Skip to main content

tv   Worldwide Exchange  CNBC  July 15, 2013 4:00am-6:01am EDT

4:00 am
you're watching "worldwide exchange." i'm ross westgate. the headlines today from around the world, beijing's resolved to tolerate a slow growth rate put to the test. second quarter gdp down to 7.5% on the year. stocks around the globe are rallying picking up friday's gains off the southwest and nasdaq have their second best of the year. banks lead iing the way. scb tops the stoxx 600. cautious optimistic. the german government is looking to sell its stake in
4:01 am
commerzbank. and a third of the dow sending members due to results. all right. welcome. it's a brand-new week here on cnbc with "worldwide exchange." plenty to get through as ever on today's show. let's run you through the menu. french president is calling for optimism in his bastille day speech insisting economic recovery is under way. our next guest says he has two months to fix it or risk losing the country. german he elections less than three months away. the campaign is pumping up. we'll hear from the leader of the green party. is he holding the key to merkel's victory?
4:02 am
gold prices saw a modest rebound at the end of last week after posting the worst quarter on record. expect that rally to continue according to guest harvey of duke university. he's making the ultimate bear call, $800 an ounce. feigned out why in 30 minutes. and the pain at the pump is far from over with gas prices set to rise over the next two weeks according to industry research. the summer driving season continues in the u.s. the latest on jackie deangelis at 11. . 40 ct. any thoughts or comments, you can e-mail us worldwide@ china's growth slow down continues. 7.5% below the pace clocked in the first quarter. while the figure was as expected, economists are wondering how long beijing is willing to hold off on stimulus. june output disappointed their sales managed to ring in above
4:03 am
estimates. the bank chief says despite the dow and pressure on growth the pboc will do its part to keep credit flowing to small businesses. reaction from beijing. our very own eunice is there. this is what people expected. so presumably we're not very concerned about it. >> reporter: well, it's not that we're not concerned about it, but what's really telling here is that it's indicating that the authorities are basically sending the message that the world probably should try to start getting used to the idea that the economic growth figures in china are going to be slower and that maybe that is okay. the officials today had said that part of the slowdown was deliberate, that it's actually good for structural reforms and the long term. that economic conditions are well enough to meet the growth target for the year which is
4:04 am
7.5%. now of course the big question people have been having is, you know, just how comfortable are these authorities really going to be if the slowdown gets a little bit out of hand or if the pace moves at a rate that they're not really comfortable with. we don't really know that at this point. but what was interesting from these numbers, ross, was that we really are in uncharted territories. i really feel like i can't stress enough how different the mindset now is among the government leadership because if we saw this exact same set of numbers a couple of years ago for sure they would be coming in with guns blazing and trying to pump up the economy. that isn't happening now and you could even see some of the confusion in this transition by the various comments that you're hearing, one from the finance minister. he mentioned 6.5%, 7% growth, the government might be comfortable with that. then over the weekend the state news agency, came out saying he
4:05 am
didn't mean that. a lot of comments coming out. the central bank coming out and saying credit growth, we'll do whatever we can to keep things okay and it's really interesting because usually for the chinese government when any type of decision is made publicly, everybody reads from the same script even though internally there could be factions. >> is this just a way of trying to get control of local government? trying to get control of local governments, local government spending? >> reporter: definitely there is concern about local government spending. in terms of what the pdoc or the chinese central bank has been trying to do and it has been sending a strong message, you know, to a lot of these different banks is to get your house in order. we actually might come in and
4:06 am
get a little bit tougher on you. that is our main concern. and people are worried about the financial industry. another comment that came out in the past couple of days was one from a government economist who actually said that the leadership here should stop using bland phrases or what he characterizes as bland pes such as stabilizing the economy and saying instead you have be to be more up front about fixing the problems in the financial industry and just calling a spade a spade and saying this is a financial crisis or that there's really some problem in the industry. and just these different comments we're getting are really an indication that, you know, you're really seeing the government trying to figure out how to really handle this transition in the midst of all this structural reform. >> okay. stay there, eunice. let's bring in more guests and discussion. joining us from hong kong the director of asset management in
4:07 am
singapo singapore. we have the regional economist at cimb. welcome to you both. if i could kick off with you, first of all, does this rate of growth mean absolutely nothing happens from policymakers for the time being? >> well, no, i think looking at the headline numbers, what they are is in the comfort zone. they will be looking at a component and saying, okay, we see growth from consumption side, from investment side. it is stronger than what they are comfortable with but hardly any contribution. i think looking at the headline numbers they are quite all right with it. they know that once the global economy picks up pace we should see adding to growth at this juncture. the question that they will be asking now, is there any down side risk to the external sector in the coming month or perhaps even year as well which may require them to step in suddenly at this juncture.
4:08 am
i think it's still okay within their policy comfort zone. >> alex, the shanghai composite firmer today. not hugely. up about a percent at one stage. what does this mean for investors in china. bear in mind the equity market has been an underperformer. >> i think people are very cautious. first of all we do not expect any stimulus from china in the f future so that is why i think the momentum after the data was very short-lived. people were still cautious on the financial sector and the performance in the oval index. i think china because right now overseas markets are bullish. people are very cautious about the financial sector in china, so that's why we would see china to continue to underperform. >> yeah, underperform, what, against everything in the
4:09 am
region? what would outperform? >> i think, first of all, we would underperform in the market, but the emerging market we would not underperform that much because actually had come down quite a lot recently. i think we are quite likely those emerging markets but i think overall china would still be the underperformer and trading probably people would not be very aggressive in getting into china. probably they are interested in several sectors. today we see a very strong internet because the internet actually was not affected by policy much and they actually would benefit from the rising wages in china. so that's why we would see strength in several sectors. >> yeah, we have part of this
4:10 am
move from quantity itty to quality. do you see this longer term vision of reforming the economy pay i paying off? is it going to work? can they get there? >> fingers crossed. fingers crossed. i suppose it's one step at a time which is why at the moment it's a combination of getting low income workers better pay, squeezing the margin side on the economy itself and ensuring that a key institution like the finance sector itself becomes much more stronger. what we are seeing now is the policymaker trying to regain control of the lending. it was fine when the banks were doing them, and because of excess liquidity, lend iing itself, so they're trying to rein that in by limiting supply of liquidity itself that seems to be working better now so against the backdrop obviously the economy as a whole would
4:11 am
start to slow down and the question really is how much further would they want to, i suppose, in a sense to strengthen the financial sector it self. so obviously a lot on the global economy generally speaking. it would still be tough as far as the macro landscape even on the equity side as well. >> this is eunice in beijing. how much of a floor or how willing do you think the chinese government will be to allow the economy to really slow down much further? what kind of floor do you think we're going to see here? and would it be an actual number you are looking for, say 7%, or is it a point when the jobs market starts to look a little bit shaky? >> okay. the first signpost we could look at is, okay, the second quarter, a lull period for businesses and manufacturers in general, perhaps in july as well.
