developed world are very, very high, in a world where inflation really isn't an issue. the idea of sharply higher rates is one that we think we should entertain. >> it's highly valued and quite explode. >> nominal yields are as low as they've ever been. look at the competition of the european high yield market. the development of that market, it's now 270 billion euros. but a lot of that has been the result of sovereign downgrade risk.
financials now represent 25% of european high yield. prepsoriasis, they were only 5% and that's simply been a function of being downgraded for one sector, high grade, into high yield. so the risks are, i think, clear that the composition of the high yield market, a lot of the yield still there comes from risk with financials. that's about 25 billion euros worth of debt. so you have to tread carefully i think in high yields. >> in fact, one would argue it's one of the fundamental reasons why someone stunts the world.
you come by it unbelievably cheaply. is that era finishing or if it's not, when does it finish? are companies going to scramble to do some more deals in the last few months? >> i think we'll see some of that this year. i think as well as financing costs being very low, wage costs are very low. i don't think the financing issue is going to suddenly deteriorate for companies just yet. i think there's still structural supply and demand balances that support the ongoing interest in corporate debt even at relatively yield levels. >> for high grade investors, it's potentially really interesting real return, inflation is falling, you have a nominal yield on a three and an
eight. and a company for a lot of people with stable large cap company. >> do you think what has benefited corporates, people look at the cost basis and low borrowing costs. is margins the only way down? >> i think it's the shareholder return rather than the debt holder return. >> central banks have sort of engineered those. so i think we're moving away a little bit from that. i think we're going to see that more actually rather than through debt destructive m&a. you have lots of lowly rated companies looking to aggressively equate high companies. >> we're seeing a lot of that. some argue they're the best performers.
>> managed doesn't really know what else to do with their money. that's the one worry he would have. >> the macroeconomic input to the return rather than the credit or the company's specific input. the environment, it doesn't feel like companies are at the point the animal sxeert is returning. >> briefly improving as we -- >> well, we see that improving, i think. i think we generally see that in the u.s. rather than europe. >> that said, it was in items of spread. >> thanks for joining us. some of the other stories we're following today, facebook is going to join the s&p 500 index
after the close of trading on december 20th. it's going to replace teradine in the s&p 500 and the williams company in the s&p 100. the move comes after facebook reported its fourth straight profitable quarter. a criteria that s&p uses to determined eligibility. jpmorgan is reportedly close to a settlement over the bank's relationship with bernie madoff. a tentative deal would involve around 2 billion in fines and a rare deferred agreement. jpmorgan is being assaulted for turning a blind eye to madoff's ponzi scheme which cost investors nearly $2 billion. madoff had a two decade relationship with jpmorgan before his arrest in 2008. and ford motors reportedly
plans to press alan mulally for a decision on his furp plans as speculation announces he may be offered the position at microsoft. the issue will be discussed when the board meets in detroit today. he's reportedly amongst a handful of candidates still in contention with microsoft and hasn't tried to dismiss talks that he is interested in the job. ford motor company down around 0.8% in frankfurt. and a recap of the headlines, hilton worldwide is raising $2.34 billion in its ipo as it makes a return to the market. just a year after its stock market debut, social networking site facebook is joining the s&p 500. and in exchange for a payment of a $366 million tax bill, india agreed to unfreeze nokia's assets. still to come, it seems investors are turning more
attention to u.s. and japanese equities. we'll look at the trends and the money flow in a moment. ♪ [ 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 70% 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. open to innovation. open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses... we're open to it. start a tax-free business at startup-ny.com.
position on the red devil stock. manu currently sits in a lowly ninth position in the premier league after alex ferguson steps down as manager after more than 25 years in charge. shares of the football club listed in new york are 20% over the course of the last year. at the same time, english premier league football is amongst the bed paid in the world. and a poll by wealthx has found that 28-year-old manchester united striker wayne rooney is the wealthiest fwlish born player. and we were joined earlier by blahblahcar, the car sharing service with a difference. it pairs passengers and drivers based on how talkative they are. we've been asking what bad habit in a car passenger drives you mad. olu has written in to say hands dangling in through car windows while on the move. person nigh says what gives him road rage is people driving slowly in the passenger lane and not signaling lane changes.
yes, that is rather annoying and potentially dangerous. get in touch with us on "worldwide exchange." you can e-mail us, email@example.com, tweet @cnbcwex or direct to me @rosswestgate. still to come, will next week's fed meeting giving equities a santa claus rally or will it leave traders saying bah humbug? hi honey, did you get the toaster cozy?
