tv Worldwide Exchange CNBC May 22, 2013 4:00am-6:01am EDT
you're watching "worldwide exchange." i'm ross westgate. the headlines today. sony ceo gives his own opinion but says the board will assess the plan for a partial entertainment spinoff. bank of japan governor kuroda pledges to stay flexibility after keeping policy unchanged. and top of the agenda at an eu summit in brussels, president martin schultz tells cnbc the current system needs to be fixed. >> it's tough to debate about morality of ethics. let's reform the system to bring
back more solidarity, and by more solidarity, more coherence to the society. david cameron's in for a fight. the british prime minister says he's confident, though, he can get his colleagues to agree to new terms for the uk in the eu and avoid a european super state. plus, fed chairman ben bernanke's delivering his latest assessment of the u.s. economy at congress today with investors and analysts looking for clues if there is to be a shift in fed policy. all right, welcome to hump day here on cnbc, the middle of the week. on today's show, tax reform is the main event in brussels today, but eu leaders could also ruffle feathers with tougher talk on bonuses. julie will join us in a few minutes. investors also counting down to the bank of england minutes, due in 30 minutes.
we'll speak to one currency expert who sees little change in the policy start. he says the ball, though, has now officially been dropped into future governor mark carney's court. we'll also be in washington ahead of a hearing in congress over the irs scandal as the case casts a cloud over obama's second-term agenda, this according to a former white house deputy press secretary, tony fratto. he'll join us from 11:00 cet. and as hp gears up for second-quarter earnings, one expert says the company faces trouble from all sides. so, when will meg whitman's recovery plan actually kick in? we'll take a look at that at 11:20. any thoughts, comments, anything else, e-mail us, email@example.com. there we go, right there. that way. firstname.lastname@example.org. now, sony says its board will look into dan lowe's plan to spinoff, but with the japanese market surging again, he's under pressure to unlock
more value for shareholders. speaking a strategy update, the ceo says he's committed to restoring sony's electronics business to its former glory and is sticking to his operating profit goal of 5% margin on $58 billion in sales in fiscal 2014. he cut the sales forecast. i was enjoying that game. he cut the sales forecast for cameras, tablets and smartphones by 17% and scaled back expectations for video game profits. ben collard is head of equities at sunrise brokers, joins us for more. hi, ben. good to see you. >> hi, good morning. good to be here. >> the nikkei is up another 5 1/2-year high this morning, and sony's taking part in that. what do you make of what their response is going to be to mr. loeb? >> well, you know, i think if mr. loeb actually does -- the fact that he's got a meeting and
we're talking about that is more progress than i was expecting, more progress than he would have made five or six years ago. i think sony's ceo is just trying to do politic and being very japanese in his approach of entertaining this proposition. they have some unsettlement on the board. i think essentially the ceo's probably worried about making the wrong decision. he knows the shares have increasingly well held by u.s. and european investors, but to be honest, if third point are going to succeed in being an active shareholder, they'll be in a very unique group. historically, these kind of activities don't go down well in japan. corporate japan certainly in our experience tweets activism in shareholders like the u.s. treats terrorism. they don't like it at all. i think what they're really doing is figuring out if they can do something to defend their stock. >> are they likely -- is this action by loeb going to attract more overseas investors into sony and into other japanese corporates?
>> yeah, you know, absolutely. i don't know -- you can't sort of go into this -- you can't try and acquire the bigger stake in a japanese company without knowing what's gone down in the past. i'm sure he knows what he's doing. i think by drawing this attention to sony, he's gone for their investment and share price. i think at end of the day, he wants to realize some value in sony, i'm sure, whether by via price in the market or whether they sell the assets off. i'm not sure it makes much of a difference. certainly, sony is a name that everyone knows. it's a pretty easy stock -- it's easy to buy names you've heard of. it's been trading the adrs in the u.s. for a very, very long time, so it's really the first stock you look to when you hear that japan's up 50% year to date. >> yeah, look, here's the thing, he's already, just by launching this action, and you've alluded to it there, he's already adding an extraordinary amount of value in a very short pace of time. so, one could argue he's done
his job, now may be the time to sell the stock after what he's done. >> hell yeah would be my response to that, sure. i don't see any -- i think the risks of him achieving what he wants are very, very low. we certainly think just generally across the board, if you have a large long-term investment or if you've been holding japan in the u.s. dollar or it's selling, for example, right now is the time to be reducing your position. so yeah, if he's watching, i would suggest he starts reducing th that. that of course will have an impact in the stock, but there is little liquidity, but i agree. >> he doesn't have to, but others could. ben, stay there. i want to talk about bank of japan, kept the policy unchanged, as expected. the central bank raised its economic view of the economy for the fifth month in a row. not everyone's happy. the bank of japan didn't take steps to tame volatility in the bond markets after jgb yields spiked. governor kuroda says they'll watch the jgb market carefully.
besides ben, i'm joined in london by jonathan webb, head of equity at jefferies bash. dollar/yen got up to 1.3332. the bank of japan pledging to double the supply of money in two years. >> yes. >> so, what -- after the big move we've had in the yen, what now? do we need more to keep the yen move going? >> i think there's plenty to keep the yen move going at the moment, in particular, the way we look at the market is that some of the big hedges in, for example, the pension funds and life insurers haven't been lifted, and also they've been sort of slow to reorientate their assets to take advantage of the fact that the yen is weakening. so, we see that there's actually that, you know, big position that still remains in the market. but you know, we do know they are slow moving, but over time, you know, we expect those hedges to be reduced. >> i was going to say, so far,
this move seems to have been front run by speculators. i'm not saying it's not real, but it's currency players deciding something is going to happen, therefore, we'll get on the move. is there any sign yet there has been any flow of money, real money flow out of japan as a result of the policy? >> yes, there has. i think that's essentially what's very interesting is that we were sort of waiting patiently for it to happen, and in fact, at the beginning of the year, we're actually seeing flow coming back in, as hedge ratios were kept constant, the yen was going down. so, actually, positions were being sold, which is slightly counterintuitive. but since the end of golden week, the beginning of may, we've actually now seen two or three -- i think it's now three weeks of outflow. and i think that's encouraging for me that we'll see more of that over the next six months. >> and ben, is the correlation between the yen and the nikkei going to stay firmly in place?
>> yeah, you know, at some point, i think we're going to see the nikkei take a pullback. i think likewise, you know, i think the yen also should do that in order for us to take the next leg up. i think, you know, i think the 12 to 24-month direction is certainly up, but what we're looking for now is a correction in both of those. but as far as correlations go, i think you're pretty safe buying nikkei if you think and believe it will go to 110. it's going to push higher to 17,000. but it's not going to go into a straight line. we have been in a straight line so far, but we feel there is a move that has to come in order for us to make another leg up, but i agree with jonathan. >> have a good evening. >> you, too, thanks. >> sorry to tcut you off. it's the little delay. ben collat, sunrise brokers. >> thank you. >> john, i think you'll stick
around for a little more. fed chairman ben bernanke is on capitol hill today testifying about the economy before the joint economic committee at 10:00 eastern. he is expected to maintain a dovish tone, despite the fed getting ready to cut back on its money policy. kevin brady said he plans to ask bernanke how the fed policy can be unwound without hurting the economy. cnbc of course will have full coverage of that testimony. it starts at 10:00 a.m. eastern. jonathan, what's the risk, what's the positioning on the dollar, what's the risk for the dollar going into this testimony? >> well, the market is definitely being a good buyer of dollars in the last two weeks. actually probably caught people a little surprise. but i think there's two important things going on. clearly, what's going on with the fed is very important, but i think the other thing we should bear in mind is that across the globe we're seeing easing monetary policy, and i think, so, this sort of strength in the
dollar is driven by two things -- >> everyone's at it. >> that everyone's at it, and i think if you look at what's actually driven that, it's lower commodity prices. so, lower commodity prices, reducing inflation, allowing other countries to cut. so, if you look at the u.s., u.s. policy is steady, probably going to move tighter at some point while the rest of the world is easing. and obviously, currency's a relative game. the dollar has been a beneficia beneficiary. actually in terms of bernanke, i actually think it's probably too early, really, to see, you know, definitive story about exiting qe and how we're going to do that. i mean, that is something that is on the way. we've got a relatively positive view on the u.s. economy, but it's actually -- i actually think if people are expecting some framework there may be a little disappointment on the dollar, but we see the bigger picture is very constructive for the dollar. >> all right, more to come. meanwhile, it's time for today's "global markets report," first one.