4:12 am
things should pick up pace august/september as we see all the factors streaming for the christmas tree, the angels, the star of david as well. if we don't see those orders coming through in a meaningful way, then perhaps the authority would be a lot more cautious about how much external sector could still be a drag on headline growth and then and there perhaps they would start to be a little more accommodating and say, hey guys, we need to put more money into the banking system. we don't have the requirement or anything like that on the broad base. it can be more targeted in terms of lending through the market, et cetera, as well. so a lot really depends on the strength of the seasonally stronger half . >> alex, i'll just come to you. it's interesting when you look down at the breakdown of the
4:13 am
growth, nearly six percentage points from investment, contribution consumption down from 4% to 2.5% which is -- they don't want growth going that way. so what does it mean for investing in the consumer story? >> i think right now the sector underperforms and that was less than expectation. and i think we need to be a little cautious. in the longer term, i would only invest in those companies which are delivering lower end products and low priced products because the extensive distribution network, very strong defensive strategy against the competitor. china will still pick up and that would benefit the consumer sector as a whole.
4:14 am
i think invest iing in china companies you have to be very selective. a very strong stock for some years. i think comments like that type would outperform but not order stocks in hong kong. >> alex wong, thank you very much, indeed, for joining us. we'll catch you a little bit later. so china's second quarter gdp not missing expectations. why aren't the markets doing more? head out to our online analysis to find out what analysts are saying. you can follow us on twitt twitter @cnbcworld. citigroup reports second quarter results and analysts expect $1.18 earned a share, revenue of $19.76 billion. it operates in several countries outside the u.s. and whether there's been any growth in loan
4:15 am
volumes. they have a new ceo michael corbett. stock up about a percent. surrounded by a third of the dow companies on the s&p 500 report this week. tomorrow we get earnings from coca-cola and goldman sachs before the bell. midweek bank of america it continues as ibm and intel pick up and morgan stanley, microsoft and stanley will take the lead. we finish with general electric and state street. we'll continue economic weakness across southern europe on vodaphone, weekend media reports, the region has been a source of an for telecom's firm force 0ed to write down the value of its spanish and italian operations. vodaf 0 vodaone has its trading figures
4:16 am
on friday. with fresh record close ts on the u.s. you can see the heat map showing plenty of green on the stoxx 600, 8 to 2 it at the moment. the ftse last week had its second biggest weekly gain of the year up 2.7% today. it's up another 0.75%. the ibex up as well. the cac up nearly a percent as well at the moment. take a look at the sectors after that chinese data. you see basic resources doing well. none in excess territory. technology, retail, banks are doing fairly well. we have basic resources up a little bit. come back off the gain as well, a number of individual stocks worth looking at. the german finance minister could sell the government's stake in commerzbank, up 2.3%. a report in focus magazine. they have held talks with ubs about purchasing the government's share in the country's second biggest bank.
4:17 am
and seb, as you can see, up 3.75%, a 3.8 billion profit for the second quarter. the firm says it's cautiously positive on business sentiment amongst its customers. as far as commodities are concerned post-china, a bit of a lift. not really. copper is down about a third. gold at 1,300. not a bad recovery last week. that seems to be more short closing out the position. brent $108.66. and nymex here just at $105.59. we will talk crude later. yields, treasury yields, a little bit low today. just below that 2.6%. we've moved away from the 2.75 of last week. the currency market, dollar has been steady across the board. the aussie drar dollar, we were
4:18 am
down at 89.98 so we bounced 0 of th that. dollar/yen firm around 59. down slightly to 1.3051. slim losses. we talk about the chinese impact. let's find out how we've got on in asia trade today. sixuan has the update. >> asian markets took a sigh of relief. the mainland markets were the standout performers in the region. the shanghai gained 1% and up a stronger 2.3%. shares in hong kong, korea and australia reacted cautiously. the kospi and australia's asx 200 closed marginally in the green. local media reported the trial program may expand to london and singapore with a higher quota. the trading system may
4:19 am
significantly boost the transaction volumes, therefore benefiting brokerages fee income. shares of gf securities and he everbright gained. china's tech space also got a lift up by beijing's recent plan to speed up the it technology space aiming to expand the size of the sector by 2015. internet giant tencent, shares gained 3.7% today so really outperforming the broader hang seng index. japan is set for a public holiday. samsung electronics reversed early weakness to end a tad high and automakers rebounded strongly with hyundai motors making gains. muted gains in the australian market today. the strength in banks were offset by weakness on some profk taking. >> sixuan, we'll catch you
4:20 am
later. the vow to fight in the bastille speech days after losing the final aaa rating. the latest from paris. [ male announcer ] it's time. time to have new experiences with a familiar keyboard. to update our status without opening an app. to have all our messages in one place. to browse... and share... faster than ever. ♪ it's time to do everything better than before. the new blackberry q10. it's time. [ agent smith ] i've found software that intrigues me.
4:21 am
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 ]
4:22 am
4:23 am
french president francois hollande has called on the nation to be less pessimistic. stefan is in paris with the latest. how hard does he have to fight? >> reporter: we are one of the most pessimistic in the country. what hollande explained in france for years we have been the most pessimistic country in europe and sometimes in the world. he argued that some were even more optimistic than french people. you know that consumer confidence is linked to consumer spending and it is the main driver, the main component of the french gdp. francois hollande said yesterday that the french was recovering
4:24 am
although the signals remain very tiny at this stage. he mentioned a slight in industrial production and the increase in consumer spending and the higher forecast from the bank of france for the second quarter. as a result he believes that the second hatch of this year will be better than the first half. the french are likely to be flat, the official forecast is up 0.1% for the gdp. for sure, ross, a significant gap between what francois hollande said on television yesterday and what fitch said before the weekend. on friday fitch downgraded the country from aaa to aa-plus because of concerns be on the budget deficit because of the high record unemployment rate and the weak economic output. that was not a big surprise. fitch is the last of the three
4:25 am
ratings can companies to strip the company of its aaa. for the time being no significant impact on the bond market. france is still enjoying some record interest rates on the bond market but, yes, that was an interesting weekend. francois hollande trying to make french people more optimistic and fitch saying that's -- >> what is sarkozy up to at the moment? >> reporter: you should ask him the question. we are expecting him to come back. according to recent survey i think it was the majority of french people believe he will come back in 2017 for the next presidential election. 17% believe he will run for the election. but only 40% would like him to come back, so the majority believes he will be back but the minority want him to come back. >> stephane, we'll have professor john gafney in around
4:26 am
20 minutes. in portugal the three main political parties have set a july 21st deadline to agree on how to keep the bailout program on track. a so-called national salvation pac can be reached the president has agreed to call early electio elections. socialist party is causing the biggest obstruction to a deal. the group's leader on friday warning he doesn't agree to the amount of austerity being imposed. greece's euro bank chosen to buy troubled lender new hellenic. they have been chosing to buy another bank as they try to secure its next round of aid. and predicting more sunny weather for the british economy. the latest projections suggest a strong housing market and consumer spending to keep the economy afloat until a rise in exports and business investment kicks in.
4:27 am
the club believes britain's gdp is on track to reach 2.6% in 2015. peter spencer, economics adviser says a rise in business confidence will fuel growth. >> what's really giving this recovery its legs is the fact that with the euro crisis hopefully behind us, business confidence is returning. companies are have been spending very low amounts, a lot of investment has been on a care and maintenance basis. now they're in a position to actually spend some of that cash. >> and prices have reached a record high in july according to on online state agency right move. the average price is over 253,000 pounds, a 3% rise from june. the website forecasts home prices could grow as much as 4% more this year. the numbers have fueled concern the help to buy program is creating a housing bubble. and the british business secretary says a lack of trust
4:28 am
in the financial sector is holding back the economic recovery. they are launching a discussion paper called trust and transparency. the london stock exchange where he's expected to outline proposals to build faith. the main suggestion is the new registry which would help crack down on tax evaders and criminals who hide money in shell companies 6789 he is due to speak shortly. those are pictures of where he will be doing so and we'll await his comments with interest. also talking about more clampdowns or greater direct responsibility as well. meanwhile, we'll take a short break. still to come, we'll hear from a professor of international business who believes gold is still $500 -- $500 -- higher than its true value. more to come. i want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. ♪
4:29 am
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. ♪
4:30 am
4:31 am
and the other headlines from around the world, beijing's resolve to tolerate a slow growth rate is put to the test as second quarter gdp decelerates to 7.5% on the year. stocks rallied picking up from friday's gains after the second best week of the year. banks are higher.
