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tv   Worldwide Exchange  CNBC  July 3, 2013 4:00am-6:01am EDT

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you're watching "worldwide exchange." i'm ross westgate. a recap of the headlines. portugal plunges with shares in the country's major banks down more than 10%. this is the political turmoil in lisbon escalates. two more ministers are ready to resign despite the prime minister's vows to keep the government together. and where would global jiters be without concern over china and india. disappointing service sector readings in june raising concerns over how resilient their domestic economies are. the clock is ticking in egypt. the president and the army warn of more bloodshed and what the military are calling the final
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hours of morsi's rule. all right. welcome to today's edition of "worldwide exchange." over 20 stocks in the green here on the dow jones stock 600 out of that particular universe. we're down at the session lows. off 1.5% at the moment. we got a real confluence of events. official pmis out of china services and india casting suspicion on that.er data of u.s suggesting that maybe there will be room for the fed to taper. and more crisis in arizona and instability in egypt. we're down 1.5%. as far as the individual bosses are concerned, we'll get into that.
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plenty of discussion around what is going on in portugal two ministers resigning yesterday, two more may be on the way and forests going on with delivery of the austerity program. down 6.3%. sharp spike higher as well in the ten-year government yield. just under 8% right now at 20% in the move. yield higher. the banks down heavily as you might expect. espirito santo down. we don't have quite those falls in european equities but after a slim move yesterday, the ftse fairly flat, off 3 points. we are up, down 1.7%, we have a rogue war there. ftse down nearly 2%. the ibex, a close eye on of portugal of 3.3% and ftse down 2% as well. spain and italy showing an increase as well. a week ago in spain we hit around 5%.
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we move it on, we'll show you where we stand today as well. can we do yields first? commodities in a second? we can do that, that would be the way that would be great. maybe we can't. all right. i do want to show you the yields. this is where we stand at the moment. the other story, of course, is what is going on with crude as well. interesting, the spread swen nymex and brent down to the narrowist since march 2010, december 2010. couple of things going on here. we have got bigger drawdown of supplies for west texas and the strengthening u.s. economy helping. up over 100 a barrel for first time in 14 months. narrowing the spread with brent, that affects weakness elsewhere in the global economy. that spread is kind of interesting. bouncing a little bit off the lows as well. back to the bond rates. there we go. portuguese yields we saw,
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spanish yields 4.78%. back up towards the 5% mark as well. we'll keep our eye on treasuries and gilts. 10.2. we have service pmi coming out in around 25 minutes. so that will be kind of key. now, on the currency markets, aussie dollar is the one we're focusing on. down a fresh three year lows today. 90.73. the rba saying they think the aussie dollar is too high and not helped by the weaker chinese data either. we have come back from the 100 mark, the high since may 31st. eurodollar today is down 129.34. pretty much the lowest for a couple of weeks. right. so that's where we stand with the markets. china still very much in focus. the service sector continues to expand. the pace is slowing, stoking more worries about the growth of the world's number two economy. official services pmi 53.9 in june, lowest in nine months.
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the hsbc, slight uptick, 51.3, new orders down at a 4 1/2 year low. india's service sector also losing a little momentum. pmi on hsbc's measure still above 51.7, but a subindex measuring new businesses down to 20-month low, signaling poor prospects ahead. inflation a big concern as the indian rupee at a record low against the dollar. keep your eyes on that. with that information, let's find out how the asian markets have performed. sixuan li has the details out of singapore. >> thank you, ross. as you mentioned, negative news from egypt, greece and china and india dampened sentiment in asia. china services sector lack luster in june. the weakness came from new orders dipping to more than a four-year low. the hsbc survey shows business confidence also slumped to levels we haven't seen since late 2005. on the back of the data, the hang high composite lost .6%
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today, ending below the 2,000 mark. the hang seng hong kong tumbled 2.5% in today's session. financials and real eestate stocks were lower. we don't have estimates for first-year, but many worry the cash crunch could hurt some highly leveraged property developers. the risk of sentiment also hurt the australian market. money majs aors banking shares e lower by almost 2%. a decent debut for suntori beverage with shares rising 1.5% from issue price of 300,000 yen. the broader japanese market saw some profit taking today after a
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four-day rally. but the successful listing and a relatively soft yen offset some of the weakness. the nikkei managed to close down by only a marginal .3%. back to you. >> sixuan, thanks for that. portugal's government is tightering on the vertight eri teetering on the verge of collapse. portas quit in objection to the appointment of maria louis albuquerque as the finance minister. in a televised address, he said he would work to ensure the political, economic and social stability of the country. >> translator: let me be clear, i won't resign, i won't abandon my country, i embrace as i always have serving the country with the same dedication and the same hope. we live in a time where we
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cannot get scared in the face of diversity. >> times of trouble, always good to rely on an old friend to guide you through. and we're joined by annettia. i never got the e-mail and here you are, back on air. fantastic. is it significant you're coming back as we seem to be ramping up tensions again for the eurozone? >> reporter: that meeting today with angela merkel and the 20 heads of states from the eurozone with the labor ministers will probably be overshadowed by all the tensions with -- coming from portugal. as well from greece, with their respective prime minister both attending. speaking about portugal, their prime minister is nevertheless, despite the -- nevertheless is attending the summit in berlin. the economy minister of portugal as well is here to speak about youth unemployment and as well
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to tackle the problem of youth unemployment by, for example, bilateral treaty with germany on combined or on support from germany, when it comes to vocational training or training on the job which germany promotes as one of the key remedies to the crisis of youth unemployment in southern europe. that is mainly what they are discussing here today. they'll probably come up with a more pronounced plan, using not used funds from the european union which could amount to 16 billion euros according to the labor minister here in germany. >> as you say, annettia, you're there, because, of course, we have got this youth unemployment meeting today in germany. so let's just talk about that for a little bit more. shall we go back to annettia?
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right. right. come back to us for a second. a little bit of confusion, my apologies for that. >> reporter: don't worry. thank you very much. i'm not here on my own. i have a guest next to me, the co-ceo of the german chancellor -- of the german chamber of commerce, i should say. he actually was in the position of meeting the portuguese eco minister yesterday. very warm welcome to you. and my first question would be how was that meeting with the portuguese eco minister? >> the portuguese minister described reform portugal has undertaken and is going to undertake in order to flexiblize the labor market, in order to, yes, as well reduce taxes and in order to improve competitiveness in portugal. my iminvestigatipression was ve.
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despite the governmental crisis, portugal is on the right track. >> reporter: let's switch topics to the youth unemployment summit we're having here in berlin. do you think this remedy that angela merkel is promoting so strongly, this dual education system, will really solve the crisis? >> we have to curb our expectations, what the time horizon is regarded. if we really were to introduce such a system, the vocational -- the education training system, what we have in germany, this is a really structural reform. it will take time in order to have viable fruits, but we would really value, but our concern is that much more emphasis is put today on short-term measures and will create kind of straw fire.
