Skip to main content

tv   Worldwide Exchange  CNBC  July 18, 2013 4:00am-6:01am EDT

4:00 am
welcome to "worldwide exchange." i'm karen cho. these are your headlines today. bernanke didn't move markets, but corporates around the world sure are. tech earnings in focus in europe. the german software giant warns that softer growth in china is hurting sales. >> we see the slowdown of the economy in china affecting the countries around china. we have reiterated our guidance for the full year on operating income, which means we're managing to the situation in asia. >> challenging conditions in asia are also dragging on ericsson as the mobile network
4:01 am
equipment supplier disappoints with weak second quarter earnings. the market also waiting for nokia numbers with the hand setmaker expected to confirm that losses have narrowed. and it's decision day for dell as shareholders are set to vote on the company's buyout offer. carl icahn who is leading the bid against the deal got the last word right here on cnbc. >> i've never seen one as bad as this. i really mean it. i've never seen anything where they actually go out and they scare their own shareholders. >> and another big name investor causes quite a stir on cnbc's delivering alpha conference. nelson peltz calls for a shake-up in the food industry urging pepsico to merge with mondalese. good morning, welcome to
4:02 am
today's show. plenty of news out there today. let me bring you up to speed with some news crossing. ecb is not all purpose weapon for all problems. so suggesting that perhaps the firepower of the ecb can't solve all the ails of the eurozone. there is plenty on the corporate front today. let me tell you what's coming up on today's show. as greece signs off on fresh public sector cuts to meet austerity demand, we'll hear from a german mvp of greek originalen who says the troika should apologize to the great people. he joins us at 10:30 cet. and spain looks to sell up to 3 billion euros in bonds. will investors keep their cool? we'll have the latest from madrid where stephane pedrazzi has been this week. and tokyo, where shares of softbank are higher. we'll tell you more live from the nikkei in about 30 minutes time. and morgan stanley is reporting
4:03 am
second quarter earnings on the back of a strong quarter for u.s. banks. will the good news keep on coming? we'll discuss with u.s. bank analyst at 11:45 cet. plenty coming up on the show. feel free to get in contact with us, worldwide@cnbc.com is our e-mail address. we're looking forward to your correspondence today. ben bernanke did not rock markets as many had feared. he soothed tapering concerns saying any winddown of asset purchases depends on the economy. not a preset timeline. speaking on capitol hill, he said the central bank would be keeping policy flexible. >> indeed if needed the committee would be prepared to employ all of it tools including an increase in the pace of purchases for a time to promote a return to maximum employment in a context of price stability. >> one man who did move markets yesterday was famed activist investor nelson peltz. the founder of the tree fund
4:04 am
management made some waves at the delivering alpha conference that he had acquired a huge position in dupont sending the stock to a 13-year high. and moved pepsico to an all time high by arguing he wants the soft drink giant to buy food group mondalese. >> you've talked about this. >> i have. >> my understanding through my own reporting is you have a meeting planned with irene rosenfelt, the ceo in the next couple of weeks. >> i do. >> what has been the response from pepsi? >> pepsi right now doesn't love the deal, okay. and i'm asking all the shareholders of pepsi and m ondalese, get your cards, let them out and send them to the board to back this transaction. >> we got plenty more of that set to come on the show. stay tuned for more sound from the world's top investors speaking at cnbc's delivering alpha conference. sap shares are moving lower after the german tech giant warned of a slower growth in
4:05 am
china. also trimmed its software outlook. group says it now sees 2013 software and related services revenue up to 10% compared to earlier forecasts of 11 to 13%. let's get out to annette in frankfurt. a little bit of volatility in sap shares of late, but particularly today on the back of these numbers. tell us about the outlook now for the company. >> well, as you already mentioned, the outlook for the software revenue, which is, of course, the biggest chunk of the revenue, has been revised downward. that was quite a bad surprise here. analysts had expected that the quarter wasn't really great, but they -- most of them at least expected the company keeps their outlook stable, but, of course, one of the big reasons was the chinese slowdown for the company and as well what that means for the whole region. take a listen what the co-ceo said today in the morning when we spoke with him during "squawk box." >> we see the slowdown of the
4:06 am
economy in china affecting the countries around china. we have reiterated our guidance for the full year on operating income, which means we're managing to the situation in asia, and at the same time we're accelerating the pace for the future, which means we're best positioned to take advantage of the transformation of the industry and i think best positioned to be in asia when the market picks up. >> so the company has different battlegrounds. on the one side, we have the geographically weakness in asia, but then as well the whole industry is changing. so looking at the detailed numbers we have cloud computing coming up and sap is saying cloud computing actually is eating up a bit of their traditional revenue, but at the same time, not making the same revenue, so you see a whole -- the whole industry is changing and making it very difficult for such software giants like sap to operate. but at the same time, there is some green sprouts and they are