futures suggest we might tick a little higher at the open, the s&p he 0.5%. 2.5 points for the dow, the nasdaq up 4 points. neither here more there at the recent moment. the next guest says it's all about japanese equities absorbing the falling interest in gold and commodities. steven, good to see you. thanks for joining us. yeah. when the nikkei i suppose is up 50% in yen terms, and the s&p is up 25%, it's very hard, i guess, for a fund manager to keep money in falling commodities in gold. >> yeah. that's really been the story, particularly the second half where it's been very much a momentum trade. so i think you've seen the u.s. continue to attract a lot of money, even though valuations arguably have reached levels where they're becoming a little
bit stretched, particularly given how high corporate margins are. but we're definitely seeing some of that rotating in europe so europe has been the story over the last six months. >> which, you know, it's hard to know whether that's justified. there has been a marginal change in growth rates. it looked to be in recession compared to an improving germany. i don't know how that gets reflected in the flows. >> yeah. i think it's reflected to the extent if you just look at where the discount was going back six or nine months between european equities both historically and relative by the equity markets. we've closed some of that discount. so i think what we've seen so far is a rerating of european equities back for more the normal area where crisis isn't imminent. the next question is do earnings follow through to justify where valuations are heading. >> and there's that sort of massive debate. do you have a view on that? >> i think earnings should be good. i think some of the estimates are getting a little bit high.
i mean, growth is going to be very mixed. so it's going to be positive. but, again, as you mentioned, france and italy are struggling with competitiveness, particularly with the likes of germany and some of the competitive changes we've seen in the likes of spain and are very much different from what we're seeing here in the uk. i think it will be positive, but the bigger questions around the bank's stress tests, the bigger questions around how does the recovery become a sustainable recovery is still very much out there. >> and look, clearly, this year, all the central banks still have their biggest open. we've launched forward guidance. whether it's the fed, the bank of england, the ecb, the bank of japan have all been doing their best. are we going to get the more divergent central bank policies and if so, how does that work? >> i think we will. one of our key themes is that central banks are starting to die verge at the margin.
you clearly have qe replacing forward guidance. the uk has done that, the bank of japan is doing the other way with expanding its balance sleet. so i think that's going to be a key driver for volatility and rates markets. the challenge you have if you're the ecb, just look at the strength of the euro or the uk and some of the gilt market is that actually correlations with treasuries are very high. so it is hard for those central banks, particularly the ecb to try and divorce what is required for a sustainable recovery in europe from where the u.s. is in the cycle because, clearly, we're in still very different parts of that -- >> whatever happens, you say look, monetary policy remains communicative. >> i think it does in general. >> therefore, what does that do for flows when you look at it? >> yes. i think in general we'll see a cognitive monetary policy. but i think we will see a lot of rate volatility within that. so what does that mean for flows? i think we see a continuation of actually going into 2014 along the trends we've had recently which means in equities still
some more money to go into europe, still some more money to go into japan, potentially some reallocation into emerging markets at the for instance and be very din republicanate aed in terms of countries. and i think a fixed income is still very much for areas like high yield financials in europe. >> how big a chance that growth is better than we would expect? >> if led by the u.s., i think the u.s. is the one area where we think there could potentially away growth breakout if you have some smooth, political situation relative to what we had this year. again, this leads to the challenge that central banks have, which is navigating what the effects of policy ultimately looks like. and that's going to be difficult. >> steven cohen, joining us from ishare. we have some news, the banks in slovenia need 4.758 billion euros worth of recapitalization. and that would take government debt to around 75.6% of gdp.
this is "worldwide exchange." the headlines today, health and worldwide returns to life as a public company after pricing its ipo, the second biggest offering this year. facebook is joining the big boys' club. the social networking giant tapped to be the newest member of the s&p 500. an indian court ordered nokia to pay $266 million as a down payment for a disputed back tax bill. in return,s its assets have been unfrozen. and hold to look, russia's president putin insists he will not hold back on spending plans despite a bleak outlook for the economy. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. a very good morning to you in north america if you've just tuned in. u.s. equities had their worst
performance in a month yesterday by the close. the dow was off some 129 points. right now, the futures are suggesting that we are now going to open down. they have turned around a little bit. we're now some 8 points below fair value. the nasdaq at the moment is just above fair value and we're pretty much just below for the s&p 500. global equities ahead of the open have been down. the ftse cnbc global 300 down 0.3%. and european equities have been softer. the cac 40 is down around 0.2%. now, we are down at the session lows, as well. the xetra dax is off 0.5%. the ftse 1100 do you know around about 0.8%. here we are in the second week in december. what are investors to do? particularly with the fed next week? here is a recap of some of the guests we've already had. >> right now, my pick is yonder. it is the domestic leader in search as well as one of the emerging players in e-commerce.
