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tv   Worldwide Exchange  CNBC  December 19, 2013 4:00am-6:01am EST

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this is "worldwide exchange." i'm ross westgate. the headlines, stocks in europe and the u.s. cheer the fed's decision to taper its bond buying program. while sources signaling short-term rates are still going to remain low for a long time. banks doing very well. a more mixed reaction, of course, but the taper timeline adds dollar strengths against the aussie and the yen. given a solid decision. and shares. >> saab, much higher after the
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swedish company wins a jet deal from brazil. rivals boeing and eads get snubbed. reports suggest kiev has missed out on a considerable eu aid package. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. warm welcome to you. u.s. stocks posting their biggest rally in two months, the dow closing at a record high up 292 points, nearly 2% higher at 16,167, cheering the announcement from the federal reserve they're going to taper their asset buying program by $10 billion a month commencing in january. the federal reserve taking the first step towards unwinding this unprecedented era of bond buying. steve liesman has the details. the federal reserve in a significant news, surprising
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markets somewhat by reducing the amount of quantitative easing by $10 billion a month, equally of $5 billion of treasuries and mortgage-backed securities, but providing strong guidance that interest rates will remain low through december 2015. fed chairman ben bernanke explained his move today. >> our modest production in the pace of asset purchases reflects the committee's feeling progress has been changed. we will likely reduce the pace of securities purchases in further measured steps at future meetings. >> bernanke suggested the fed would reduce the $85 billion of monthly qe in measured increments. it sounded like about $10 million a month reduction depending upon the economy. he said the course of reductions is data dependent. but he also said when the fed hits the 6.5% unemployment threshold, which the fed said it would raise rates, no, that's
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not going to happen any more and the fed giving substantial guidance that the fed would remain on hold once they hit the 67.5% unemployment rate. >> i expect it will be some time past the 6.5% before all of the other variables that we're looking at will line up in a way that will give us confidence that the labor market is strong enough to with stand the beginning of increases in rates. >> all of that means bernanke later said rates could remain at zero through december 2015. the senate is expected to confirm bernanke's replacement janet yellen. bernanke was asked if yellen supports the program and he said that she fully does. so little change expected in the program for tapering and keeping rates low later on today by the outgoing chairman ben bernanke. back to you guys. >> steve, russelling up the details here. we're weighted to the upside, just 30 stocks out of the stoxx europe 600 in negative
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territory. shows you how much we're weighted up. and the stoxx europe 600 up 1.4%. last night, the ftse 100 closed pretty flat. just up 5 points. this morning, it's up another 60, nearly 11% higher. we've got retail sales coming out in just under 30 minutes. xetra dax, cac 40 up 1.5%. ftse mib up 1.3%, as well. in brussels, european officials backing a deal to create a bank resolution plan. credit suisse up 2%. santander up 2.25%. these are typical average gains across the sector. take a look at bond rates. how high would bond yields push high. treasury yields, 2.87%. that's kind of where we've been for most of the week. so just a little bit higher from where we were this time yesterday. but not necessarily a scary
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place. now, as far as currency markets are concerned, euro/dollar has come back down. euro/dollar down to 1.3677. this time yesterday we were down 1 is.3760. dollar/yen, just below 104. the highest since october 2008. and sterling/dollar, yesterday we hit a fresh two-year high, 1.6486. that's come back to below 1.6370. this is the commodity reaction. gold actually relatively muted move. 1203 is where we stand. down 11 .2% today. gold is off 27% this year. copper having the worst day in around three weeks. now, what may help copper out is there is a consensus here that potentially you could offset the dollar strengthening with the
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back. maybe there's a consensus that the economy is going to do better next year. nymex up slightly at 97.84. that's where we stand in trading in europe. let's recap that session in asia. only one that can do that for us. sixuan joins us out of singapore. sixuan. >> thank you, ross. at the end of uncertainty helps lift most dollar sentiment in asian markets. japan and australia outperformed on currency losses against the greenback. the dollar/yen pair was soaring past five-year highs and the aussie/dollar slipping to about 3 1/2 year lows. the nikkei 225 ended on near its year-to-date high up 1.7% and the asx 200 had its best day since july, ending higher by over 2%. meanwhile, continuing to support south korea's kospi, ending just a touch higher. but china markets were the market's laggards yet again.
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is shanghai composite ended an eight-day losing streak down by 1%. lingering with credit concerns weight on financials and developers. and the seven-day interest rate and money bank jumped as the pboc skipped into the markets for the second straight week. the mainland weakness dragged the index lower by 1.1%. but the taper didn't dent investors appetite for ipos. stocks surged 44% from an issue price leading a back of trading rights into the city. this may body well for china's ever bright banks tomorrow which is the biggest of the year. >> thanks for that. we're joined by a man who said
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the fed would taper at this meeting. >> good to see you. well done. >> thank you. >> there weren't that many people that were prepared to stick their neck on the line, particularly before the jobs report. >> if you want accurate monetary policy forecast, don't go to goldman sachs, go to amplified trading. >> there you go, and with your huge research department. >> yeah. >> actually, another house got it right, but they didn't come on air and say it. >> there you go. >> what was trading like around this yesterday? tlchz so many different positioning. >> an hour after the statement at 8:00 p.m., the dollar treasuries, gold were all trading back at exactly the same. i mean, exactly the same prices they were trading just before the statement. having gone through huge
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volatility, euro/dollar dropped, reversed and reversed back to where it started. so i think only equities had a consistent initial reaction. and this is because, really, the two things that have happened here. as we were expecting, the fed have taken away with one hand by tapering 10 billion, which is a bit more than i thought they would go with. so it's a bold step and i like it. i think that they've shown leadership here. i think that their credibility is enhanced in my eyes with this decision. but then they've offset it by altering forward guidance subtly, but it's important alterations. so previously they've had the unemployment threshold of on 6.5% as being the guide as to when they may well look at raising rates. but they've changed that now and bernanke said that the unemployment rate would need to drop well below 6.5% before they look at rates and secondly they've added -- we might hear
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that 6.5% at the same time they finish tapering. >> yeah, right. >> putting up rates at the same time. >> importantly, maybe even more importantly, they've added inflation into their forward guidance, which wasn't there before. so now they've said that we're not going to raise rates. rates will stay around zero until inflation moves back up towards our target. now, they're not expecting that until maybe the second half of 2015. so, really, that's the message. rates will stay low until the second half -- >> and the medium fomc forecast suggests the rate will end at 1.75%. so is this now investors or stocks at least now understand that is what's now important? >> yes. >> they finally -- well, it's taken us seven months to teach ourselves that. >> yeah. >> we've got it, have we? >> i think the fear of the taper crippled everyone in the summer. it was that fear of the unknown.