4:32 am
seb tops with expected earnings. they are cautiously optimistic. investors cheer a report that the german government is looking to sell its stake of commerzbank. and citigroup will set the tone for u.s. earnings with a third of the dow and 75 members of the s&p 500 all due to report results. click on to the activities in a moment. the economy is recovering in 2013. domestic demand relatively strong in the second quarter. loan growth is indicating that recovery and the headline elevated for the next few months for the june budget deficit around 1.2 turkish lira. we have the strong close in the u.s., of course, a big week for
4:33 am
the u.s. the s&p up nearly 3%. equities up between a half and two-thirds. the ftse last week had its second best week of the year up 2.7%. bond markets we see yields today fairly contained, kind of where we were. ten-year treasury 2.6%. spanish yields 4.75%. on the currency market, the dollar is up on the board apart from the aussie dollar. down to 1.3048. u.s. drivers are bracing for more pain at the pump. the latest lumme bourg survey shows retail gasoline prices fell around half a cent to a national average of $3.59 a gallon. analysts say there are ample supplies but could jump 10 to 15 cents as retailers pass on the high costs.
4:34 am
high demand during the peak driving season and concerns about possible supply disruptions in the middle east impacting gas prices. last week higher crude prompted refiners to hike the cost of refined products they sell to the wholesale market. now gold had something of a bounceback last week up over 5%. today it's just slightly -- it's flat really. finding 1300 a difficult place to go. a man who thinks the true value of gold is a lot lower than that. professor campbell harvey from duke university and the fuqua business school. >> that is correct. >> where do you think the true price of gold should be? >> well, what we did is studied gold over, like, 2,500 years. so a very long sample. >> 2,500? >> exactly. if you look at the real price of gold, so that would be the nominal price divided by a cpi
4:35 am
level, it's pretty flat. and right now we're way above the mean, so in terms of long-term averages we're above it at $1,900 and we're above it at $1,300. and if you look at our analysis, suggests the fair value would be approximately $800. >> $800? >> $800. >> that doesn't mean we're going to go to $800. >> actually -- >> are you saying -- okay, how long does it normal take to revert? >> it depends. so you're correct, it might not be tomorrow. the other thing is if you look historically it doesn't just go down to the average and stay there, it goes through and falls below then comes back up. so to say it's $800, it could go lower. it has been lower. >> how long would it take for the average to go higher, though? >> the cycles go in like 10 to 15 year cycles and we're well into one of these cycles.
4:36 am
>> okay, we're well into the cycle. so actually in another few years you might be refining that and say it might be $1,000. i don't know. i'm just saying, how long will it be a different average? >> actually in my paper i have this graph, and it plots the price -- the real price of gold. and people have called it the golden gate bridge almost finished where you see these big swings and we're just heading down to finish the bridge. >> right. >> and that would suggest the price falling through $800. >> all right, so going lower rather than higher? >> yes. >> how much does gold swing on supply? how much does supply impact it? >> we also studied the demand and supply. supply is amazingly constant. so the production of gold is right now about 2,800 metric tons a year. if you look 13 years ago it's about the same. though the price has gone up by a factor of five, the supply doesn't respond to that.
4:37 am
so supply is fairly fixed and we need to focus on the demand facto factors. so even this news today, the 7.5% growth in china, china is a demander of gold, lower growth there means lower demand. >> people talk about jewelry in china and india and then speculative flows. how do you break down the most important margin demand flow? >> okay. i think the most important marginal flow has been investment. jewelry -- actually demand for jewelry has gone down because the price has gone up for gold. but investment, you have the gldetf that holds more gold than the official holdings of china. so investment basically has gone up dramatically as the price was actually going up. and part of this is people believe incorrectly that gold is an inflation hedge. my research is pretty definitive on this one point that gold is a
4:38 am
bogus inflation hedge. it just doesn't work. >> so the implication being as investors eventually lose patience or come to believe what you say is the truth it is inflation -- it isn't an inflation hedge, they will sell those holdings at some point? >> this could be. i go around to many companies and they have positions in gold -- and these are very sophisticated institutional investors that are positioned in gold to protect their portfolio against inflation. i say based on what? everybody knows. i say, based on what evidence? well, that's the way it is. and i said, well, my paper actually has got the evidence. it's incredibly unreliable. just recently we've seen the economy go from expectation of potential deflation and we're moving towards an expectation of some inflation yet gold has dropped 35% like a hedge. gold would actually go up. so it's very volatile, very
4:39 am
unreliable. >> professor, really good to talk with you. professor campbell harvey from duke university. you heard it here, folks. gold definitively not an inflation hedge, which means it won't help you out with this next story. headline inflation up to 4.86% on higher food prices. june's readings snaps a four-month easing trend coming in above the may number. prices rose at their slowest pace in more than three years. hector has more. hi, ekta. >> reporter: you put it in perspective for us. it has inched up to 4.8%. remember that the earlier figure was actually revised lower as well to 4.77%. the reason we've seen this in terms of inflation is primarily due to inflation which has
4:40 am
inched up higher simply because of the floods which took place earlier in the monsoon with the onset of the monsoon. so we've seen a lot in terms of food prices and populated into the food inflation that we saw and was primarily even more dominant in the cpi inflation which inched up to 10% this time around. surprisingly the fuel inflation came down a tad bit but there is an expectation that maybe fuel inflation would now inch up because the depreciation would stop playing a part and not only that a lot of the pe it tro price hikes in the past six weeks that we've seen yesterday itself populating into the wbi inflation figures. but the big disappointment with inflation this time was the core inflation figure which fell to 2% versus 2.4% on a month-to-month basis showing industrial activity is distressed at this point in time. pricing power within the manufacturing sector is also
4:41 am
quite disconcerting and is completely corroborated by the data which came in at a contraction of 1.6% for the month of may. back to you. >> ekta, thanks for that. a reminder on what's on the agenda in asia, governor glenn stevens, of course, said policymakers deliberated for a long time. we also get second quarter output from rio tinto. now the british business sector says a lack of trust is holding back the economic recovery. today he's launching a discussion paper called trust and transparency at the london stock exchange. speaking right now, is expected to announce a look at proposals around whether he can make director responsibilities more o onerous.
4:42 am
the german finance minister is considering selling the government's stake in commerzbank. a report suggests wolfgang has talked about it. the german finance ministry has commented. shares of commerzbank down 44% this year but they're higher today. a anita, does this story make sense to you? >> reporter: actually it's more probably a question of who is going to or who wants to buy commerzbank. it's not a question the german government wants to sell it because it was settled with a lot of losses ever since they injected money in 2009 more than 18 billion euro in order to get a break even commerzbank, the shares had to rise to 30 euros which is an illusion looking at the share price.