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>> talking again about that dual education system, my understanding, it is the case that you need a strong companies to provide those training on the job measures. but what do you do in a country like greece where you literally don't have a industry left? >> you have some good companies in greece and you have some sectors which have the potential to grow and to be competitive. for instance, they have a logistical sector, they have i.t., viable nucleus of i.t. companies in the service sector and they have tourism. so they could have more companies, but they need the will in order to introduce such a system together with the companies, together with the company sector, because the education should take place 60% in the companies and therefore you need chambers, you need associations, and you need the political will. >> reporter: well, it sounds
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like it could take years to build up that infrastructure to help those young people. i mean, then we're anyway having that lost generation without a job now, right? >> no, now we have 6 billion of financial volume provided by the european union and with that you can start. you can start to build structural reforms and you can give incentive to companies in order to say, okay, i will qualify young people in my company and guided by a chamber and guided on the other hand by vocational schools, so this can create a positive effect in between two years. but, first of all, we need the political will. and we have to overcome some obstacles in different groups in the countries. >> and where do you see the biggest obstacles? >> yeah, the biggest obstacles is the political will together,
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the different interests. the question is who from the company side is responsible to build up and are helping building up such a system. is it the chamber system, the association system? and each country is different. and what party now in the government thinks that is a good way and a third obstacle is it is a proposal from germany. and germany right now brings -- is not bringing the best mood into other european countries. >> reporter: you would say with ankle angela merkel is saying across newspapers it is good to get other german structures into other countries might create a little reluctant to do so or -- >> yeah, that could be the case. but we have good examples. portugal, for instance, and also spain, they have begun to establish a structure like we
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have with german companies located there as a nucleus. that's a good starting point. >> reporter: thank you very much. and with that, i'm throwing it back to you to london. it is a very interesting day, i would say, here in germany, with all that talk about youth unemployment and perhaps even some remedies to tackle it. >> that would be extraordinary if we got something along those lines. annettia, thanks for now. catch you later. the growing problem of elderly people is see in beijing and forced the elderly rights law. children must now visit their parents or face time in jail. a daughter has been ordered to visit her 77-year-old mother at least once every two months. what is the big concern? how we take care of our youth or our aging population? weigh in worldwide at worldwide@cnbc.com or to @cnbcwex or direct to me at @rosswestgate.
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egypt's army denied a political road map will come into effect after the proposed deadline which expires later today. the next step would be to call political social economic figures to talks on the country's future. the military warned there will be more bloodshed if president morsi refuses to step down in what they're calling the final hours of his rule. yousef is with us from cairo on the telephone. we had these reports out that the armed forces were going to effectively put in an interim government and look for new elections. that now seems to be false. do we know what is going to happen when the deadline finishes? >> well, ross, the story is developing very rapidly. you mentioned some of the bloodshed. it has been a very, very long night here in cairo. 20 have been killed across the country. and violence was especially difficult in the vicinity of cairo university, clashes between the two camps supporting the president and those opposed to him. the president eventually made a
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speech around midnight, lasted for 45 minutes in which he was clearly agitated. the tone was stern, insisting he had the constitutional legitimacy and calling on the military to withdraw their deadline. that's an interesting development. and also said the price of legitimacy is worth preserving with his life. it didn't take long for a response on a facebook page with a statement on the official page saying that they would sacrifice even their blood for egypt to protect people, egyptian people from radicals, terrorists or fools. now, the deadline, we're not far away from, just under seven hours, for politicians to come up with a power sharing deal and the road map you talked about. we had reports from the official government-owned newspaper and they said that the road map would see a dissolution of parliament and suspension of the constitution with the transition period lasting between nine to
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12 months. now we understand from reuters that that has been denied by a military official. though we're still getting different reports trickling in, not quite certain what the exact details are of that report. also, reporting that the armed forces coordinated with security force to detain muslim brotherhood leaders and placing them under house arrest. it is a very fluid story here, ross. keep a close eye on the market indicators as well to gauge how investors are feeling about the latest developments. as the hours count down, doesn't look like we're getting any closer to political reconciliation and we'll have to see what happens. at the moment, the incoming government is not budging. >> right. yeah, we'll see what happens. yousef for now, thanks very much. that's the latest from cairo. take a short break. plenty of other things to come on "worldwide exchange." japanese investors high hopes for economics. we'll be in tokyo in a few
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moments. president obama delays a key provision of his signature health care law and a fresh setback from the white house. former presidential adviser piper malgom will weigh in. asia's largest ipo of 2013 made its traying d itrading debut to. were some left with a sweet or sour tastes in their mouth? we'll be in hong kong for the latest after this. i want to make things more secure.
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that wasn't a big splash many investor were hoping for, but asia's biggest ipo managed to outperform the markets in tokyo. suntory rose 1.5% in the trading debut after they raised nearly $4 billion. the seller of pepsi and canned coffee seen as a play on japan's rebounding consumer market. analysts say raising cash will help suntory compete against its rival like nestle. tim, it is notable the stock up today in a down market. what does that tell us about sort of the overall demand for
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this stock? >> well, obviously investors were positive on it at the low end of the indicative range. company listened and priced it down there. incredibly volatile market during the book build. and we have a situation where in, you know, a down market, the shares perform. i think people are fairly satisfied all around. it is really all you can ask for at this point. >> is there a view that it is going to stimulate the consumer? >> well, i think we really need to wait on the election. the ldp is tipped to win. if they do, then they have a opportunity to really put in place their economic restructuring plan and that would provide a platform for companies to tap into the equity markets. i think people are expecting this volatility at least be tempered somewhat going forward in that respect. >> yeah.
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look, what are the ecm drivers then, the key big drivers this year? >> well, really in japan it has been all about abenomics. with the run-up to the election and the election in december, the shares performed incredibly well in japan all the way through to quite recently. there was a little pullback now, and i think everyone is waiting on the election. there were the issues with the u.s. federal reserve which created a heck of a lot of volatility. we're on the summer break as well. i think there will be a pullback in terms of volume and people are waiting to see what happens from september. >> and in terms of the deals and the floats we had, we got some here, repro cell, altplus doing fairly well. what is the key behind those that have outperformed? >> well, yeah, i mean we have seen a lot of activity in the housing space, and the one you
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mentioned there, biopharmaceuticals. biopharmaceuticals has been popular on an aging population in japan and the expectation that would bring in a lot of technological improvement or new medicines, et cetera. in the housing space, better or improving economic outlook. people expected the housing industry to do well. there is also the expectation of the internet space to be active going forward. >> good to see you, tim. thank you for that. tim leemaster at deal reporter. hong kong appears to be getting its ipo mojo back. it expects another 70 to 80 deals in the second half, worth around $19 billion. that's good enough to be the third biggest listing destination this year. hong kong could be tops in value. the pipeline keeps flowing. legend says it raised more than
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$280 million in its deal. malaysian minor caa resources shares slid on their debut. deutsche annington canceled its market debut. germany's biggest residential real estate company was expected to list today with shares between 18 and 21 euros. they will continue to evaluate the market environment, but gave no clues regarding a potential listing in the future. is hong kong going to return as one of the hottest ipo markets? you can read more about that on cnbc.com and follow more about it on twitter @cnbcworld. biostein slumped 20% today on news that one of the units is being investigated by china's top economic planning unit for possible price manipulation and violation of antitrust laws. biostein is one of the infant formula suppliers in beijing.
