tv Worldwide Exchange CNBC May 29, 2014 4:00am-6:01am EDT
welcome to "worldwide exchange," i'm julia chatterley. these are your headlines from around the world. an apple a day doesn't keep the doctor away, the u.s. tech giant finally puts a $3 billion bid on the table for rap star dr. dre's head set and music streaming business beats. more home improvement needed for condition fiking fisher. >> we're very confident about the opposition in france, the french economy and the french consumer. short term there's a confidence
issue basically in france right now, 11% unemployment. japan suffers the first negative effect of the sales tax hike in april. retail sales in the country fell at their fastest pace in three years. you're watching "worldwide exchange." bringing you business news from around the globe. a warm welcome again to today's edition of "worldwide exchange." let's get to one of our top stories straight away. apple is buying beats electronics for $3 billion to boost its music business. streaming services encroach on itunes. apple doesn't only gets beats streaming service and its market leading high-end head phones but high profile talent. beats co-founder jimmy ivin and
dr. dre, too. now, apple expects the deal to close in its fiscal fourth quarter. tim cook tweeted this photo, saying, sharing a laugh with jimmy and dre. interestingly for apple here, what do you think of it? >> i think it's an interesting move. because over the sort of past 20 years apple has been very much seen as a product innovator. and this is the first time that i can think of where they've actually bought somebody who is a product innovator. in the overall scheme of things, for apple, $3 billion is not a huge sum but it is an interesting move. they're seeing they're having to make moves like this as well. >> a lot of heads being scratched about the price tag right now. if they want to get into the
streaming business it's perhaps going to cost them a lot more to not be in this business at this stage or at least going forward. from that perspective it makes sense. >> absolutely. i think that's probably the major reason they're going for this. they want to get away into the streaming business. they see that as very much the future of the music. they want exposure to that. i think also the point you made about some of the talent they're requiring as well and the people is also a reason for the deal. >> what about more broadly, the number of m&a deals we're seeing as a sign or at least underpinning the equity markets right now? what's your take? >> i think it is underpinning the equity markets. i don't think it's a real surprise. there has been a lag in m&a deals since this sort of 2009 recovery. i think a lot of people expected to start in 2013 and it didn't. i think now that businesses are getting more confident, maybe chief executives are thinking
that the global economy won't grow quite as quickly as they're used to. they have to look to buy revenue. they're having to make acquisitions. they also realize the low interest rates may not stay there forever. they want to take advantage of that while they're still there. i think it's a combination of things. the deals we are seeing are very large. and i think that you'll probably see more of them over the next few months. >> what we've seen has been primarily dominating the tech sector and pharma sector. where specifically would you be focusing right now? >> i think we've seen it in the industrials, gec looking at alstom. i think there will be a broader pickup in m&a deals as ceos get more confident for the outlook, the economy in general across the globe. as i said, as they look to buy, look to drive revenue through acquisition. >> you can read more on apple's
purchase of beats and why some experts think it's all about new models in music on our website. don't forget to check that out. you can see, the ftse 100 gaining around 0.3% and losses for the mather markets today. the ftse mib, the only one really gaining. that's europe but what about asia? let's check in on the market action over there. sri is in singapore for us. sri? >> hi there, julia. the markets here did start out in a reasonably resilient footing despite that wobble that we saw on wall street overnight. we are starting to see a lot of these markets succumb to selling pressure. let me start with the nikkei. we are consolidating around this level of 14,700. we did see fairly -- retail
sales numbers. it remains to be seen whether this is going to be repeated in future months. i think one of the big unknowns is really whether we'll see meaningful increases in real wages. that's really going to be the key factor that's going to unleash the animal spirits amongst the japanese consumer. in the here and now, some are saying we continue to see weak consumer sentiment, weak retail sales numbers and that could be -- who want to see more accommodation from the bank of japan. elsewhere, the broad weakness is confined to the southeasternationen markets, especially the philippine benchmark, the underperformer today. down by almost 2%. a lot of these markets we're in a holding pattern until we get a few more decisive leads externally, especially the nonfarm payroll. that will be key for next week.
back to you. we saw the u.s. markets yesterday coming off a bit towards the close yesterday but we saw trading around these fresh highs particularly in europe, too, but all the focus really on what's going on in the u.s. bond market. we saw the ten-year hit its lowest level since 2013. now trading at 2.43. the 30-year trading at 3.29 this morning, too. 12-month lows for the 30-year. a lot of questions being asked not just about the messages being sent but what's going on as far as the front end of the relative to the back end. we'll be talking about that a lot more during the show. let's get back to paul cedric. you've given me lots of reasons about why we're seeing this bull market being so unloved by investors. >> yes. >> what changes that? >> that's a good question. i think people -- i think -- the
obvious things. people want to see confirmation that the economic growth is sustainable. they want to know what's going to happen, get a clearer picture when interest rates do start to move in the u.s. and the uk, how that pans out. and equity markets are all about earnings. ultimately it's earnings. you've seen recently the earnings revision ratio start to tick up pretty much across most of the advanced markets. the uk, the u.s. i think the earnings season that just went through, definitely was encouraging. there were no -- there were no real upsets there. and in fact in the u.s., they came out above expectations. >> is it all about earnings, really? as you point out, zero interest rate policy covering half the world right now. another $2 trillion worth of stimulus to be added this year, liquidity added this year to the markets. it's not just about earnings, surely. >> it was interesting. i was listening to jeff this morning first thing at 6:00.