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but i think -- yeah, over those seven months, i think this idea has become less dramatic and somehow -- and hats off to them, the fed actually tapered and yet somehow still overall delivered a dovish -- >> because they made a statement. >> yes. >> so broad of it that i said get on with it. >> the really important reaction was actually in the emerging market space, where even like stock markets, indonesian, filipino stock markets rallied, up 1.3%. and these were markets that got annihilated back in may when bernanke introduced this idea. so tapering, we're on the path. well done for them. they got the ball rolling. and i think this -- you know, i think equities will perhaps finish the year strong. i don't think we're going to get a massive boost higher. we're already up, you know, the best year in 15 years, right? but i think we can go into next year fairly above. i think what this does mean is that each fed meeting from here
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on -- >> we'll expect 10 billion. >> we're going to expect 10 billion. but bernanke said if data changes, then we will look at not tapering. so each meeting is going to be -- because what if data cools off a little bit? we've had an extraordinary period of data in the last two weeks or throw weeks, one of the strongest periods of u.s. data i can remember. one thing after another coming in very, very strong. that can't continue. so what happens if data slightly dips in january? you know, what happens if payroll goes down to 175, you know? that's going to open the door to uncertainty about are they going to taper another ten billion or not? but, you know, i think we got over to a certain extent -- >> at least we can spare out of 2014 strategy about when, right? >> yeah. yeah. >> as far as i'm concerned, that
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is about right and i don't have to have the when discussion any more, if ever again. and for that, so that fact alone, i am entirely thankful. >> that is your christmas present. >> that is my christmas present. thank goodness for that. gold is on track for its worst performance in two decades. you can read analysis on the precious metal edged up slightly yesterday, but inflationwise receded. it's a question of time before we see more price particularly if the dollar continues strengthening, as well. once you've read that piece, give us a call. give us your call, even. we haven't set on out r a telephone number. join the conversation here, get in touch with us, e-mail, tweet @cnbcwex or direct to me
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@rosswestgate. >> i'm a contrarian. i think gold is going to have a good year next year. >> all right. what do you think? let us know. now, the russian president vladimir putin is holding his annual year-end news conference at the moment in moscow. we're going to talk about russia and the deal they signed with the ukraine a little bit later. we'll look at the comments coming out from that. doesn't oppose an association agreement with the eu. that may be ukraine's best hope. meanwhile, coming up on the show, from india to indonesia, we'll find out how the emerging markets are reacting to the federal reserve's decision to start tapering its bond buying program. we'll get the latest from singapore. as we've been saying, vladimir putin holding its annual year-end news conference. we'll find out what's wind the kremlin's deal for kiev as eu protests continue in the
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ukrainian capital. that's at 10:30. also, for oracle, says it's prepared to take on the likes of amazon and rack space. it's made its first beat in three quarters. we'll have the latest analysis. and spain plans to sell 3 billion euros in bonds this morning. if that's not enough, could new regulation send ecigarettes up in smoke? we'll talk to the ceo of vapor corp. we'll be back after this short break. ya know, with new fedex one rate
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former fed governor ric mishkin said the fed got it right with tapering this time around. >> this is a very good outcome. they decreased uncertainty. they made it very clear that there is a difference, but that tapering does not mean a tightening of policy approximately. >> mishkin said the fed under yellen will likely focus on
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inflation which he sees as too low. the emerging market reaction was okay, as well. it was more muted and the stock dicht from the stodifferent fro which said it would reduce its bond buying program. the dollar is up against the rupee, the rupiah, the real and the rand. but not necessarily dramatic moves. joining us is rajiv biswald from ire chase global insight. rajiv, are you happy with the emerging market -- maybe happy is the wrong word. are you happy this we haven't repeated what happened in may? >> absolutely. i think this, as you say, is a very dirchbtd reaction that we're seeing from emerging markets in asia compared to what we saw back on, you know, may 22nd. and i think the key change that
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has happened since then is that we are seeing a much better growth environment. i think growth investors are much more convinced that the u.s. recovery is strong and sustainable. and that is going to give very positive impact on asian exports into next year helping asian growth momentum. and also the eurozone is showing much better momentum since back in may. and the recent months, you know, we've seen much better data out of germany and broadly from the eu, as well, with the uk improving. so i think all of that fits a much better context for the emerging market's response to the fed tapering. >> yeah. clearly, there is a feeling, what equities are telling us, that this is sort of a global economic growth story, that there's going to be a better fundamental support than it was this year. but what we have seen in the last 24 hours is the dollar
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doing what we expect it to do, which is strengthen it and it has strengthened a little bit against these emerging market currencies. thou are they going to deal with that story if it continues? if you're in indonesia, for example. >> i think what we also have seen since about august this year is that global investors have been much more differentiating in the way they've treated different emerging markets. so the countries with the greatest macroeconomic vulnerabilities, which include indonesia and india due to their current account deficits and also the upcoming political general elections in both countries next year. that makes them have greater downside risks. and i think we're seeing that reflected in the weakness of the indonesian rupiah and indian rupee during the last six months or so. of course, the u.s. dollar has been supported against most currencies, given we're now
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looking at, you know, at some point tighter policy rates in the u.s. but i think we need to differentiate between different emerging markets and i think indonesia and india are amongst the most vulnerable of the larger asian emerging markets. taiwan is already vulnerable to the political risks. >> do you expect those banks -- india held off this week from raising rates. would you expect it to resume -- they have a difficult balance between controlling inflation and not choking off the economy too much. >> yeah, i think so the governor is walking a really difficult tight rope. he needs to convince markets that he's tackling inflation and he did that back in september and october with rate hikes as inflation was rising. but the further rises in inflation, he stayed on hold this month because i think he's starting to be looking -- or anticipating inflation stabilizing and coming down
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somewhat. partly because we're expecting world oil prices to edge lower and that will help india which is a very big oil importing country. and also food prices may come down somewhat. we think inflation in india is probably at least on the wholesale price index peaking at the moment. but it's a very difficult tight rope. and for india, it's crucial to have lower interest rates to boost the economy because consumption accounts for over 60% of gdp. so that's the key to economic recovery in india. >> rajiv, thanks for that. good to see you. have a good christmas. >> thank you. and you. >> pierce sticks around. now, five years on from the beginning of the financial crisis, the eu might be on the verge of how to deal with troubled banks. a resolution fund is going to be created, but it's going to take a decade to do it. and it will take 55 billion
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euros, which doesn't seem like an awful lot of money be paid for by the banks themselves. make up of national authorities or make recommendations on how to wind up a bank. julia caught up with the speedish finance minister who says he's still pretty concerned about the compromise involved. >> it will be give a broad based boost to the recovery in the european economy. this is a banking union and it's good that we are very close toon agreement and that is a positive sign. but the complexity is clear. >> even in terms of deciding how quickly we can wind down a bank, do you think that would be able to achieve that in your view? >> it will involve a lot of people and a lot of meetings. i think this is a very complex process. that is a major drawback, i think. >> the risk is that we're going to struggle too chief that? >> we don't now how this will work in practice at the end of the day.
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it could have been much clearer and the backs could have been much stronger and give it a stronger confidence boost to the european economies. >> if we look at the fund that's going be built, 55 billion euros, you have the experience of dealing with troubled banks in sweden. how big do you think this fund needs to be? >> well, i mean, that's obviously up to countries to decide on. we have not set a ceiling our on funds. we're going to let this continue to grow as long as it's necessary because banking crises can be difficult to deal with. so i would probably have argued for a larger fund, but i will not be a part of this fund. so i leave that to the members. >> you look quite pleased about that. >> i'm quite pleased that we have a strong banking system and i'm quite pleased that we secured the member states that the outside of the banking union will be treated equally. >> but fragmentation risk is not going to be addressed by this banking union given your current
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assessment. is that your view? >> well, i think the complexities is the drawback of this compromise. >> joining us meanwhile the president of the euro group has been rejecting the idea that the decision making progression is going to be too slow. >> the vast majority will be taken by the executive board. if there is no consensus, the members will decide by simple majority. the second agreement that we had is that the executive director of the board will decide how much time can be taken and that will be a limit that everyone has to stick to. so if he says we have 24 hours, then it will be done in 24 hours. so i'm quite sure it will be fine. >> all right. you can see the shares in saab are up a little higher, up 25%. after the firm won a 4.5 billion contract to replace brazil's fleet of aging process.