chloe kicks us off in singapore. >> hi there, ross. interesting stock coming out from the japanese central bank, especially as they are very mindful of the jittery moves. just a flash coming through that they are going to hold a meeting with jgb market participants later this month, on may 29th. interesting to know how we've actually seen quite a bit of moves, even in the ten-year. remember, there was a 40-year auction, and that was luke-warm yesterday. i mean, after all, you have to think about it, why would anybody really want to have a lot of confidence of the 40-year in light of the fact that japan is the world's fastest graying society? that said, today, even with the jittery moves we saw in the japanese bond yields, we did see the market tick up higher, up 1.6%. remember, some of the commentary, the economic assessment upped for five months in a row, the economy export situation, saying that was looking better. that, bear in mind that we did get export numbers for april that were sgoidisappointing.
the explanation is that there is a time lag and each the capex situation has bottomed. hong kong, a half day of trade with the black rain alert. there was an ipo today, galaxy securities, china's number six brokerage by revenue. demand was quite high both on the institutional and retail side, about $1 billion ipo. there was a bit of profit-taking kicking in in light of the fact that at one point it had a pop of about 9%, 10%. did trim some of those gains but still did close about 32 cents higher than the ipo price. also, very quickly, australia consumer confidence down for two months in a row. that triggers a lot of concern as to how the consumers and how the economy will fare in light of the slowing mining environment. so, back to you. overall, a pretty resilient picture because of reassurances about qe here to stay. >> chloe, thank you very much indeed for that. meanwhile, here in europe, fresh record highs -- well, not record, recent highs for the ftse yesterday, highest since 1999 was the close, ended about
150 points away from the all-time high, just down 16 points this morning. xetra dax just off its all-time high. cac 40 is up, ftse mib up another 0.5%. on the bond market, we await the bank of england minutes. we dipped lower to 1.86% after the inflation report came in better than expected. key rise in treasurys. italian yields firmly below 4%. on the currency markets, we were just looking at dollar/yen, 102.81. aussie/dollar 97.43, not far from the 11-month low. sterling/dollar 151.28, back to the recent trading range. euro/dollar about 1.29 at the moment. still to come, british prime minister david cameron says britain would be better off in a reformed eu, but what does the rest of the continent think? through the show, we'll bring you julia chatterley's interview
with martin schulze, president of the european parliament. the first part coming up in just a few moments. we went out and asked people a simple question: how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed: the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪
would be better off in a reformed eu. speaking ahead of a leaders summit in brussels earlier, he said that he was confident about negotiating new terms for membership. julia has gone to her regular perch in brussels. no, it's not the regular perch, slightly different. >> reporter: no. >> joins us now. clearly can't hear me, though, which is a bit of a shame. she has been talking to the president of the eu, mr. schulz. let's bring in while we wait for julie, the principal analyst at nomura, alastair, good to see you. >> i can hear you. >> you can hear me. that's a good start. look, how do you view the developments of british policies? the impact they've had is stark and everybody is scrambling around to bring forward or advance their plans. what hope does the british prime minister, david cameron, have of executing his policy, which is to be able to wait until 2017
for referendum, predicated on him trying to renegotiate some powers, repatriate powers back to the uk? >> well, as things stand, i think it's very unlikely we're going to see a referendum before the next general election, which is scheduled for the 6th of may 2015. first of all, of course, if mr. cameron wants to have a referendum thereafter, he's got to win the election, and that's not going to be straight forward. opinion polls at the moment giving labor a ten-point lead. but as you go back to the way you phrased your question, perhaps the most interesting thing about you kip's success in the recent elections is it has flushed out the euro in the euro party. and it's not possible in my view that admidiband in what could be a tight election in 2015 might concede the principle of a referendum on eu membership downstream. so, that's where we are basically today. you may recall that i published
a report back october, "the bric six," where i put a 50/50 probability on the uk being out of the eu within five to six years. i stand by that today. if anything, i think the risk is likely to go up from here on, especially since i don't think the europeans are going to give mr. cameron or any other british prime minister concessions which would satisfy the euro skeptic bloc in the british parliament. >> yeah. well, that was going to be my follow-up, because alastair, this whole strategy is based on we've managed to negotiate something back. so, you just alluded you don't think that's very likely. if we don't get anything back, it's a pretty stark choice because you've got to then suggest, if you don't get anything back, the argument for leaving becomes so much greater, doesn't it? >> i think that's probably right, but the arguments for staying in also remain very strong. at the moment, they are not getting a sufficient airing, in
my view. i suspect that the business community, in particular in the uk, will start to be more proactive when we're actually staring down the barrel. let's also keep in mind, too, that this isn't just about economics, it's also about politics. although barack obama was pretty tactful in his press conference with david cameron last week, the americans have made it very clear that their relationship with the uk pivots to a significant extent on the uk's influence in europe, particularly with negotiations over transatlantic trade liberalization ongoing at this time. the irony of that, of course, is that many of the most euro skeptic members of the conservative party are ardent tra trans-atlanta crists but they don't have it on board that leaving europe would create a fault line between us and washington as well. >> or maybe it's just that washington, for their own purposes, want the uk to stay, because as you say, they are a
reforming force. stay there, alastair. let's go back to jules, who's been speaking to mr. schulz. hopefully, jules, you can hear us now. >> reporter: yes, i can hear you. thanks, ross. sorry about that. we've been having sound issues all morning. yes, i spoke with president schulz this morning. a number of issues to pick up on point you were just making about david cameron and the uk's membership of the eu. we talked about that and i asked him for his advice and i'll bring you that later on in the show, but he did happen to say that, david cameron, by opening pandora's box on a referendum with eu membership, he's created a rug for his backing, in some sense and allowed the party to push him in this sense. but bringing it to a broader issue of just handling these kind of issues within the eu, the first question i really asked him was can he score european leaders' handling of the crisis with a mark out of ten? this is what he had to say. >> you can't consider the european council as a coherent
body, because within the european council, let's be honest, between the greek prime minister and the condition in his country and the german chancellor and the conditions in germany is a small difference, to be honest. so, traveling to brussels with other things in mind than angela merkel, so difficult for me. if the management of the eurozone or the euro sovereign debt crisis should have mark between one and ten, not more than three, in my eyes. >> reporter: as i say, plenty more from that interview coming up, advice for david cameron, and actually, just how he sees germany's role in the eu progressing even as far as the election, just what, if anything, can change angela merkel's policy, so worth checking that out later in the show. for now, ross, back to you. >> yeah, let's bring alastair back in, because jules, you mentioned germany there. alastair, this is now, you know,
the uk's now woken up a little bit to the fact that germany's going to be the key relationship here. are germany going to avoid, as they progress their way through reforming the structures, are they going to avoid anything that would require a vote in a british parliament? we've got this referendum lock, haven't we? are they going to avoid any necessary changes to the treaty that would require the uk to have a referendum? >> it's very hard to say definitively at this stage. what is clear is that the germans will be going for treaty amendments, and small treaty amendments, as we've seen already, can be dealt with without resort to referendum. frankly, though, i think the scale of amendments which are going to be likely in order to effect transfers of sovereignty, which is what we're talking about, from member states to brussels -- more control so that germany can avoid its taxpayers being still more liable for
bailing out profligate peripherals -- those sort of treaty amendments i think are likely to trigger referendums, not only in the uk, but also in other countries which are going to struggle -- france, ireland, netherlands and so on, over their track record. >> if we get to that point, alastair, is that the point at which david cameron will be hoping to enter negotiations about repatriation of certain -- is that what he's sort of hoping for, we get to that point and then he thinks now i've got an opportunity to go into negotiations to get some power back? >> that's the plan, but let's keep in mind that some of the things he's trying to negotiate are pretty much core values within the european union, not just within the eurozone. and opting out of some of those core issues is going to be, i suspect, very, very difficult indeed. now, i'm sure that angela merkel will do her absolute best, assuming she's still chancellor, and i think that's probably likely. looking forward to the german election on the 22nd of september. angela merkel will do her best to accommodate the british
government and to keep the uk on board, but she is not going to do that at the expense of her cherished ambition to build a fiscal union within the eurozone. >> alastair, thanks for that. good to see you as ever. jules, we'll come back to you in brussels as well later on in the show. coming up in just a few moments, we'll get the bank of england's latest minutes. we'll find out whether the vote changed from six to three, what's mr. king been doing in his vote as well. plenty more to come on "worldwide exchange." ♪ [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time.