he was talking about the fact that he was pointing out the performance of the u.s. bond markets and what's that telling people and the fact that equity markets are rerated so much in the past year where earnings haven't really gone with it. he makes very good points. at the moment, most equity markets are of reasonable value. they don't look expensive. they done the necessarily look as cheap as they did. i do believe you need to start to see earnings growth come through and that will give people the confidence to continue to invest in the market. but you hear -- >> you're saying the pessimism is because people aren't yet seeing earnings underpinning the rally we're getting right now? >> i think that's part of it. i always think there's a psychological thing as well. i mean, the 2008-'09 is relatively visible in people's minds. to get over that and get the confidence back in the equity market is going to take a little bit of time. >> does that explain the
difference between what we're seeing as far as professional investors are concerned and individual investors? as far as the professional investors are concerned they're relatively bullish. if you look at investor surveys, like the aaii as you point out, two-thirds of those polled in this market think we'll be at the same level or lower in six month's time. >> i think that's right. but it's a good -- retail sentiment is something you look for when you look for sort of markets topping out. traditionally people say when the retail investor starts to get very bullish. the institutional investors, even so, they may talk about being bullish but a lot of the data i see and a lot of the surveys that i see indicate that they are still relatively underexposed to the equity market compared to history. i mean, merrill lynch's fun manager, for example, shows the average pension fund manager has 5% of his portfolio in cash. relative to history, that's
pretty high. they may be talking a bullish game but they may not be following it through quite as much. >> very quickly, this then looks like a good opportunity for investors to get involved. what should they be buying? >> you have to be exposed to -- we prefer good, solid global companies with strong balance sheets. progressive supportive dividend yields. so if you do get the wobbles, which you're bound to do, you have the fundamentals underpinning you. >> let's bring our viewers up to speed with other corporate news today. we are watching king fisher on the slide as investors react negatively to 'weaker performance in key markets as well as promotional activity. speaking first to cnbc earlier, the ceo was asked about the recent share price performance. >> on a long-term basis we're very confident about the opposition in france. the french economy, the french consumer. short term, there is a
confidence issue basically in france right now with 11% unemployment and uncertainty despite the more encouraging noises the french government has been making recently about how that economy is going to move. i think we'll ride out this period and maybe on the plus side, we wouldn't have had the opportunity to sort of look at this deal in the same way two or three years ago. >> uk medical technology firm smith and nephew is trading higher on reports of a bid interest from stryker. aggreko down 2.6% as investors react to news that the company has poached an executive chris weston to be the new ceo. and saga has begun untraditional trading in london. they saw shares drop in
conditional trading. slightly higher this morning. 1.87. new also on today's show, we'll head out to paris where france's biggest job related social network will attempt to lure investors with an ipo. but is the hunger for tech strong over in paris? we'll be finding out. meanwhile, egypt's former military chief wins the presidential election with an astonishing 96% of the vote. with the opposition screaming foul play, just how reliable are those results? and a board that's far from boring. the side kick the edge are set to become board members for guitarmaker fender. all that after the break. stay with us. huh, 15 minutes could save you 15% or more
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you're watching "worldwide exchange." we're seeing the first bite of japan's sales tax hikes in april. retail sales in the country fell that month at their fastest pace in three years. the number of cars and electronics sold declined in april showing consumers are trimming their purchases. in fact, the 4.4% annual decrease in retail sales is the biggest drop since the
devastating earthquake and tsunami in march 2011. ed rogers ceo at ed rogers investments joins us now. the nikkei barely budged on these numbers. they were pretty much expected. you see this as a temporary blip and you're not worried at all. is that right? >> absolutely right. the markets saw this coming a mile away. it was well predicted. the reaction was so what. i think topix ended up slightly positive on the day. if we have three more months of worries like this, you should get worried. but i'm a bettingen and i'm betting that's not going to happen. >> this figure suggests that the underlying momentum of consumption was far weaker than it was in '97 when we saw the last sales tax hike. >> if you're going to draw a comparison to '97 i would say asia was crumbling around us,
multiple countries. the currency crisis was taking hold. that was a far bigger problem. we look around asia today, there are far fewer issues. balance sheets are healthy and whole. many, many companies in many, many countries have cash on the balance sheets. i don't think we're anything near close to having the problems, even if we have another quarter of bad numbers, frankly, in japan. there's nowhere near the situation there was in '97. the reality is we're far less worried. >> as far as investors are concerned, perhaps far more important is the government's restructuring plans, the progress as far as the tpp trade talks are concerned. is that what we should be focusing on right now? >> absolutely. the bigger picture number if you want to focus on a number was the first quarter gdp at almost plus 6% annualized. far better than anyone anticipated. we think that means that the underlying investor sentiment is actually quite positive.
that will be reinforced over the coming weeks when we see the ldp reform plan, the government reform plan. the formal proposal is due out very, very soon that investors should be focused on. the tpp talks are absolutely ongoing. we think we will see resolution, positive resolution. we think it's a very important agreement for not just japan and the united states but the entire asia region and, therefore, the world. those are the things that we're focused on when we're allocating for our portfolio. investors have responded to this downtick by putting more money into the market. now is a great time to be getting more exposure, particularly to the hedge fund space. the hedge funds that we're invested in are in aggregate down 50 basis points for the year versus the market down 10% still. when the uptick comes, we make 20%, 30% on the upside, which is quite conceivable, the next uptick leg. investors want to be able to participate in that. >> ed, do you think that the
weaker economic news may actually be good -- quite often they say poor economic news can be good for the stock market. because it means you get a response from the central bank. do you think some of the market reaction today was a reaction to the fact they think the possibility that the bank of japan could increase their action this data could show that? >> it's a great question. when we've looked at this, we think that the news wasn't bad enough to warrant boj or government response. we think that the government sees this really, let's say the last five or six months in its entirety as confirmation that abeonomics is working. we're on track to 2% inflation. if you have a blip, especially in april, the march/april move is going to be the most corporate intuitive of numbers to look at because really with the sales tax distortion, you
just can't take these numbers as a serious number and base anything on it going forward. another two or three months of this, absolutely. if we saw this continue, you'd see bank of japan action. we're firmly convinced of that. we don't think they'll see that action. that's a sign it's worked, abeonomics is working despite news to the contrary or commentary to the contrary. we're on track towards 2% inflation. that's the goal. >> i think it's interesting that we're talking about the possibility of the boj adding more stimulus. i hear there's informal debate right now in tokyo about just how they exit. they don't want you to make the same mistake as the fed made when they signaled an exit. are you hearing anything like that right now? >> look, i think the commentary is running as you say, more towards look, we've been very successful at this. we probably don't need to take further action. and what does that mean as far as how we do unwind? i would caution listeners to not
overreact to that comment. they're not going to do anything until it's very, very clear they were on track to 2% inflation. the goal is not to hit 2% and fall back again. they want a steady growth rate on the gdp and until that's achieved, you will not see anything that looks like an unwind on the part of the boj. >> absolutely. ed, great to chat to you. ed rogers, ceo at ed rogers investment advisers. paul, it seems like they're in the sweet spot. they can sit pretty and see how the numbers go. >> well, exactly. japan's been, obviously, it's been talked about a lot. it's had a very difficult time over the last 20, 25 years. and this abeonomics as people talk about, there's a lot of stock being put by it to getting the economy recover again. >> he was talking about getting
back involved in the markets. what do you think as far as the markets are concerned? >> they've had a slightly disappointing start to the year this year. which is another one of the things that may have taken people by surprise. he seems optimistic that this is a good opportunity to get into the japanese markets. not a market i focus on a huge amount. obviously i watch it to keep an eye on the broad markets. it would make sense if the data continues to look in the way it is and the policies of the central bank are supportive, you would think this is a good opportunity for investors. >> you're staying with us. let's move on to our other top stories. u.s. whistle-blower edward snowden says he will attempt to extend his asylum in russia if he fails to reach an agreement to return to the u.s. he said he felt a moral duty to reveal the practices of the nsa. >> the reality is the situation determined that this needed to be told to the public. you know?
the constitution of the united states has been violated on a massive scale. now, had that not happened, had the government not gone too far and overreached, we wouldn't be in a situation where whistle blowers were necessary. i think it's important to remember that people don't set their lives on fire. they don't say good-bye to their families, actually pack up without saying good-bye to their families. they don't walk away from their extraordinary, extraordinarily comfortable lives. i made a lot of money for a guy with no high school diploma. and burn down everything they love for no reason. >> are you looking for clemency or amnesty? would you like to go home? >> i don't think there's ever been any question that i'd like to go home. i mean, from day one, i said i'm doing this to serve my country. now, whether amnesty or clemency ever becomes a possibility is not for me to say.
that's a debate for the public and the government to decide. but if i could go anywhere in the world, that place would be home. >> how anxious are you right now to make a deal to go back? >> i think my priority is not about myself. it's about making sure that these programs are reformed. and that the family that i left behind, the country that i left behind, can be helped by my actions. i will do everything i can to continue to work in the most responsible way possible and to prioritize causing no harm while serving the public good. >> doesn't your asylum run out soon? >> the temporary asylum runs out, i believe, august 1st. >> will you apply for an extension?