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the move was a blow to boeing who was competing for that. stephane has more for us. >> we were not expecting saab aviation to win this contract any more, although the company was in exclusive negotiations with brazil back in 20309. at the time, the french president nicolas sarkozy presented the contract as a done deal, but the -- which is produced by aviation was much more expensive than its competitors. it wasn't also the option of the brazilian army which preferred the swedish plane. that's why it says it is disappointed for not being selected. saab justify tess heavy price target. according to the newspaper, the brazilian paper told francois hollande recently that the french offer had been too expensive. responding the different
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minister in france, claimed that brazil wasn't a priority any more and that it is now looking at an indian contract. a new daily recently preferred that to the fighter and this potentially would be a much bigger contract than brazil we're talking about, 189 aircraft including the options. still, the market is cautious about this outlook because we've seen in the past that always clues to a deal, but never being able to sign a proper contract to its aircraft and that's, ross, the reason why the stock is off 3.6%. it was actually up more than 7% at the start of trading this morning. >> yeah. other news, awell, stephane, airasia has placed an order for 25 airbus aircraft, as well. how is that going down? what will that mean? >> it's going to increase its portfolio for this aircraft to
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57 for airasia. you said 6 billion euros although we know that airlines usually get a significant discount, especially if they are big clients of the planemaker. airasia is one of the biggest customers of airbus with 532 orders and that number raises to 640 if you clue all the options. the ceo of airbus, concerned that asia was now the most important market for the commercial aviation industry. >> this will be, by far the biggest market as it is close to 40% of our back loetd of our orders already from asia. is it southeast asia or china. >> many people can travel. >> and on the negative noe note, ross, airasia expert didn't
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place an order for any airbus 380, although this craft could fit into its expansion plan. for that to have a negative side of this contract, that was ar noupsed yesterday afternoon. but still, it's very good news for airbus. over to you. >> thanks for that. have a good day in paris. still cowell, hard times on the high street with reports of slow christmas trading. but has the last-minute rush made a difference? we're talking about uk retail. we'll get the numbers out right now, actually. the numbers are coming out. let me bring them to you. retail sales, currently, up -- sales including up 0.3% on the month, up 2% on the year. that's a little weaker than what we were expecting, the annual rate up 2.3%. november retail sales excludeing fuel up 2.3%. up 2.5% on the year. november retail sales deflator up 0.6%. so november retail sales pick up in november, 0.3% month on month, which is what we were
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expecting. we had that pullback in october, 0.9%. that's pretty much as expected. we have seen an awful lot of pressure on uk retailers. certainly the super marketes and some of the stores over the last couple of days, they've been upping supplies to reduce their prices and a lot more shoppers are going to to discount on the likes of the pressure of the other super market groups, as well. so those retail sales have come in as expected. we'll get more from that and reaction from pierce when we think about the uk about we come back. see new a few moments.
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stocks in europe and the u.s. cheer the fed's decision to taper its bond buying program. short-term rates are still going to remain low for a long time, the banks leading the rally. more mixed reaction in asia, but the taper timeline adds dollar/strength against the aussie and the yen and that's given a boost as well to markets in tokyo. saab wins a jet deal company
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from brazil. and help thy neighbor, russia must help brotherly ukraine as a report suggests kiev has missed out on a considerable eu aid package. and we have data out of the uk, just to recap, cml mortgage lending, growth mortgage lending 17 billion in november. slight tick down from 70.6 billion in october. this is retail sales rebounded in the month, up 0.3% after falling 0.9% in october. that was as forecast. the sales deflator up 0.6%. it was plus 0.7% in october, as well. there have been some concerns about the strength of retail spending in the uk. just confirm those retail sales numbers up month on month in november. >> reaction from pierce on this, look, this comes on top of what
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is a big jump down in the unemployment rates, 7.4%. a huge number of people came off the unemployment with 90 odd thousand and it's the biggest sort of number of people that have stopped being unemployment since 62,000. how does this all play into what we're pricing now in the uk? >> well, that employment figure was extraordinary and i mean, you're even get something of the short end of the yield curve bond pricing in a rate hike at the end of the next year. so -- >> and houses with that call. >> yeah, absolutely. i think numora changed their call to august 2014 yesterday. so, i mean, this is a big problem because carney has got this 7% threshold that he's kind of a bit married to now. can he change it? the problem he's got that bernanke doesn't have or yellen wouldn't have is inflation is above the bank of england's
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target. but carney can't say, you know, we're going to keep rates low until unemployment rate falls well below 7% or inflation come back up. >> yeah. they already have been saying, though, it's a threshold just because they hit 7%. and the same way the fed has, just because we hit it, it doesn't mean rates go up automatically. and the good news for inflation is coming down and clearly, the only inflation really the bank is worried about is wage inflation. >> right. >> and average earnings are running up 0.8%. >> and that hasn't happened, really. i think it's been a great six months. i think this momentum can definitely push into next year, as well. but that fear will remain. the bank of fwlnd will be the first central bank to hike. as it stands now, that's a fairly -- that's a major sort of developed economy, the g-10, right.
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that will be an interesting one. we have to deal with that first and how that plays out. retail sales figures here are slightly better than expected. so finishing the year on a high, i would say, and look, the unemployment rate coming down ultimately is great. and if it does mean rates are going up, well, so be it. the underlying economy is strong. >> good to see you. thanks so much indeed for that. merry christmas. >> indeed. >> we'll see you in 2014. for more correct calls, pierce kerns from amplified trading. european equities are doing pretty well. there were only 30 stocks on the stoxx 600 a wile ago that were down. we're up 1.5% for the french markets and the ftse mib, as well. bond markets, yield are higher, but not by an awful lot. the treasury yield is ticking up
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to 2789%. ten-year gilt yield sniffing the 3% mark if i can put it like that. starting in january, just to remind one it's reducing asset purchases by 10 billion a month, split evenly between bonds and mortgage security. the cushion effects, the fed is signaling short-term rates and pierce was saying could remain near zero longer than previously expected and at its final news conference, ben bernanke said if the economy continues improving, he foresee tess program ending by late next year and says the fed could pause if the economy stumbles or tapers more quickly if growth surprises to the upside. >> our modest recollection in the pace of asset purchases reflects the greatest belief that progress towards objectives will be sustained. if the incoming data prodly support the committee's output we will likely reduce the purchases in further related steps at future meetings.
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of course, continued progress is by no means certain. subsequently, future adjustments will be deliberate and dependent on incoming information. meanwhile, we have an auction out from spain. the first one post the tapering. what i haven't got is the yield, which is rather annoying. the bid to cover on the 2018 is 2.7% and 2.2 in the last action and the last auction was 2.6%. i've now got the yield here. the 2023 yield, 4.12%. down from november when it was 4.176, bearing in mind i imagine the yield has fallen for the 2018.
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and i just can't find it, which is rather annoying at the moment. as soon as i get that, there we go, the maximum yield, 2.72% from 2.74%. joining us for these thoughts, nicola mei. thanks so much indeed for joining us. we were concerned whether peripheral yields would bounce up. >> absolutely. if we look at the auction, the stats have just looked at them like yourself, they look pretty good. the bid to cover ratio, there is quite a lot of on demand and spain managed to issue as much as they were planning and towards the top end of the range as far as i can see it. i think what this confirms is that peripheral markets continues to trade well. if we look at the spanish spreads this time of the year, they've tightened about 100 basis points. and actually, the tightening has been -- the tightening is happening this morning.