this is a company that has been around for 12 years so it's not a start-up. generates significant amounts of cash flow. >> does it make money? >> it makes a lot of money, actually. >> specialist coming out, we've got a lot of the materials place coming in, so we've still got kns over in germany. constituents, it's separation to see one of those sees a pretty significant short interest. you know, really kind of over the last crop of ipos, looking at some data yesterday. we've got twitter coming in as one of the hot shots, the shorts, seeing a pretty heavy -- in the last few weeks. >> a topic right now would be a very similar company. many with the explicit strategy to sell down roadway over a defined period of time gives you
the potential for capitalists. facebook is going to join the s&p 500 index after the closing of trading on december the 20th. the company will replace terradine in the index. companies in the s&p 100 index, as well. the move comes after facebook reported its fourth straight profitable quarter in october, a criteria s&p uses to determine eligibility for the benchmark u.s. index. facebook as a result up more than 4% after hours in the state and up over 4% currently in frankfurt. jpmorgan is reportedly close to a settlement with u.s. authorities over the bank's relationship with bernie madoff. a tentative deal would involve around $2 billion in fines and a rare criminal action or a so-called deferred prosecution agreement. reports say jpmorgan is being faulted for turning a blind eye to madoff's ponzi scheme which
costs investors $2 billion. and ford motors board reportedly plans to press ceo anl mulally for a decision on his future plans. speculation is that he may be offered the ceo job at microsoft. the decision will be discussed when the board meets today. it's not clear if mulally is going to attend. but directors may talk to him this week or next. mulally is a handful of candidates in contention and he hasn't tried to suggest he is or is not interested in the job. still to come, health and twitter makes its return to the market. we'll take a look at the ipo and find out later what it could mean for the hotel change. ♪
joining us is peter sillick. pete, good to see you. your ninth in south carolina. what do you like about this state? >> well, we've been in cycsouth carolina now for 40 years. we started in the mid 1970s. we've made over $5 billion of investments here over the last 40 years. and those investments have paid off extremely well and that has motivated us to continue to invest. today, we're opening a brand new facility here in anderson county, south carolina. we're making these larger earth mover tires as you can see over my shoulder. and these earth mover tires are interesting because 80% of what we're going to produce here in the united states will be exported to the rest of the world. not only is michelin building plants here, but we're building this in the rest of the world. it's a great story. you theoretically could have built this plant somewhere else, right? if you weren't in north america, where would it be? >> you're exactly right.
when we analyze where we're going to putplants, we certainly can build them anywhere in the world. but our strategy is to build our passenger car tire and our commercial truck tire plant in the markets where we're going to be selling the tires. but in the case of our specialty division, such as the either moving tires, we create global bases and in the case of earth moving tires, we have one plant here in south carolina. we have the critical mass of people necessary to operate this and we have great people here in south carolina. >> skills is one thing. how much are energy costs another factor? a lot of german firms are complaining to the government about, look, we are at a competitive disadvantage to america because of the difference in energy. is that a key factor for you staying there? >> well, the entire infrastructure is very important when you're setting up a manufacturing plant like this. and you're exactly right.