>> if the asylum looks like it's going to run out, then of course i would apply for an extension. >> do you see yourself as a patriot? >> i do. >> snowden faced harsh criticism from u.s. secretary of state john kerry who said the whistle-blower was taking dangerous actions. >> he's hurt his country. he's exposed for terrorists a lot of mechanism which is now affect operational security of those terrorists and make it harder for the united states to break up plots, harder to protect our nation. if this man is a patriot, he should stay in the united states and make his case. patriots don't go to russia. they don't seek asylum in cuba. they don't seek asylum in venezuela, they fight their cause here. there are many a patriot, go back to the pentagon papers with dan ellsburg and others who stood and went to the court system of america and made their case. edward snowden is a coward.
he's a traitor and he has betrayed his country and if he wants to come home tomorrow to face the music, he can do so. >> john kerry pulling no punches. still to come on the show, egyptians go to the presidential polls. will the vote end the country's controversial turmoil. as different people, we are able to express ourselves and where we are able to accomplish our ambitions.
you're watching "worldwide exchange," bringing you business news from around the globe. an apple a day doesn't keep the doctor away. the u.s. tech giant finally puts a $3 billion bid on the table for rap star dr. dre's head set and music streaming business, beats. more home improvement needed for king fisher. shares sink as the diy chain disappoints after first quarter numbers after a poor performance in some markets, including france and china. >> we're confident about the opposition in france, the french economy and the french consumer. short term there is a confidence issue basically in france right now with 11% unemployment. >> japan suffers the first
negative effects of the sales tax hike in april. retail sales in the country fell at their fastest pace in three years. and think like a freak. the authors of the hit book freedo freakonomics say that's a good thing. >> people we pay the most are about as early as good as a monkey with a dart board. >> the uk's largest building society nationwide has urged the bank of england not to take any immediate action to curve mortgage lending. the lenders say there could be unintended consequences for house prices outside of london. we're also waiting for data from them this morning on house prices. joining us now is simon rubinson. paul sedgwick is still with us. simon, we're obviously focusing
on the housing market. take us through the numbers. >> essentially with london, what we're finding is the buyer appetite seems to be losing some of its momentum. it's still strong and at a relatively high level compared to where it was. actually what we're finding now, there's a few constraints kicking in. wherever it's linked to affordability, we know how far prices have moved up. whether it's linked to the introduction of the proposal following the mortgage market, the recommendations. wherever it's linked to perhaps some lenders, lloyds, for example, beginning to talk about mortgage finance not being available on quite the same terms for london buyers or the bigger borrowers which was the case previously. and there isn't that much supply still out there. all of those factors, perhaps dissuading buyers and the combination of a drop in buyer momentum and a lack of stock means we're seeing indications
that perhaps price momentum will continue to slow. >> what does that translate to in terms of price increases for the rest of the year? >> i think the back end this year, we're seeing price gains, at least 5% plus, probably 5% to 10%. as you go into 2015 where our lead indicator kicks in and we see a slowdown, we could see the year-on-year price gain very low single digits. >> we had the bank of england's funding for the first quarter, 2 billion pounds, that's data from the bank of england. tote outstanding funding at 43.3 billion. doesn't look like there's any money available there from the uk government. >> there clearly is still a lot of money around. there is discussion about whether the interest rate stance is appropriate. i think their reflection of a broader economic issue, rather than specifically related to the housing market. the bank of england is focused on whether it needs to do
anything to address some of the challenges we are seeing in housing. >> absolutely. paul, comment here. what do you think? >> i think obviously getting the housing market moving was very key to getting the recovery, the uk economy was starting to recover to give people the confidence and that sort of thing. there still seems to be a supply side shortage of housing generally across the uk. so i think there will be a reasonable demand. i think uk house builders look reasonably attractive in terms of investment proposition. i think -- i feel london is possibly a little bit of a different case. >> would you like to see cooling in the london market? >> the thing is my personal view is, i don't know how much of the london mark set driven by domestic money, people looking to part money overseas. >> simon? >> that overseas driver a couple years ago was strong.
i'm not sure those three borrowers are a lot of the borrowers for overseas money. i know it's heading for the center. >> their cashing into oversea buyers into the center of london and moving to the outskirts. >> absolutely. a combination of overseas buyers and domestic cash buyers has played an important role. when there's focus on the use of macro prudential policy doesn't have impact when you're talking about cash braving the markets. >> simon rubinsohn, thank you for joining us. on a programming note, following the dominance of an - anti-establishment and anti-eu parties, nigel farage will be speaking with michelle caruso-cabrera at 12:30 cet, 6:30 eastern live today. another complication for carnie
and cameron there. looking out for that interview. focusing on apple, buying beats electronics for $3 billion to boost its music business. streaming services encroach on itunes. apple gets not only beats streaming service and market-leading high-end head phones but high profile talent. beats co-founders jimmy iovin says ceo tim cook told him he wanted to buy beats at a meeting two months ago. speaking at the co-technology conference, apple's media boss explained the motivation behind the deal. >> we have a lot of customers, we know what they listen to. we have al gagorithms. we have a great relationship with artists. we deal directly with artists.
we work with them to market that content. we think all of those things when you put them on together it's on steroids with us together. >> apple expects the deal to close in the fiscal fourth quarter. quick check on apple stock, down 0.5% in the german market trading today. tim cook tweeted this photo saying sharing a laugh with jimmy, dre and eddy cue. and apple isn't the only company looking for star power. fender will name u2 front man bono and the edge to the board today. fender which has helped give birth to the modern electronic guitar is in the midst of a turnaround. in an e-mail, the edge says some of youtube's biggest hits feature fender stratocasters.
he thi what rock star would you choose to promote your company? if you want to join the conversation on "worldwide exchange," get in touch by e-mail email@example.com or via twitter @cnbc.wex or straight to me, @jchatterleycnbc. as you can see, gains for the ftse 100 0.3%. smith and nephew speculation, the german markets, french markets 0.2% higher and the tfte mib higher by 0.3%. we saw a rally innen b bond pri yesterday. we have the italian spreads trading at .294. a lot of focus on the
irish-year-oiriseyirish yields yesterday. euro/dollar trading around the .136 level. seeing a few gains there, too. similar story, dollar, broadly lower on the session this morning. the egyptian presidential elections were extended for a third day yesterday. apparently because of low voter turnout. does the low ballot number raise doubts about the level of support for the man still forecast to win? former army chief el sisi. we are joined from dubai with more. >> well, julie, the victory of el sisi in this election according to provisional results is in the a real surprise. as you pointed out, what would be a surprise is the low turnout which is just over 40% is less than half of what sisi himself
called for just last week. several factors and variables playing into that. you have obviously a segment of the population is boycotting the results. you're also looking at voter apathy, voter fatigue. some people tired of being called to the voting booth several times over the last year. all of that, of course, creating an ambiguous picture. investors show their reaction on the stock exchange yesterday which lost 2.2%. they were concerned that the lack of a broad popular mandate for sisi would prevent him from tackling the important structural economic reforms that he needs to do. also the market trading to the downside at the open this morning. now, also watch out for that central bank decision, which is due today. analysts divided about whether the central bank will keep the rates on hold or slash rates to stimulate lagging economic growth. i was in cairo recently and i sat down with some of the top industry leaders to get their take about the political process. one of them was the ceo of
telecom egypt. here's what he had to say. >> to tell you the truth, you know, what i have is i have an extraordinary sense of pride. let's look, for example, at some of the western markets. that are reasonably stable or flat erb. let's see the dynamic behind this. you see much of the dynamic is related to population and the quality of the population in terms of production and wealth. now, if you look at our parts of this, you'll see growth. >> if you want foreign investors to be part of that success story, then they need to be convinced that this time round the government is not going to fall within a year again. >> we have a young population and our democracy is very young as well. so we are going in different directions. but in fact, we do so because
simply we expect -- we as egyptian people, we expect a more -- where we able to express ourselves and where we are able to accomplish our ambitions. >> remember that telecom egypt has a 45% stake in vodafone egypt. now that the firm is moving into the mobile spectrum space it needs to do something with that stake. it hasn't made a decision on that front yet. it has a year to do so. also telecom egypt overseeing much of the country's telecom infrastructure which by the way has significance globally as well. we took a 4.5 hour nerve rattling bumpy road trip to the mediterranean coast to a sleepy village outside alexandria to take a closer look. >> this is where east meets west in cyberturns, connecting millions of people around the world.