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i noticed italian yields were also coming down and gilt is going up. >> absolutely. and i think this reflect tess fact that this is a normalization trade that has been going on in the euro area. and this has happened since the ecb has anchored the system. i'm talking about the middle of the last year, really. and as the periphery has been making progress in terms of the structural adjustment. so you talk about the tapering. i think risk assets more broadly have taken the tapering down. and peripheral markets were never vulnerable to the tapering as we saw this year. >> can we get -- italian yields just over 4%. can we get sub-4% going into next year? >> i think we certainly can, yes. i think what we see right now in the euro area is an improvement in growth from modest levels to i think we get too excited about. we at pimco expect growth of about half a point next year with the periphery growing only marginally. but i think the stabilization from an environment of recession is an important development.
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and as long as the ecb is there, and it is the game in town at the moment, we think some further tightening is actually possible. >> clearly, relief at the moment. there is still that concern, though, that, you know, euro area needs to be swamped by the fed. and today, that hasn't happened. that's the good news. is there still a risk that it might during the course of next year? >> of course, there are many risks. what i would say is that the fed tapering, first of all, has come alongside some reassurances on the part of the fed, which is we will keep rates low for a very long time. well past the time when the unemployment rate is 6.5%. so the anchoring by the fed is something that will help risk as etses and in our view will help the short end of the curves. not only the g-3 curves, but also of the spanish and italian curves. so that coupled with the fact that i think the tapering comes in an environment of stronger growth. so that is the good thing for risk asset. the tapering is allowed by the
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fact that the u.s. economy is doing better as a result of that i think risk assetes and peripherals can do well. >> what did you make of pierce's comment that i thinkous of the g-10 the uk will be the first top rate. what do you think of that? >> we would be somewhat skeptical of that in the sense that the upturn in the uk economy has been surprisingly strong, has been driven by low mortgage rates and by a very strong housing market. but i don't think the uk can necessarily decouple from the global economy for a very long time and for a sustained period. >> out of the main central b banks, then, who in your book would actually raise rates first? >> well, if we had to take a bet, i think it would probably be the fed. >> do you? okay. >> yeah. i would say so. i think the ecb is well behind in the game in the sense that they're barely exiting a recession and employment is at 12%, inflation is coming down,
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also for structural reasons. and so i think the ecb will probably be among the last. on the bank of england, of course, this is the strongest economy right now, but i think it would be a big risk for a small open economy to go first. >> okay. stick around. more to come from you. let's get over to japan where tapering might still be a dirty word. yukako from the nikkei is taking stock of his record, even. >> hi, ross. the nikkei 225 closed at its year high today at 15,859 points. more than 50% higher than it was when abe took office nearly a year ago on december 26th. during his tenure, he announced the growth strategy which includes aggressive monetary policies, flexible fiscal policies and policies to boost private sector investments. while the market appreciates the
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most so far is his first and second arrow, especially the introduction of a 2% inflation target and the bank of japan's easing measures announced in april. the policy has driven the yen to fall to its lowest level in five years, boosting earnings and stock prices of exporters like toyota and other heavyweights. the strong market has lifted consumer sentiment, as well. japan's cpi has been increasing this past year and the government is expecting it to top the 11% mark by the end of 2013. now, what we have to look out for in abe's second year at the helm is the sales tax hike in spring. abe has announced a 5 trillion yen package of policy toes offset the impacts that some say he might need to introduce more measures like lowering income and corporate taxes. that's all from nikkei business report. back to you, ross. >> yukako, thanks for that. and months after helping tokyo win the 2020 olympics, its
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governor is stepping aside. he says he doesn't want his personal issues to cloud preparation for the 2020 games. the japanese prime minister shinzo abe says the resignation won't hinder olympic planning. >> investors in hong kong are showing strong appetite for new listings. shares jumped 44% on their debut on a highly oversubscribed play on the funeral business in china. meanwhile, constant farmer and carrie logistics stau a pick up from their offer price. but over in aus trail tralia tr a major listing was down 7%. recent deals haven't offer enough to new shareholders. aia group confirmed it's beaten four other rival toes a major distribution deal.
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citibank will sell life insurance through its asia pacific offices for more than 50 years. the deal is valued at more than $4 billion. metlife, prudential were the other firms that had submitted final bids. aia shares up from the broader hong kong market today, up around 0.6%. meanwhile, chinese equities underperform more asian peers with ongoing liquidity concerns still weighing. the benchmark is at its highest level since june and appeared to be going up. announcing only after today's close that it actually did so. there was speculation in the central bank was trying to put the brakes on shadowbacking activity fueled by into bank loans. as for the agenda in asia tomorrow, don't expect any tapering from the bank of japan is expected to hold its bond buying steady and its policy decision, perhaps even hint at expanding it. we've got prada's nine-month
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earnings results out of hong kong and that market's biggest listing of the year, china ever bright bank, as well. still to come, the russian president vladimir putin is holding his annual year-end conference. we'll find out what the bailout deal means for kiev and how it's fueling more pro eu process.
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earlier this week, the ukraine agreed to a bailout from russia. thousands of protesters remain in the street of kiev. drafting of these documents suggest a bigger deal worth $26 billion might have been available. the president had walked away from that eu agreement siting that it was not worth enough and the conditions were too strict. the vice president of tenio intelligence joins me around the desk. nice to see you, atillia. on this deal, it's 15 billion in total, but to begin with, they're getting 3 billion to shore up ukrainian debt. what happens to the rest of the money?
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>> what they will be doing is purchasing ukraine's governmental bonds in small batches. of 3 billion pretty much every quarter. and we are looking at the maturity of about two years. which essentially pulls in 2015 and 2016 as the timeline. >> what other leverage are they trying to -- the we've seen some this in other countries where russia has been able to take equity stakes in major corporate players. presumably, there's a lot more to this deal than meets the eye. >> indeed. this is something that remains behind closed doors for now. but eventually it's going to leak out. and don't forget the gas prices, the ukraine improves the outlook for the state budget which has been drained. >> it's a really big deal.
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ukraine is a split country. i mean, there is a large chunk of it that is reclose to russia or it has been. and there's a chunk of it that would liken any eu deal. presumably, the ukraine would like a deal with both. but that ain't ever going to happen. why did they do such a long dance with the eu knowing in his mind he was probably never going to sign it? >> it's essentially about getting the best deal for them if they can. it would be in the interest of each and other country to have a tug of war over their country. putin said something about trying to do an eu/russia loose agreement. if i was in ukraine, i would be praying for that to happen, right? i would be praying that russia and the eu could get better relations and i might be able to get something out of it. are we ever going to get anything going on that level?