energy costs do play a key role. the energy future of north america has changed dramatically in the last five years. north america is projected to be energy independent by the year 2020. and that certainly is keeping the cost differential for energy between the united states and the rest of the world very competitive. and that's one of the reasons why you're seeing a lot of manufacturing coming back to the united states at this time. >> how much do you believe in the reshoring concept? >> well, in the case of our industrial, we have seen clearly that a number of plants closed from 2000 to 2010. but we seem to hit bottom during the crisis. and now we're recognizing the limits of that. assuming labor costs are an issue, but certainly the cost of logistics and our particular is industry moving a tire like the one over my shoulder is very expensive. in the case of passenger tires, we have installed them in the
local markets. 80% of our growth in the industry will occur in emerging markets. but we're creating certain global basis and we're going to the best places in the world where we can find to manufacture. in the case of earth mover tires, right now for michelin the place is in the united states. >> so you need to be close to where the consumer is. that would seem to be clear for manufacturers. in terms of michelin's capital investments in the state, what happened to the climate to keep you investing? >> well, as i said, we clearly, first of all, look at where market growing is going to occur. that's the first factor. and we're seeing obviously in the emerging markets as classes are emerging and as more and more consumers are going to buy cars fo rt first time, that's where we're going to build plants. we have two plants going into china, a plant in india, a plant
in brazil. but at the same time, it's very important for us to keep our customer base strong and in certain cases growing. that's our strategy. it's worked for us for 40 years. that's our strategy as we move forward. >> the currency makes or currency moves, do they -- how much do they weigh into a decision? >> well, currency factors are important. and one of the reasons why we try to balance our manufacturing in the markets where we're selling our tires is to remove that currency risk. so that's a factor. in the case of these global tires, obviously, these earth mover tires, we are going to be exporting from the united states and the dollar exchange rate with our currencies is a factor. but that's not factor one. factor one is the ability to have access on to a good workforce, to have access to infrastructure, and to be able to to know that the investment that we're going to make is going to be able to be sustainable over the next 40 to 50 years. >> good to see you. one of those earth movers, how
big are they? how much do they weigh? >> well, the earth mover tire behind me is the largest tire in the world. it stands 13 feet tall. it weighs about 11,000 pounds, 5.5 tons. it's a huge tire. it goes on large mining and construction equipment in mines. and these large tires allow the mines to go to larger size trucks to dramatically improve the reliability and productivity. there's a lot of innovation and technology in those tires. that's what our customers are looking for. very few companies have the technology michelin has and it's working very well for us in this particular segment. >> thank you for joining us this morning, pete. now, hilton is checking in meanwhile at the new york stock exchange today. the hotel operator is pricing its ipo returning to the ranks of publicly traded companies after a long absence. bertha has more details for us
at cnbc hq. imagine if you had a doughnut the size of that tire, bertha. >> you know, as i was looking at it, i was thinking, why do you believe ross probably wants father christmas to bring him that this year. although it would be a big give away under the tree. >> maybe. >> meantime, our producer, adam, says who wouldn't want one of those? i guess it's a guy thing. meantime, hilton worldwide is returning to the public stage pricing its ipo at $20 a share. that's within the expected range. the company raising $2.34 billion giving it a market cap of just over $19.5 billion. that makes it the second largest u.s. ipo this year, behind oil pipeline operator plains gp holdings which raced $2.8 billion and ahead of zoetis and twitter. blackstone took hilton private in 2007 for nearly $27 billion
including debt. the financial crisis hoot soon after. timing was not their friend, leaving the company facing a huge debt pile due to both the reduction and the buyout which hurt business. blackstone refinanced about $13 billion of hilton's death. it will still hold a 76% stake in the company after the ipo. that means blackstone is on course to more than double its investment. hilton was founded back in 1919 by congress. hilton included such well known hotels as the waldorf astoria and hilton hawaiian village in honolulu. it operates in 90 country wes 672,000 rooms worldwide, 523,000 of those are in the u.s. that makes hilton both the top hotel company in the world and the united states.
ipo will be coming as the u.s. hotel industry, actually, continues to recover along with the economy. the dow jones u.s. hotel index has risen nearly 30% this year. another blackstone backed company raised another 5.5 billion last month and the firm is planning an ipo for its la quinta hotel chain. you know what i wish, though, is that they would give some of their hilton honors members just a few bonus points to celebrate. just saying. >> put it out there, see what happens. not a bad idea. bertha, thanks for that. good to see you. coming up, as well, we have a guest who says after an initial pop, we shouldn't expect the stock to rise that strongly over the next few months. stay tuned to find out why. hilton worldwide is raising $2.34 billion in its ipo. just over a year after it
hit the stock market debut, the social networking site facebook will be joining the s&p 500. and in exchange for a payment of a $266 million tax bill, india courts agreed to free up nokia's assets. open . open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses... we're open to it. start a tax-free business at startup-ny.com.