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speculation about whether mr. snowden is on the bolivian president's plane. he has been granted permission to land in spain for a refueling stop after initially refusing spanish authorities' request to inspect his plane in vienna. no idea where he is. we presume he still is in moscow. let's recap what we had in services pmi earlier this morning. the composite pmi came in at 48.7, lower than 48.9 flash. still a 15-month high for the composite number as well. the employment component of that 47.4, up from the 47.1, which was the flash number. eurodollar is down at the low at 29.36. what is more important, not more
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important, but in terms of the latest bit of data will be what we get out for uk services. we have seen data coming out this week already strong from mr. carney. mortgage approvals up at a five-year high from the bank of england and manufacturing pmi coming in stronger again than expected. and construction pmi ticking up and expanding as well. in a few moments time, or right now we get the services pmi up to 59.9 in june. 54.5 is what we expected. the highest since march of 2011. the new business index up to 59.3 in june. the composite pmi pointing to gdp growth of at least half a percent in the second quarter, this according to market. joining with us his reaction, david owen, at jeffries. the uk data just keeps
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surprising to the upside. >> it does. also worth highlighting we had the quarterly survey, and that showed not just generally the trends all improving but more importantly, i think, perception about profitability also increasing. that makes it more likely companies in the uk bring investments on stream. it is early days yet in the recovery still very much in the early days. but uk continues on the upside. >> talked about a big jump in service exports. >> exactly. coming through -- >> everybody talks about extraordinary weakness and haven't seen a rebound in exports. but your economy is service. does the pound affect service exports? >> to a lesser extent. the uk probably does service -- not make things but it exports things which is probably less -- also again the argument with germany as well.
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the exchange rate mass is less. general trend at the moment in the uk is improving. we saw this week, this particular measure, that's now 8% year over year, a strong pickup. >> nice place for mr. carney to start. what is he going to do for the next couple of months? nothing? >> the communication major has been interesting. >> talked about the issue of forward guidance. too early to talk about that, isn't it? >> the inflation report data, that's when people expect to make some decision on forward guidance. general consensus, they will move to forward guidance and give a further degree of confidence that interest rates in the uk are not going to rise that quickly. certainly not probably priced to the next election. >> is there any argument of gilt yield rises? >> that's the issue. at the end of the day, if he
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comes out with forward guidance and very clear that the short term we won't have a bank rate rise for a long time that should anchor expectations on the short end. we'll expect the gilt market, fairly obvious. on the short end, i don't think anything will happen for a long time. >> david, stay there. more to come from you. we'll take a quick break. before that, a reminder of the headlines. portugal is plunging with shares in the major banks down 10%. two more ministers are thinking about resigning despite the prime minister's vows to keep the government together. and where will the global jitters be without more concern in china and india. disappointing service sector readings in june raising concern there over just how resilient their domestic economies are. in egypt, the clock is ticking. the president and the army warn of more bloodshed and what the military calling the final hours of morsi's rule. [ male announcer ] it's time.
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by what is going on in portugal. we had the economics minister resigning and the foreign minister threatened to resign, not being accepted by the prime minister and more reports of more ministers wanting to resign as well. so the psi is down 6.3%. and we have seen a sharp rise as well in the portuguese ten-year bond to 7.8%. so those yields continuing to head higher. not helping, of course, the rest of the sentiment on the european markets and banking sector either. a little earlier only around 20 odd stocks that were up across the entire space. so european equities are down this morning. the ftse 100 off 1.5%. xetra dax down, the cac down and the ftse down 1.8. we have some 3% losses from the ibex earlier. bond yields climbing back up in spain impacted by what is going
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on in portugal. 4.74% is where we stand. yields lower elsewhere. we had strong services pmis out, much stronger than expected. 56.9, forecasted at 54.2. it is the biggest rise as well in new business. the fastest base of new business rise in that measure for six years. the fastest increase services pmi in two years as well. we also are keeping our eyes, sterling, on the back of that, bouncing a little bit against the dollar at 152.05. more comments out from the bank of england as well. they say corporate loan demand is on the rise. demand for credit from business in the uk up in the second quarter expected to increase again in the third. this is a bank of england, they say the credit conditions that demand for credit of all sizes up to april in june. companies wanted credit to fund mergers and acquisitions and
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restructure their balance sheets. they say the rise in demand is matched by an increase in supply of loans and supply of loans is expected to remain broadly stable between july and september despite government efforts to spur greater lending to small businesses. david owen is with us. quick view on that survey, david? >> all very encouraging. corporate loan growth is picking up. i would hasten to add it is skewed toward larger companies. that's more of a large cap company issue. the end of the day, it is the s&p that we want to see more traction in the early days. they catch more types of -- the way companies at that end of the food chain actually get financing through factory and invoicing and so forth. we'll see where that has the effect going forward. >> meanwhile, angela merkel hosting the youth unemployment summit today. but the problem is that it is a
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large part of the bailout programs that have caused youth unemployment. >> absolutely right. an overall employment rate of 4.2%, remains higher than in the early '90s. in the early '90s, people were concerned about europe not working. we're going back into that world and youth unemployment is high now. all the reforms that many companies are doing will bear fruit but over the next five to seven years or so. at the end of the day, many of the countries are in recession. what we're seeing in portugal is very alarming. and we know all eyes now on ecb tomorrow to see what they can do, whether they can do anything to resolve that problem. >> it is not ecb problem, is it? >> they can't react if you don't have a stable fiscal back grop in portugal. bond yields have gone through the 7%, seen as a magic level, which portugal was forced into the bailout in the first place. it is very difficult to know what will happen tomorrow what to do to right the situation.
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>> yeah. just one point here, is there in danger of losing control of this again? if you combine the political instability with fed policy, exported fed policy, raising yields, is there danger the ecb might lose control. >> it is possible. they can, of course, opt for easing, that's the thing they could do. that's what they're buying bonds and failing capital shares and bundesbank buying bounds and they could move to that policy. but that's going to happen. >> that happens when -- >> the world is ending. >> yes, okay. david good to see you. david owen from jeffries. we're keeping our attention on what is going on in tahrir square as well. this after egypt's army denied a road map will come into effect after its imposed deadline, which expires later today. this is cording to a reuters report which conflicts earlier reports that the next step is to talk on the country's future. there will be more bloodshed if
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president morsi steps -- refuses to step down in what they're calling the final hours of his rule. prince alwaleed says he thinks the egyptian army has an eminent role to play in the crisis speaking to maria bartiromo about the possibility of further contagion. he said the persian gulf nation like saudi arabia will not necessarily protect from the unrest. >> if you look at the countries, saudi arabia, qatar, bahrain, kuwait and oman, they are really at peace completely. and the quality of life there is high. the economy is doing well. having said that, there is no country that is immune from what is happening in the vicinity. so it is very important to use and capitalize on this tranquility and stability they have now and inject as many possible reforms on the political, economic and social
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front. so they have immunity from god forbid any sort of revolutions or any turmoil. >> he also touched on the rise of shale influencing future price movements as well. >> the price for oil is a function of the stability in the middle east to a certain extent. having said that, there is no doubt that the production of shale oil in the united states, europe and some other countries in the world and actual production of more oil and gas in the united states, australia and canada is going to put more pressure on the price of oil and gas in the coming years and decades. so it is very important for the -- those countries who depend on oil such as the members of opec to really begin diversifying and be less dependent on oil. >> plenty more from the interview with alwaleed on the channel and online. back on portugal, parties meet wednesday to discuss the
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positi position. yields up to 7.78%. back over that key 7% threshold. at the same time, greece is saying it cannot meet the demands on the public sector transfer scheme as they stand right now. this is a senior finance official who says in the worst case delaying the payment they could compensate for it by issuing additional t bills and expect to reach agreement with the eu by monday. and all issues except the public sector reforms. plenty going on. any thoughts or comments, e-mail us at worldwide@cnbc.com. the prize rise of protest a the world. pack to berlin where a summit on youth unemployment is under way. and we talk exclusively to laslo
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ander.