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>> there have been suggestioning on this kind of alliance for a long time. you might remember the attempts at the nato corporation in the 1990s and so on. never, ever has it come to any sort of a practical structure. >> on the deal, i think that it will, in the interest of the eu to participate. and i think it is possible that we would have a contribution going forward at some point. but i think the difficulty -- and i'm speaking from the european perspective here, i think the difficulty is that the eu alongside the imf would demand some clear conditions and i think that that is -- >> the conditionality -- >> the conditionality would be difficult. >> there was one very key thing, at least one that we were looking at in terms of a potential deal between ukraine and european union. and that the fourth coming
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presidential election necessary early 2015. this is the year when they cannot afford to put up -- give leeway to the opposition where he would be facing a challenge to his presidential bid and annoying the court supporting him. so the conditionality and the timing of the conditionality was essentially wrong. >> thanks for that, otilia. meanwhile, the eu is on the verge of agreeing to a deal with how to deal with its troubled banks. it's been asked if they finally cut the cord between weak sovereignes and banks. >> translator: one can never say never, but i think we will have reduced it when we reach final agreement with the european parliament and the system becomes operational. i believe then we will clearly
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reduce the harmful link between the banking crisis and the sovereign debt crisis. >> i think this deal is not much progress, i would say, in the sense that the sovereign bank link, which is the key link that has to be severed hasn't really been broken here. and the main point is that the agreement has been partial. the only thing that was really agreed is that you're going to have a bail-in of senior debt as the start of a resolution of a bank. you don't really have a back stop in place. off resolution fund that will be billed over ten years and it will be of an amount of 55 billion. >> which is not all much when you're bailing out banks. good to see you. thanks for joining us from pimco. still to come, markets rally as the fed finally sets the wheels of tapering in motion. we'll have all the analysis in the second hour of "worldwide exchange." so as his financial advisor, i took a look at everything he has. the 401(k). insurance policies.
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this is "worldwide exchange." i'm ross westgate. the headlines today, stock necessary europe and the u.s. cheer the fed's decision to taper its bond buying program while stating short-term rates are going to remain low for a long time yet. a more mixed reaction across asia, but the tapering timeline doesn't have dollar/strength against the aussie and yen. that i say that's given a boost to markets in sydney and tokyo. shares in saab rocketing
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after the swedish company wins a jet deal from brazil. rivals of boeing and get snubbed. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. all right. relief, relief everywhere. i've got personal relief. we finally got the fed announced tapering. we don't have to have a discussion whenever they're going to taper again and relief for global equities. look at the move yesterday for the dow. we were trading down towards the session low. we got that announcement, bang, we closed up nearly 2% higher. 292 points higher, up at a fresh record close for the dow after the federal reserve has taken the first step towards unwinding its unprecedented era of bond buying. steve liesman wraps up the details. >> the federal reserve in a significant move surprising
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markets somewhat by reducing the amount of quantitative easing by $10 billion a month, equally up $5 billion of treasuries and mortgage backed securities. providing strong guidance that interest rates will remain low perhaps all the way through december 2015. fed chairman ben bernanke explained his move today. >> our modest reduction in the pace of asset purchases reflected the committee's belief that progress towards its economic objectives will be sustained. if the incoming data broadly support the committee's outlook for employment and inflation, we will likely reduce the pace of securities purchases in further measured steps at future meetings. >> bernanke suggested that the fed would reduce the $85 billion of monthly qe in measured increments. it sounded like backside 10 billion a month. reduction depending upon the economy. he said the source of reductions is data dependent.
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the fed giving substantial guidance that the fed would remain on hold once they hit the 6.5% unemployment rate. >> i expect it will be some time past the 6.5% before all of the other variables we're looking at will give us confidence that the labor market is strong enough to with stand the beginning increases in rates. >> all of that means bernanke rates could remain at december 2015. the senate is expected to confirm bernanke's replacement, janet yellen. bernanke was asked if yellen supports the program and he said that she fully does. so little change expected in the broeg for ta progress for tapering and keeping rates low today. back to you guys.
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>> the dow ae moment pretty much on fair value. the s&p half a point below fair value. european equities are still reacting to what happens overnight and we are up across the board a short while ago. there are only 30 stocks that were in negative territory. take a look at financials. they have all been boosted, also in brussels where european officials have backed a chris resolution plan. in the bond markets, treasury yields have been ticking higher today. we have been this week trending before the fed's decision between around 2.85 and 2.87% on
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the ten-year. elsewhere, yields higher in germany and the uk, as well. 2.95%. italian yields okay. we had a fairly good spanish auction out a short while ago. there had been concern when you get tapering, periphery yields win demand. on the currency markets, the dollar has made ground over the last 24 hours. so the euro has come down to 1.3676. this time yesterday we were around 1.3760, something like that. dollar/yen, just below 1 .04. overnight, we got to 104.37, highest since october 2008. a five-year high. the aussie has come down today to the low since august 2010. the dollar has been up across the board this morning.
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that's where we stand right now here in european trade. let's bring you up to speed with what's happening in swish win and recap the asian reaction for you. sixuan. >> thank you, ross. the end of the fed tapering on thursday helped the dollar/sensitive markets in asia. japan and australia outperformed on currency losses against the greenback. the dollar/yen as we just mentioned soaring past five-year highs ends at saucy dollar slip to go about 3 1/2 year lows. the nikkei 225 hit its six-year closing high ending up 1.7% in the asx 200 had its best day jins since july, up over 2%. but china markets were the laggers yet again. the shanghai composite extended its eight-day losing streak, ending down by almost 11%. lingering liquidity concerns weight on financials and developer stocks. the central banks said they din jex fukts after interbank money rates jumped, but did not specify by how much.
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the hang seng index lost ground down 1.1%. but the fed taper didn't dent investors appetite for ipos. five new offerings hit the markets today, including china's largest funeral services provider. that stock surged a 45% from its issue price leading a pack of trading gains in the city and this may bode well for china everbright banks ipo tomorrow, which is the biggest of the year at 2.6 billion u.s. dollars. so we'll be watching on that front. so that is a look at the asian markets. back to you, ross. >> all right. thanks for that, sixuan, joining us for the remainder of the show today. petro, good to see you. >> good morning. >> so the initial reaction has been we're not phased by tapering. rates are stale low. and it's sort of been seen as a global economy is getting better reaction seems to be the theory.
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is that going to last? >> i'm a bit puzzled myself by the reaction. only a third of the economists were expecting it. when it came, the initially sold off and i thought that was probably going to continue. but the interesting point for me, more than the equity markets rallying, was the fact that the ten-year yields went up. so i'm not entirely convinced this move is going to last. i need to see a couple more days of what the ten-year yields are going to do before believing that we're on for a new bull rally on the equity markets. >> at the moment, infwlagzary pressures are on the downside,
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aren't they? >> absolutely. i think actually deflationary pressures are more than inflationary pressures. >> which would be supportive of bond markets. in which case -- >> agreed, but in that case, i'm still puzzled why the ten-year yield went up. >> but isn't that theoretically the natural reaction or not? >> yeah, i guess. there's less buying of tresh riryes so yields should go up because they have less support going forward. but at the same time, the natural reaction when stocks go higher is for markets to go lower. the cash flow at present at a higher rate. >> but on the other hand, if we're starting to get normalization because economic growth is solid, that would argue, you know, okay, that should be some support, shouldn't it? >> i take a slightly more cynical view in the sense that -- >> have we already discounted all of that? is that what this move was, a
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huge discounting move? >> no. my view is the fed was smart in tapering two weeks before year-end. and as we know, wall street tends to push markets higher towards year-end. so not wanting to have a little -- a big correction two years before people get paid, i think it's probably a smart move to start tapering because they could count on wall street to -- >> and the other thing is, we knew -- what does it doesn't make? we knew it was going to happen either in january or march. there was no press conference in january to have to schedule one. comfortable with it. i for one, pedro, am absolutely delighted, not because i know it's the right or wrong thing to do, but because i no longer have to have a single discussion about whether the fed will taper. we can start 2014 with a whole different set of discussions. but isn't that good for fund managers to say, okay, i no longer can take that out of the equation, i can plan a different
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strategy? >> i don't know. because this has been a lick kwi quitty driven market. that should have an impact because the market has been driven by liquidity. it hasn't been driven by earnings growth. it was a rerating of the p multiple due mostly to the fed keep on printing 85 billion as mortgage backed securities buying them in treasuries. so the fact that you're reducing and you announce you're going to further reduce for the next upcoming meetings at that pace of 10 billion or so on should mean if this is a liquidity driven market that the market should rally less strongly. >> yes. we would rally after a 27% move, we would rally less strongly. history would tell us that.