4:07 am
happening in the united states. and so, again, listen of what jim is saying about the united states. >> in the u.s., at the cloud business, it is now more than 25% of our total software and cloud business. so you really see how this acceleration to the cloud is happening first in the u.s. and we're taking a leading role. >> so all and all he's quite optimistic about cloud. business, but it remains to be seen how long it takes until other nations, europe or asia, is actually catching up with the development in the united states. and, of course, there is security concerns, above all from european clients he said as well during the interview today in the morning, because they want to know whether data is protected in those clouds with all these nsa standards going on, which is, of course, highly discussed here in europe. for now, the shares are taking a dip, but when asked to point out that sap shares were valued
4:08 am
compared to their competitors such as oracle, quite at a high pe, forward trailing ratio, comparing pes trading before today, compared to yesterday's pricing at roughly 17 2013 pe, oracle at 11. those shares now taking a dip, the revised forward guidance in terms of software revenues is not a big surprise, karen. with that, back over to you. >> thank you very much, annette. sap on the dax at the bottom of the pile so far today. elsewhere, ibm's second quarter profit fell 17%, but still beat forecasts. revenues came in slightly shy of estimates on declines in services and hardware. though software sales rose. big blue is raising its four-year profit outlook and on track to post annual earnings of $20 a share and return $70 billion to shareholders by 2015. ibm rose 2% in after hours trade
4:09 am
and you can see on the general market it is currently ahead more than 3%. ebay's second quarter profits fell 7% just missing forecasts, though revenue improved, boosted by paypal and core marketplace business. however, ceo john donahue warns of economic head winds in the second half of the year from europe and south korea. ebay expects full year results to be at the low end of expectations. shares fell 5% in after hours trade. and here is a look currently in frankfurt, down about 5.25 upon the set. intel's second quarter profits fell 29%, matching forecasts, though revenues just missed estimates. the world's largest chipmaker is cutting its four-year revenue outlook and scaling back capital spending as it adjusts to the continued slump in pc sales and economic slowdown. new ceo brian shannic says intel has been slow to respond to consumers, shifting to
4:10 am
smartphones and tablets but intends to make up for lost time. intel fell 4% in after hours trade and in germany, it is just down over 4%. you can see where the pressure is coming from across on the european markets today. earlier the european director at intel peter glassner told cnbc that a pickup in global gdp would provide a direct benefit to pc companies. >> currently we're in a difficult market environment. once that lifts, i think there is lots of opportunity for growth in the data center. there is lots of growth already in our mobility tablets and smartphones and possibly beyond that. there is plenty of groenl in the computer industry. and therefore also for intel. >> intel's rival in the world's largest contract chipmaker beat forecasts by posting record high earnings in the second quarter. net profit climbed 24% to $1.74 billion from a year earlier. that was thanks to healthy demand for chips for mobile devices. gross margin also came into the top end of its guidance at a
4:11 am
healthy 49%. joining us on the phone from taipei is bruce lew, an analyst at clsa. we know there has been extraordinary demand for smart phones, shouldn't be any surprise to us that the manufacturers of the chips that go inside the phone are also doing well. >> most analysts are still bullish but the company continues to deliver better than expected results for the past seven or eight consecutive quarters. i think this is truly a demonstration of execution and they capture the right trend for the smartphone. >> what is the outlook going forward? there was some concern about the momentum. some analysts are saying this is slowing the company's business. do you see that from your side? >> yes, actually dr. morris chan also addressed this concern. morris mentioned the momentum is slowed down in the second half.
4:12 am
he foresees that inventory levels for the smartphone and the pc is slightly higher, so he foresees the production control in fourth quarter. >> how important are the contract deals, because there has been a lot of chatter that perhaps tsmc will work with the likes of apple because there has been an ongoing dispute between the likes of apple and samsung, samsung having previously manufactured a lot of device or chips for apple. do you think this is opening up the playing field and will they get a greater slice of contracts? >> we do believe that, we do see tsmc will have revenue drivers starting in 2014, starting at 29. we believe tsmc will make chips for apple, which will be the revenue growth driver. >> how is the industry placed? it feels as though the capital investment required to remain in the investment is fairly high, which leaves the playing field fairly open for the largest operators in the sector. is that the right assessment?