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discontent among many young people. youth unemployment is the focus of a summit being held today in berlin, which is being hosted by th also there, annette weisbach. >> the portuguese prime minister is attending despite the fact his government is in shambles and there is a lot of insecurity around the situation in portugal, which is, of course, or most likely overshadowing the events here in berlin. but let me stick to the topic of unemployment, youth unemployment. i have a very prominent guest standing next to me, which is laslo ander, the employment commissioner of the european union. i'm very happy and honored that you have time for us today here in berlin. my first question, mr. ander, would be what is the commission
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planning now and why so late, i have to say? >> the com of young people. uniemployment package was adopted last december and has been a lot of progress with comparing the implementation. if evidence like this one today helps to give visibility to the eu proposals, and there will be more support at the end of the day for the implementation, we have to say it is helpful. >> so the topic of austerity here there is a lot of talk about germany essentially, the push to a lot of austerity in southern europe has aaggravated problem. do you think that's the case. >> i believe the problem of youth employment cannot be separated from the macro economic conditions. indeed it is true that at this moment we don't have the right macro economic policy mix for sustainable recovery in the so-called deficit country, a lot
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of fiscal and financial adjustment has taken place. we would need new measures, like bringing forward the elements of the banking union in order to ensure there are better financing conditions for growth and investment in the countries and that would also create better opportunities in the enterprise sector for hiring young people too. >> 6 billion euros of youth guarantees, you have agreed on, it looks a bit like a drop in the ocean considering the amount of more than 5.5 million people unemployed. >> well, indeed, the fund with the 6 billion euros created last february is a top off fund. most of the eu support will come from the european social fund, which has greater resources, and 6 billion will help specifically in certain regions where the youth unemployment rate is higher than 25%. so the small fund, plus the
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social fund and the national resources together will help support the implementation of the youth guarantee. >> how confident are you that this reforms or those measures are really having a material impact on those youngsters and how confident are you that we're not heading into a situation where europe makes a lot of headlines with their social tensions? >> well, the question mark is on the side of the macro economic decisions where there is a need for more progress, more consistency with the employment objectives on the one hand and the budgetary decisions and the recovery strategy. all this has to be coordinated and at this point probably not all there. but i think the confidence should come from the fact that the youth guarantee is working in a few countries. it is an existing model. and we have the channels, the networks to transfer the know how of how to develop and implement it and also we have a chance to build up the financial support as well. >> just one quick question, do you think after the germany elections you might have it a
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bit easier because austerity might soften down? >> i believe that there is a need for a more comprehensive and discussion about the eurozone crisis, how to reform the monetary union. at this stage, probably political conditions are not given for that. but maybe in the autumn more complex analysis of the emu will have to come including the social dimension of the monetary union. >> thanks a lot for your time here. and with that, i'm sending it back to you, ross. a lot on the table here in berlin and we're watching that very closely. >> absolutely. annette, thanks for that. more to come from annette. worth keeping your eyes as well as we keep our eyes on the portuguese political developments we're seeing cds portuguese five year 101 basis points wider, pushing up cds spreads for some of the other countries like spain and italy as well. meanwhile, talking about youth unemployment, it is not
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just the young that are a cause of concern for governments. in china, the growing problem of lonely ellerly people has see beijing stocks enforce the elderly rights law. growing children must visit their parents or face time in jail. a daughter has been ordered to visit her 77-year-old mother at least once every two months. what is of bigger concern and how will we take care of our youth or how we take care of our aging population? both very important. weigh in, e-mail us at worldwide@cnbc.com or tweet @cnbcwex or direct to me @rosswestgate. last night tokyo was all about womanomics, sheryl sandberg discussed getting more women into japan's workforce, moderating a panel at the conference was mikiko. she joins us for more. how was the conference? >> it was very interesting.
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everyone was very eager to hear what sheryl sandberg had to say. what she did have to say was she said that getting more women into the workforce is an absolute necessity for continued economic growth in japan. she also pointed out the pay gap between men and women in the country stands at 29%, which is much higher than most developed economies. japan also has some of the longest working hours in the world, making it difficult for women to stay in the workforce. and prime minister abe has been eager to address this issue saying increased participation by women in the workforce is an important part of his growth strategy. miss sandberg met the prime minister and stressed that more needs to be done. >> in japan, women do five times the amount of housework and child care that their husbands do. five times. almost the most in the entire world. womenomics, getting more women into the workforce, call it whatever you will, it will not
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change until men make dinner, do laundry, change diapers. it's good for your marriage. it's good for your children. and it's the growth of your economy. >> miss sandberg left tokyo today for south korea, continuing on her book tour and to encourage women to take on leadership roles in the workforce. that's all from the nikkei business report. back to you. >> thank you very much for that. staying in tokyo, district court has given a suspended prison sentence to the former owe lem pus chairman aolympus co others. olympus had to pay a $7 million fine. the accounting cover-up came to light when michael woodforde blew the whistle on the misdoings two years ago. aussie dollar is down today. the rba governor glen stevens
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said the central bank deliberated for a very long time before deciding to hold rates steady yesterday. markets had predicted a pretty clear cut decision. stevens says the end of australia's mining boom will be a challenge for the economy, but the rba stands ready to help out. as for the agenda in asia tomorrow, update on japanese retail health when earnings are reported. thai clothing retailer mc group makes its trading debut in bangkok. and financial update with coverage here on "worldwide exchange." standard & poors cut its ranking on barkley from a to a plus. the company maintained its a rating on ubs and said the outlook on all banks are stable. the report broke after the bell, but they had all ended the day
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lower. potential financial will contest the plan to label it a systemically important company. that tag would subject it to stricter oversight by regulators. peru den she prudential will request a closed door meeting. earlier on tuesday, they said they wouldn't appeal the tag. u.s. federal judge appointed former fbi director louis freeh to probe alleged improprieties behind an attorney involved in overseeing payments by bp's oil spill fund. this is seen as a victory for bp. the move comes days after a senior attorney on the fund staff resigned over allegations
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he was going to be paid by lawyers filing claims on behalf of clients. the bp stock is down 1.3%. we can continue to keep our eyes on what is going on with portugal this morning. worth pointing out, portugal appears down in the session low at the moment, off around 7%. 391 points higher. back over the 7% level. 7.67%. question marks now rain about portugal's ability to deliver the remaining of its bailout terms, which is supposed to be out of bailout by 2014. this follows the resignation of the man who originally drafted the bailout bill. there are now reports of other resignations possible. the cds group said they'll have a meeting today to decide on where they go from here. has meant yields in spain have risen as well. we'll be speaking to a fund manager on the phone in the next
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hour. also still to come, president obama has delayed a key provision of a signature health care law in a fresh setback for the white house. coming up, former presidential adviser pippa malgom will be here. also looking ahead to a bumpy day of data out of the u.s., the adp report and the ism nonmanufacturing, all key in the fed's decision to taper. shortened trading day. the latest as well from egypt. these are the live shots from tahrir square as the army's deadline nears.