and it's all controlled from the terminals in this room. worldwide undersea cables carry 99% of intercontinental internet traffic in one of the busiest hubs is right here in egypt. few people get to visit this facility. and with good reason. in march 2013, egypt's interconnectivity was severely disrupted after an undersea cable was severed. millions in africa, the middle east and south asia experienced severe internet disruption following the incident. and at the time, it was feared it could have been an act of cyberterrorism. that was just a little bit of a preview of what to expect from tonight's show. make sure you tune in to access middle east, 23:00 cet. we'll be talking about the firm's expansion plans and look back at the controversial decision to cut off egypt from
the internet when it kicked off in 2011. an exciting episode. i expect to see you tonight, julia. >> very exciting. i look forward to it, you receive. . the closed door session is said to lay out strategy for securing the country and for propping up a stumbling economy. data out on wednesday show thailand's trade shrank in april and factory output fell for the 13th month in a row. it has now been a week since the army general took power. over in japan, retail sales for april fell 4.4% compared to last year, weighed down by the consumer tax hike that came into effect in the same month. we go to the nikkei for the story, live from tokyo. >> sales fell for the first time in nine months in the sharpest fall since the massive earthquake and tsunami in march 2011. consumers wanting to avoid the
tax hike went on a shopping spree the month before, snapping up expensive items like cars, air conditioners and washing machines, sending retail sales soaring up 11%. it was exactly those same items that saw the largest decleans for april. car sales dropped 10% while home electronics were also weak, pushing machinery sales down over 12%. department stores who enjoyed a 25% increase in sales in march suffered a 10% fall. supermarkets, convenience stores and other retailers that deal in more affordable products fared better, some even managing to increase sales. japan's central bank had acknowledged in a report released last week that the tax hike had led to a fall in sales but it also said the drop was within expectations and that in general, consumer spending continued to stay steady. that's all from the nikkei business report. back to you, julia. >> thanks so much for that. let's give you a look at who else is on the agenda. lots of data, including jobs
numbers, cpi and household spending figures from japan all coming out at 8:30 a.m. tokyo time. 20 minutes after that, we have industrial output data and later in the day, over in india, we'll see the release of its fourth quarter gdp. now, still to come on the show, the brazilian central bankers put growth before inflation as it ends a year-long cycle of interest rate hikes. stay tuned as we ask if that's the right move, at least for now. stay with us. ♪ ♪fame, makes a man take things over♪ ♪fame, lets him loose, hard to swallow♪ ♪fame, puts you there where things are hollow♪ the evolution of luxury continues.
you're watching "worldwide exchange." welcome back to the show. the hit book is credited with bringing economics to the mainstream. the duo behind freakonomics gained popularity. their latest book is called "think like a freak." earlier on this channel, the co-author stressed the importance of skepticism when financial advice comes your way. >> the first important step is to figure out who has what kind of skin in the game. so you know, i will say this. we talk about the ability of experts to predict the future, whether the future is geopolitical or financial. and so if you look at, let's say, stock picking advice, specifically, you find that the
experts, the emthat we most revere, the people we pay the most are generally about as good as a monkey with a dart board. >> you have all of these incredibly smart people. that's why the markets are so efficient. on every side of the transaction you've got these good people doing it. the most freakish thing i can say about the market is that whenever a person at home watches this makes a trade or feels good about making a trade, i always tell people, there's something on the other side of the trade that's just as optimistic that selling you what you are buying will be good for them as well. jack mars 8.9% stake and the executive vice chairman's 3.6% holding has been disclosed. the much anticipated u.s. listing is set to raise more than $15 billion this year. meanwhile, france is getting
ready for its largest tech ipo since 2006. stephen is in paris with the details. it's the only tech ipo, isn't it, since 2006? take us through the details. any idea of size yet? >> yes. it's going to be the largest one indeed since 2006. it's vdo, a french professional network which has announced its ipo. it started a process with ipo, won't take place until january 2015. we always try to be first on cnbc. this time, we give you the information well in advance. the company didn't say how much cash it's planning to raise from the ipo. it will re-invest all the profits to develop its network in emerging countries, mannly in china. based on the valuation of its competitors, nine times the annual sales for linked in and six times the annual sales for zing. it is to be valued between 180
and 200 million euros. the company is much smaller than linked in with around 60 million members. that's to compare with 300 million for linked in. 50% of its revenue comes from subscription. 20% from advertising and the remaining 30% from services offered to corporate inuniters. we have plenty of time. >> yes. definitely first on cnbc there, stephan. thank you so much. >> are you on linked in? >> i am. she says with caution. >> don't tell human resources then. >> i won't. good at keeping secrets. thanks, stephan. brazil's central bank has
held the rate at 7%. slowing growth is the greater risk to the economy than rising inflation. michael henderson, senior emerging markets economy at maplecroft joins me now. you'd expect them to signal a pause here. actually, they left the door open. inflation, still a real problem, isn't it, irrespective of weak growth? >> there are no surprises from the brazilian central bank last night. interest rates left at 11%, bringing an end to the recent increases. policymakers have hinted in advance this was going to happen. the impact in the market in the near term will be fairly limited. i think it's a sensible move. we've seen 375 basis points of hike since early last year, a huge amount. that's one of the most aggressive rate hiking cycles in the developed economies. really policymakers will step back first of all and see how that pans out. the impact on the real economy before committing to more action. inflation is a big thing and because the rate of inflation at
the moment, i think there is a chance policymakers will return to rate hikes later in the year. perhaps towards the end of 2014, 2015. we think inflation has further to run. we think inflation will top the 6.5% of the central bank's target, perhaps in q3. it could stay there. that will push policymakers back towards rate hikes. >> do we expect rate hikes in q3? >> in the near term, perhaps the next four, five months you'll see rates on hold. any further tightening could strangle the economic recovery, growth is extremely weak at the moment. also with elections coming up in october, further rate hikes will be politically unpopular, particularly among the business community. i think they'll back away for the time being. >> you said economic recovery there. >> a very sensitive one. >> right. >> we tend to say about brazil, the economy is stuck in the doldrums. it's been there for a long time now. people have been predicting recoveries for a long time. things are not going any better.