4:13 am
>> yes, exactly. we do see a clear consolidation for the industry. actually, it is happening for every aspect in the industry. look at the semiconductor, almost everywhere we see growing monopolies. so this is the trend. we just cannot part with the trend. >> the company is well poised to pick up some business. one of the big concerns that people have is the ability of the company to deliver on time. in the past it often missed on the delivery of certain contracts. is this still an issue in the company? >> i have to rephrase the statement. we don't think that -- we believe we always deliver the statement, deliver the product the customer wants. so basically we -- the execution has been quite solid for the past 15, 20 years. we believe it continues on time
4:14 am
for the customers. >> let me remind you in the video conference calls that used to take place where pretty much every time the ceo is complaining about tsmc not providing the company on time. >> the different customer has a different need. you also referring to -- also mention in the conference call after the quarter, they see the yield is ahead of their expectation. they deliver is no problem. you see that comment from the biggest customers. tsmc is different from qualcomm. qualcomm never complains about deliver. >> give us a broader sense of the market. there is a lot of concerns about the slowing down in china, highlighted by the aspects of
4:15 am
tcmc. will this affect earnings? >> i think the biggest earnings driver for tsmc is coming from three fold. number one, smartphone growth, migration, competitive landscape. you talk about the overall smartphone growth slows down, that would impact the earnings for tsmc. you look at tsmc, their contribution from china is growing very fast. they just mentioned that the revenue from china is actually double for the first half of 2013. >> thank you very much, right now. bruce lu, analyst at clsa joining us. south korean lg display handily beat forecasts by posting a 53% jump in its q 2 earnings. a lot of earnings out today. the operating profit came in at $326 million, way above a reuters poll of 270 million. analysts say lg should continue to enjoy solid sales as apple is planning to launch new devices
4:16 am
this quarter. but margins could suffer if the u.s. tech firm decides to roll out cheaper models. and bumper earnings number formulation, stock exchange operator. its net profit jumped to $17 million in the second quarter from a year ago. that's mostly due to a surge in trading volume after the ruling party returned to power following a closely fought election. bursia malaysia expects results higher thissier as earnings potential of listing companies improve. in a different note, the rise in china's home prices appears to be slowing. june data shows average new home prices in 70 major cities moderating for the third month in a row. analysts say that's likely due to the current liquidity squeeze where prisses were 6.8% last month compared to a year ago. market watchers says that underlines the tough challenge that beijing faces in taming prices without disrupting stability in the markets. to li sixuan for more.
4:17 am
some would be happy with the rise on in prices on homes. >> never going to be able to afford a house in beijing, i guess, but generally, a mixed day of trading in asia. let me start with japan. despite the survey showing weakness in terms of business sentiment, the nikkei 225 the outperformer in the region, ending stronger by 1.3% to close out at eight-week high. australia's asx 200 also marginally in the again now with banking shares lending support. but seeing china markets and south korea under pressure ahead of the second day of bernanke's testimony. some individual movers to tell you about in japan, exporters got a lift thanks to weaker currency. sharp jumped over 4% today on expectations of a smaller than expected operating loss for the june quarter. and mobile carrier softbank also extended the rally, soaring 4%, this after china's e-commerce
4:18 am
giant alibaba nearly tripled its q-1 earnings. as karen mentioned, data showed housing prices in some major cities jumped nearly 7% from a year ago. in south korea, heavyweight samsung electronics lost over 2% on profit taking and also weighed down by u.s. pier intels beat forecast. but casinos rallied as shares of grand korea leisure jumped 3.7% today. >> sixuan, thank you for that. let me tap into the overall sentiment here in europe. as i walk across the heat map, we're still tracking positive territory, though there is still a fair amount of red in there and the heavyweight dragging down this market, particularly from the tech sector with earnings out from the likes of ericsson that were disappointing and sap, dragging on the german
4:19 am
market. still dragging .1%. let's move on to the individual plays and you can see where the strength is coming from. in particular, the likes of periphery, the ftse managing to gain some traction, ahead .4%. not far off that 6,000 point mark, just one point off that level at the moment. xetra dax just slightly underwater now, 4 points lower. a lot of concerns about the big companies that do business in china and if the slowdown on the main land is showing up in some of the numbers. there has been a lot of optimism already, even though we're early in the earnings season, but the numbers would be slightly better from europe. for instance, just 6% of companies that reported so far, but 56% of companies have met or beaten expectations, so some negative numbers coming out today haven't been digested all that well. on the periphery, this is where we are seeing the gains, the lax of the ibex in spain getting close to 7,900 points and the
4:20 am
ftse up .3%. bond markets as well, we have got a spanish auction coming up today, 3s, 5s and 10-year paper on offers for investors. currently the spanish yield is a little higher at 4.77% as paper is sold off, but elsewhere we are seeing yields push lower on some of the core trades. bunds getting closer to 1.5%. ten-year treasuries back low 2.5% after bernanke seemed to ease fears about tapering. yield has come back a little bit on that. carney's comments yesterday, and now gilts tracking ining .225%. the trade on the sterling dollar when minutes came out yesterday from the boe, we have given up some ground and this morning down .25%. the australian dollar giving up 92 market, sharply lower, .75%.