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you're watching "worldwide exchange." i'm ross westgate. these are the headlines. european equities in the red. portugal plunges with shares of major banks down more than 10%. this as the political turmoil in lisbon escalates, two more ministers getting ready to resign despite the prime minister's vows to keep the government together. where would global jitters be without more concerns over china and india. raising more concerns about how resilient domestic economies there are. plus, the clock is ticking in egypt. the president and the army
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warned of more bloodshed and what the military are calling the final hours of morsi's rule. all right. just joining us state side, warm welcome to you to the start of your global trading day. we have red across the board for global equities this morning. also reproduced in the futures. the dow down 42 points yesterday. now the futures are currently 83 points below fair value. the nasdaq is just over 20 points below fair value and s&p 500 is around 9.5 points below fair value as well. it is a shortened trading session today to remind you. equities close at 1:00 eastern. bond markets close at 2:00 p.m. eastern because it is july fourth tomorrow. but, of concern here in europe, lots of things going on, of concern has been portugal.
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the minister responsible for engineering the austerity package has resigned. also being threatened -- followed up with a resignation from the foreign minister as well. two more ministers reportedly considering their positions. that means the ability for portugal to deliver their austerity plan is supposed to be out of bailout by 2014 has come under big question mark. the psi in portugal down 7%. ten-year government bond yields up 8.21%. the yield at the moment well above the 7% level, which is where they ended the bailout program. and banks being hit heavily as you might expect, dispirito santo down 12%. off 14% for commercial portuguese. losses for european equities, all down fairly heavily. the ibex down 3%. 2.9% there. 1.78% xetra dax. the ftse down 1.5% as well. we have seen elevated bond yields in spain. hit 5% last week on fed fears.
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back up to 4.72% this morning. elsewhere yields are low. treasury yields, 4.23%. we had a good another bit of data out of the uk. services pmi, 56.9 in june, the fast northwest t fastest in two years. still down on the session, 2.33% as well. now, also looking at what is going on in the foreign exchange space as well. look at eurodollar, it is low, 1.2955. we keep our eyes on the aussie dollar. had a fresh three-year low today, 90.78. the rba saying a close call to keep rates on hold. we think the aussie dollar say little too high. add to that pmi, 53.3 lower than may's 54.3. also raising concerns about the sector there and that, of course, has an impact on
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commodities. big mover in commodities has been the oil price because while we get weaker data out of china and asia, china and india, we're getting better data in the u.s. all the sales strong yesterday and stock drawdown closed the spread between nymex and brent, down to the narrowest now for three years. 104 to 100. brent dictated by global events. a little firmer on egypt. spot gold at 1248 as well. just recap that services number out of china, continuing to expand, but the pace is slowing. stoking more worries about the growth. the official services pmi 53.9, the lowest in nine months. the hsbc reading, slight uptick, 51.4. in india, service sector losing momentum, hsbc pmi at 51.78.
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a subindex measuring new businesses down to 20-month low. maybe seeing poor prospects ahead. inflation still a big concern as the rupee is down still near the record lows against the dollar. as we recap the nation's session with that data in mind, sixuan has the latest from singapore. >> asian markets, equity markets lower today after data showed growth momentum in the world's second largest economy is weakening. hang seng was the standout loser, down 2.5% today. the coal sector was the lowest. all tumbled more than 6% over supply fears. and china banks and property firms got a beating. local media reports that 70% of property firms in the city of shi may be facing liquidity strengths. many worry the cash crunch could
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hurt lenders and some highly leveraged property companies. global growth worries. with petroleum down 3% after posting weak earnings guidance, but on an upbeat note, we saw a decent debut for asia's biggest ipo this year. $4 billion offering, suntory climbed as much as 3% during the daytime from its price of 3,100 yen before finishing 1.5% higher. back to you. >> sixuan, thank you for that. that's the latest in asia. we'll be looking ahead to the u.s. markets, shortened trading session. recap portugal, that's the latest political developments over here, five year cds over 100 basis points wider after the government is teetering on the verge of collapse. reports filtering through from reuters that two more government leaders are going to resign following last night's stand-down by portas, the former
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leader of the coalition party. the portuguese prime minister still striking a defiant tone, refusing to step down from his post or accept the resignation of his foreign minister. he said he would work to ensure the political, economic and social stability of the country. >> translator: let me be clear, i won't resign, i won't abandon my country, i embrace as i always have serving my country with the same dedication and the same hope. we live in a time where we cannot get scared in the face of diversity. >> with us for the rest of the hour, pippa malgom. good to see you. joining us now as well from lisbon is yorken gomez. thank you for joining us. how much of a question mark now is there about the stability of this government and its ability to deliver the remainder of the
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bailout program? >> it is a huge question mark without a doubt. the -- we might get the situation where we'll have early elections, which will coincide with the local elections. yesterday the prime minister in his address said he'll make a last ditch effort to keep his government together, but doesn't just look very promising at the moment. so the stability -- the political stability is in question without a doubt. >> and the cds party is debating what they want to do as well. if the government falls, surely there is no way to deliver this program. is there? >> well, there is a way to deliver this program. but there is going to be a delay in delivery. there is going to be three to six month delay in the delivery. and so in a sense want to
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deliver as planned but there is still a hope a new government will be formed with -- with a socialist with no other option but to deliver a program. >> this is a -- let's bring pippa in here. no other option than to deliver the program, why is the government falling? >> i think because there is a realization that they can't deliver on what they have already promised. that's exactly -- >> there is no option but to deliver it. >> from a market point of view. for a political point of view to deliver it is to commit suicide as well. so it depends what they think -- what the public thinks they're going to have to do is now obviously different from what the government realizes they're going to have to impose which is why they're saying i'm out of here. and i think that's exactly where two months ago when the finance
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minister said it would be a bad idea to use the template to portugal, we should have listened because that's kind of what's coming. >> what? bailouts in portugal? >> definitely. >> do you fear that? do you fear a cypriot application to portugal? >> i don't think there is going to be a cypriot application. we're not talking about the stability of the banking system. but there will come a time where we have to official sector involvement. that's basically what we have been getting on the slice with a postponement of -- enlargement of the securities of the official liabilities of portuguese state. but i don't think we'll get a cypriot situation, but there will be some sort of official
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sector involvement by playing around with the maturities of our official liabilities in the troika. >> let's understand, though what we mean by official public sector involvement. i mean, already the government of portugal effectively nationalized the pension funds of portugal telecom and put them on to the government's balance sheet, so those pensioners now have been effectively ex-appropriated, but they believe the government will deliver. but that's a big assumption in the current environment. when you say public sector involvement, what does official involvement -- what is the widest definition of that for you? >> well, when basically in order to facilitate the return of portugal to the market, the troika just elongates the maturity of the additional liability in a sense the mpv of
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the troika loan to portugal is cut. that's what they have been doing. in the last six months with the troika has been a little more lenient on portugal, not just in terms of maturities of liabil y liabilities, return to market, but also in the fiscal targets. >> okay. thanks for that. just said to me that's default. >> that's default f you. if you pay a little later, a little less, it sounds nice, but it is a haircut. that's what it is. >> a nice haircut. >> a nice haircut. we had 90% default of greece's debt through haircuts. but still 90%. >> you know we have to have haircuts. we know greece needs another default. they need more money.