4:43 am
it's more a question of which bank has the guts to buy that stake of 17% which is right now approximately valued 1.2 billion euro on the market. commerzbank, of course, is a very shaky candidate because they have a lot of exposure to call things you don't want to have on your balance sheet, ships, a lot of ship financing, and as well a lot of real estate in southern europe all inherited mostly inherit ed for once the biggest real estate as well as ship financing and sovereign debt plan here in the eurozone. it is still a very shaky thing. commerzbank is on a road map to 2016 to get things really done. but this bank has already disappointed on targets once and so not a lot of investors are trusting they will w. that, back to you. >> thanks for that. general electric could be
4:44 am
planning a $5.3 billion counter about bid for invensys. they would have to top schneider's. this is according to online sources speaking to the "sunday times" in the uk. shares of invensys up to a ten-year high on news of schneider's proposal. that ended up the session more than 15%. ticking a little bit higher again today. at&t is buying prepaid phone service for around $1.2 billion in cash paying nearly double the company's current value. at&t's paying $15 a share, an 88% premium, closing price on friday leap has around 7 million customers and offers pay as you go under the cricket brand. the deal comes days after the acquisition of sprint is closed and after t-mobile merged with metro pcs.
4:45 am
not often do you see that. and at&t is up half of a percent. dell special committee says they'll review carl icahn's bid and are willing to meet with him to discuss his various proposals. icahn and asset management added a warrant they say would boost their offer from $14 to $18 a share. it would entitle dell shares for $20 each within the next seven years. icahn wants shareholders to vote against dell's proposal buyout. that vote is set for thursday. dell stock is flat in frankfurt. hedge fund starboard value to explore alternatives. starboard is smithfield's biggest holder. last month starboard said the company could be worth up to 64% more than what is offered if it
4:46 am
split up into international units separately. smithfield stock flat in frankfurt. and bubbling to the surface in italian politics. this time around it's over proseco. they are going to restaurants and bars to check the you a then it tisty of the bubbly wine and how it is being served. hard to make sure customers are not getting ripped off by paying for imitations of the fizzy drink. heaven forbid. so we want to know what drink you think deserves legal protection. join the conversation on "worldwide exchange," get in touch with us, e-mail and still to come french president francois hollande is urging the nation to stay positive in the face of a stalling economy. but our next guest says france
4:47 am
says there is no reason to be optimistic about hollande's policies. we'll find out why after this. ♪ [ 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 ]
4:48 am
4:49 am
the german election is less than three months away.
4:50 am
the latest poll shows angela merkel's ruling coalition is short of a parliamentary majority. seeking new coalition partners. back to anita in frankfurt. are most people thinking about a grand coalition? >> reporter: well, that's actually true. the germans really would prefer a grand coalition but the problem is that the social democrat candidate doesn't want to have a grand coalition. it's probably not up to him. looking at the recent polls, though, it might suggest angela merkel's party even might make it in her known coalition with the liberals because the liberals for the first time in a year reached the 5% threshold which is the prerequisite of getting into parliament and that would be a sign that the ruling coalition might still be
4:51 am
re-elected but there is still a lot of insecurities. i mean, one of the very strong opponents is the green party, of course. they have that traditional part, the social democrats, which is a bit weak nowadays. and the strategy of the greens is to distance themselves a bit from it. yesterday evening there was a big interview with the public broadcaster in berlin the party leader of the greens and their chief and just let's take a list listen to what the main aim -- it doesn't really look that they are planning on a big partnership here. >> translator: we primarily care about getting a good result. we did that three years ago. two years ago and this year in lower saxoney. everywhere it was voted out of office and replaced by social democrats or social democrats
4:52 am
and greens, the green party has gained very much. on average we've gained more than the cdu and fdp have lost put together. my main concern now is to have a good election campaign to boost the green result. >> reporter: so while the social democrats are the green's traditional partner, there are more voices that there is a lot of discomfort with them being so weak and at the same time we are hearing chryistian democrats no excluding the option of going together with the greens. so a lot of confusion around that election, who is going with whom, so to say, because there is weakness with the social democrats and of course weakness with the liberals. so it's still probably all up in the air. one thing is clear, we won't get a grand coalition and the likelihood of the greens going together with the christian democrats is not very high. nevertheless trittin pointed out what makes them different,
4:53 am
because in germany we have a system of a lot of subsidies which are often favoring those who are already quite in a good position income wise, but take a listen to what he is planning on doing if he will run this country together with whatever party. >> translator: we need to free up capital by cutting subsidies. that's the main source for investment. tax hikes will only contribute minimally. we need to free up capital to really allow us to invest and we need to cut debt. that differentiates us from our competitors who, like angela merkel, promise approximately 28 billion euros mostly benefiting those who already have a lot, the liberals, who want to open new tax loopholes like an island or the netherlands. >> reporter: so, ross, it looks quite beautiful down there at the river. i would prefer to be there. back to you. >> it looks nice, doesn't it? thanks for that from german
4:54 am
politics to french politics, the president who wifrancois hollan called on the nation to be less pessimistic during the annual bastille day celebrations in paris insisting economic recovery is under way. comments come after fitch stripped france of its last aaa credit rating citing a deteriorating debt outlook. joining us for more co-director of the ashton center for europe. stephane is also with us as well. let's kick off with you, professor. stephane was outlining the problems facing mr. hollande. how much of a tough spot is he in politically? >> he's in a very tough spot. he is incredibly unpopular and his government is unpopular. within a year of being elect he's more unpopular than any french president has ever been. in order to kind of grasp the situation, you have to look at french politics, sort of two aspects and one is symbolic and the other is practical. from the symbolic point of view, we have to bear in mind that
4:55 am
this regime is incredibly personalized and, therefore, the personality of the president, the perceived personality, the attitude of the president, the things he says, how he performs, for example, at the press conference yesterday and so on, has enormous political influence. he performs very badly. whenever he comes on the television, his popularity ratings fall. from the practical point of view, he and his government came into power with no real plan. even the tax, the big symbolic 75% tax on the rich was thought up in the middle of the campa n campaign. it wasn't even in the manifesto. so there's lot of gesturing going on. but in practical terms -- >> the worst kind of policies. >> they've had ten years to develop policies and what they've essentially been doing is fighting each other who is going to be the presidential candidate. >> stephane? >> yeah, professor, you think francois hollande isn't able to reform but recently he changed
4:56 am
the economic policy compared to a year ago when he was elect ed. he's about to reform the pension system. why do you think hollande is unable to reform the french econo economy? >> i think that to a certain extent there are reforms that have gone forward, but the general consensus is everything is inadequate. it's kind of too little too late. and part of the problem of the french government at the moment is what to do with the massive public sector. per capita, we were just looking at german politics, per capita the french have twice as many civil servants as the germans and an awful lot of people have written books on -- >> politicians reforming the public sector but, again -- >> exactly, exactly. and the problem is that the public sector is hollande's electorate. but think how classy it would be to not care whether you're going to be re-elected and to adopt a
4:57 am
series of reforms that really got the country back on its feet again like sloweder in germany from 2003 onwards and to not worry about whether you're going to win. >> yeah, which is always the thing, isn't it? and he's lost business as well. we'll have to leave it there, professor. thank you for joining us. professor gaffney for europe. stephane, thank you as well. we'll take a short break. still to come, china's growth has eased in nine of the last ten quarters. is the slowdown still part of a grand plan? we'll be back in beijing the second half of "worldwide exchange" continues right after this. the
4:58 am
4:59 am
5:00 am
you're watching "worldwide exchange." i'm ross westgate a. recap of the headlines today. beijing's resolve to tolerate a slower growth rate being put to the test the second quarter gdp at 7.5% on the year. stocks around the globe rallied picking up from friday's gains after the s&p and nasdaq have the second best week of the year. basic resources and banks have done well. and citigroup will set the tone for u.s. earnings this week for a third of the dow and 75 members of the s&p 500 due to report results.