and these are the headlines from around the globe. sony's ceo won't give his own opinion but says the board will assess dan loeb's plan for a partial entertainment spinoff. bank of japan governor promises to watch out for jgb moves and stay flexible in response after keeping policy unchanged. cracking down on tax avoidance. that's top of the agenda at an eu leaders summit. the president of the european parliament, martin schulz, told cnbc the current system does need to be fixed. >> there's debate about morality and ethics. let's reform the system to bring back more solidarity, and via
more solidarity, more coherence to the society. and fed chairman ben bernanke's off to the hill today with his latest assessment of the u.s. economy. investors will look for any clues of a shift in fed policy. right now we turn our attention to the uk as we get the release of the bank of england minutes from the last meeting. and here we go. ah! 6.3. we kept it at 6.3 for further asset purchase. king fisher miles repeated calls for 5 billion more qe. the minority thought more qe would lift growth and reduce unemployment. the minority thought more qe would speed the normalization of the policy. the minority thought the weakness of rebalancing would push up sterling. they say that the gdp level at
the end of the second quarter likely to be 0.7% higher than the february forecast. inflation to stay above 2% target for much of the next two years as well. gilt futures extending the gains after those minutes. let's also look, we've got the -- there we go, sterling/dollar heading down to the lows of the session, now back below 1.50. when you look at the inflation number yesterday and the fact there are still three members voting for more qe, it means the policy's still alive, and we've got mr. carney to come as well. let's get a quick reaction from jonathan, who's with me, first of all, to that. >> well, i think that's definitely a surprise. i think the market thought after the stronger gdp, the upgrade of the assessment in the inflation report, that king was likely to move back to the sidelines. so, i'm not surprised the market is -- that sterling is lower on this. >> i'm just trying to see as well what we had. uk for retail sales. this is what i wanted to look
at. public sector borrowing up 6.3 billion pounds versus minus 19.1 a year ago. it was expected at 8.5. so, a drop in public sector net borrowing for the month. >> yes. >> of april. also not bad news. >> no. i mean, if anything -- i mean, our view is that the uk economy's probably going to surprise on the up side. so, it is, given that information, it is surprising that we see, you know, that we still have king still looking for more qe. but really, the whole story is what happens when mark carney arrives, and i think his problem is probably lowering expectations. we actually look at it as carney has got two big jobs he's being given, and one of them is the reform of financial regulation and i don't think the markets are focusing enough on that. i think he was brought in because, you know, just how well canada sort of sailed through
the crisis in terms of the financial regulation. and i think that the market is sort of focusing on, you know, is going to be much more dovish in his activism, but actually, his priority's probably to try and sort out the banks. >> yeah, a little bit more qe is not the point. it's whether we get more imaginative monetary policy in other areas. >> yes. yes, i think that's right. >> and there's an expectation that we'll, you know, we'll, we'll have more funding or other schemes that go much further than funding for lending. >> yes, i think that's right. i think people are looking for him to do something a bit more ambitious. our actual thought is that the economy is recovering, and so over time, we think the pound will do better, but just the current environment, where everyone has got this, you know, these expectations about carney and also this sort of discussion about the exit from the -- potential exit from the eu are
negatives for the pound. >> could we go below the 1.49 mark? it seems to me, i would have put pound in the range between just below 1.50 to sort of 1.60, 1.65, i don't know, but what's the chance of the sterling going substantially weaker against the dollar? >> well, we see the dollar stronger, so looking at it against the dollar, we see the dollar stronger as the u.s. economy recovers. there is more talk about scaling back qe in the u.s. so, that itself i think will take the pound below 1.50. against the euro, i think it's much more mixed. we see the euro lower as well. so, really, euro/sterling, it's not really such, maybe not such an interesting story at the moment, two very weak regions. >> jonathan, thanks for that. good to have you on today. jonathan webb join us from jefferies. a reminder, we had retail sales out as well. april retail sales down 1.3% on the month, up 0.5% on the year, the lowest since april 2012.
weakness led by food store sales. it was forecast up 0.1% on the month. so, that is a weaker number. meanwhile, we just talked about mark carney. the incoming bank of england chief warns that europe faces a decade of instagnation without significant and sustained reforms. in his speech, he said the eurozone requires bold action, including a banking union. speaking about japan, he said their massive stimulus program is likely to shape the global economy over the coming years, describing that as a bold policy experiment. and imf officials today present their conclusions on the british economy following a two-week trip to london, this after the group abandoned its support for the british government's austerity plan last month. the chancellor, george osborne, is not expected to pay heed to it, however, since the government has been emboldened by recent economic data and also comments from the bank of england. as far as equities are concerned, we've dipped down a little bit today, but we're trading up, well, record highs as far as the xetra dax is
concerned. the ftse closing at the best level since 1999. i remember it well. we were all worried about the 2000 bug back then. sony says its board will look into dan loeb's plan to spin off parts of its entertainment arm. ka rai said he's committed to restoring sony's electronics business to its former glory and is sticking to his two-year operating profit goal for the business, despite cutting forecasts for cameras, tablets, smartphones and video games. carey's been at the press conference for the company and is now in tokyo. what's your assessment? >> reporter: well, you know, kaz hirai has told us he's discussed and talked with his board about this proposal from thirdpoint. this is a week after this letter was hand-delivered. what's happening now is that? june there will be a shareholder meeting where a new board is coming in. i think that's where the real
discussion will take place. he didn't say much more beyond this at today's press conference. >> translator: this is a very important issue for sony, so we will discuss it thoroughly among the board, after which we will respond to thirdpoint. at this point, i don't know when that will be, but it is an important issue that has been raised by our shareholder. >> reporter: this was supposed to be a news conference on how much sony has done in the last year since kaz hirai has come on board and announced his revival plan, but there were some fresh setbacks today. there are three critical areas for the company right now -- smartphones, tablets, digital camer cameras. these are key critical three businesses, but sony today lowered its sales targets in all of these three elements. this is a big disappointment, because sony is battling for third position in these key areas behind apple and samsung. he has a lot of rivalry coming from the rest of asia as well. there was another change today, this time lowering the
profitability targets of its video game operations. now they say that business will only have operating profit margins of 2% in 2015, which is well below the original target of 8%. sony, we call this company an electronics giant, but it's really an electronics business that is holding the company back. the television operations continues to be unprofitable, and again, they reiterated what they have said many times before, that this year, finally, they're going to try and push that television operation back into the black. sony has in the past has a history of spinning off operations, whether it be insurance or banking. so, it's not entirely a foreign idea. i mean, ross, you saw the share price moving over the last week, today very, very wimpy, up 5.9%, but a lot of individual stocks have been seeing very, very erratic movements, especially over the last couple trading days. >> yeah, he's done his job, though, hasn't he? loeb, just by sort of launching this plan, i mean, he's put a
lot of value into the sony stock price. >> reporter: yes, i can say in just a week it's up dramatically. but you know, the profitability at sony has improved, even though it's mostly on the back of the weaker yen, which by the way, as we speak, is testing these new levels at 10..03. >> yeah, fresh off 1 1/2-year low. thank you very much. it seems facebook is not so cool with the kids anymore. according to a new survey by the pew research center, teens are expre expressing waning enthusiasm for the world's biggest social network. twitter's gaining popularity instead with nearly a quarter of online teenagers using the microblogging service. so, why are young web users potentially turning away from facebook? find out more on our website. see what annoys teenagers the most about facebook. it's all on cnbc.com. a wonderful resource. i urge you to use it.
france telecom plans to invest between 30 million and 50 million euros in video website daily motion, according to rtl radio. this is after the government reportedly shot down a potential bid from yahoo to acquire 75% of the french start-up. the deal with the u.s. internet giant would have valued daily motion at around $300 million. stefan's got more for us in paris. got to be careful what you bid for in france. >> yeah, because there's always a minister to tell you that you shouldn't buy a french company. well, you know him, the french industry minister. he said recently that the government blocked the potential deal between yahoo and dailymotion because it would jeopardize, france would lose the control over one of the biggest successful internet company of the country. that being said, the ceo of france telecom made it clear it is still looking for a partner for dailymotion, its video-sharing website.