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just can't tell anybody we're going to give it to them. let's move away from europe to egypt where things are even more serious. egypt's army denied a political road map will come into effect after its imposed deadline which expires later today. according to a reuters report, the next step is to call political, social and economic figures to talks on the country's future. the military warned there will be more bloodshed if president morsi refuses to step down in what they are calling the final hours of his rule. yousef is in cairo, been following this story. yousef, we heard from the president last night. you said earlier he soiunded agitated. what is he saying and what are the military now saying at this moment? >> reporter: well, ross, the president made it clear that his government had the legitimacy of free and fair elections and then he will continue and seek out his term, calling on everybody to help out in this process. and also on the military to withdraw its statement and
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deadline. it shows you how far apart these entities are and the political paralysis the country is facing. the military would respond on its facebook page by saying, well, we're going it defend and do whatever we need to do, even if it has to be with our blood, to protect the people of egypt against radicals. even the rhetoric is getting sharper. we're just under six hours away from the army imposed deadline for politicians to come up with a power sharing deal. otherwise they'll implement a road map. you'll mention they had details earlier and they were rejected by some of the military officials. you can see some of the -- some of the tension here as well in this morning's paper. this is the government-owned paper, and it says today dismissal or resignation. so only six hours to go until we could get a decision on that front. it is not yet clear what we're going to see here, possibly earlier elections. what is interesting here, ross, is that even in islamic party called on morsi to enter into
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early elections. that shows you even within his own ranks there is a breakaway. >> yousef, thanks very much indeed for that. pippa, you think this is erupted because of food prices and lack of food. >> particularly wheat. they started rationing in march, all about the bread price, right? this is the key. the leader said i'll deliver more than we need and now it turns out they don't have enough fuel to harvest the wheat in the fields. basically that's the public is objecting to, the promise they'll have this and they're not going to get it. this is the key. the thing driving these riots is its core, bread. >> what happens if -- if the government -- if the army steps in here, my fear would be that's it, you know? they could step in and who knows when elections might be, but the people would then riot against the army.
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this is such a -- so many different possibilities here. >> absolutely. and i think this is why egypt is trying to negotiate so hard with russia about getting a shipment of wheat in, that would relieve a lot of this pressure. and russians i think are playing hard ball and saying, well, we might be able to deliver some if you let us have a military base in egypt. so there are big politics at stake. not just local as well. >> yeah. and the u.s. will get involved, right. stay there. the emerging markets pushed evaluations to low levels as well. is now the time to get in or not? full report on cnbc.com. you can follow us on twitter worldwide@cnbc.com. we'll recap today's headlines and the latest on youth unemployment session in germany being hosted by angela merkel. ♪ ♪
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quick recap of the headlines. portuguese stocks plunge as political turmoil continues. losing momentum, india and china both post weak service sector readings in june. and deadlock continues in egypt as the army ultimate imfor president morsi looms. still to come, we'll take you to berlin where a summit on youth unemployment is taking place. can they do anything to help the matter? more to come on "worldwide exchange." with the spark miles card from capital one,
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greece is another risk to eurozone stability. this is what was told to a german newspaper. company has more to do to convince lenders to continue with its scheduled bailout plans.
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athens has been given until friday to prove it can deliver on reforms. speaking yesterday, the german chancellor angela merkel told reporters that greek debt continues to be sustainable and she didn't see another haircut for holders of greek debt. lank miracangela angela mer youth unemployment summit in berlin. the figure is nudging higher for the euro area. germany has the lowest, while many in southern nations the rate is above 50%. annette is in berlin. the problem is that most people just see this as a bit of an election nearing stump, but no one is really going to be able to deliver any policies when you have bailout programs in place that are going to improve the youth unemployment situation. >> reporter: yeah, well, that's very true. there is a lot of criticism that the 6 billion euros of youth guarantees that just a drop in
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the ocean and that is the case. and yesterday i had the chance to catch up with the labor minister of germany who has spent a lot of time abroad in spain, italy, but as well in portugal to speak with their counterparts there. and i asked her as well what is that 6 billion euro thing, roughly 1,000 euro per capita youngster unemployed so literally nothing but she explained we have to count as well the 60 billion euros of unused funds sitting with the eu, so-called social funds and the eib, the european investment bank will make more loans to small and medium-sized enterprises in those countries who essentially face the credit crunch. so take a listen what they have -- what she has to say on the sheer numbers, where they're upping the budget for that. >> it is not only the number that is -- but where do you want
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to invest this money. it has to be efficient. and for the first time we have labor ministers and the finance ministers and the heads of public employment services at one table because the investment in mobility in europe, the investment in dual vocational train, skills for the future generation, next generation, and, of course, to fight the credit crunch in southern european countries. these are the three pillars we want to invest in. >> how do you want to export the model to southern europe. a lot of companies are in very bad condition. >> there is european funding to invest in the theoretical training. and, for example, to pay subsidies to those companies who are willing to offer dual vocational training job. secondly, there is kind of a blueprint. we can export, we have gotten a lot of experience on how to bring a dual vocational training
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on the road. and third factor is, of course, something like public/private partnership. you need the european business sector. it is in their own interest because if they do not train the young generation right now, we will have a huge lack of skilled labor in the next generation. so for our own future, we need an investment in education now. >> the only month away from the germany elections. how likely do you think we'll get a grand coalition as the outcome of those elections? >> well, we are working for this government right now to go on with its work so we want a personal democratic liberal coalition and at the moment, being people really rely on chan chancellor merkel which is precious to have this confidence and trust in chancellor merkel so it is clear, if you want to
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work with chancellor merkel, you have to work for the union. >> the guardian had in the headline, the new merkel. are you seeing yourself as a potential chancellor candidate? >> no, i think each generation has one chancellor. my generation, it is angela merkel and she's doing a very good job. >> annette talking to the german labor minister. pippa, this summit, serious or election nearing? >> i think it is election nearing. bottom line, the message to the rest of europe is basically you tighten your belt, you agree to hand over your fiscal sovereignty to brussels, agree to one foreign minister and maybe we'll think about giving you some cash. in the meantime, you're losing a generation, which is true. >> there is no -- is there no price too high to save the euro? as far as political leaders in europe are concerned? >> i think the price is already too high. that's why they can't comply. they can't -- >> those in favor of -- >> who is in favor of one
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foreign minister? what public has voted for fiscal sovereignty -- >> in favor of the euro. that's the price you have to pay. >> we'll see if brussels gets everybody's money. >> we'll see. still to come, u.s. crude prices up at a 14-month high on the back of u.s. supply data. tensions in egypt not helping out. how crucial is the geopolitical factor? pippa stays with us. futures right now, we're down lower at the open for u.s. markets. the s&p down 9 points. ♪ [ 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. [ telephone ringing ] now a waiting room is just a room. [ static warbles ]
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this is "worldwide exchange." recap of the headlines today. european equities in the red. portugal plunges. shares in the country's major banks down more than 10%. this is the political turmoil in lisbon escalates with reports suggesting two more ministers are ready to resign, despite the prime minister's vows to keep the government together. and where would global jitters be without concern over china and india. disappointing service sector readings from june raised concerns over just how resilient their domestic economies are. plus, the clock is ticking in egypt. the president and the army have warned of more bloodshed and what the military are calling the final hours of morsi's rule.