5:01 am
all right, if you're just joining us, thanks for joining the show today. a global trading day on "worldwide exchange." not a bad week for the u.s. stocks last week. the s&p up nearly 3%. they've been up seven sessions in a row, the s&p and the nasdaq. the dow right now, futures indicating 11 point start above fair value. the nasdaq three points below fair value and so no real indications of a strong move for u.s. stocks after those gains. the global 300 has been ticking higher throughout the course of the day just up two points at the moment. we've come back in the last half hour or so. markets were up around 0.75%. the ftse had its second best gain of the year up 2.7%. right now up another half a percent higher for the xetra dax.
5:02 am
the ibex and cac as well. a boost for commodities and basic resources. the best performers right now, you see health care is the weakest. this is the one i want, thank you very much. so not doing too badly, the banks are doing fairly well. if you break that down to commodity prices, though, not much of a jump. copper is off 0.7%. spot gold is down and even oil is off just a little bit. brent had a good gain last week up 2.6%. nearly $3. nymex as well just off slightly at 105.37. very strong gains the last few weeks. as far as bond markets are concerned, the yields where we were just below 2.6% for treasury so slightly higher today. spanish yield still around 4.75%. the dollar has been doing well across the board. the one standout or the one difference, the aussie dollar,
5:03 am
did come back on that chinese data. we were at 91.08. otherwise sterling, the yen and the euro all slightly weaker against the dollar in today's session. the nikkei is closed today but plenty of other trading. sixuan wraps it up for us. china's gdp came in line with expectations for the other asian markets actually came off their session highs ending only marginally in the green. in china brokerage stocks were the big winners today. this after chinese regulators doubled qualified institutional investment or quotas to $150 billion. everbright and gf securities up and over in hong kong, beijing's plans to boost technology and
5:04 am
energy savings industries helped send shares to its record high up nearly 4% in today's session. asia's largest wind power producer up on that news. south korea automakers staged a strong rebound after last week's tumble. hyundai and kia motors gaining a percent. we'll be back on line tomorrow. >> sixuan, thanks for that. let's recap the chinese data. second quarter growth, 7.5%. below the pace clocked in q1 but was the number expected. some economists wondering how long beijing would be able to hold off on the stimulus. retail sales managed to ring in above estimates. the central bank chech says despite the downward pressure on growth the pboc will do its part. joining us in beijing is eunice looking at reaction.
5:05 am
this is a number we were expecting so, therefore, i'm presuming that we should not get any policy response from the government or the pboc. they'll be happy with this. >> yeah, they'll be happy with this. they're not going to be doing a whole lot because it met expectations. interesting there is such a big relief rally off of this and it's because of expectations have been managed so low and the past couple of days comments from government officials and so this morning they were really fearful we would see these horrific numbers today for q2. so when they came in 7.5%, oh, thank god! they're 7.5% which is really interesting because when you look at the overall trend, they're still indicating that the economy is weakening. this is what some analysts told us today. >> looking at the headline numbers, they are quite all right with it.
5:06 am
we should see that adding to growth. in the coming month or year as well it may require them to step in. >> people are still very cautious. we could not expect any stimulus from china in the futures. that's why i think the momentum after the data was very short-lived. people were still cautious on the financial sector and direct underperformance. >> what does the government thi think? the government said the economic conditions were still good enough for the country to meet its economic target of 7.5% by the end of the year. of course -- and also said that, you know, one of the reasons we are seeing the slowdown is it's deliberate. they're saying there's a lot of structural reforms being pushed through. there are a lot of questions as to just how far the government
5:07 am
is going to allow things to slow down before they're going to feel compelled to step in. ross? >> presumably one of the good things that will please them, the labor market looks healthy. wages still rising at a pretty good clip. i wonder how disappointed with the breakdown of where that growth comes from, nearly 6% is investment and a decline in consumption which is the opposite of what they're trying to achieve, isn't it, eunice? >> right. that's definitely the case. and so there are a lot of questions as it to how the economy is going to be able to move forward especially when people aren't quite sure exactly how healthy the economy is really. and i thought the other point that you brought up in terms of the labor market was also very interesting because you've been hearing a lot about how maybe the government is actually okay with 7%. that's their floor. maybe that's going to be all right. but beyond that number, people
5:08 am
have been talking about how the labor market is going to be very important it watch and the reason for that is that the government really doesn't want to have a situation where a lot of people don't have jobs and potentially that could lead to social unrest. so that is one thing that we're watching very closely. not there yet. we have seen some weak ness in the job market and manufacturing sector the overall the job market maybe you've been hearing stories about graduates not quite getting the jobs they want but it seems as though it's still a mismatch in terms of the skill set that people have when they graduate and the kind of people that companies are actually looking to hire. ross? >> eunice, good stuff. thank you very much indeed for that. that's eunice from beijing. we'll turn our attention to the london. boris johnson on the dreamliner at heathrow airport on friday, took place on an empty --
5:09 am
one proposed by lord foster for a new airport, london airport on the north coast. we'll keep an eye on those comments. also, don't forget phil lebeau had will join us on the fall yoit from the company's hometown of chicago at 11:40 from his hometown of chicago at 11:40. now citigroup kicks off a busy week of u.s. earnings reporting groups at 8:00 a.m. eastern. that's revenue of $19.76 billion. investors may focus on citi's outlook for emerging markets as it operates in a number of countries outside the u.s. and whether there's been any growth in loan volumes. the turnaround success under the new ceo michael corbett.
5:10 am
up nearly 2% higher. now nearly a third of the dow and 75 companies on the s&p 500 report this week. yahoo! reports after the close. bank of america continues around bank earnings and on thursday morgan stanley, microsoft and google take the lead and we'll finish the week with general electric and state street. so still to come, a full breakdown of second quarter earnings season with christine short. she'll join us in around ten minutes' time and a reminder of what else is on the agenda today state side, june retail sales out at 8:30 eastern. forecast to rise 0.8%. we'll get may business inventories. we get results from chuck and company, jb hunt and uniform supplier cintas.
5:11 am
apple is ramping up the highly anticipated iwatch. more on that, "worldwide exchange" continues. i want to make things more secure. [ 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. ♪
5:12 am
5:13 am
and a recap of the headlines
5:14 am
if you just joined us this morning, china's growth slowdown continues. 7.5% on the year. but as expected doesn't hold markets back. stocks are rallying. basic resources and banks are firmer. citigroup is first up as well and u.s. earnings this week with a third of the dow and 75 members of the s&p 500 all set to report results. and we'll look ahead to those earnings. apple is ramping up its small scale product plans. the financial times suggest the company has been on a hiring spree for its iwatch project over 0 the last several weeks to help tackle design problems. the "ft" says the timing suggests the wearable device wouldn't be launched until next year. tim congress could still scrap the iwatch but he didn't sound enthusiastic about wearable technology last month. apple has watched for a trademark in japan.