speaking to rtn radio, dailymotion say the door was not closed to yahoo, despite the recent failure of their negotiations. yahoo wanted to take a 75% stake in daily motion, valuing the company at roughly $300 million. the dailymotion is the second largest web-sharing website after youtube, but it's much smaller than youtube. dailymotion claims 110 million users per month. that's to compare with 1 billion for youtube. in the short-term, france telecom will continue to invest in dailymotion up to 50 million euros, but for the long-term it needs to find a partner to develop the company outside europe. that's an interesting question from the french point of view -- do you want the company to remain french, but then it doesn't have the means to expand, the resources to expand internationally? or you accept that the company's taken over by an international
group, but then you take the risk of losing the control, at least losing a part of the control on the company. interesting. ross, you're on twitter. we are on twitter, so it means we are young and cool, isn't it? >> clearly not, if i'm on it. do these young people know that it can't be cool because i'm on it? >> well, listen carefully to what you are saying. young people tend to go more towards twitter than facebook, so if we're both on twitter, we're young and cool. >> they think it's cool, but it can't be if i'm on it. that's all i'm saying, by definition. stefan, how would you say dailymotion in french? >> dailymotion. >> in french. what would the translate of daily and motion be? >> oh, you -- oh, movemon
contiduant? >> i like it. it will go places. stefan, thanks for that. that's the latest motion out of paris. we bring it to you every day. eight years after launching its exports 360, microsoft has released its latest console, the xbox 1, which includes a voice-control system and skype. it is the tech giant's latest bid to boost its flagging entertainment and devices division, but is it enough to reinvigorate the console gaming market? julia boorstin's been taking a look. >> reporter: microsoft unveiled its first new console since 2005, calling it the xbox 1, microsoft stressing that this isn't just a gaming console, but it's an all-in-one entertainment hub, controlled by voice and motion and personalized, depending on who's talking. the new console includes a blu-ray player, but perhaps the biggest change is that it also features live tv as well as group skype and allows users to
quickly switch between all of its features -- live television, games, skype and music. and unlike existing consoles, it allows you to do two things at once, to have both gaming and music open at the same time. the company showcased what it calls interactive television with an espn basketball game, the ability to watch the game and also pull up information about players at the same time. with the big focus on content came an announcement about microsoft's most popular game, halo. legendary director steven spielberg is creating a live-action tv show about the franchise. there was also big emphasize on personalization, the ability to access content through the cloud and how much better the new voice and motion sensor technology is, but there was no word about the new console's price. we are expecting to hear more about the xbox 1 and all of the games created for it at the e-3 video game convention in los angeles in just a few weeks. from cnbc los angeles, i'm julia boorstin. >> that's the latest on microsoft and the xbox.
british opposition labor party leader ed miliband is going to challenge google over its tax policies today. miliband meets with eric schmidt, executive chairman at google's big tent event. according to extracts released by his office, miliband plans to tell schmidt that it's wrong in going to extraordinary lengths to avoid paying taxes and it has to change. tim cook defends his company's tax policies. making no argument for avoiding $44 billion worth of taxes between 2009 and 2012, cook instead turned the spotlight instead on what he said was a tax code that's not kept up with a digital age. >> we pay all the taxes we owe, every single dollar. we not only comply with the laws, but we comply with the spirit of the laws. we don't depend on tax gimmicks. we don't move intellectual property offshore and use it to tell our products back to the
united states to avoid taxes. we don't stash money on some caribbean island. >> carl levin, chairman of the subcommittee, meanwhile, said apple sought the holy grail of tax avoidance. listen to this exchange before tim cook's testimony had even begun. >> frankly, i'm offended by the tone and tenor of this hearing. i'm offended by a $4 trillion government bullying, number aiding and badgering one of america's greatest success stories. if anyone should be on trial here, it should be congress. i frankly think the committee should apologize to apple. i think that the congress should be on trial here for creating a bizarre and byzantine tax code. >> thank you, senator paul. you're, of course, free to apologize, if you wish. you can apologize to anyone you want. this subcommittee is not going to apologize to apple. we did not drag them in front of this subcommittee.
>> good exchange. wetokyo's government is looking to undercut other jurisdictions with a special zone. there, foreign companies would enjoy an effective tax rate as low as 20%, half the regular rate. let's get more on that. we have the story from tokyo. >> hi, ross. tokyo is proposing a low tax zone for foreign companies and offering access to excellent education and health care. they are expected to present data at a meeting of the national governments council on industrial competitiveness, which started about 20 minutes ago or so. the plan is part of prime minister shinzo abe's strategy for accelerating economic growth. possible locations for the zone include tokyo's central wards and bayside areas. with the new zone, official aims to bring at least part of tokyo's corporate tax rate close to those of singapore and hong kong, which is around 17%.
but given the problem of finding source of offsetting revenue, the proposal faces a difficult passage. back to you, ross. >> all right. thank you so much for that. tax reform on the top of the agenda leads to brussels as well. european policy members discussing a wider cap on bonuses. jul julia's been speaking to martin schulz. sorry, she asked him if tougher limits would hurt the european banking sector. >> i think if the competitiveness depends from accelerated banker bonuses, then i think we should discuss what is competitiveness. the other way around, if we can't bank our bonuses, for example, bonuses from short-term speculation that makes, in europe, makes a pressure on the government, for example, in the united states to do the same, i and a lot of colleagues in the united states congress will share our view that this
short-term speculation with these enormous bonuses on short-term speculation on rates is one of the biggest risks also for the united states' banking system. therefore, if we start, and that's what we did, i think other regions of the world will follow. >> reporter: but you're willing to see european banks disadvantaged in the hope that other countries will follow? >> i take note about this message i get every day from banks. deutsche bank, they contacted me, that i am one of those who are reducing their competiti competitiveness. i doubt that this is true. rden an my experience always -- of a bank or ofdinary citizens reaction is you are liming my possibilities to act.admissible it is really a reduction of
competitiveness. the other way around -- if you reform our banking system, the pressure on other parts of the world to reform their banking system as well will be increased. >> more on that in a few in the second half. also, reform efforts in china have led to opportunities for entrepreneurs to build their way out by building their own business. this report is on the challenges and rewards that young chinese entrepreneurs face. >> reporter: these sisters are preparing for a big day in their career. they're opening a luxury spa in the southwestern city of kuhn ming. when you first meet them, it's hard to imagine they've lived anything but a blessed life, but they understand poverty very well. the two grew up in a nearby village. when they were young, their parents divorced, each taking one child. their father died and the girls were reunited, both raised by their mother until she was killed in a car accident when they were teenagers.
"life was really tough," she says, "i remember trying to get a death certificate for my mother. it cost $20. we really didn't have the money." yet, like so many chinese before them, the guo sisters took the path of entrepreneurship to lift themselves out of financial hardship. decades ago, under chairman mao zedong, most enterprise wasn't allowed, but reform efforts unleashed opportunities for entrepreneurs, one reason china alleviated poverty so quickly. 27-year-old shin packed her bags for shanghai. with no college degree, she joined the beauty industry and later persuaded her sister to open a small spa together, here close to home. with no bank backing them, they spent their life savings of $48,000, setting up the business in a one-room apartment. "the sofas, the double-seal beds, we carried everything upstairs all by ourselves," she says. "we did everything."
to help them navigate the government bureaucracy, they used outside agencies. when you lack connections here, they said, money helps get things done. "even though the country initiated many policies which aim to help young entrepreneurs, you shouldn't think of relying on anyone but yourself," she says. businesses like theirs are helping to transform entire neighborhoods and the local economy. just five years ago, this used to be all fields. today it's the trendy shopping district in kun ming. the sisters invested their company profits into their second spa. the business is now breaking even. and with more chinese willing to spend on little luxuries, the sisters are hopeful it will continue to grow. "i think if our parents were alive, they would be really happy," she says. happy their daughters are finding financial peace of mind.