4:21 am
dollar yen rates are supported. in fact, the dollar strength is playing out here, but more a story too of yen weakness. and the euro is stronger to the japanese yen. this as we have upper house elections. we are seeing a lot of foreex traders sell down the yen and that's why the trade is moving around. eurodollar rates fairly steady 131.12. a rough ride for nokia in recent years. can the new louima model boost crumbling sales of mobile phones? the earnings release next. don't go away. [ male announcer ] it's time.
4:22 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...
4:23 am
faster than ever. ♪ it's time to do everything better than before. the new blackberry q10. itime.
4:24 am
welcome back. plenty breaking while we have been in the advertisement break. solar panel dumping duties but from the like of china. let me bring you the latest. the chinese commerce industry has evidence of dumping. china's commerce ministry says preliminary findings show chinese companies have suffered damage. as a result, china will impose anti-dumping duties on the u.s. and south korean solar materials. this is fascinating because as you may recall, europe slapped anti-dumping tariffs on the like of china.
4:25 am
the latest in recent days is that china has been pushing hard for limited restrictions on the solar panel exports to europe. this has been part of ongoing negotiations. the background to this a little bit more is that duties that are currently on these chinese goods have been imposed but will jump to punitive levels on the 6th of august. there may be a link here with chinese companies now feeling the pressure to be competitive, but the europeans have always argued that the chinese products are way cheaper than cost of production, which is driving out some of the european companies out of business, but, again, anyone who followed this knows there has been so many subsidies right across the entire solar industry. we'll have more on this a little later on. if we see any more information break, but that is the latest crossing from china. as mentioned at the top of the show, activist investor nelson peltz moved markets when he called for pepsico to buy mondelez in a deal worth more than $62 billion. speaking to cnbc, he said he
4:26 am
plans to meet with mondelez's ceo irene rosenfeld in the next couple of weeks and it comes to judging her success so far, peltz said her biggest mistake may be changing the group's name from kraft foods. >> the name mondelez, i hate. i think that hurts us in two multiples of pe. and then -- >> really? >> it sounds look a disease. suffering from mondelez. >> he may have had a point there. took us a while to figure out,000 sout to say it as well. but can a name make or break a company? get in touch with us. we're on e-mail at worldwide@cnbc.com, also by a couple of twitter handles, @cnbcwex or direct to me @cnbckaren. still to come on the show, german fin man wolfgang
4:27 am
schaeuble is visiting greece. we'll discuss the tensions between berlin and athens shortly. we'll be right back. 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.
4:28 am
we can show you how at&t solutions can help you do what you do... even better. ♪
4:29 am
[growl] can help you do what you do... we used to live with a bear. we'd always have to go everywhere with it. get in the front. we drive. it was so embarrasing that we just wanted to say, well, go away. shoo bear. but we can't really tell bears what to do. moooooommmmmm!!! then one day, it was just gone. mom! [announcer] you are how you sleep. tempur-pedic. bernanke didn't move markets, but corporates around the world sure are.