5:15 am
apple is up half a percent in frankfurt. at&t is buying prepaid phone service wireless for around $1.2 billion in cash paying nearly double the current value. at&t is paying $15 a share, an 88% premium to leap's price. leap is around 7 million customers and offers pay as you go service under the cricket brand. the deal comes after soft bank chosed its acquisition of sprint and t-mobile merged. it has leapt 124%. at&t up 0.74%. dell special board committee says they'll review carl icahn's bid for the pc maker and are willing to discuss his various pr proposals. on friday icahn and asset man e
5:16 am
management added a warrant they said would boost their offer from $14 to a range of $15 to $18 a share. the warrant would entitle investors to buy stock for $20 each within the next seven years. icahn wants shareholders to vote against the proposed $24.4 billion buyout. that vote is set for thursday and stock is flat. general electric might be planning a $5.3 billion counteroffer for british engineering company invensys. this would have to top schneider's offer. this is according to unnamed sources speak iing to "the sund times." shares of invensys up to a ten-year high on news of the schneider bid that ended the session up more than 15%. and hedge fund starboard value financial advisers to explore alternative deals for smithfield foods bought by china's company. last month starboard said the company could be worth up to 64%
5:17 am
more than what was offered if it split up and shopped its production, pork, and international units separately. smithfield stock is flat in frankfurt. if your stash of twinkies is about to run out, the hostess snack cake is officially back in u.s. stores today. walmart got its new supply of twinkies and other hostess treats. they are marked with the slogan the sweetest comeback. they filed for bankruptcy and went into liquidation. the snack business was bought for $410 billion. what a relief to all the twinkies fans out there. and things are bubbling once again in the italian port around prosecco, the italian version of wine. a special monitoring agent. his job is to go to restaurants
5:18 am
and bars and then check the authenticity of the prosecco and how it is being served. he has been hired to make sure customers are not getting ripped off by paying for imitations of the fizzy drink. let's get this right, this guy is 27, he gets to go around bars all day. and test drink. so we'd like to know what drink do you think deserves legal protection? join the conversation, get in touch with us, e-mail or tweet and find out why this 27-year-old now has the best job in the world. still to come, citi kicks off a slew of u.s. earnings. we'll ask if the good news will keep flowing for big banks. christine short will be with us from new york after this. the heat map in europe, we're weighted to the upside 7-2 advancers outpace decliners.
5:19 am
5:20 am
[ 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
5:21 am
while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ] citigroup reports at 8:00 a.m. eastern.
5:22 am
this when revenues of $19.76 billion after wells fargo and jpmorgan beat expectations this the first round of their bank earnings. as mentioned citi kicks off a busy week. 75 companies the s&p are reporting. they expect overall earnings of 3.2% for the index this season. christine short is global markets intelligence senior manager and joins us now. christine, thanks for joining us this morning. how do you think we're going to go versus expectations? >> currently, as you mentioned we do have an estimate of 3.2%. however, as you know, right before the earnings season kicks off, you do see an estimate that's quite a bit lower than what we end up with. we looked over the past ten quarters and the estimate on the day that alcoa reports is on average 4.7 percentage points lower than where we end at the end of the season.
5:23 am
the trailing four quarter average has been lower. so we're thinking that's more realistic with what will happen this time around. so we're expecting an overall growth rate about 6% to 7% if that historical trend is upheld. >> we objeviously got citi toda and had wells fargo last week with jpmorgan as well. are the financials going to outperform by a bit? >> we're looking for financials to be the leader this time around. they are looking to have about 15% growth year over year. as you mentioned jpmorgan beating by 15 cents last week. overall they were up 30% year over year and wells fargo doing well, also. beating by 5 cents. today we're looking for citi to come in with shares of $1.18 verse us a dollar on a year ago period so the overall growth of 18%. we expect the big banks, morgan stanley, bank of america is looking to be a big winner year over year as well looking to post growth of 72% so, yes, we do consider and expect the run
5:24 am
in big banks to continue as the season goes on. >> after financials, what comes next? the next better performer? >> we're looking for discretionary to follow behind with growth. we're seeing big improvements in the home builders so the household durables industry overall is expected to grow about 50% year over year. that's the winning industry within consumer discretionary as we saw lenar came in strong, expecting pulte group to do so as well and some of the retailers. great same store sales beating expectations and had great retail sales during the quarter. so we're expecting textiles, apparel and luxury goods to come in at 45% growth year over year. >> chinese growth day was as expected. do you think the materials are going to be a laggard? >> materials are expected to be the biggest laggard this quarter, looking to be down around 5%.
5:25 am
a lot of this does have to do with difficult year over year comparisons, prices that are lower in this quarter versus year ago quarter. again, we saw this in the first quarter. it's continued on. metals and mining really expected to be the biggest laggard within that group looking to be down 43%. we saw alcoa come out and beat expectations and match year over year. however, the other six stocks within the industry are expected to be down double digit year over year. hopefully they follow the gain now alcoa kicked off with. analy analysts do expect the other mining stocks to be negative. >> tech stocks as a whole are doing well. the nasdaq up seven sessions in a row, 19% this year. within that you say i.t. is going to be fairly weak. why? >> tech stocks have been doing well. year over year earnings when you look at the comparison, we are expecting the sector down 4.2%.
5:26 am
really this has a lot to do with apple. they're heavily weighted. they are expecting to post $7.31 a share versus $9.32 a year ago, a decline of 22%. if we actually take apple out of the equation, we see an improvement on i.t., it goes from that 4.5% negative growth that they're expected to post down to negative 3% so an improvement there but the overall index also improved. the s&p 500 expecting 3.2% gret this year up almost one percentage point to 4% growth. so a lot of this weakness we're seeing is within apple, certainly the computers industry, that industry expected to be down 23% year over year and apple being a part of that. >> just can't overstate the apple importance. christine, stay there. get a cup of coffee. we'll come back to you in a little while as well. i know it's early. you're doing a good job. thanks for that. still more to come from you. also still to come, a closer
5:27 am
look at how earnings results are impacting investor sentiment and will china be the real market mover? we'll be over at the cme for a preview as we go to the break, futures indicating the opening right now after fresh record closes on friday. we'll bring you those futures in a few moments.
5:28 am
5:29 am
5:30 am
"worldwide exchange," i'm ross westgate a. recap of the headlines today. beijing's resolve to tolerate a slow growth is put to the test as the gdp decelerates to 7.8%. stocks rallied from friday's gains after the s&p and nasdaq had their second best week of the year. talking to of banks, citigroup setting the tone this week. we have a third of the dow and 75 members of the s&p 500 all due to report results.
5:31 am
if you're just joining us state side, i hope you had a great weekend. this is where we stand after the great run we had last week, the dow up nearly 2%. the s&p 500 up nearly 3% right now. pretty flat as far as futures are concerned. about a half point below fair value for the s&p. a couple points for the nasdaq and at the moment the dow is, what, ten points above fair value. the ftse and global 300 have had slim gains. it doesn't get going until the u.s. market gets going. the second best week of the year for the ftse last week up some 2.7%. right now up another two-thirds. half percent gains for the xetra dax. ftse mib up and the cac 40 as well. that's where we start. reaction to the chinese gdp number as well.