eunice yoon, cnbc. now a reminder of what's on the agenda in asia tomorrow. the focus shifts from japan back to china's economy. the flash manufacturing pmi for may. after today's storm delay, galaxy securities finally gets its listing security in hong kong, but it will share that with sinopec engineering making its stock debut. and after full-year earnings are due from pc-maker lenovo as well. forbes is due to publish its annual list of the most powerful women in the world online today. last year, angela merkel was at the top, followed by former u.s. secretary of state hillary clinton and then the brazilian president. only two businesswomen made it into the top ten, jill abramson and facebook coo sheryl sandberg. so, what we want to know is who do you think is the most powerful woman in the world? to let us know, you can get in touch with us, e-mail email@example.com, twitte
twitter @cnbcwex or @rosswe or @rosswestgate. plenty more to come in the second hour of "worldwide exchange." top tax officials face another hearing on capitol hill today as the irs scandal continues to distract the white house. our next guest says the controversy could derail obama's second-term agenda. all that and plenty more as well as we count down to bernanke going to capitol hill as well. "worldwide exchange" continues in just a few moments. [ male announcer ] i've seen incredible things. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel,
all right, this is "worldwide exchange." a recap of the headlines for you today. sony's ceo won't give his own opinion but says the board will assess dan loeb's plan for a partial spinoff. and bank of japan governor haruhiko kuroda plans to watch out for jgb moves flexible in response after keeping policy unchanged. cracking down on tax avoidance is top of the agenda at an eu leaders summit in brussels. president of the parliament, martin schulz, tells cnbc the current system needs to be fixed. >> let's start the debate about
morality and ethics, let's reform the system to bring back more solidarity, and by more solidarity, more coherence to the society. and fed chairman ben bernanke's off to capitol hill today. he's testifying before congress, investors and analysts, looking for any clues of a potential shift in fed policy. all right, we come off the back of fresh record closes for the s&p and dow again yesterday, up over 17% for the year, some of these u.s. markets. right now we are called higher again at the open, just by six points for the dow. the nasdaq is actually just below fair value, and s&p 500 at the moment pretty much trading on fair value as well. we had the ftse yesterday closing at the best level since 1999. right now the ftse global 300 is at a session low but is flat really as you can see.
so, the ftse, after hitting what was only about 150 points away from its all-time close at the high yesterday, at the moment down 18 points. xetra dax at its all-time high, off 25 points or so, the kayak down and the ftse mib flat, just up about four points. minutes from out from the bank of england, vote 6-3. governor mervyn king and others voting for more qe. that's three month in a row. people thought king may have held off, so that's lowered gilt yields down following a weaker inflation profile than was expected yesterday. we'll keep an eye on treasureie as we wait for mr. bernanke later. italian yield maintained below the 4% yield mark as well. dollar/yen below 1.03. remember, 1.0332 is where we were with that 4 1/2-year low. aussie/dollar 97.55, not far
from the 11-month low. sterling/dollar is weaker, back below 1.51 at the moment and euro dollar 1.2937. and to remind you what's happened in asia, chloe filed this report. >> and asian markets have reason to move up a notch, albeit it with a degree of caution. the bank of japan staying the status quo, did raise their economic assessment for the fifth month, also said the economy exports are looking better and that the capex situation bottomed. that said, export numbers for april did disappoint and the explanation is that there is a time lapse. only a half day of trade in hong kong today due to the black rain alert. that also meant the delay of a $1 billion ipo for china's brokerage buy revenue. demand strong for galaxy securities. the share price about 33 cents higher than the ipo price. the shanghai market, in fact, snapping a five-session losing streak. and australia certainly getting that hit from consumer confidence, especially at a time
of mining slowdown. we have earnings from toll brothers right now, the nation's leading builder of luxury homes as they call themselves, announcing second quarter results. the second quarter net income $25.7 million, 24 cents a share diluted, equating to an income of 10 cents a share in 2012's second quarter. what is interesting, they say the average price of homes delivered was $577,000 compared to $569,000 in the full-year 2013's first quarter, $557,000 in 2012's second quarter. so, the average price of homes going up. they believe that the average price for 2013 full year will be between $610,000 and $630,000 u.s.
so, they're still looking for an increase at the moment from $577,000 up to for the full year to somewhere between $610,000 and $630,000. suggesting no slowdown in the house price increases there. meanwhile, rescue workers in oklahoma say rain is preventing them from wrapping up their search of buildings damaged or destroyed by monday's tornado in the town of moore. the local fire chief says he's pretty sure no one else is trapped in the rubble and no additional survivors or bodies have been found. the tornado killed 24 people and injured more than 230. the national weather service has upgraded the storm to the highest scale, an ef-5, with winds of at least 200 miles per hour. the tornado's path stretched 19 miles long and 1.3 miles wide. a reminder what's on the agenda in the united states today. we've got april existing home sales. they're out at 10:00 a.m. eastern. forecast to rise 1.4% to an annual rate of 4.99 million
homes. at 2:00 p.m., we get minutes from the last month's fomc meeting. then lowe's, target, staples and american eagle all report results before the opening bell. after the close, we'll hear from hewlett-packard, l. brands, petsmart and seaworld. and fed chairman ben bernanke's off to the hill today, testifying about the economy before the joint economic committee. it's at 10:00 eastern. he's expected to maintain a dovish tone, dispelling notions the fed is ready to cut back on its easing money policy. chairman kevin brady told cnbc he plans to ask bernanke how the fed's bond-buying program can be unwound without hurting the economy. cnbc will have full coverage of his testimony, kicking off at 10:00 eastern. also in washington, there's another hearing today on the irs scandal. the house oversight committee gets their shot at 9:30 eastern. deputy treasury secretary and the treasury inspector general
jay russell george and former irs commissioner douglas shulman will testify. the top irs official in charge of the division, though, that targeted conservative groups will not. the attorney for lois learner says she will invoke her fifth amendment rights against self-inkrimsion. the justice department has opened a criminal probe into the matter. and joining us with his views on the fallout from this, tony fratto, managing director at hamilton place strategies, a former deputy assistant to president bush as well. tony, good to see you. >> good to see you, ross. >> another hearing today. how far is this impact go? how long is this impact going to last and how far does it go? >> i think for a very long time. i think we should all settle in and, you know, get a cool drink and pay attention for a while, because you know, we're in that period where, you know, the news has broken and now the investigation's going to go on. we're going to learn things day by day. i think the white house has learned that in recent days with
jay carney, the press secretary's had some troubles with getting facts straight as new facts emerge and new knowledge emerges in this, and we're going to see that over time. we'll get some of that out of the hearings today. we're going to get it when the committee and other investigators begin to look at e-mail and communications throughout the administration. and it's that unknown. you know, today the story's going to have another leg when lois lerner takes the fifth and she's going to have to do that sitting at the table in person. the committee is not going to let her do that, you know, in an informal way. she's going to have to formally take the fifth and that's going to be a dramatic scene. >> how distracting this going to become for the white house in the second term, tony? and you know, what's it going to distract from? >> i think terribly so. look, i mean, i remember having to deal with a lot of these kinds of investigations when i was in the white house and when i was at u.s. treasury department, and they take up an enormous amount of time. the deputy secretary will be testifying today.
i'm sure he'll have to do lots of precipitation and making sure that he is testifying in a way that's consistent with all the other witnesses, because he does not want to be appearing to mislead the committee, but it is an enormous amount of energy for an administration to deal with something like this and working on getting the facts straight. the president had, you know, a modest agenda for the second term. obviously, immigration reform. i know he wants to get something done on the budget and climate. i think climate was going to be a really, you know, long shot, getting a big budget deal i think is a long shot. they may be able to get immigration reform, but it's hard to see what other really big pieces of legislation can move in the second term, and every day they lose to a scandal like this reduces the amount of time available to do that. >> we've been talking about, you know, on the other side, taxes. you had the tax hearing yesterday, you know, with mr. cook, and he made the point, look, we've got an enormous tax code. we need reform, and it would be
helpful if we could get an agreement in congress on repatriation of u.s. corporates money. so, is this scandal going to hinder getting some progress on that? >> i think everybody would love to see it. actually, i think a lot of people learned a lot from tim cook's testimony yesterday in the questioning, learned a lot about, you know, how multinational firms are dealing in the global economy, and you know, really, a lot of rell viaatory facts that i don't think the committee anticipated to get from tim cook. they're just trying to compete in a global economy and to be as competitive as they can, which we want all american firms to do, obviously. you know, but it also showed just how complex tax reform is and the, you know, the controversy, the seeming controversy over some of the things that multinational firms need to do to be globally competitive. i think it's going to be really hard to get tax reform done in this environment. a lot of people want to do it.