4:30 am
tech earnings in focus in europe with sap one of the biggest losers as the german software giant warns that softer growth in china is hurting sales. >> we see the slowdown of the economy in china affecting the countries around china. we have reiterated our guidance for the full year on operating income, which means we're managing to the situation in asia. >> it is decision day for dell as shareholders are set to vote on the company's buyout offer. carl icahn who is leading the bid against the deal, got the last word right here on cnbc. >> i've never seen one as bad as this. i really mean it. i've never seen anything really -- actually go out and they scare their own shareholders. >> strong growth in north america boosts sales at publi s publicis, the third largest advertising agency. the ceo outlining the performance exclusively on cnbc. >> it has been growing extremely well with 7.7% growth and the
4:31 am
second is the growth in digital, which has reached the level of 30.4%. we have the latest numbers crossing from the uk retail sales, up .2% on month end and 2.2% on year. little bit of a breakdown for the june number. sales including fuel were up .9% on the three-month basis, and plus .18% on the three months versus a year ago. the retail sales deflator, plus 1.7% year on year. so in terms of numbers and how they are positioned against market expect takings, let's take a quick look at that. they're a little firmer on the month by month read and also, in fact, on the year by year read. .1% is what we were expecting and 1.7% on year. that's the biggest increases up on the metric which 2.1% suggests that there is a little momentum on the high streets.
4:32 am
more good news for the uk. let's take a quick check on sterling dollar. it has been rising on the back of the sales numbers currently. 152 just crossed over because we have been tracking below that all morning. you see still negative on the trade, but trimmed some losses today. let's move on and take a look at how european markets are faring as well. we have had the ftse tracking in positive territory today. the dax, though, the weak one there. the ftse ahead .4%. the cac .2% higher. the periphery, the like of the mid in italy and spain's ibex tracking firmer today. to mobond markets. the yield has been a little higher on the spanish trade this morning, 4.75%. elsewhere, you can see most of the yields coming down for the core trades as you see on the
4:33 am
screen there. car production numbers, different than what we have seen in terms of the car numbers out of europe. car registrations were fairly weak in the last few days for europe. so the numbers coming out from the uk suggest that perhaps we don't need qe after all. this is exactly what the boe was outlining in the recent minutes. just a quick look on what we're seeing elsewhere on forex rates again. you can see now still above 100 on the trade on dollar yen, upper house elections coming up this weekend, sterling dollar holding now above that 152. a huge miss for ericsson as q-2 profits came in well below expectations. the mobile equipmentmaker blamed challenging conditions in asia, where chinese firms are offering fierce competition. the operating profit was almost 2 billion in swedish crowns below forecast. here is a look at how ericsson shares are tracking. sharply weaker in trade, down 3.5%. on the earnings releases today, nokia is out with its second
4:34 am
quarter numbers at 12:00 cet. just a week after showcasing its latest lumia hand set, with the 41 megapixel camera. dow jones expects the finish hand set maker to narrow losses with an average net loss of 276 million compared to 1.4 billion euros for the same period last year. investors will also be eyeing the earnings report for guidance on smartphone sales volumes and average selling prices for hand sets in the third quarter. dell wagner is with us now to set up the numbers as they come out today. nokia, there is so much riding on the new releases of phones and the ones we had out from the likes of blackberry, htc, samsung, a little disappointing of late. why is nokia's lumia going to be any different? >> i'm not so sure it is disappointing. the nokia phone has just been released it quite an extraordinary piece of engineering. it has a 41 megapixel camera into it. if you wanted to buy that as a
4:35 am
camera stand alone, the only one you can buy is 20,000 pound, that has that sort of resolution. to put that into a small phone is quite extraordinary. >> the analysts keep talking about this, i keep having these conversations and the number one thing that comes out is it is about the camera. to me it seems almost backward looking because we all know that smartphones have fairly decent cameras anyway. so what difference does it make? >> it does make a difference. the phone is becoming the center of every person's universe almost, the main access point for the internet now, it is first point of call when people go online to buy things. it is becoming a device that can be used to make payments, something we're involved with and also something that people more and more are using as their camera, main camera. it actually has the potential to replace all existing camera devices, which are sort of superfluous when you have one device that is your camera, your payment device, your phone, and your contacts and e-mail and
4:36 am
everything else. it is the center of everyone's sort of universe. this is an early stage start for nokia, who is the -- we mustn't forget, the second largest hand set manufacturer in the world. they do 18 million units every quarter. though those phones are low level phones, not smartphones, as yet, these new smartphones that are coming out are leaping ahead in terms of their capability. >> nokia has been disappointing of late, though. and, you know, we are waiting for a catch-up trade. i wonder if it is positioned at the right end of the market or mass market than what the likes of samsung and apple are. is this where the money is to be made, in the sector? >> i think nokia are making the right bet, they are placing down some long-term strategic markets to say we are going to build the best phones in the market, the most sophisticated phones that can replace other devices in your life, and make this the center and will take a few months. might take a few years. but nokia well placed to pick that up. there are lines with windows
4:37 am