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just joining us this morning, futures indicating a down day, a shortened trading session in the u.s. because of july fourth holiday tomorrow. right now, the dow is currently some 80 points below fair value. the nasdaq about 19 points below fair value. the s&p around nine points below fair value. this follows yesterday of 42 points on the dow. european equities in the red during most of the session today. the ibex has been down 3% this morning. mainly on portugal. the cac down 1.9%. weaker pmi out of china as well. bigger focus on portugal. we had economics minister resign, who originally designed the program to deliver austerity and bailout. the foreign minister threatened to resign. two more talking about it as well. it appears portugal down 5.3%. ten-year government bond yields 7%. back over that key 7% level. they have come back from earlier
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elevations. banks also down hard espirito santo and commercial portuguese down 10%. while that's all going on, here is the thoughts some of the governme guests already today on cnbc. >> if i look at how portugal prices up on, for example, our internal alpha model, it looks to be quite cheap. a lot of bad news priced in and any instability should be met by outperformance. >> portugal never really had a real estate bubble like spain or ireland and didn't have that stress on its banking system. other countries have had. so, yes, we have a political -- i would call it a political hiccup. my central case would be the government holds and that the
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program is on track. >> not out of safe bonds into risky equities. it is out of low -- ill liquid, long duration and low quality assets which primarily are assets in emerging markets and high yield bonds, with investment bonds and treasuries and direct government bonds will stabilize into okay, but particularly weakening market is narrowing on u.s. equity exposure. >> big focus on egypt, the army denied that a political road map will come into effect after its imposed deadline which expires later today. reuters report suggests the army's next step will to be call political, social and economic figures to talks on the country's future. the military has warned there will be more bloodshed if president morsi refuses to step down and what they're calling the final hours of his rule. now, we have been keeping our thoughts on oil.
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wti, light crude, up 101.21, over $100 a barrel for the first time in 14 months. several banks moved to revise forecasts with the brent wti spread this week. ubs said it now seats the premiere $12 a barrel this year as opposed to a previous forecast for $17. deutsche bank cut its targeted $10 and goldman sachs closed its trade recommendation on the spread differential. what i can tell you is that spread is the lowest since december 2010. pippa is still here with us as well. the wti move surprised me. we talked about the impact of shale and wti and brent spread getting a lot wider. do you think this is an indication there could be a bigger drawdown on stocks than we thought? an indication the u.s. economy is doing pretty well? >> it is doing very well. it is starting to fire on many, many different engines. the reon shoring story is
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widening every day. manufacturing coming back to the united states. mexican wages 20% lower than china's wages. that's tied into the u.s. being a more attractive place. but agriculture is booming. everything related to energy is booming. tourism is doing well. property, foreigners are buying property in the united states from trophy properties to residential. people are bidding more than the asking price for houses in the midwest. there is a lot that is positive in the u.s. >> just interesting, we'll talk about that, it is how the rest of the world gets affected by a fed that is reacting to the u.s. economy. >> yeah. >> interesting implications. still to come, the latest in the dell buyout battle. control of the struggling pc maker takes another turn. [ male announcer ] citi is over 200 years old. in that time there've been some good days. and some difficult ones.
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the all-new 2014 lexus is. uh-oguess what day it is!is?? huh...anybody? julie! hey...guess what day it is??
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ah come on, i know you can hear me. mike mike mike mike mike... what day is it mike? ha ha ha ha ha ha! leslie, guess what today is? it's hump day. whoot whoot! ronny, how happy are folks who save hundreds of dollars switching to geico? i'd say happier than a camel on wednesday. hump day!!! yay!! get happy. get geico. fifteen minutes could save you fifteen percent or more. bolivia's ambassador to the u.n. says he's no doubt that orders to divert and search president evo morales came from the u.s. several european countries refused to let the jet which is flying from moscow to enter their air space on suspicions that the nsa leaker edward snowden was on board. snowden applied for asylum in bolivia with more than a dozen other countries. morales said he would consider granting him safe haven if asked. no evidence that snowden has
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left skmoscow's airport where hs been holed up for more than a week. a quick word on this, very quickly, look, what do you make of the snowden affair? what is this doing for the geopolitical relationships? >> it is worsening the relationship between the u.s. and china. everybody knew it anyway, but it is public now. look, it is like a shakespearean play where all the characters are true to their character. they have government has to go after the leaker. the leaker has to go public so the public understands what is really many in play. the real issue is this isn't going to be resolved if they catch this one guy. governments are still looking at every e-mail you've got. and that's not going to go way. the big issue is going to come when people realize government are going to tie this to the tax office and you start claiming your lunch with george was a business expense when you talked baseball as is clear from your e-mails back and forth, people will realize what the
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implications are. >> stop using e-mails. >> yeah. >> that's scary. i'm scared. the obama administration is delaying a key part of the president's landmark health care reform, providing coverage to all workers. the provision which was supposed to take effect in january will now be delayed until 2015. the administration says the decision comes after it heard numerous requests from businesses and lobby groups for more time to comply. the provision requires companies with 50 or more full time workers to provide affordable health coverage or face potentially large fines. michael dell's plans to take his company private may have hit a snag as carl icahn steps up the pressure. sima has more. >> dell's special board committee has reportedly told michael dell he needs to sweeten his $24.4 billion buyout bid. dell and silver lake partners are currently offering to pay $13.65 a share to take the
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pcmaker private. carl icahn who has teamed with dissident shareholders southeastern asset management, is preparing a bid underwhich investors would tend are their shares at 14 bucks a piece. icahn said he's committed more than $3 billion or two thirds of the debt financing to back his proposal. dell special committee is also reportedly concerned that influential proxy adviser firm iss won't back michael dell's bid. iss is set to make its recommendation next week ahead of a shareholder vote on dell's proposal on july 18th. reports say iss has been peppering the team working on the buyout bid with questions about whether the deal is a good value for shareholders or whether dell should pursue a recapitalization which could involve taking on debt and stock buybacks. recommendations from proxy advisory firm iss carries weight, but it doesn't always mean shareholders follow them. icahn's proposal will only be put to shareholders if michael dell and silver lake's offer is
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rejected by shareholders later this month. checking dell shares now, up about a percent on the day. back to you. >> all right, thanks very much indeed for that. some other stories we're following today as well, apple hired yves st. laurent ceo to work on special projects. he'll report to the ceo tim cook. the company wouldn't elaborate on what the special projects would be. kind of intriguing. the speculation is that he may take over apple's retail operations. seems sensible, without a leader since paul burrell was ousted last year. apple stock is outperforming today, up. a u.s. federal judge appointed louis freeh to probe alleged proprieties from bp's oil spill fund this is seen as a victory for bp which argued the fund's administrator has been
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approving payouts too big or go to companies that didn't suffer losses. the move comes days after senior attorney on the staff resigned over allegations he was going to be paid by lawyers filing claims on behalf of clients. bp stock today down 1.5% in line with the ftse. still to come, traders will be searching through a raft of economic data for clues about friday's key u.s. jobs report. we'll preview the adp and ism service reports when we come back. i want to make things more secure.