5:32 am
what do investors say we should be doing? some of the thoughts of some of the experts we've had on cnbc today. >> personally i'd rather -- there are concerns and higher yields are reflecting genuine risk. the uk is looking better. it's not fully out of the woods yet and for us if there are going to be growing concerns again about europe, you want to be in safe haven assets and that's gilts. >> there's elements to the euro, you have a high level of yield. so even though we are bearish y euro/dollar we are looking for a lag of the currencies which means crosses should -- euro crosses should generally move higher. and euro sterling, euro/aussie. >> i think people are still
5:33 am
cautious on the financial sector and the direct underperformance in the overall index. i think china would still be in reform because we are bullish. some people are very cautious about the financial sector in china, so that's why we would see china to continue to underperfe underperform. >> right. so that's the thought of some members with the s&p up a fresh record highs, let's get a look ahead at president. christine is still with us. ben, good to see you. what do you think? do we have retail sales today, mr. bernanke during the week, and a whole host of earnings, how does it look to you? >> reporter: well, certainly a lot on the plate, if you will, for traders right now and a lot of information coming out this week. as was the case last week for the most part and really what i'm seeing is a subdued kind of
5:34 am
limited reaction, limited in terms of precipitation at least across as far as stocks go and some of the stock indices future products. very low energy type trade. again, you touched on the fact, albeit it very much conviction to the upside, but limited participation, limited volatili volatility. we saw volatility index come off last week. and really to levels again where traders just become a little bit uninterested in the product, if you will. a lot of attention shifted over into the energies. still focused on the metals and the interest rate as well. so with earnings coming out, with the numbers that you kind of already touched on, i think we have retail sales, cpi data as well this week. as far as i know friday is just a wash so there's no numbers scheduled for release but a lot of information here and focus is kind of been shifted or distributed over multiple different products over the last couple of weeks. >> how much are we still keeping our eye on treasury yields? >> an enormous amount right now. we're watching basically in some
5:35 am
ways the yields are what's kind of creating the wag of the tail if you want in some ways right now. we've seen a major move in the treasuries. interest rates are starting to climb. we're watching the futures products come off again basically since may we've seen the 30 year come off from the 150 handle and last week i think they touched off the 132 handle. a slight rejection from those levels. that major market, the 30-year bond, are the ten year, those f futures products, the prices have been hanging out near lower levels, record low levels. new year low levels and, again, i think it's important to realize there's been very little rejection from those levels. that's really what i look at in terms of price activity. once you test a certain level you want to see if there's acceptance or rejection at that level. we've seen acceptance in terms of the trend becoming or poi pointing in the direction of higher interest rates and that was weighing on the market. if you look at back in the s&ps coming out of the month of june
5:36 am
and into the month of july. that sentiment has shifted. last week we had the minutes come out and, again, basically saw how investors responded to that. really right now it's kind of hold i holding the market back i think a little bit this morning as the chinese gdp data but for the most part, you know, it's been on ward and upward. we had a really big week last week. very low energy, low participation. >> still coming out and talking about starting in september. christine, let's just bring you in here. what do you think is the scope for yields to head higher? what's the upper band of that scope? >> when we look at how the markets react like we were just speaking of when the fed minutes come out, i really think as far as earnings play in, i think earnings are becoming sort of a secondary indicator whereas, you know, speaking of interest rates and anytime ben bernanke says anything we're seeing the markets react to that.
5:37 am
i think at one time if you had great earnings coming out from citi and jpmorgan that would be the backbone of stocks trading high higher. right now i think it's a news driven market. so i think perhaps if we do have earnings come out ahead of expected, as i'm anticipating, perhaps that could head the markets high er but i do think right now it is so news driven any economic ibd kator, china gdp coming out today, things of that nature are really what's going to be padding the market and influencing traders to trade. >> ben, your final thoughts about energy? >> yeah, well, we've seen a major move in the markets in the crude oil market up above that $100 a barrel level. geopolitical concerns associated with that rise. one thing that's been a little bit odd is for a couple of weeks we're seeing prices come off in the gasoline and i was screaming last week saying it's a matter of time before that changes and, sure enough, over the last
5:38 am
couple of days i've seen a spike in chicago and gas prices up at least 30 cents a gallon and, again, as i mentioned before in terms of the treasury and the 30 year bond, very little rejection from that $105-$107 level. for the most part very little rejection trading up at $105. major upside energy. if we breached the $110 level into that $115 level, major concern. certainly the potential to see those levels and there would be energy and volatility associated with it. so right now i guess in some ways the sky is the limit there and, again, just focus on that $100 level and the fact we have yet to reject trade up above it. >> ben, good to see you. ben lichtenstein. christine, we appreciate it. drivers in the u.s. as ben
5:39 am
was talking about this bracing for more pain at the gas pump as many get set to hit the road for summer vacation. jackie has more for us at cnbc hq. jackie, i hope you had a good weekend. >> reporter: hey, good morning, ro ross. i had a great weekend. happy monday to you. ben mentioned it but, of course, a lot of consumers are focusing on gas prices and they seem to be creeping higher on a daily basis. there is a new report out that says actually they've eased just slightly in the past few weeks. it's the latest lundburg survey that shows it fell to a national average of $3.59 a gallon but that's still 18 cents higher than we saw at this time a year ago. the most expensive gas in the continental u.s. chicago averages $4.01 a gallon. if you want cheap gas, you should head to charleston, south carolina. $3.22 a gallon down there. analysts say there are ample
5:40 am
supplies on hand but prices could jump 10 to 20 cents the next several days and that's what's concerning because retailers are starting to pass on the higher cost of wholesale gas prices to consumers. now increased demand, of course, during the peak summer driving season is an issue but also higher crude prices and concerns about possible supply disruptions in the middle east is impacting these prices we're seeing at the pump. late last week higher crude prices prompted refiners to hike the cost of refined products that they sell to the wholesale market. gasoline futures shot to their highest level in nearly four months on friday as a series of production glitches at several u.s. refineries started sparking concerns about the readily availability of fuel supplies out there. our futures are up more than 7% in the past week. take a look at the board there. you can see they're down slightly today. and despite the rally, i want to point out the u.s. does have a lot of spare gasoline. inventories now standing at 221 million barrels. that's the highest level for this time of year since 2001
5:41 am
according to the energy information administration. but supplies have been dropping with the eia reporting bigger than expected declines in the past two weeks so traders are going to be eyeing this week's data that comes out on wednesday morning. all eyes on that and, of course, what's happening in the middle east as well. back to you, ross. thanks for that, jackie deangelis. the latest on gasoline so we'll keep our eyes on what's going on in that particular space. meanwhile, plenty more to come on cnbc, of course. we'll talk about boeing. investigators say probe into the dreamliner fire at heathrow could take days. the latest reaction from phil lebeau. [ male announcer ] it's time.
5:42 am
time to have new experiences with a familiar keyboard. to update our status without opening an app. to have all our messages in one place. to browse... and share... faster than ever. ♪ it's time to do everything better than before. the new blackberry q10. it's time.
5:43 am
5:44 am
the headlines today, china's growth slowdown continues as second quarter gdp decelerates to 7.5% on the year as expected. that doesn't hold markets back. stocks are rallying with basic resources and banks lead iing t way. citi is first up for the earnings frenzy with a third of the dow set to report.