we know that the ways and means committee chairman dave camp wants to do it, senator bachus in the senate wants to do it, but it is really tough because there are incredibly complex issues. >> yeah, say that again. i doubt anybody knows that -- i don't know anybody who probably knows what's in every tax code in the states or in this country, for a start. tony, stick around. more to come from you. good to have you on board today. fomeanwhile, jean-claude juncker has arrived in brussels. we'll keep an eye on this shot and others arriving for the eu summit. and mark twain reportedly said there was nothing surer than death or taxes, but what he wrong when it comes to big companies? after the break, we'll hear the opinion of the european parliament president, martin schulz. ♪ bonjour
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families. italy now has the highest level in europe of young people neither in education nor employment at 23.9%. the study showed in italy's impoverished south and one in three people ages 15 to 29 fall into that group as well. basically, this figure really underlying the scope of the challenge facing enrico letta's new coalition government. they've got to vow there to stimulate growth and tackle the youth jobless rate of almost 40%. meanwhile, let's recap what's coming up in a few moments' time. european lawmakers proposed a resolution urging the member states to harness the uncollected taxes by 2020. julia's been sitting down for an interview with the european parliamentary president, mr. schulze. "worldwide exchange" examines in a few moments time. bny mellon combines investment management & investment servicing,
just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's. wiggle your toes. [ driver ] and it got his okay on treatment from miles away. it even pulled strings with the stoplights. my ambulance talks with smoke alarms and pilots and stadiums. but, of course, it's a good listener too. [ female announcer ] today cisco is connecting the internet of everything. so everything works like never before. u.s. markets closed at a record high yesterday. futures indicate we might after those gains today, the s&p's implied higher by a point. the dow jones up 12. nasdaq implied higher by half a point. european stocks have been weaker today, but we've closed at the highest level since 1999 for the ftse so.
the xetra dax is down a quarter and the ftse mib is flat. cac 40 is down. investors are counting down to bernanke's testimony on the hill today, looking for any clues that the fed will take for qe. sony shares jumped. the company says it will review a spinoff proposal from dan loeb's third point snp and tax talk tops the agenda in brussels. more must be done. european lawmakers have adopted a resolution urging member states to half the $1 trillion worth of estimated uncollected taxes each year by 2020. taxes high on the agenda at the eu summit in brussels, where julia joins us from right now. hi, jules. >> reporter: thank you so much, ross. yes, as you said, tax avoidance, tax evasion high on the list of priorities for the eu leaders here. it is a huge issue, as you
mentioned. it costs the eu an estimated $1 trillion euros a year. that's the same size as the budget for seven years that we still can't agree on here in brussels. yes, we got an agreement among the finance ministers last week to begin negotiations with the likes of switzerland and liechtenstein, but luxembourg the key sticking point here, saying they want that agreement in place before they're willing to see broader negotiations on information-sharing among all the other eu leaders. so, the question is just how far forward can we push with those talks today? but i did sit down with the european parliament president martin schulz, and i said to him, particularly given the noise that we heard about the likes of apple last night, whether the question over ethics of tax avoidance and tax planning is taking the issue away from the fact that, ultimately, european countries need to see significant tax reform. >> i think tax evasion is the call of the debate because it is
a question of solidarity. on one hand, taxpayers are asked to pay for enormous losses of the banking system, for example, or to save countries. taxpayers are asked to make sacrifices to accept cuts of their salaries, of their pensions in the public budget. and the same time, people see that rich people can bring that money out of the country, out of the european union for tax savings. this is a question of solidarity and justice. and therefore, i think it is in the call, but it should not prevent that we stick to what is necessary in europe reforms of the whole tax system. >> what about corporates like amazon, like apple that was being discussed, are they being immoral? >> to discuss about moral or immorality in economic or political life is always very difficu difficult.
the risk of the position, everything that is admissibility, which is allowed is not. so, i have no judgment about morality, but one thing is clear -- >> well, ethics? >> my concern is not a debate about ethics or moral. my concern is the lack of trust of citizens to public institutions allowing a devel development when ordinary citizens are losing every day a little bit more and a few are becoming every day a little bit more rich. also, because they can bring their money out of the european union, out of the country, this is moral or ethical. let's stop the debate about morality and ethics. let's reform the system to bring back more solidarity, and via more solidarity, more coherence to the society, or we will end in the faces of very difficult social problems. >> do we need to see more flexibility from the likes of
luxembourg and other islands with regards to tax rates and tax rates for offshore entities and things, too? because that's one of the issues that's been raised here. >> we must coherent and consequent within the european union or we are in incapable to ask other parts of the world to be transparent and to be cooperative with us. therefore, i think luxembourg and austria must move, and that's a point of debate in the european council of today. the precondition asked by some of the countries that the european union first has to conclude enouveau or european agreement with other countries, like, i don't know, cayman islands or whomever, liechtenstein. this is a very interesting thing because at least two are not only two, few members of the european union say, first of
all, a european agreement. then we are prepared to reform our self. and what will happen if the european union will fail to make such an agreement, to achieve such an agreement, will they then continue this with their specific -- i avoid other words -- with a very specific tax system? so, this is incoherently inconsequent if you want to put pressure, perhaps on singapore to accept transparency rules. the european union must internally have such transparency rules or we are incredibly incredible. >> reporter: i think the takeaway from this and the apple hearing yesterday is this isn't something that can be addressed in the island or luxembourg or even at the eu level, but broader, at minimum at the g-20 level, so that's why they're focusing on that. here today, though, consistent message from the eu countries would be a beneficial thing. whether or not we manage to achieve that over the next few hours is a moot point. plenty more from that interview coming up on "closing bell."
discussion and advice for david cameron on his referendum issues and some german politics, too, which i think is certainly worth tuning in for. but for now, ross, back to you. >> good stuff, jules. thank you very much for that. "forbes" is due to publish its annual list of the most powerful women in the world online today. last year, german chancellor angela merkel was on top, followed by former secretary of state hillary clinton and european president dilma rousseau. only two women made it into the top ten, "the new york times's" jill abramson and facebook coo sheryl sandberg. on that note, we asked you earlier who is the most powerful woman in the world? one tweet says "the most powerful woman is my grandmother, followed by hillary clinton, who's been a top negotiator for years." keep your responses coming in, firstname.lastname@example.org. tweet @cnbcwex or @rosswestgate.
still to come, will he or won't he? what will he signal about qe? that's the question surrounding ben bernanke's testimony on capitol hill today. we'll take a closer look at the future of the fed when we come back. are you still sleeping? just wanted to check and make sure that we were on schedule. the first technology of its kind... mom and dad, i have great news. is now providing answers families need. siemens. answers.