should not be -- microsoft windows should not be dismissed, even though these guys are lagging behind the leaders of apple and samsung, they certainly have the potential to overtake them. >> let me continue to probe away here, the emerging market strategy has been one thing that analysts have been somewhat excited by. nokia has so many different devices and been trying to target consumers across asia. we had numbers out from sap, concerns about the pace of growth and the likes of china. a company like nokia that is focused on timing in the markets as well, doesn't this raise concerns down the track that perhaps the earnings growth that has been priced in is not going to be forth coming anymore? >> the other guys who are suffering at the hands of chinese manufacturers are suffering because those products are better or cheaper and what nokia is doing now is they're trying to step ahead of everybody. >> this is not a competition story. it is about a slowdown on the macro front in china. >> i think people are migrating to smartphones and there is a long-term trend for people to move up to these devices which become, you know, the center of your universe. as i said before, the pc
4:38 am
previously was the main port of call for access to e-mail and internet and so on. that's now moving to the phone. the traditional phones, the sort of feature phones as they're known can't do all of the capabilities that these new smartphones can. the new smartphone is the new machine, the new pc. >> let's put you on the hook quickly. is nokia going to be a beat or a miss today? >> in the forecast today? probably will come in on target. >> okay, great. you're staying around when the numbers cross. dan wagner, talking to us a little later on. let's recap some news that has been crossing on russia, let me try and bring it up on our screens for you, russia's main index, has dropped after a judge has sentenced a protest leader to five years jail. that's navalny to five years in prison. that's the latest crossing on that front. elsewhere, greek lawmakers voted through a bill late last
4:39 am
night approving thousands of public sector job cuts in a bid to unlock the next tranche of bailout aid. it comes ahead of a visit by german finance minister wolfgang schaeuble who is arriving in athens today with an offer of 100 million euros for a fund to promote economic growth. it seems unlikely to appease the people on the streets of athens for last few days. police have banned public gatherings in the capital today ahead of mr. schaeuble's visit, a move called fascist and undemocratic by the left wing party. joining us now on the line from brussels is the german mep of european parliament. nice to have you on board with us today. perhaps you can set the scene for us. 100 million euros will be kicked in by the germans to some form of a growth fund. will this make any difference whatsoever? it would seem like a bigger number might be required. >> it would make adifferen diff
4:40 am
for the moment because a fund does not exist. a fund should be ready for two years now. by the way, greece is the only european country without such a development bank or development fund. and it will be ready as we see in december. so the 100 million of the euro that mr. schaeuble brings along will have to wait some time until they get into the real economy, because this is the one that suffers in greece. there is no access for sme in greece to banking capital, so this is urgently needed money, but 100 million is much too low as a spur of the greek economy. >> a lot of tensions on the streets as schaeuble arrives and a lot of the protests have been forced away from the area. does this just fuel resentment towards the germans? >> well, it has happened already during chancellor merkel's visit
4:41 am
to athens that all the protesters have been expelled from the city center and away from the airport to the city center. it is bad, i say this as a european parliamentian, bad for the european spirit that having somebody who is a friendly nation who should be somebody who helps you in such a bad atmosphere, but this is the way we are. this is the status we are in europe at the moment. the greeks try to do their best in order to show the best picture and mr. schaeuble wants to win time. he needs to win some time until the german elections in 22 of september and until then he needs to encourage the greek government to move on. nobody knows what will happen then. in athens, everybody hopes that there will be after the german elections big haircut, and also in europe, many, many of my members of parliament think that the big haircut will come, but not before the german election. so i would say this visit to athens is rather -- you're a
4:42 am
nice guy, please keep quiet until the 22nd of september. >> does it suit some sort of an olive branch to have the germans come with some money in hand rather than suggesting more austerity, higher taxes are the answer? >> well, to be honest, this money in hand is a very, very, very slow -- low amount of money, first of all. second, the money is not going to go anywhere because the fund does not exist. so i would rather encourage everybody to set this fund to practice. it does not exist. it is a good sign, but as i said, it is just a sign. it doesn't have the real economy. you have to see that during the crisis, greece has lost according to the oecb 1 million of jobs where as germany has won some half a million of jobs. so you see there is a parallel going on, and we need to stop the spiral, this downward spiral into 100 million for a fund that
4:43 am
does not exist is not the right answer. the right answer would be to fundamentally change the way towards authority. this is rating the vice president of the european commission just recently, this week, said we need to finish the troika, the troika that has negotiated the bailout memorandum -- the memorandum of understanding with greece has to be finished since there is no -- no single idea where to go to. the imf and the eurozone, that is why everybody thinks after the german elections things will change dramatically. >> the mp of european parliament. elsewhere across europe, spain is looking to sell up to 3 billion euros in bonds. the spanish premier is facing allegations of wrongdoing in connection to his former party treasurer who is accused of
4:44 am
trunning a slush fund to channel illegal payments. let's get out to stephane who joins us in madrid. stephane, doesn't seem as though investors have been all that concerned about the story in the backdrop because there has been barely any move higher in spanish yields. >> yes, absolutely. we had a first test on tuesday and the market reaction was rather limited on the spanish short-term debt. it was no significant pressure for the 12-month gild. on the very short-term debts, under six months, we were at 0.95% on tuesday, up from 0.8% a month ago, no significant pressure. >> stephane, thank you very much for that. still to come, shares of softbank are moving higher on exposure to chinese e-commerce alibaba. we'll get the full story from tokyo. ♪
4:45 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 while dramatically reducing waiting time.