if you look at the growth rate, that's 2.3%. that's way down in the 5%, 6%, 7% growth rate we saw in the after market, the global financial crisis. evidence from 2014 is weak. economic activity has been poor in the first few months of the year. we have q1 out pretty soon. that will show the economy group by 0.1 or 0.2 in the first quarter. it's hard to see where a pickup is going to come from. >> there's a lot of focus on the world cup. we'll be talking later on about the market impact of the world cup. just what impact is the tournament going to have on gdp? >> in economic terms, we've looked at this before and said the impact is probably going to be fairly small. we're probably talking about something of the order of a few tenths of a percentage point of gdp, certainly no more. of course you'll see higher tourist revenues, an increase in consumer spending. a feel-good factor. businesses will scale back activity, partially shutting down as the tournament gets
going. the historical evidence doesn't suggest these major sporting events have a lasting impact on the economy. there's no evidence to suggest when we look back through the decades of olympics, world cups, those sorts of things, we're expecting a slowdown in gdp growth this year. that will speak for itself, really. >> the other interesting question is the election as you also just mentioned there. the second runner right now in the polls are climbing and narrowing the gap. what's the probability that we have a huge surprise in this election or even if we don't get a surprise, does the fact she's going to win by a lesser margin change policy after the election? that's what we need, isn't it? >> i think maybe to a limited extent, clearly he's on track to be re-elected. she's still quite popular with her core support, having benefitted from the traditional cash schemes. as you mention, her nearest
rival has picked up momentum, ben 10 percentage points behind. which sounds like a lot but that's squeezed by half since the early stages of the campaign. is she under threat? probably not. she'll get in again. i think when -- if and when dylan gets back in, there will be more pragmatism, they'll have to reign in fiscal spending. >> a lot of work to do. >> yes. >> michael henderson from maplecroft. after the break, we'll be talking gdp, was it just the weather in the first quarter? stay tuned. we'll be discussing, next.
welcome to "worldwide exchange," i'm julia chatterley. these are your headlines from around the world. an apple a day doesn't keep the doctor away. the u.s. tech giant finally puts a $3 billion bid on the table for rap star dr. dre's head set and music streaming business, beats. snowed in, u.s. gdp for the first quarter is expected to be downgraded with the first growth numbers due later. japan suffers the first negative effect of the sales tax hike in april. retail sales in the country fell at their fastest pace in three years. and think like a freak. the authors of the hit book
"freakonomics" tells cnbc that quitting your job is a good thing. they also talk about financial experts. >> the experts, are generally about as good as a monkey with a dart board. you're watching "worldwide exchange,"ing before i you business news from around the globe. thanks for joining us on "worldwide exchange." as always, a quick look at the u.s. futures ahead of the market today. the stocks coming off the board into the close losing ground for 0.2%. not too much to talk about. futures indicating higher. we have the dow higher by 30 points. the s&p 500 around 3 and for the nasdaq right now, 8 points higher. we did see an intraday high of 1912 for the s&p yesterday, too, but much of the focus is what was going on in bond markets in particular. let's take a look at the european markets this morning.
we have investors perhaps out in some of the core markets. losing a bit of steam in the dax and the cac current, 0.2% there. the ftse mib also taking back some of this week's 4% gains so far. let's complete the circle now and check in on asia. sri of course is in singapore. sri, what's going on? >> hi there, julia. i think the big story today was really down to the japanese data retail sales were fairly negative. the markets seemed to take it in stride. the explanation for such weak numbers was the fact that we had the sales tax hike and that probably took a toll on the consumer and retail sales broadly. the big question is whether that's going to continue. the japanese authorities don't think that it will. they believe that the consumer is in fairly good shape. i think we're a big part of this equation is whether we're going to see further meaningful increases in real wages. that should have a trickle-down
effect, of course, on to the japanese consumer and help to unleash the spirits. markets taking this on their stride. at the close, 14,681. expect some fairly narrow ranges in the short term for the nikkei between 14,350 and around 14,700. elsewhere in the markets, quite a negative session for the philippine benchmark, down by more than 1.6%. quarterly gdp data disappointed for the philippines. we saw heavy bouts of selling on the philippine market. elsewhere, there are a few pockets of weakness as well. following that stumble we saw on wall street overnight. it's probably going to be trading in the ranges for the next couple of days or so, heading into next week, until we get something decisive, including the ecb in your neck of the woods and at the tail end of next week, the nonfarm payrolls. that's going to be the factors that will really inform the
trading, help us get out of the range. back to you now, julia. >> very much focused on what the ecb does next week. the bond markets right now certainly anticipating action. what we saw yesterday in europe with the bond market rallying, including core market. the bund down to 1.34. 2.62, the yield there in ireland. must point that out also. also watching what's going on in the u.s. bond markets right now. we saw the u.s. ten-year down at 2.44. it's right now trading around 2.43, just under that now. the 30-year also trading at 3.29 right now, near 12-month lows. asking questions not just about the message that the equity markets are sending as relative to the bond markets, the longer end of the bond market but also some of the disconnect perhaps in what's going on at the shorter en6 the curve to the longer end of the curve. i'll be talking about that most definitely in the next hour. the other big piece of data is
of course the u.s. second reading of q1 gdp. forecast suggesting the initial reading will be revised downwards. joining us now is the president of arcadian asset management. take us through the numbers. >> i'm not shocked by it. if you think about the weather situation we've had in the united states, everyone stayed home. i know i didn't want to go out, it was so cold. to have activity down is really not surprising. there's a lot of evidence it kind of got moved forward. i'm looking athat the numbers would go stronger as we go forward in the year for sure. >> we're getting quite a lot of mixed messages as far as the equity markets and the bond markets, not just the two, of course but just what's going on in different parts of the curve. what is your take right now and how do you believe investors should be positioned? >> i think that is the central theme of the moment.
the bond market seems to be signaling trouble ahead. i think what it's really reflecting is trouble behind. people have been so traumatized by the markets over the last four or five years, people that saw markets making new highs in 2007, 2008, that watch their fortunes tumble as the market got crushed, are skittish about new highs. the market keeps making new highs. we can discuss there are reasons for doing that. but a lot of people that have booked a lot of profits did not want to give it back. they're skittish and there's quite a lot of money sitting on the sidelines. as we see things like the gdp number going backwards, looking to be revised down, people are playing it very, very close to the vest. waiting to see what's going to happen. but i think the equity markets are moving up rationally. we're seeing the numbers looking much better. earnings continue to come in good. economies are coming back slowly, maybe slower than we like but they are coming back.
i think what's happening in the equity markets is rational. i think we're a way aways from the grand rotation everyone has been talking about. there's still a lot of scared money on the side that's just kind of accepting low interest rates. as warren buffett famously said, sometimes the best way to double your money is fold it over once and put it back in your pocket. i think you're seeing that in the flight to quality in the bond markets. >> we can talk about the fear factor but the positioning survey, people are reducing duration, at least they have been over the last month. if that's the case, who's buying? >> well, you have a lot of institutions out there. you're right. reducing duration is a smart thing to do. because this fabled interest rate, whenever it is, it seems to be never ending pushout of time when it's going to happen. but it is going to happen at some point. i think people are very, very scared about getting caught too far out on the curve. you're seeing that. i think that's a very rational
move. i think that investors right now are trying to play that balance between i can't get any yield but i'm afraid that if the market's making new highs, i've seen this play before and i don't want to get crushed again. you had a rough type of thing. you're getting people begrudgingly buying into it. i do think that the equity markets in this spot now are not really markets that should be feared. we are seeing as i said before, growth coming back. i think we are seeing signs of corporations really loosening up cash. we're certainly seeing it in the m&a world. interest rates being low now but probably not forever. chairman yellen -- chair yellen, excuse me, basically said we're probably not going to see interest moves for at least another year or so. but that implies they're going to move in about a year or so. doing deals now and deploying cash, that's healthy for all equities. i remain kind of bullish. i still think we'll have a positive year, probably upper
single digits. i think we'll have a positive year in the equities in the united states. >> the story of unloved markets, bullishness but being unloved. it's interesting. great to talk to you. president of mercadian asset management. we also get weekly jobless claims today at 8:30 a.m. eastern. it's forecast to drop by 6,000 to a total of 320,000. then at 10:00 a.m. eastern, april pending home sales, they're expected to rise 2%. we've also got kansas city fed president e president esther george and look for earnings from abercrombie & fitch and lions gate, the music studio. we've just been talking about the brazilian economy and inflation. but also the eyes of the world are on brazil as we're only 14 days away from the start of the world cup.