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>> one thing i take note of, the market is cheap, the it's at 4.6% times alternatings. that is a profit to earnings ratio. the problem is their constituents are only growing earnings at less than 5%. i don't see that changing. one thing that people forget is that 50% of the earnings growth from '09 to today was due to a lower interest rate environment. that tailwind turned into a headwind. so i'm very curious to see how the markets will do next year. >> we'll pick up more on that at the earnings and the price of the market, as well. pedro sticks around. gold has plunged. on, read analysis on gold price related to the scale back. it was more muted than you might have thought. the precious metal edged up,
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both inflation worries receded just a question of time before we see prices, particularly if the dollar continues to appreciate. once you've read that piece, give us what you think your call. let us know which direction gold will go in 2014. e-mail us, tweet @cnbcwex or direct to me @rosswestgate. pedro, your view on gold after this fall? what happens next year? >> i'm very bullish long-term. but i actually have put options on gold that i think it's going to go lower. i think we might test 1,000 and then it will probably be one of the most important buys of the decade. >> okay. >> but i still think there is a downward pressure. >> look out for buying opportunities. all right. thanks for that, pedro. what's on the agenda then stateside today? post the fed, we've got weekly jobless claims out at 8:30 eastern. they're forecast to drop by 18,000 to a total of 250,000. at 10:00 a.m., we get november existing home sales. they're expected to fall by 2%.
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and also at 10:00, it's the december philly fed survey and november leading indicators. accenture, carnival, darden, report before the bell. after the close, we'll hear from nike. and the eu is taking a step towards banking unions. will anyone understand it or believe it's drawn a line under anything? we'll get into that.
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the eu is on the brink of agrees to the dell tails as a blueprint of dealing with the troubled banks. critics claim the proposal is too complicated. the finance ministers insist it is a step forward. julia caught up with the swedin finance minister. he said they made progress, but admits he has plenty of concerns about the complexity. >> there are a lot other other things that have to be dealt with and the back stop for that. but i think the complexity is the draw back of this compromise. >> i think we made an effort to make it less complicated, to provide clear guidelines, procedures, instruments to cope with the situation of tensions and crisis that would require an
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orderly approach to crisis management in order to avoid spillovers, contagion to other banking systems. so i think europe is a complex reality. baines oxley or dodd frank are not very simple reading, anyway. >> what they've basically agreed here, pedro, is a plan to create something in ten years, right, that will only eventually maybe amount to 50 odd billion. and is not single in any sense they've given it that label. does this create any -- the idea about this is to shore up confidence that we can resolve issues. does it do that in any sense? >> to tell you the truth, it is not even on my radar screen. i think that pretty much answers your question. i think it's too little too late. they don't even seem to agree on what needs to be done at the
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moment. >> why don't we care at the moment, then, is the next question? why don't we really care? >> why don't we care? i don't care because i don't see anything firm. i don't see a back stop that is big enough in size. >> but it's not worrying you, either, is it? >> no, it's not worrying me. >> because the ecb is there. >> exactly. what's the difference? the ecb is there. what will the banking union do that is difference? it will probably change when the next -- comes around, it will change things a little bit. but the market didn't care about cypress, either, which was startling to me. but i mean, the market is the market. so right now, confidence is high and it's all about confidence and the data, the confidence that appears we'll start caring about this and many other things we don't care about right now. >> pedro, thanks for that. ben bernanke's parting gift, the fed decides to start tapering its bond buying by $10 billion from january.
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stocks in the u.s. and europe take the fed's news in their stride while a more mixed reaction is seen across asia. and shares in saab accelerate as it wins a deal to replace brazil's aging jets, beating boeing. oracle breaks a run of weak quarterly earnings with its latest analyst results. is there a bright future in store for what's been the struggling software giant? we'll get into that. hi honey, did you get the toaster cozy? yep. got all the cozies. [ grandma ] with new fedex one rate, i could fill a box and ship it for one flat rate.
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right after the best rally in two months, the stock yesterday was down, the s&p both closing up at record highs. right now, futures indicating we don't know what to do today. the s&p is flat, the dow flat and the nasdaq futures are flat, as well. if anything, just down about a point. we have been focused on earnings again, though. oracle ended a run of weak earnings with a set of analyst beating second quarter results. the tech firm reported earnings of 69 cents a share, up 7% compared to the same period last year. revenues grew 2% year on year. as well as strong demand for the firm's cloud enterprise surfaces. oracle is now forecasting a 3% to 7% jump in revenue for the next quarter as the company said it plans to go head to head with the likes of amazon and rack
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space. oracle's stock in frankfurt, doing pretty well. up 4.3%. daniel ives is managing director and senior analyst as sbs capital markets. daniel, good morning to you. clearly, the reaction from stocks has been pretty good. what's your reaction? >> it is a sigh of relief. the last year, it's been a real rocky road for oracle. and this is the first quarter that you've had a good enough quarter. and what i would say a sigh of relief in terms of guidance. and it seems like there's brighter days ahead and that's the first time you could say that in probably about five or six quarters. >> how bright, though? >> i mean, i wouldn't call it ultra bright. they have some hurdles ahead, competition. we're still talking mid single digit growth. there's a lot of wood to chop here. they still have to execute. but at least for the first time,
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there is some optimism going forward. and the evaluation is such that i think a lot more investors now are going to play oracle going forward. >> yes, look. companies like sales force, work day have been offering competitive products in the cloud, as well. oracle has now turned their attention to that. are they going to pick up lost ground? yeah. i mean, look, they were late to the cloud. but i think finally, for the first time oracle has looked in the picture, realized what they've had to do, both in the product perspective as well as the sales force expansion perspective. you know, they also partner with sales force, partner with microsoft. so for the first time, you feel like they have their a game on, they have the right products, the right, you know, sales force and now it's about, you know, talking the talk and walking the walk. so i think now the benefit of the doubt is there and it feels like that growth trajectory is start to go accuracy. is there a big acquisition on the horizon for oracle?
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they've been real quiet and i think that could be another key ingredient in the recipe for success. >> what about this idea of going to ed h ed to head with the likes of amazon and rack space? do you applaud that? >> look, anything that amazon is touching is kind of viewed as socksic within the incidenter price market. i think that's a little perception reality. but with that said, they have to be offensive and defensive. they have to go after that head on. oracle has been a -- you know, a company that over the last, you know, 15, 20 years has really done a great job taking the threats on and being able to kind of, you know, escape to where the talk is going. that's what i think they're doing here is recognizing the landscape and changing their product strategy accordingly. >> thanks for that, daniel ives. pedro, stocks were an
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underprmper yesterday in the states. who do you make of the sector? you love apple, but you have concerns about that, as well. >> i love apple as a customer, not as an investor. i think apple some some of the most amazing products that we have today. but as a potential investor in apple, i feel like apple is very much at the same time that sony was, just after mr. sony passed away in the 80s and where they lost that tech logical edge. if you look at it, apple, since steve jobs passed away, hasn't delivered any new product. they refined the iphone, they refined the ipad. but that was can'tly coming at a very fast pace just wasn't there any more. what worries me about apple as a potential investor is that google is now coming into their home ground with the purchase of motorola and they're releasing in january of 2014 the moto g,
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which i think is going to be a for formidable competitor for the lower end of this stage. >> see what happens. pedro, more to come from you. we're going to take a break. still to come, homeowners beware. the fed's decision to get on with its tapering program will trigger a slow grind higher in mortgage rates. see you in a few moments.