4:46 am
[ telephone ringing ] now a waiting room is just a room. [ static warbles ]
4:47 am
can't escape the earnings today, all about the numbers. carrefour reported improved sales at its core french markets. the world's largest retailer after walmart posted q-2 sales
4:48 am
of 20.46 euros. that was just marginally lower than analyst expectations. the luxury end of the chain hermes posted a 6% increase in second quarter sales boosted by strong demand in the americas and europe. the group says that its four year revenue could be higher than midyear target of 10% growth. and the french advertising group publicis earned a rise in their profit during the first half of the year. there was boost by strong growth in the united states and continued gains in the chinese market. earlier publicis' ceo spoke exclusively to cnbc about the company's outlook. >> we believe we will end of the year with growth which would be around 3.6%, so we are raising a little bit our forecast or our internal objectives. the current situation is roughly as follows.
4:49 am
we have the u.s. which is constantly dating its growth. there is still some concerns regarding the emidteerging mark and europe remained the charge of the world. >> he also expanded on the individual countries within the eu. >> for the time being, the information that we have regarding the advertising market not really extremely encouraging. what we see is a situation where by italy still facing a lot of difficulties, spain is still very negative, france is not yet totally out of a negative growth. germany's doing slightly better. so i'm quite cautious regarding europe. we are currently forecasting for the end of the year, quite
4:50 am
positive for the publicis group but we have to bear in mind the fact that the imf has changed its forecast for the four-year, five times in 2013, and all the times it has been in downgrading the forecast. we have also the same situation with the forecast of a reduction in investment in advertising, so we remain cautious. we have some very strong and very positive aspect within the publicis group. we believe that we will not only be able to catch up internal objective, but take maximum advantage of the growth which is forecasted for 2014. >> we have some numbers crossing from the spanish auction.
4:51 am
and the main takeaway message across on this, 3s, 5s and 10s just to remind you is that the yield has come down across the board. for instance on the two-year, 2.79% versus 2.89% is what we saw in july. let's get to stephane for more on this. we have been noticing of late that the yield has been fairly stable. at least on the ten-year, despite the political eruptions with rajoy and the concerns about the allegations of a slush fund. today, investors look fairly comfortable. >> yes. that's a good surprise and also the demand was strong. if you look at the ratio, it is higher than the one of the last auction on the 4th of july. that's good news indeed for the spanish treasury, which is planning -- which was planning this morning to raise up to 3 billion euros in 3, 5 and 10-year bonds, having the results just now. earlier this week we have seen a very limited tension on the bond market on the short-term debts both under 6 and 12 months
4:52 am
treasury bill which means investors are not that concerned about the scandal, the financing scandal involving the prime minister, mariano rajoy and the possible no confidence vote that is possibly -- that will possibly be requested by the socialist opposition. actually, investors are not concerned about the health of the eurozone and recent downgrades in france and italy, rather than the political scandal in spain. and also the spanish governor still believes the country will go out of recession in the second half of this year. it is planning -- it is expecting the growth to be close to zero for the second quarter after contraction of the gdp of 5% on the first quarter. we'll have the results shortly because we'll have at the end of the month, on the 30th of july, the first estimate for the spanish economic growth for the second quarter. so, yes, investors are still confident about the outlook of the spanish economy. if you look at the outcome of the bond auction this morning,
4:53 am
no, there is no additional pressure on the bond market as a result of the scandal involving the prime minister mariano ra y rajoy. >> interesting, a little more detail on some of the yields for the longer duration paper, the five-year, the 2018 bond, the 3.76%, down from 3.85% on july 4th. the auction of the ten-year was further back on july, june 20, rather. and the yield on this was 4.75%, versus 4.81%. you can see there has been a retreat on that buy by about six basis points, small, but significant nonetheless. glaxosmithkline's china finance director has been stopped from leaving the country. the british citizen was hit with the travel ban as chinese authorities investigate the alleged bribery of doctors and officials by gsk. cnbc's eunice yoon filed this report. >> reporter: glaxosmithkline confirmed its finance director in china has been barred from