what impact does the tournament have on equities? and can financial markets help us predict a winner? going to tell me now is peter oppenheimer, the chief global investment strategist at goldman sachs. >> hello. >> great to have you on. >> good to be here. >> what impact will the world cup have on stock market behavior, investor behavior? >> it's a difficult thing to predict the overall outcome of the world cup. we have a model that will do that. we think brazil will win. statistically, the winner seems to have a feel-good factor in the stock market. it outperforms 2.5 to 3% after the month after the final. >> how long does that last? >> the fundamentals sta s star take over pretty quickly. it fades in about a month. it is a significant observation. >> is there take-back beyond that one to three-month period,
does it underperform if it's outperformed in that period? >> typically it does. it depends a great deal on what's happening in the country and the macro fundamentals. in fact, on average, most of the winning countries have seen the stock markets underperform within about a year. that's really dependent on what's happening fundamentally. >> have there been exceptions to the rule? i know brazil in 2012 when they were having a currency crisis, deep recession, it didn't happen then, did it? >> 2002. >> 2002. sorry. >> was the one real major exception. they had a very bad time, currency crisis, economic crisis. the stock market fell about 20% relative to the world stock market within a month. but having said that, it did extremely well when it won in 1994. it outperformed the world market by about 20% over the following month then. the key signal is, if there is no real economic crisis or currency crisis, generally you get a pretty good feel-good factor that's reflected in the market for a short period.
>> what about the runners up? >> not such good news. >> oh. >> the runners up seem to have a bit of a post-tournament slum in confidence. again, it doesn't last very long, about a month. typically, the runners underperform the world market by 1%, 1.5%. >> speaking of runner-up, i was thinking about england. >> england's chances are not that good. looking at the probability we have that's looking at the overall chances of different teams competing puts england's chances of getting into the final at only about 5%. its chances of winning about 1.5%. >> 1.5% for england? i'm mortified. are you a chelsea fan? >> i am a chelsea -- i'm a chelsea fan now that i've interviewed chelsea players. >> you went to meet four of the brazil players from chelsea. how was that?
>> very exciting, wonderful people. they were talking about their experiences of growing up in brazil, their passion of football, what got them into football and where they are now, playing for their national team at home in the world cup. it was an amazing experience. a wonderful tune. >> the if we cross the probability of the market rallying after they win the world cup according to your model or likely to win the world cup, with the fundamentals right now, what do you think happens to the stock market? >> i think there's a good chance, there's been a bit of stability in brazil. there were fundamental problems that we heard before but i think they will win and hopefully that feeds through optimism in the 345shgette. >> you heard it here first, brazil is going to win. in other sports news, malcolm glazer, the man who pioneered the takeover of manchester united football club has died at age 85.
he was also the owner of the tampa bay buccaneers. tiger woods pulled out of next month's u.s. open at pinehurst. he's continuing his rehab after undergoing a back operation. it's the second major in a row that he's missed. now up next, payday for dr. dre. apple is buying beats electronics for $3 billion to boost its music business. all the details, coming right up. relax into child's pose. sfx: bing. who's got two hooves and just got a claim status update from geico? this guy, that's who. sfx: bing. and i just got a...oh no, that's mom. sorry. claim status updates. just a tap away on the geico app.
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you're watching "worldwide exchange." welcome back to the show. these are your headlines. markets wait in wonder as u.s. gdp figures for the first quarter are revised. apple confirms $3 billion seals the deal with beats. and japan retail sales fall at their fastest pace in three years. let's take a closer look at today's top stories. apple is buying beats electronics for $3 billion to boost its music business. as streaming services encroach on itunes. apple gets not only beats streaming service and its market leading high-end head phone but also high-profile talent. beats co-founder jimmy iovine an
dr. dre will be joining the company. speaking at the code technology conference, eddy cue explained the deal. >> we have algorithms, we have a lot of curation, we have a lot of customers that have an easy way to pay. we have a great relationship with artists. we deal directly with artists to give us incredible content. we work with them to market that content. we think all of those things when you put them all together it's on steroids with us together. >> apple expects a deal to close in its fiscal fourth quarter. as you can see today, down 0.3% in the german market trading session. tim cook tweeted this photo saying sharing a laugh with jimmy, dr. dre and eddy cue.
excited to welcome the beats to team to apple. it's all about the music. apple isn't the only company looking for star power. "the new york times" reports that fender will name bono and the edge to a contract today. in an e-mail, the edge says some of u2's biggest hits feature fender stratocasters. he believes guitars are here to stay. we want to know what rock star would you choose to promote your company? if you want to join the conversation on "worldwide exchange," get in touch by e-mail, firstname.lastname@example.org, by twitter, @cnbcwex or direct to me @jchatterleycnbc. > the numbers aren't good for
google. the company is 70% male and 61% white. nearly three-quarters of google's leadership is also white apparently. companies in silicone valley have been reluctant to share diversification information. there's been pressure for the firms to hire more minorities and more women. alibaba is reportedly expected to reveal the name of 28 people who will control the company after its u.s. ipo. "the wall street journal" says alibaba will identify the so-called lakeside partners who founded the company in 1999. in an updated s.e.c. filing. who they are has been subject to speculation and controversy given alibaba's corporate governance structure. they will keep an iron grip on the company post-ipo as they have a power to nominate a majority of directors to the board. a u.s. judge in chicago is holding a hearing to consider a motion on whether to consolidate all lawsuits related to gm's
ignition switch recall into one single class-action. at the heart of the claims is the argument that many gm owners say the value of the cars has dropped due to the press and scrutiny of models in the recall. lawyers also believe the current, not prebankruptcy gm should be held liable. the judge is not expected to issue a ruling today. quick check on gm shares, up just over 1.5%, outperforming the german market session. still to come on the show, edward snowden says people don't set their lives on fire for no reason. the fugitive makes his case for whistle blowing in an exclusive nbc interview. all that coming up after the break.
we've just had auction results from italy. they've sold 7.5 billion euros worth of five and ten-year debt. both yields coming in at euro lifetime lows. this of course on the back of the success of renzi and elections this weekend. growth and jobs this year will continue to go badly. a real dichotomy as far as the real economy is concerned and the market take on what's going on in italy right now. quick check on u.s. futures also this morning. we saw them coming off a bit.