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the headlines today from around the globe, stocks in europe and the u.s. cheer the fed's decision to taper its bond buying program. also signaling short-term rates are still going to remain low for a long time. a more mixed reaction in asia, but the taper timeline has made the dollar strong against the aussie and the yen and that has helped equity markets in both sydney and in tokyo. shares in saab rocketing, the swedish defense company won a 4.5 billion jet deal from brazil. rival boeing supposedly losing out due to the nsa spying scandal. t-mobile once again is a target. reporting claim b dish network is now determining whether to make a bid for the wireless company next year.
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the fed has taken the first step to reducing its bond buying program. it will reduce asset pure chases by $10 billion a month. to cushion the effects, the fed also signaled that short-term rates could remain near zero for longer than previously expected. at its final news conference at chairman, ben bernanke says if the economy continues improving, he perceives the program ending by late next year. he also said the fed could pause if the economy stumbled or taper mog quickly if growth surprises to the upside. there is a case for being particularly aggressive. and i think we have been aggressive to try to keep the economy growing and we have seen progress in the labor market. i would dispute the idea that we're not providing a lot of acam addition to the economy. >> only one fomc member
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dissented on the tapering decision. bernanke says incoming chairman janet yellen agreed with the move. toughened his standz stance on inflation, saying the central bank is committed to ensuring it doesn't stay too low. now, the u.s. futures after the best day in two months yesterday in terms of a rally indicate at the moment we're going to get a softer start in reaction today and we're pretty much trading on fair value. pedro is with me in the studio. also joining us now is greg mcbright, senior bank analyst. we saw a slight uptick in treasuries yesterday. what happened to mortgage rates? >> not a whole lot of movement. we will see rates as opposed to this year where we sa you a
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rapid start-up. keep in mind, the initial tapering, whether it was announced this month or on next month or in march, that was expected. and it was kind of a baby step. so i don't know you're going to see a catalyst for this. the catalyst where additional movement comes is when we start to see some better economic data, does that mean the fed picks up that tapering? >> it could go the other way, right? if we get a jobs number at 175,000, people might think, oh, me might pause. >> well, people might think that. i think that's part of what the fed does in terms of taking this baby step. if they're going to taper, you can't really taper at a much smaller increment than $5 million off the mortgage backs and the treasuries. that buys them latitude. if we get a weak job number or two, they can kind of maintain the same piece. keep in mind, at this current pace, it's going to take them all of 2014 to wind their wie
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out of the bond buying. >> greg, question for you. do you think the taper yesterday was the fed's vote of confidence in the u.s. economy or was it the fed realizing this is getting to dangerous levels, that the benefits of qe are not exactly as they expected them, so they have to taper it, anyway? >> i think from the fed's perspective, it was more a vote of confidence from the economy. i think the rest of us would say it's more of the latter than the former. with the fed having singled out the fact that job markets and unemployment specifically were metrics that they were watching, you know, i think we kind of hit that mark for them to at least begin the tapering and, again, doing so in a baby step buys them a bit of latitude so they don't have to worry about backing off necessarily if we get one on two weak job numbers in the months ahead. >> there has been some thought that they wouldn't taper mortgage-backed securities. why do you think they chose not
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to do that? why do it evenly? >> yeah. i mean, i think that's going to be interesting going forward is do they kind of rachet both of them down or do they err on the side of tapering back the treasuries and maintain the mortgage-backed securities. i think a lot of that just kind of depends on what kind of behavior we see out of mortgage rates, you know, what the fed really wants to do is they want to keep mortgage rates low, they want to continue to stimulate the housing market and what that does for the overall economy. if that means erring on the side of maintaining mortgage-backed purchases, i think that's a step they're prepared to take. but at this point, they're keeping their options open. >> and look, the fed is -- when you look at the forecast at the moment, from fed funds, they're talking about ending fed funds rates at 1.7%. maybe this rally is looking and going, okay, we can live with that.
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forward guidance is much more dependent now and what's it worth? >> yes, very clearly. i'm not convinced that their language that they used yet about keeping the fed funds rate unchanged until unemployment falls well past the time unemployment gets down to 6.5%. i think it's a recognition of the fact that the unemployment rate has come down quickly. we didn't want to get to a situation where we get to the middle of 2014 and all of a sudden we've got the unemployment rate near 6.5% and people start think they want to allay rates soon.
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>> thanks for that, greg. you're implying that qe is not doing anything, which then would cause you to question further investments in stocks, right? >> absolutely. the proof is there. since they started this over 12 months ago, ten-year yields are considerably higher than when they began. i'm not sprieft the market reacted in a different way. so that makes more sense. but in terms of -- i mean, qe hasn't worked out. i mean, you just look at the daily lives of normal mrerns, normal people. their lives haven't improved, their financial conditions haven't improved. what improved was wall street improved quite a bit. everybody who owns assets had their wealth quite impacted. so i think the fed might be
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coming to the relation that this hasn't worked. >> you could have injected that money directly into the businesses. >> or through a helicopter. as he said he would do in 2002. at least the middle class would have benefited from that rather than the 1%. >> european equities are sort of catching up from what happened with the u.s. last night. the ftse 100 up 0.8%. the xetra dax and the cac 40 and ftse all up about 1.25%. individual stories, saab's stock is rocketing after being up nearly 25%. the firms won a 4.5 billion contract to replace brazil's fleet of aging fighter jets. the move is something of a blow to boeing and dassault.
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and dish network is reportedly mulling a bid for t-mobile next year. dish had been talking to t-mobile's majority owner about a potential deal. last week, "the wall street journal" reported sprint was considering an offer for t-mobile. reports say while dish hasn't decided whether to move forward, it won't sit on the sidelines if sprint does make a bid. the three firms involved, dish is down slightly, t-mobile up nearly 4%. sprint up around 1%. still to come, a cloud hangs over the market's electronic sfwrets as officials side whether the sector needs more regulation. ly will this choke off the boom? we'll speak to the manufacturer, next.
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a leading voice in council may have to spell out a change as he could head from washington to beijing. seema has more from for us from cnbc hq in the states. >> senate aides say president obama will nominate senator max baucus to be the next u.s. ambassador to china. the democrat from montana was elected to the senate in 1978. he's the third longest serving u.s. senator, but announced earlier this year he would
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retire at the end of 2014. bachus currently chairs a powerful senate finance committee. he's the chairman of the joint committee on taxation. bachus would replace gary locke, the former washington governor said last month he would leave his post early next year to rejoin his wife and three children in seattle. locke's 2 1/2 year tenure has been marked by increased tensions in china. bachus has taken tough stances on china's trade infractions. in july, he and three other lawmakers rose to president obama to urge him to curb electal property and practices that dis -- against u.s. companies. bachus led the fight in the
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1990s to get china admitted to the w.t.o. and to get bilateral trade relations with beijing. one of his first tests may be to manage security issues. a u.s. guided missile cruiser and chile even war ship narrowly missed each other in the east china sea. if bachus gets the job, montana's governor would appoint a replacement to serve the rest of his term. if a democrat is appointed, it wouldn't change the balance in the senate. >> we'll see how the politics pans out over next year. thanks for that, seema. and a recap of the headlines today, ben bernanke parting gifts after months of guessing. the fed decides to start tapering its bond buying by $10 million come january.