likely to see another rough quarter. cnbc's jon fortt is previewing the numbers. >> reporter: big earnings report coming up for hp later today. wall street's looking for revenues of $28.1 billion, earnings per share around 81 cents, particularly a big deal because of the way the enterprise market's been shaping out recently. got to note, hp stock is up about 20% over the last quarter. there's some optimism about enterprise demand after cisco's earnings did a little better than some people expected in recent days. wall street's going to be looking for guidance toward eps of around 83-84 cents. that's up over this quarter, but there are a few headwinds, particularly the pc market. that has not been doing well at all, as we've seen from microsoft and intel. also, we've got really crunched margins in the server market and uncertainty on whether hp's really been able to sell through their new multifunction printers in a way that's going to
revitalize that unit. meg whitman's tone and her attitude about revenue for the back half of the year is going to be particularly important to watch here, guys. i'll be covering it on the "closing bell." >> yeah, absolutely. we'll look ahead to that. meanwhile, joining us is eric casselldal from all things digital. eric, thank you much indeed for joining us. jon highlighted some of the issues. even on enterprise, which is interesting, where he thinks we think we've done quite well, you've been talking about comments from dell which suggests that may not be as good as we think. >> right. michael dell and some of his senior lieutenants have been going around talking publicly about some of the market share results. they've been arguing that dell has taken a lot of share away from hp, so it will be interesting to see how hp comes out in the server market. hp has a very good story to tell in servers with project moonshot, kind of a micro server. everything's shrunk down, takes up a lot less space and energy than a conventional server, but it's not shipping for revenue
yet really in any meaningful way. a good story to tell, probably a 2014 story. but all the major sectors at hp -- servers, personal computers, printing and enterprise services -- are all very much under pressure. not a lot of sign of a quick fix available. >> and on the pcs side, how are they also -- dell also, you know, has come out with some aggressive pricing. i'm presuming that's not helping either. >> yeah, dell has been especially aggressive. dell is essentially in the midst of its go private transaction, is starting to act like it is a private company and it doesn't feel responsible to shareholder, so you're seeing a little taste of dell as a private company. going ahead and doubling down on a lot of costly price cuts and price war. essentially, dell started a price war in personal computers and that is not helping hp one bit, especially in light of
historically bad demand. i mean, pc demand is down and slowing down at levels that are as bad as ever seen since they've been keeping records at the market research firm. >> yeah, printers is 20% of revenue. what do their competitors tell us about what's happening here? >> yeah, the competitive read-through from lexmark, from epson, from xerox are not good at all. hp did do a significant refresh on printers, so there's some hope there that that may have generated some demand. but really, in printing, it's about managing costs. you've got todd bradley, who is longtime pc chief, is also now overseeing the printing operation as well, and a combined unit called personal and printing -- printing and personal systems group. and so, he's especially good at managing operations, managing costs, which is really a big part of the hp story now. and that's probably the one thing that hp really has going for it is managing costs,
managing cash flow. they did surprisingly well in q-1. we'll see if they're able to deliver that in q-2. look for some especially aggressive cost and cash management tactics there. >> we will do that. arik, thanks so much for that, senior editor at all things digital, joining us bright and early this morning. and as you say, jon fortt will be covering those numbers when they come out on "closing bell" later today. meanwhile, a reminder for the headlines right now. fed chairman ben bernanke delivers his latest assessment of the u.s. economy before congress with investors and analysts looking for any clues of a shift in fed policy. bank of japan governor haruhiko kuroda promises to watch out for jgb moves and stay flexible in response, this after keeping policy unchanged. sony's ceo won't give his own opinion but says the board will assess dan loeb's plan for a partial entertainment spinoff. and cracking down on tax avoidance is top of the agenda at an eu leaders summit in
brussels. the president of the european parliament, martin schulz, has told cnbc that the current system does need to be fixed. >> let's stop the debate about morality and ethics, let's reform the system to bring back more solidarity, and by more solidarity, more coherence to the society. right now, let's talk about mr. bernanke and capitol hill, testifying before the joint economic committee at 10:00 eastern. he is expected to maintain a dovish tone, dispelling notions that the fed is ready to cut back on its easy money policy. committee chairman kevin brady tells us he plans to ask bernanke how the program can be unwound without hurting the economy. chris rapke is with bank of tokyo mitsubishi ufj and still
with us, tony fratto, very patiently sitting there in our library in d.c. good to see you. chris, let's kick off with you, first of all. this tapering, the slowing down or halting of the $85 billion monthly purchases, what will bernanke say about that? >> well, perhaps not a lot. i mean, they did announce it in december. you know, when they meet in june, it will be a six-month period. some of these earlier qe governments were only for six months. they might have to make some sort of decision in june, but look, the fed chairman's on record a decade ago saying that the unemployment rate at 6.1% was unacceptable, that it showed a lot of economic distress out there in the country. it's 7.5% now unemployment. it's a long way from where he personally wants unemployment to be in this country. so, i think he, if he can, wants
to steer the committee in the direction of strengthening the recovery. 3.5% gdp, lower unemployment rate. keep going. >> it's interesting, because just -- i know, tony, do you share this view about the unemployment, therefore they keep the taps open? >> yeah, look, i think that's right. i think you're going to hear ben, chairman bernanke, you know, talk about maintaining his flexibility and trying to get better signals, you know, from the economy. i think if you look back at the chairman's testimony over the years and the times that he has announced moves, you don't get a lot of news-making. he rarely commits acts of news at one of these committee hearings. he does it in, you know, places like jackson hole and sometimes a speech or one of the fomc meeting press conferences. but we're not really expected to see that from, you know, from the chairman this week. i think they're looking at the
macro signals. they feel that the economy is fairly predictable at relatively stable growth, relatively stable job-creation, not enough to cause any, you know, wage price pressures, and we're nowhere near on capacity utilization. so, i think it's going to be steady as it goes and i think he's going to take this opportunity today to explain where the committee is to the joint committee on taxation. >> yeah. and chris, what do you make of mr. williams's comments? basically, the san francisco fed president saying, you know, we could end a little bit sooner than we think. normally, he doesn't stray too far, does he, from the centrist view? >> right. that was a very interesting comment, and it shows you how alert the market is to any sign that there might be tapering when those headlines came out last thursday, stocks went down, bond yields went down. i mean, bond yields went up. so, yeah, i mean, people are very alert to that. i don't know what to make of that. i mean, he is saying -- we kind
of took from that that they would be tapering earlier, but it was highly conditional. he said if the labor market continues to create jobs in the months to come like he expects and hopes, then they can taper, but it sounded like we needed a few more months to realize whether or not there was going to be additional jobs growth before he would personally feel comfortable with tapering. >> you made the point that unemployment in the subprime states is falling rather rapidly. how does that play? >> well, i have my view and the fed chairman has his view and the committee has their view as well. i think, you know, prior federal reserves fought inflation for too long. this fed is fighting unemployment for too long. the unemployment rate in those key subprime states is collapsing much more than the national unemployment rate.
it's collapsing and people are finding work. it's not just for a bad reason that people are dropping out of the labor force. i think the fed's a little behind the curve here. the economy might be stronger than they think. >> tony, can we afford to be -- at the moment, are the risks to being behind the curve okay? >> yeah, i think so. i think i would disagree a little bit there. you look at just where we are on, you know, on prices right now. core inflation's still relatively low, still below the fed's target. and on some of those job-creation statistics, i mean, it's true that the unemployment rate has gone down in some of these states and it's not necessarily people dropping out of the labor force in those states but some of them are actually leaving the state. so, they're going to other states to find employment, but you have to look at it at the aggregate across the country right now. 7.5% unemployment rate, even
with relatively low participation is not a great number. you know, we're still not seeing wage growth. so, i think there's still a long way to go and talk of tapering is really, really premature right now, and i think that's the consensus view on the fed. we had, you know, one of the fed presidents, bullard, in europe yesterday, talking about that the eu should do qe and do more qe, and i think that's really where the committee is right now, that they think the support is still needed and it's going to be needed for some time. >> you never know what might happen over here. tony, chris, thank you both very much indeed for joining us. have a good day there stateside. cnbc's going to have full coverage of bernanke's testimony before congress, starting at 10:00 eastern. don't miss out on that. it starts at 1600 cet, if you're watching in europe or around about 1500 london time. right now, though, let's show you where we stand with the futures. fresh record closes, of course, yesterday for the u.s. markets
and the s&p and the dow. we are right now just below fair value for the s&p 500, kind of flat for the nasdaq and about five points above fair value for the dow, so indications are for a fairly flat open at the moment, this after the ftse yesterday closed at the best level since 1999. we haven't had a fresh record close yet for the ftse, but best since 1999, currently down 15 points. we have been at fresh record highs for the xetra dax, at the moment off a third. the ftse mib is flat in italy and the cac 40 is down 19 points. so, as ever, we've been asking our guests today what are investors to do as we get ever higher equity markets? here's a recap of some of their thoughts. >> we're probably capped about 2% in terms of ten-year yields and we've probably just dropped a slightly larger range because market views on this are going to continue to swing quite sharply. unfortunately, this is the problem with bernanke's doctrine of transparency. you're getting a very, very public fed debate and the market is very, very volatile on the
back of it. >> i wouldn't want to be a seller of jgbs given that somebody's buying every one that's issued. maybe down the road, three years, four years, ten years, this could end in tears, but i think the timing aspect of shorting jgbs, you're fighting someone who has unlimited firepower and willing to buy the whole market. i think i'd go into the yen and sell that instead. >> we're going to see the nikkei take a pullback. i think likewise, you know, i think the yen also should do that in order for us to take the next leg up. i think the 12 to 24-month direction is kind of, is certainly up, but we're looking for now a correction in both. >> all right, some interesting comments there. still to come, are facebook's days not looking as good as they were? maybe not?