the steam as far as u.s. markets were yesterday, losing between 0.1% and 0.3%. we did see a fresh high for the s&p 500. right now, gaining, you can see the dow jones around 29 points higher, the s&p 500 just over 2.5 points higher in those futures. now u.s. whistle-blower edward snowden says he will attempt to extend his asylum in russia if he fails to reach an agreement to return to the u.s. speaking in an exclusive interview with nbc news, he said he felt a moral duty to reveal the practices within the nsa. >> the reality is the situation determined that this needed to be told to the public. the constitution of the united states had been violated on a massive scale. now, had that not happened, had the government not gone too far and overreached, we wouldn't be
in a situation where whistle-blowers were necessary. i think it's important to remember that people don't set their lives on fire. they don't say good-bye to their families, actually pack up without saying good-bye to their families. they don't walk away from their extraordinary, extraordinarily comfortable lives. i made a lot of money for a guy with no high school diploma. and burn down everything they love for no reason. china has begun to downplay cyberspying since last week's charges against five military officials for industrial espionage of u.s. firms. a news agency said they should not let the dispute to become a rift. do they have enough tension on their own door step without
aggravating the u.s. at this point? >> that's what many people have been talking about here. it's been interesting. snowden's interview has been played up here in china. there's a lot of people who are saying he's a hero, also saying that he is a real patriot. in fact, a government spokesperson today said that edward snowden only revealed what many people already suspected, that the u.s. is the chief of all the cyberspies and it adheres to double standards. this comes after the u.s. had indicted five chinese military officers and to highlight the american perspective, that government-to-government spying has been going on for quite some time and everybody does it. but at the same time, governments going to spy and stealing secrets for their own companies is completely unacceptable. this distinction has been completely lost in china. this is a country that is dominated by the state. in fact, there's one chinese military officer who ran a commentary which said that the
u.s. spy agency is the one that needs to be indicted. now at the same time, just in the past two days we have started to notice that the propaganda line has started to soften. and there hasn't been a really big question since these charges arose as to how long china could retaliate because the relationship between these two countries is so strong and so interdependent. now, some of the state press has been running commentaries that counter some of the outrage and essentially are saying that this rowell over cybersecurity shouldn't undermine the cooperation between these two countries. many within the american business community are concerned they could be the ones who would become the political football between these two countries as china looks to retaliate against
welcome to "worldwide exchange," i'm julia chatterley and these are your headlines from around the world. an apple a day doesn't keep the doctor away. the u.s. tech giant finally puts a $3 billion bid on the table for dr. dre's head set and music streaming business beats. gdp for the first quarter is expected to be downgraded with the first numbers due later today. more info from alibaba, the chinese internet giant reportedly expected to reveal the names of 28 people who will control the company after its ipo. and think like a freak. the author of the hit book "freakonomics" tells cnbc that quitting your job is a good thing. >> we find that the experts, the people that we most revere, pay the most, are generally about as good as a monkey with a dart board.
you're watching "worldwide exchange," bringing you business news from around the globe. >> if you're just tuning in, thanks for joining us here on the show. as always, we give you a look at how the markets are faring ahead of the u.s. open. stocks losing ground by 0.1 to 0.2%. we did see a fresh intraday high for the s&p 500. gaining 30 points for the dow mini, 8 points for the nasdaq and a few points for the s&p 500. the bond market, we saw the ten year hit at the lowest level. we saw the 30-year hit the lowest level as well. 3.28 the number there. david wu, head of global rates and currency research at bank of
america merrill lynch global search is on set with me now. that's a bit of a tongue twister. give you are your thoughts on why the longer enof the curve is immuned to tapering and data, what we're seeing in the equity markets right now. >> it's amazing. there's been a lot of debate about what is driving this rally. the bottom line is, i think it's difficult to justify the price action based on fundamentals, especially given the fact over the last month, believe it or not, u.s. treasuries have generally rallied on better-than-expected data. that's the most amazing thing about this, data has been surprising to the upside, if anything. and this treasury ought to continue. that leads us to think that actually you have to go away from fundamental reasons to explain what's going on here. i think the most likely explanation is that somebody has been buying a lot of treasuries for reasons it was still trying to fathom. >> who is buying? >> you know, it's difficult to
prove definitively but i think u.s. treasury data suggests that belgium's holding of treasury securities have increased by $125 billion. you know, in the first three months of this year. that is an annualized rate of $500 billion. this year, u.s. budget deficit will be only $550 billion. so many treasuries acouldn't the for 90% of the financing of the u.s. budget deficit financing this year. the question really is who may be buying and treasuries and keeping these securities with euro clear, that's basically headquartered in belgium. >> who? >> you know -- >> i want to say china. >> i think there's a pretty good chance it could be china. though again we can't prove it definitively. i think china is the only country that's large enough, that can account for the magnitude of the numbers we're talking about here in belgium. >> how though? what are we talking about? we have a credit squeeze going
on in china right now. are you saying that sucks in investment? is that the idea? >> you know, i think that's the most compelling, i think explanation. i think in some sense, at the end of last year when china started to tighten domestic liquidity. what extently happened it forced chinese borrowers to go somewhere else to borrow money. china corporatance marketed to foreign investors, now led to a surge in capital inflows, now forced the chinese central bank to step in, buying dollars, weaken the currency. all these dollars had to go somewhere. i think it ended up going to u.s. treasuries. >> when does it change? are we looking at a signal from the chinese economy and the chinese financial sector in particular to see an impact in the u.s. bond market? >> there's some sense there was a time that u.s. -- this year,
china will overtake the u.s. in becoming the world's largest economy. in some sense, china, i would argue, whatever it does, will have a big impact on the rest of the world, especially on the u.s. treasury markets we've seen this year. >> david, stay right there. we'll continue this conversation. for now, let's bring you up to speed on some of today's top stories. after weeks of speculation, it's finally official. apple has snapped up beats to the tune of $3 billion. josh lipton has more. >> reporter: during cupertino, california where apple did announce with will buy beats for $3 billion. i had the opportunity to speak to apple's tim cook and eddy cue as well as beats co-founder, jimmy iovine and dr. dre. cook telling me it will be acreedive in fiscal year 2015. why do this transaction? cook told me first and foremost, this is about the music, a company that has a history, a heritage of placing emphasis on
music. this is still a company that sits at that intersection of technology and the arts. cook telling me there is no berlin wall between apple and los angeles. it's also about the talent you're bringing on board. dr. dre, jimmy iovine who knows this company very well. jimmy iovine talked to me about how much he knew steve jobs, how close their friendship really was. if you look at beats and the two separate divisions, beats electronics, let's start there. tim cook said they did 1.1 billion in revenue, that division. beats electronics. important to remember, this is a company that dominates that head phone space, controls about 52% of the high end of the head phone market according to npd. that's a space that's growing fast. it jumped about 20% in q1 year over year. also of course you're getting beats music, that's a streaming service. i asked tim took whether he was concerned about entering that space. obviously a lot of competition with pandora and spotify.
cook telling me he was not concerned about that competition. rather his focus is on building the best product. you can see when it comes to music, that is where the growth seems to be, right? last year, digital music downloads, actually decreased for the first time but meanwhile, streaming consumption actually jumped 32% according to nielsen and finally, i did ask dre about his feelings. he said, listen, he's excited about this transaction. he told me he's ready to roll up his sleeves and get to work for tim cook. guys, back to you. alibaba is reportedly going to reveal the names of the 28 people who will control the company after its u.s. ipo. "the wall street journal" says alibaba will identify the so-called lakeside partners who founded the company in 1999. based in an updated s.e.c. filing. who they are has been subject to speculation and controversy given alibaba's corporate governance structure. they will keep an iron grip on the company post-ipo as they have the power to nominate a
majority of directors to the board. sprint chairman continues to make the case to u.s. regulators for the deal to buy rival t-mobile. speaking at the code technology conference, they pledged to abide by net neutrality rules if sprint is given the green light. he also points to recent cable and telecom mergers saying u.s. access to the internet is currently dominated by just three giants. he also says americans don't know how bad their internet service is. >> beijing has a terrible air but people in beijing don't know this, every morning, it's the same air. american people who live in america, using the internet every day and say, okay, this is the internet. but a guy like us who come from outside and use internet at the hotel or my home in silicon
valley, i said, oh, my god, how can american live like this? >> tech industry analyst mary meeker has put out our report on which trends are set to take off. the 164 pages cover everything from media consumption to health care and security. the standout call is on the rise of data creation from the sensors we carry around in our mobile devices. she says we are only just realizing the usefulness of the info gathered. coming up, after the break, lawyers for plaintiffs in the lawsuits against general motors are plotting their strategy. on just how to attack the automaker over its massive recall. we'll bring you all the latest, next. mine was earned in korea in 1953. afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation.