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[ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business? i need help selling art. [ male announcer ] from broadband to web hosting to mobile apps, small business solutions from at&t have the security you need to get you there. call us. we can show you how at&t solutions can help you do what you do... even better. ♪ just joining us, headlines today, portuguese stocks down heavily as political turmoil continues on reports more minister are getting ready to resign. weaker service sector readings in june. and deadlock continues in egypt as the army ultimatum for president morsi looms.
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european equities are down fairly heavily today ahead of the u.s. open right now. the ftse 100 is off 1.7%. the xetra dax down 1.8. the cac down 1.7%. debate now wages about whether this government can hold together following resignations of key ministers. and, indeed what that will do to the program, bailout program is in or delayed if they have to have a new election. and may have to have more public sector involvement in further bailouts. portugal's government teetering on the verge of collapse. two more ministers would be s resigning as well. joining us on the line from lisbon, melina costa lobo. thank you for joining us. how tenuous right now is the
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current government? >> i think that the current government is not going to hold off, continue. it is holding by a thread. we have information that not only have the two main ministers resigned, the minister of finance two days ago and the main -- the leader of the second party in government, the minister of foreign au paffairst now we have information that the two ministers and all the members of government who are -- who belong to the second party are also going to tend their resignations today. and if that happens, there will be no alternative but for the prime minister to also turn in his resignation. >> that would lead to elections presumably, yes? >> there are two possibilities. the possibility that the
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president would try to form a government without recourse to elections. he has always interpreted the constitution very minimalist way. and so it is very doubtful that he would follow this course. the alternative, yes, would be to hold elections. and so he would have to dissolve parliament and call for new elections. the elections -- the local elections planned for the 29th of september and so this could be a likely date for holding the elections. >> of course that would immediately delay implementation of the current program. and what is clearly happening here is that every time somebody wants to deliver what that program needs, politicians know it is too much. i can't impose it. in an election who is going to step up to the plate and say we'll impose it for you. >> i think that that is indeed the question.
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the minister of finance resigned because he had been implementing the program quite strictly. but the results of drbt resu s results have not been what had been desired. there was -- they didn't reach the objectives that they had set out to reach. and this is a problem that has to be dealt with because it might be that the program needs a little -- needs a bit of adjustment because these programs have led to a lot of unemployment, a lot of social problems, and so politically they are difficult to implement. >> yeah. an adjustment, of course, as pippa was saying, basically means not paying back all the money. i guess in some form or another. thank you for joining us.
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marina costa lobo at the university of lisbon. the central bank will continue to provide stimulus to the u.s. economy for quite some time. even as there is optimism over a self-sustaining recovery. powell says the private sector is showing signs of improvement and housing market is rebounding strongly. powell also commented on the fed voting on new capital rules for banks saying much needs to be done to reduce risks wall street poses to the financial system. the agenda today, a heavy one. july fourth holiday tomorrow. pippa is ready for that. the june adp employment report at 8:15 eastern. 8:30, weekly jobless claims expected to rise by 4,000 to 350,000. and 8:30, the may trade deficit. at 10:00, the services index. pippa and john silver, chief economist at wells fargo. a busy day, a shortened session, but a busy economic slate to get
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through beforehand. how is this going to play in to our tapering talk? >> well, definitely self-sustaining. i think powell has it right on that one. it is self-sustaining at a fairly modest pace. when you look at, for example, you mentioned the trade deficit, what you are seeing here is you take the stories about india and china a little bit about the euro problems, you can see u.s. export growth slowing a little bit. imports continuing to move ahead. so our trade deficit continues to widen a little bit. you talk about jobless claims, 350,000, that's a good number in terms of sustaining the recovery. doesn't mean there is an acceleration of job growth. on friday, we're looking for something like 150 to 160,000 jobs, which say little bit below what we have seen over the last six months. i agree, ross, self-sustaining economic growth, but at a very modest pace. >> does that still mean tapering
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in september? >> it seems as if, ross, they have gotten away from the unemployment rate at 6.5. they have got an way from the 2% inflation target which was the descent and they seem like they decided we're going to taper despite the fact that the unemployment rate is above 7% in september. >> what do you make of the thought they really introduced this tapering concept because they wanted to restore a two-way bet. the markets were locked in a one-way trade, and just by hinting at this possibility, they have re-established a normal market. >> that i would agree with very much. the markets were too much one way, a lot of people are talking about 1% treasury bond rates. didn't make a lot of sense when the inflation number is 1.5 to 2% at the time. i think it is a two-way situation is much better improved. you have to start at some point
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in time zpoudiscounting in the marketplace. that has to show up in three, five, ten-year treasury bond market which is the base for pricing mortgages and corporate debt as well. so, yeah, i think it is much better. i agree with your point. i think the two-way trading is a much more effective system to really figure out what market prices are. >> and if the rates do jump up a bit at the short end, what are the implications for both the outstanding mortgages, and the student loan story, which are the two points of vulnerable ty? >> well, i think what you're going to see this morning is the mortgage bankers association, the origination index will continue to improve. but it is the refi index that will be hit. and you'll see that probably tapering off again as it has in the last two or three months. i think the implication is
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slightly higher on mortgage rates. you look at some the markets dealing with, home prices going up 8% to 10% in the major markets, the mortgage rate isn't at the point yet where it is really going to be a damper on housing, particularly in some of the strong markets going forward. and, again, going back to your earlier point, it is more two-way, you look at corporate debt, high yield, high grade, leverage finance, more of a two-way system going on there. again, the market has to adjust at some point in time, it is adjusting. we have to get off this, you know, qe-3 stimulus and get back to what we may see as proper market pricing. >> good to see you. thanks for that. chief economist at wells fargo. is this still going to be america's decade? >> i do think that the u.s. is positioned incredibly strongly. we have on shoring happening, energy self-sufficiency, people
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are bidding more than the asking price for houses, people are innovating, coming up with new ways of generating pnl. i think everyone was too quick to write off the united states and now the rest of the world remains uncertain, which makes the u.s. more attractive location. >> what are you doing tomorrow? >> opening with a breakfast speech about how well the u.s. is doing and then celebrating through the day. >> good. i don't ever work july fourth ever, primarily because it is my brother's birthday. we have an annual golf day. have a great day tomorrow. pippa, thank you very much indeed for joining us as well. just a reminder, a fairly sad day for us in cnbc. after 14 years, lloyd of london, lloyd stacy is leaving to take on a new role in singapore. on behalf of everybody at cnbc and "worldwide exchange," lloyd, thank you very much. we'll leave it with you. with the spark miles card from capital one,
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good morning. a stunning turn of events for obama care. the white house delaying a key mandate that required businesses to provide health care starting in 2014 by a year. egyptian president morsi remains defiant in the face of the military's ultimatum. and oil prices bubble over $100 a barrel for first time in months. get ready for the economic fireworks before tomorrow's normal ones. we have several key reports today measuring jobs in america where the outlook brightened considerably as of yesterday. "squawk box" starts right now.
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good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick with joe kernen and andrew ross sorkin. we have several key economic numbers that are going to be released during "squawk box" today ahead of the independence day holiday. everything crammed in on wednesday because of the holiday tomorrow. at 7:30 eastern time, we'll get the challenger report. that measures job cuts. at 8:15 a.m., the adp unemployment report. economists are looking for an increase of 160,000. then the initial jobless claims. it is wednesday, but we get the claims today. they are expected to rise to 350,000. the markets will be looking at today's numbers for clues on what to expect from the friday's june employment report. a lot of this is

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