qe. sony shares jumped. the company says it will review a spinoff proposal from dan loeb's third point. and tax reform tops the agenda in brussels as the european parliament president tells cnbc more must be done. now, as we all know, teenagers are a fickle bunch. they change their mood and opinion on things as quickly as they change their clothes. a new survey finds teens have now changed their mind on the world's biggest social network. oh, dear. seema mody's joining us from cnbc hq in the states. hi, what's going on? what are they up to, those pesky kids? >> all right, ross. well, kids love twitter these days, but facebook not so much. a new survey by pew research centers shows teens expressing waning enthusiasm for facebook. the biggest reason? there are too many adults on the site, including mom and dad.
teens are also tired of all the drama on the site, such as stress in managing their profiles, and they're annoyed when their facebook friends share all their teenage angst as well as inane details like what they had for dinner. contrast that with an increase of twitter use over the past two years, the pew study says 25% of all online teens use the micro blogging service. that's interesting since it wasn't that long ago that many teens said twitter was a place for letting people know what you had for breakfast. while they are shifting over to twitter it doesn't mean they've completely abandoned facebook. the poll finds 94% have a profile on the site, but that's flat from the previous year. in what could be a concern for parents, more than 60% of the teens on twitter say their tweets are public, meaning anyone can read what they write. about a quarter say their tweets are private, and 12% admitted they don't know whether their messages are public or private. ross, i'm guessing yours are public. >> they are very publi
public, @rosswestgate. i urge everybody to logon and have a look. the interesting thing is if you've got -- in that sound pool, facebook's got 94%, you said, right? there's nowhere -- once you've got 94%, there's nowhere to go. >> that's a good point. you're wondering if they've hit a certain saturation point. but you know, i think what's also interesting, there was a recent study about the cool factor between the iphone and the samsung galaxy phones with teens. so, basically, they found that the iphone was slowly losing its cool factor among teens and that the samsung galaxy still had that novelty factor, and therefore, was seen as more exciting amongst teens. so, this is an interesting study just to see what products are being seen as not only popular but attractive to this specific demographic. >> yeah, well, you know, teenagers don't like what their parents like. we just -- that's a pretty well-established fact, right? >> true.
>> so, okay, i can't wait for my girls to become teenagers. thanks for that. coming up, target is set to report first-quarter results in about 90 minutes. will the retail giant's numbers be on target and what will they say about the u.s. consumer? we'll preview the company's earnings when we come back. [ female announcer ] what if the next big thing, isn't a thing at all? it's lots of things. all waking up. connecting to the global phenomenon we call the internet of everything. ♪ it's going to be amazing. and exciting. and maybe, most remarkably, not that far away. we're going to wake the world up. and watch, with eyes wide, as it gets to work. cisco. tomorrow starts here.
some of the other stories we are following today. rescue workers in oklahoma say rain is preventing them from wrapping up their search of buildings damaged or destroyed by monday's tornado in the town of moore. the local fire chief says, though, he's pretty sure no one else is trapped in the rubble and no additional survivors or bodies have been found. the tornado killed 24 people and injured more than 230. the national weather service has upgraded the storm to the highest scale, an ef-5, with
winds of at least 200 miles an hour. the tornado's path stretched 19 miles long and 1.3 miles wide. the senate judiciary committee has passed the immigration reform bill by 13-5 vote. the action sparked cheering from immigration activists who packed the committee room to watch proceedings. the measure would create a pathway to citizenship for 11.5 million immigrants and allow more highly skilled foreign workers into the u.s., but it also includes new steps to guard against future illegal immigration. the bill now heads to a full senate debate. appearing on "the kudlow report," republican senate yormarko rubio urged a bipartisan approach to pass the legislation. >> virtually every group that's looked at immigration reform, except for one, has said that immigration reform would be a net positive for the economy of the united states, and that's what we expect the congressional budget office to say and others. ultimately, if it's not good for our economy, we shouldn't do it, and i do believe that immigration, legal immigration done in an orderly fashion in a
controlled fashion is a positive for the united states of america's economy. pro >> president obama's applauding the action by the senate judiciary committee, saying the bill's largely in line with his own proposals but he hopes the measure will be approved. we're also looking at arrivals here from david cameron, just arriving at the eu summit where he's under pressure, of course, about negotiations on referendums. >> well, i think this is an important meeting because i believe in low taxes for businesses because we've got to encourage investment, we've got to encourage jobs. i want britain to be a winner in the global race. but we've got to make sure as we set those tax rates that companies pay taxes, and that means international collaboration, sharing of tax information. i'm making that the headlines of my g-8 summit in a month's time, and it's important that we make sure the european union as well, that we act together to make sure we do everything on this agenda. it's good for our own countries, it's also good for the developing world as well, so an
important agenda and i hope we can make some progress today. >> there you go! that was the views of david cameron laying out what he wants to do, and he also talked about, of course, the presidency of the g-8 as well. we'll monitor the reaction to those comments a little bit later. meanwhile, ahead of the u.s. open today as well, european markets have, well, just come off the recent highs. ftse 100 closed at the highest level since 1999 last night. xetra dax is pretty much on record highs at the moment, just down 0.4% at the moment, fitsie might be off two points, the cac 40 down as well. u.s. futures, record closes last night for the dow and the s&p. right now we're just three points above fair value for the dow. the s&p is just half a point below fair value. the nasdaq is pretty much on fair value. so, we'll see where we go during the session. as far as the agenda in the u.s. is concerned today, we've got april existing home sales out at 8:10 eastern.
forecast to rise 1.4% to an annual rate of 4.99 million homes. at 2:00 p.m., we'll get the minutes from last month's fomc meeting. of course, that will be superseded by mr. bernanke's testimony. and lowe's, staples and american eagle report results before the opening bell. after the close, we'll hear from hewlett-packard, l. brands, petsmart and seaworld. and u.s. prosecutors are reportedly considering the use of racketeering laws in the insider trading case against hedge fund sac capital. those laws, known as rico, are most commonly associated with laws against the mafia but they have been used in white-collar cases, most famously against michael milkin, the junk bond king. they denied wrongdoing, but prosecutors have charged or implicated nine current or former employees in insider trading schemes. and ford is adding a week of production at 20 north american
plants to make an additional 40,000 vehicles to meet demand. the factories will be idled for just one week this summer instead of the traditional two-week shutdown. the improving u.s. housing market has boosted demand for pickup trucks like the ford f-150. around 75% of ford's plants operating more than two shifts per day. sales are up nearly 13% through april. things continue to look better for the auto industry. ford motor, in fact, today just down 1%. and sony has said its board will look into dan loeb's plan to spin off part of its entertainment arm. the ceo wouldn't give his own opinion of the proposal. the japanese market surging, he's under pressure to look for more value for shareholders. speaking at a strategy update, hirai says he's committed to restoring sony's electronics business to its former glory. all right, we'll take a break now. that's the end of "worldwide exchange" for today. coming up next, the countdown to the open markets stateside with
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good morning. today's top stories. fed chairman ben bernanke heads to capitol hill. he'll testify on the state of the u.s. economy. man, the time flies. he's back again testifying. in global market news, the bank of japan wraps up a two-day meeting with no change to monetary policy. some say the surprise that the boj didn't do anything further to calm the bond markets. and in headlines out of washington, there is another hearing on the irs scandal today. this is good, though, rich. the tax official at the center of the controversy's going to invoke the fifth, does not plan to testify. lois lerner. it's wednesday, may 22nd, 2013,
and "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin, and we're going to start things off this morning with the markets. look the u.s. equity markets, barely budging. the dow is coming off another winning session, and guess what? this is the 19th straight session of tuesdays of gains. so, 19 tuesdays in a row the dow has ended higher. the s&p and the nasdaq have now been up nine tuesdays in a row. and stocks actually took a turn higher around midday yesterday. among some of the reasons that were cited were some comments from st. louis fed president jim bullard. he told an audience in germany that the fed ought to stick with its bond-buying effort to try to bolster the economic recovery. that's not things you usually hear out of someone like jim bullard, so it is not a stretch to say that fed chairman ben bernanke will be in focus today.
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