5:45 am
fire seriously damaged a jet on a boeing 787 at heathrow airport on friday. no links to a battery issue. this is according to british investigators. but still the exact cause of the incident and the ethiopian airlines jet is still under an investigation. as far as the boeing stock is concerned in frankfurt right now it's just up two-thirds after ending the u.s. session down 4.5%. cnbc's phil lebeau is on the phone from chicago where boeing is headquartered. how does this story fit in with every other problem we've had with the dreamliner? >> reporter: well, this one is obviously problematic. anytime you have a fire on a plane it's problematic. the issue for boeing over the weekend provide add little bit of relief with the uk investigators saying that they believe there is no direct causal link between the battery
5:46 am
system and the dreamliner which has been retrofitted and upgraded. any link between the battery system and this fire, while that certainly is providing a little bit of relief for boeing and investors, at the same time they have not determined what the cause is. and there is genuine concern amongst investors primarily that the determining cause, when they determine a cause, that they will find, listen, there is a problem in the electrical system or in the wiring. now if it's one component that goes bad or somebody who was installing a piece of equipment whether it's a processor or something within the wiring, it was improperly installed and that might have been the cause of the fire, that's one thing. if it is a systemic problem, it's far different and a greater concern. so that's why the next three days or four days, however long it takes, it will be really interesting to see how investors react once they come up with a determining cause here. >> yeah, well, absolutely.
5:47 am
phil, for now thank you for joining thus morning. have a good day. some of the other stories we're watching. jury selection begins in new york in the trial of the former goldman sachs trader. the s.e.c. accuses him of misleading investors in the 2007 mortgage security investment known as abacus doomed to fail. this is the highest profile to date. tourre has been named fabulous fab, a name he called himself in his girlfriend describing the abacus deal. new developments in the glaxo smithkline deal. this was allegedly a bid to boost sales in china where police also are accusing the pharma giant of illegally inflating drug charges. several executives have been detained in connection with the probe. as far as the shares are
5:48 am
concerned, pretty flat. the company says it will cooperate with tlorts. the still to come, citigroup. will investors be able to bank on the company's figures? we'll get a preview after this.
5:49 am
5:50 am
second quarter growth was 7.5% below the pace clocked in q1. that figure was expected although economists are still wondering if beijing will want to hold off on stimulus and for how long they will. june industrial output did disappoint. retail sales managed to ring in above estimates. despite the downward pressure on 0 growth the pboc will do its part to keep flowing to small
5:51 am
businesses. up for most of the session, down on the session lows right now. 30% higher for the ftse. german market up over a tenth. the cac up nearly a half. u.s. futures haven't really indicated very much during the sessi session. pretty much on a fair value for the dow. the nasdaq around six points below the s&p 500 is below that, closing at fresh record highs again on friday. as far as the agenda today we have june retail sales due out at 8:30 eastern. they're forecast to rise 8%. at 10:00 a.m. may business inventories. and it's a busy week of u.s. earnings kicking off today with citigroup reporting at 8:00 a.m. easte eastern. analysts expect the bank to earn $1.18 ref few. it may be on emerging markets.
5:52 am
it operates in a lot of countries outside the u.s. and whether there's been any growth. the managing director of the u.s. banks and specialty finance at credit suisse joins us. are you going to have a big focus on citi's emerging market report card? >> clearly. clearly, ross. i think investors are somewhat concerned about a slowdown in growth. the important thing to remember is spread out over quite a number of emerging markets. >> bigger than anywhere else not including the u.s. >> consumer loan growth and they've had positive comments to say in the last few months about the quality of the loan portfolio.
5:53 am
>> they announced fannie mae and fault faulty mortgages before. they're not going to be charged in the second quarter, reserves will cover this. what do we think of the mortgage business right now? >> so i guess this is one of the times you could say thankfully citi is small in the mortgage business. what they do have is $85 billion of mortgage loans that they would like to run down. the good news there is the value of those assets have been increasing and they've been able to get rid of them at smaller discounts and so they sold, i think, 2.8 billion in the first quarter, looking for sales in the neighborhood of 1.5 billion this quarter. >> clearly like all the other banks as well, what is the impact in rising rates and rising treasury yields going to be for citi? >> well, the interesting thing is it's going to be muted for citi. we're not so bullish on the effects for the u.s. banks in general because i think the fed will prevent them from investing a lot at those higher rates
5:54 am
until they're more convinced rates plateau. the nice thing about citi, only half exposures are in u.s. interest rates. >> yeah, when you compare citi with what we heard about jpmorgan, what would be the biggest distinction? >> jpmorgan had a killer quarter from investment banking perspective, our estimates for citi are strong but not as robust as jpmorgan's. that's the single biggest factor driving swings in reported earnings is going to be the performance of the investment bank and, you know, was it a strong quarter for everyone or was jpmorgan a standout? >> yeah, and the securities portfolio performance as well will be continuing interest. >> yeah, although i think, as i mentioned before, a little more muted for citi because u.s. dollar securities that are only a little over half of their total. >> what do we think about -- they're doing fairly well now.
5:55 am
are we now in a stable path with reserves? >> yeah. so that's a really interesting question. the banks have been steadily improving capital. regulators keep changing the goal posts periodically and are in the process of doing that once again. so i think, you know, the newest one is the leverage ratio which the fdic has proposed a 5% requirement and that will take a little bit of work. in the second quarter, morgan stanley completed the purchase of the joint venture and that will add 35 basis points and maybe half that to their other ratios so they have a little bit of a tail wind in q2. >> we're going to have -- you talk about the combination of low rates and sluggish loan growth as being a general environment. in that environment who is going to stand out for the year? >> so what -- it's interesting.
5:56 am
certainly at the beginning of the year we would have said that citi had the best kind of mix going in because of the better growth and emerging markets. we'll probably find that was still the case albeit a little slower than we had expected at the start of 2013. >> okay. good to see you. thank you for joining us this morning. >> thanks, ross. >> managing director of banks at credit suisse. now earlier we told but italy hiring a prosecco policeman. yes, they did, to protect the bubbles in the wine. we asked what drink do you think needs legal protection? we need global water police. without high quality drinking water it's impossible to make other beverages. a very fair point actually. fortunately in the highlands where they make whiskey there's plenty of water. i can attest to that. coming up next "squawk box." whatever happens we hope you have a profitable day. we'll be back again tomorrow. for now, good-bye.
5:57 am
5:58 am
5:59 am
good morning. china's economy slowing further in the second quarter. here at home chairman bernanke will give his latest -- oh, good -- his latest read on the u.s. economy before congress this week. more, if it's possible, more from ben bernanke. and in earnings news, citigroup kicks off a by they run of quarterly reports this morning. it's monday, july 15th already, 2013. "squawk box" begins right now. ♪ good morning and welcome to "squawk box" here on cnbc.
6:00 am
i'm andrew ross-sorkin. becky will be back tomorrow. got a lot of news to get to. the s&p and nasdaq are coming off their second best weekly gains this year. nine out of ten of the s&p sectors ended in positive territory. get that. with only telecoms finishing in the red. u.s. equity futures this morning, take a look. we have red arrows at the moment with the dow up about eight points, the s&p 500 off about three points. the nasdaq off about six points. we'll see if we can reverse that. on the economic cal endar today june retail sales rising by 0.8%. check this out, at 8:30 eastern we'll get the july empire state survey. and then at 10:00, may business inventories. the big economic story of the week may not come until wednesday. it's what joe was just talking about when ben bernanke, the fed chairman, will be delivering his semiannual testimony to congress. his comments last week about easing gave a boost to stocks and also we have a


info Stream Only

Uploaded by TV Archive on