gm's recall crisis. morgan brennan is at cnbc hq with all the details. morgan, good morning. hi, julia. a judge is holding a hearing to consider a motion on whether to consolidate hundreds of lawsuits related to gm's ignition switch recall into a single class-action. the heart of the claim is the argument that many gm owners say the value of their cars has dropped due to the present scrutiny of models in the recall. for example, the chevy cobalt. lawyers believe the currents and not prebankruptcy gm should be held liable. that issue isn't expected to be addressed until july, though. plaintiffs lawyers want the judge to determine where a potential class-action suit should be heard. one attorney who led suits against toyota over a sudden acceleration cases want the trial to be held in california where the toyota case was settled favorably. now, a suspended gm engineer who, woulded on the defective
switch told congressional investigators that he forgot ordering a design change. "the new york times" say he didn't say anything to suggest that gm ceo mary barra knew about the issue before they took the top job earlier this year. he was suspended last month. internal documents show he signed off on the design change in 2006. checking gm shares in europe today, they are up about 1.57%. julia, back to you. >> thanks very much, morgan. great to chat with you. bill ackman is planning to tap the public market for his next investment venture. the hedge fund manager is seeking to raise billions of dollars for a closed-end fund that could list on the london stock exchange as soon as this summer. ackman was reportedly in london last month to drum up support among european investors. raising money separate from pershing square could let ackman lock up news cash that's not subject to redemption request
from investors. the hit book is credited with bringing economics to the mainstream. the duo behind "freakonomics" gained popularity during sometimes controversial conclusions with an economic twist. their latest book is called "think like a freak." earlier on this channel, the co-author stressed the importance of skepticism when financial advice comes your way. >> the first important step is to figure out who has what skin in the game. i will say this, we talk about the ability of experts to predict the future, whether the future is geopolitical or financial. if you look at, let's say, stock picking advice, specifically, you find that the experts, the people that we most revere, the people we pay the most are generally about as good as a monkey with a dart board. >> you have all of these incredibly smart people. that's why the markets are so efficient. on every side of the transaction you've got these good people doing it. the thing, the most freakish thing i can say about the
market, whenever you make a trade, the thing i always tell people, there is someone on the other side of that trade who's just as confident and optimistic that selling you whatever you're buying is going to be a great choice as well. today's second reading of gdp is tipped to reveal a shrinking u.s. economy in q1 but was it just the weather? we keep asking. stay tuned.
particular. let's give you a look at what's on today's agenda in the united states. we have weekly jobless claims at 8:30 a.m. eastern, they're forecast to drop by 6,000 to a total of 320,000. at 10:00 a.m. then, it's april pending home sales. they're expected to see a rise of 2%. kansas city fed president esther george speaking this evening and as for earnings, we have a look out from retailers abercrombie & fitch and the movie studio lions gate. forecasts second the initial reading will be revised downward to reveal an economic contraction. chief economist at moody's, capital market research and david wu, head of global rates and currency research at bank of america merrill lynch research, also still with us. what are your expectations, john, what kind of revision are you looking for today? >> we think we'll see a decline
of 0.3%, the first such decline since 2011. however, i do not believe that this is going to become a recurring phenomenon. we'll get a snap back in the second quarter. nevertheless, the u.s. economy is not growing as rapidly as had been expected several months ago. instead of growing by 2.7% at 2014 real gdp perhaps comes in just under 2.5% for the year. >> when you say snap back, what are you looking for, looking at? >> i think in the second quarter we could see growth between 3.5 to 4%. that's foot going to last. what we should do is average that slightly negative reading for the first quarter with 3.5 to 4% growth for the second quarter. that leaves you with roughly 2% growth on average. in the grand scheme of things, that's lackluster. by no means is the u.s. economy growing rapidly enough to materially increase inflation risks, to bring forward a hiking
of the fed funds rate. >> david, what's your take? revision today? >> we think it probably runs minus 0.7. i think the important thing to remember is that this was the third most severe winter in the united states since basically 1950s, only behind 1977 in 2000. if you look at the five most severe winters, the main differential was over 4.5%. i think q2 will be stronger and i think the most important thing is to focus ahead rather than behind. >> i want to take you back to the conversation we were having about who's buying treasuries. you said china. talk to me about the impact of that chinese buying relative to tapering right now. what's the net effect? can you put a value on it? >> as you know, at the start of the year, the presumption of the market, this year was going to be define by fed tapering. this is why people thought higher basically bond yields and lower stock market perhaps. what's transpiring is the chinese increased buying has
more than offset reduction in fed purchases. effectively there's been no tapering. i think the reason stocks are up here and beyond yields are up here, the question reading now at this point is when will the chinese stop buying? we know the fed will continue to taper. we still think the case for higher rates remain intact. is it going to be a q3 story or a june story? >> what's your bet. >> right now the market, i think for a fixed income investor this has become the most difficult year they can remember. people are probably still short. i feel like right now in the next few weeks there's probably reason to think capitulation has yet to play out in course. i think we're already overshooting territory and investors should be looking for lower yields to look to establish new shorts. >> what's your thoughts on that? you heard the take on the bond market particularly relative to equities. >> well, i think the bonds will
continue to surprise on the downside. i don't think the market fully appreciates the extent to which the u.s. economy is aging. right now, the number of americans turning 65 years of age or older, growing by 1.5 million annually, the younger segment of the population, working age population growing by 800,000. there's a built-in increase for the demand for treasury bonds because of the aging of the u.s. economy. and that will help prevent beyond yields from rising sharply. it will also prevent the u.s. economy from overheating. the u.s. today is an example of japan-like. we don't have deflation but we'll have disinflation for some time to come as the u.s. economy turns greyer and greyer. >> david, come back on this. you told me beyond yields have nothing to do with fundamentals right now. >> i think the demographics, we've known that was coming for
the last year. it can explain what's been going on the last, basically, couple of months. at the same time, i would argue. i agree, americans are definitely aging. but the fact that they're aging also means that the work force will be shrinking which means actually they're probably see actually higher wage growth much sooner than they normally would. >> fundamentals out the door as far as the bond markets are concerned. a bit of contention here. david's not talking. fantastic to have you on the show. john and david, thank you. that's just about it for today's show. i hope you enjoyed it. contact us, tweet u us @jchatterleycnbc. "squawk box" coming right up.
good morning. a revision to gdp tops today's mark eight jen da. 2.42 on the ten-year. plus, making music. apple indood announces it is buying beats. and edward snowden speaks out in his first american television interview. why he calls himself a patriot and what he makes of u.s. government surveillance programs. we'll have more of that interview. "squawk box" begins right now.
good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen. andrew is off today. our top market story is a revision to first quarter gdp. forecasters are expecting the data to show the economy shrank for the first time in three years. polled economists are calling for a contraction of 0.6%. we also have weekly jobless claims and pending home sales. as joe mentioned, it is corporate news. it's official, apple is buying beats for $3 billion. analysts say apple is try to catch up in the fast-growing business of music streaming. we'll have more on this story from jon fortt at the code conference in just a few minutes. we've been waiting on this one. the video from dr. dre himself already out there.