[ male announcer ] this december, experience the gift of unsurpassed craftsmanship at the lexus december to remember sales event. some of the best offers of the year. this is the pursuit of perfection. brian reynolds joins us now. first up, we got a comment that stanley fisher may be joining the board of the fed. what does that mean for investors? it comes at a time when we're wonder wlg they're going to taper or not. >> well, i think he said that he's in favor of tapering sooner rather than later. i think yesterday stock market investors came to that same conclusion. i know that stock investors are
scared of tapering, but credit investors really don't care. they know that we've survived the end of qe1. we'll survive the end of qe3. so any pull back in the stock market is going to be brief before buybacks, fueled by the credit market, take share prices back up. >> yeah. i was going to say, you said look, credit is behaving as though the s&p 500 is well over 2800. so the implications are that we've got to close the gap. how do you close the gap? stocks going up or credit falling back? >> probably a little bit of both. i think we've seen the bottom for interest rates. i think they'll be biassed to go higher over the next couple of years. i know that scares stock market investors. but credit booms, credit led bull markets become more intense after yields begin to go up. so i'm actually looking forward to a tightening and a tapering. >> let me explain the reasoning. is that because people --
issuance goes -- is that -- i think companies might rush to issue more because they think, well, we're getting the end of the cheap money. >> companies would like to issue more because of that very factor. they think cheap money is coming to an end. but i'm looking take it from a buyer's perspective. our nation's funds are overfunded. they need to make 7.5% a year every year. as rates go up, they have losses on their bonds. that makes them invest for afwresively to take advantage of the higher yields. so the higher the yields go, the more flows we'll see into the credit market. that means more cash goes on to corporate balance sheets and that cash gets used to buy back shares which has been listing the stock market higher the last four years and that's going to intensify over the next number of years. >> does that mean we will be unphased by the add vice president of tapering as long as
it comes with a forward guidance that says rates are staying low? >> well, i think we will be -- not totally unphased, because i know equity investors will sell it. they sell every event we've had over the last four years, whether it's the end of the first qe, the second qe, whether it was a grid default. but if you have a longer term time frame, anything more than, say, two or three months, it's more likely that stock prices will be going up because we're seeing increasing flows into the credit market. it's ironic that yesterday while stock investors sold off fairly heavily. the credit market actually improved. >> okay. brian, thanks for that. just stay around. may get one thought on this final story. we're going to talk more on what happens with hilton today. joseph joins us now. what do you think, how much of a pop, joseph, do we get with hilton today and then what happens? >> i don't think we get a big
pop because it's a very large deal. 111.25% on the market. the market themselves look a little volatile here, especially the russell 2,000. and from my expectation, it's probably a pop of 3% to 4%, if at all. >> yeah. then why would it sort of then trade -- and there's a lot of people that come out with equities and say we've got it at a neutral. why do you think that's the case? >> well, the case is that europe is neither a value nor a growth stock. it doesn't really grow exponentially or strongly. its core business doesn't at all. and it really doesn't -- isn't a value stock, either. it does not pay any dividends. and so what type of investors are going to buy the stock right away? i believe what's going to happen is it's going to trade sideways for a while. there will be huge overhang.
and then maybe after two to three years, it's going to, you know, take off and actually starting to outperform the market. but is for the time being, i don't think it's really a place to put your money in this type of stock market conditions you're going to see. >> are we going to see more or just increasing more ipos? it's been a -- it's a target rich environment at the moment for, you know, private equity groups to offload assets they've had for a long time. >> yeah. i mean, it really -- the hilton ipo, you know, marks the end of a blockbuster year for u.s. ipos here. are we going to see more? absolutely next year growth, private equity, branch of capital backed ipos all lined up. but at the beginning of the year, we will be on the chinese ipo market. as more h-shares ipos are going to go public. >> just bring you back in here, brian, are you interested in the
ipo market, or not? >> i am because it's -- more shares are being issued, which might potentially be a november for the stock market. however, buybacks work in these ipos. the hilton ipo only raised about $2 billion. in just the last four days, we've seen over $11 billion worth of buyback announcements. so as sexy and news worthy as these ipos are, the real issue is in companies buying back their shares. >> brian, good to see you. thanks very much indeed for joining us. brian reynolds from rowsenblack securities. joseph, thank you, as well. >> thank you. and don't forget, stay tuned to cnbc because christopher nesetta, c the ceo of hilton hotels will be joining the "squawk on the street" team at 10:00 a.m. eastern to talk about today's location. coming next, "squawk box" the countdown to the opening of
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good morning. more data today. will retail sales put markets back in the holiday mood? facebook gets a big like from s&p. i don't really -- is that something you do on facebook, andrew, you like something? >> hashtag it. >> that's hot. hilton hotels is returning to the ipo market. blackstone made over $8 million. it's thursday, december 12th,
2013. "squawk box" begins right now. >> hey, "squawk box," that's hot. >> good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. and we do have a big show ahead with a crazy lineup of guests. we have the executive chairman of consumer products giant darden. martin frankel, irwin simon, tom naratir and michael dell. plus, we have the latest addition to our lineup. paul ryan will be our special guest at 7:40 a.m. eastern time. his budget deal drawing a lot of fire from fellow republicans. we'll get his answer to all of the critics out there. right now, let's get to our top stories. the markets are about to get another read on the strength of the markets. we've got a weekly jobless claims coming up at 8:30 eastern time. economists are looking for 320,000 claims