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stocks take the u.s. news in stride while we get a more mixed reaction in asia. and shares in saab accelerate as it win aes deal to replace brazil's aging jet, beating boeing. ♪ [ 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?
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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 we can expect to see a whole lot more of electronic figure e figurettes over the next few years. analysts at wells fargo predict the market for electronic devices will increase through 2017. it comes as the u.s. food and drug administration is looking to extend its definition of tobacco products to include e-cigarettes. joining us is kevin, ceo of vapor corp., one of the makers
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of the e-cigarettes is in the states. kevin, thank you for joining us. are we going to start seeing bans of these cigarettes. >> public places in certain states? is that a threat? >> well, the fda is going to pass some deeming regulation and we feel regulation is important. it's important for the clarity of our business, the investment in our business and the future growth of the business depends on clear regulation. i don't think the fda is going to ban the use of cigarettes. some local municipalities have started to writer nonspoking areas the same as regular cigarettes. but as the learning curve, we pass that learning curve, i think people realize that they're much less harmful than cigarettes and some of that might change later on. >> the american lung association, americans of nonsmoking rights say less harmful isn't good enough. second hand vapor is a pollutant
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and you're encouraging them to -- nicotine. >> there's ten times less nicotine in the second hand vapor, actually. minus the carbon monoxide and the carcinogens. i guess the answer then is to ban tobacco. and unless the fda and officials around the world decide to do that, the less harmful alternative is a better solution. e-cigarettes are the missing puzzle people to help people curb their addiction. >> is it going to -- must impact, you know job your business. it must impact your future projectio projections. >> you would think so, but they've banned cigarettes over the past few years and cigarette sales haven't gone down too much. what these cigarettes do is allow them to smoke less
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tobacco. solo they've been banning smoking of regular cigarettes, the sales haven't gone down much. so the market is still huge. there are 42 million smokers in the u.s. and it's still an $80 billion market just in the u.s. alone. >> hi, kevin. wasn't the big engine in the growth of your sector the fact that you could smoke ecigarettes indoors as opposed to conventional cigarettes and if you faced the same regulation that normal cigarettes would face, will that nod lead to more guys being head on head competitores and maybe people will keep on smoking normal cigarettes? >> well, it was one of the benefits and, actually, in the private sector in the u.s., a lot of companies are actually making the choice to allow their employees to smoke. electronic cigarettes at their desk or in the men's room, for example, or in the hallway. you know, what they fooel find is that there's a better productivity and it encourages people to take less smoking breaks, obviously. but i think the public bans are for public places and i understand the need to ban
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tobacco. and i understand the need to curb that use. so we're all for regulation and we feel that people have the choice to do what they like in the privacy of their own business or their own home. .we find that that is actually taking place in the u.s. so we expect, you know, the growth to continue. >> kevin, good to speak to you this morning. thanks for joining us from new york. >> thank you. now let's take look at some of the other stories today. michael steinberg, a portfolio manager has been found guilty on insider trading charges. the verdict was delayed slightly when steinberg fainted before it was read. he was one of the employees to face criminal charges for insider trading and the first of two to fight them in court. matthew micona goes to trial next month. the senate has passed the budget deal averting the threat of a government shutdown next month.
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president obama says he'll sign the bill, which cleared the house last week before he leaves for his christmas vacation on friday. and the u.s. senate could vote on janet yellen's nomination before they leave for the year. yellen's support of the tapering of the bond buying program has won over her support on capitol hill. last month, mancion was the only democrat to vote against approvi approving yellen. mishkin has told cnbc many of the headwinds driving the fed's hesitation to move in september when the markets were expecting it have now all come together. >> this is a very good outcome. they basically decreased uncertainty, they also made it very clear that there is a difference, but that tapering does not mean a tightening of policy. >> european equities, meanwhile, are pretty much on the best levels of the session.
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the ftse up nearly 1%. we're up 1.4% for the german, the french and the italian markets. u.s. futures, after their best day in two months yesterday and closing record highs for the s&p and the dow jones industrial average have been fairly flat this morning to a little bit negative. there we go. that's where we are. pedro has been with us. let's get some final thoughts with you, pedro. first of all, this comes back to the argument about stocks still look relatively cheap on a price earnings basis. do you disagree with that? >> if you look at that, the s&p is projected to be at 14.6 times earnings next year. that's back by a 4.6% earnings growth. that's the profit turnings growth ratio of 3.2. ideally, you like to invest in stocks with a peg ratio of 1 or lower which means you're paying less for each percentage of profit. so, yeah, i don't think the s&p
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looks anywhere as rosy as -- >> do they look attractive as bond yields go up? it's not relevant? >> it is relevant and i think it will be very relevant in the first quarter of next year and i think we're going to see a huge part of the rotations that people talk about. so i think the risk is equities will trade significantly higher over the next three or four months. >> but then when we get to the -- we traditionally have a swoon after easter and in the spring, right? >> if you look at the inflows coming to the equity markets, 95% of the inflows every year come in the first four months. so that's why i guess the sell in may and go away tends to work because that's when the in flows are finished. but in terms of your relative question, do equities look better than bonds? yes. but that's because bonds look absurdly overpriced. i mean, it's -- do you have to look at things in absolute terms. in absolute terms, equities are expensive. the shiller pe, which is a
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better way to look at the markets, because equities are long duration assets is at 25. the only times that it has been higher than this was before 200 on 0 and in 1929. so the market is not cheap. >> on your view about bonds are expensive, what about the high yield sector? >> i really do not understand how people are buying the yields. but i guess people chase yieldes and that is one of the consequences of the fed having such low rates for such long times. people need income and that forces people up the yield curve and doing risky things that they shouldn't be doing. >> that is going to change, right? next year that's going to start changing. >> i don't know if it's next year, but it will change in the next year or two, for sure. >> lovely to have you on today. merry christmas. thanks for that. that is it for "worldwide
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exchange." plenty more reaction from the fed decision coming up now with "squawk box." we hope you have a profitable day. bye for now.
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good morning, everybody. the fed starts to unwind. a $10 billion taper to start in january. the markets rally on the news with the dow closing at another all-time high. target targeted. credit and debit cards, data stolen from an amount of unknown amount of users starting on the black friday weekend. and at u.p.s., it is the busiest day of the year for holiday packages. you now have less than one week to get your holiday shopping done. it is thursday, december 19th, 2013. "squawk box" begins right now.
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good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with a version of joe kernen and andrew ross sorkin who is reporting from the yale ceo summit in new york. we have a stellar lineup this morning. erskin bowles will be joining us on set at 7:00 a.m. we have the ceos of pvh, pulitzer prize winning columnist tom freedman and steve swartzman. and yes, we are packaging all of this into the next three hours. it's hard to imagine. joe is going to be here very soon. a little bit of trouble with the tires today. yeah. pothole tied him up. right around new york. >> are you trying to generate some mail? >> andrew, you're standing by, correct? >> i am standing by and i hav


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