4:54 am
leaving the country. he hasn't been detand. he hasn't been questioned. he's still allowed to travel normally within china, but this is just the latest sign of increased pressure by chinese authorities on the british drugmaker. the government has been in a very high level nationwide campaign to try to root out corruption. they put in place a very powerful technocrat to led up the campaign and they have been trying to cut out a lot of excess waste within their own ranks. but this is really the first time that we are seeing an international firm caught up in this crackdown. however, the commerce ministry made it very clear that this won't necessarily be the last. >> china stands firmly against commercial bribery in every way. enterprises, no matter foreign or domestic, shall be punished by chinese laws and bare legal liabilities if they violate them. >> said this type of behavior on the part of foreign companies corrupts china's business morals. also, the people's daily, another communist party paper, said that it brings disorder to
4:55 am
this market economy. and finally this week one of the chinese executives of glaxosmithkline was put on nationwide tv where he supposedly confessed. now, we don't know the circumstances around this confession, we also don't know what glaxosmithkline executives did or did not do, but what we do know is this entire situation is making the international business community very nervous. eunice yoon, cnbc, beijing. elsewhere, softbank jumped on news that alibaba group nearly tripled its income in the first half of the year. we know that alibaba has been somewhat of a gold mine for the likes of yahoo! but tell us more about it from softbank's side. >> yes, hi. softbank was the most traded stock by value on the tokyo market closing up 4% at 6,450. and renewing its year to date high. nikkei reported this morning
4:56 am
that japan's the third largest mobile provider will enter the fuel cell factory market through joint venture with u.s. startup bloom energy. the 50/50 joint venture based in japan will ply fuel cell batteries to hospitals and other large buildings. shares are surging on news that alibaba group in which softbank holds a 30% stake tripled the first quarter profit on surging sales. alibaba is preparing for a possible initial public offering with investors keen to see how much softbank's shares in the group will rise. that's all from nikkei business report. back to you. >> thank you very much for that. in another tech name in focus, dell, coming up after the break, we have a panel of experts to discuss the takeover saga. which billionaire is set to come out on top? answers at 11:30 cet. is it time to turn away from the big boys? after the break, our next guest claims we are at the beginning of a decade long cycle for small cap companies.
4:57 am
the pursuit of a better tomorrow is something we all share. but who can help you find your own path? who can build you a plan, not just a pie chart? who can help keep your investments on course,
4:58 am
whatever lies ahead? that someone is a morgan stanley financial advisor. and we're ready to work for you.
4:59 am
5:00 am
welcome to "worldwide exchange." i'm karen cho. these are your headlines from around the world. bernanke didn't move markets, but corporates around the world sure are. tech earnings in focus in europe with s&p one of the biggest loser as the german software giant warns of softer growth in china is hurting sales. >> we see the slowdown of the economy in china affecting the countries around china. we have reiterated our guidance for the full year on operating income, which means we're managing to the situation in asia. >> challenging conditions in asia are also dragging on ericsson as the mobile network
5:01 am
equipment supplier disappoints with weak second quarter earnings. the market also waiting for nokia numbers with the hand set maker expected to confirm that losses have narrowed. and it is decision day for dell as shareholders are set to vote on the company's buyout offer. carl icahn who is leading the bid against the deal got the last word right here on cnbc. >> i've never seen one as bad as this. i really mean it. i've never seen anything where they actually go out and they scare their own shareholders. >> meantime, another big name in investor causes quite a stir at cnbc's delivering alpha conference. nelson peltz calls to a shake-up in theed food industry urging p to merge with mondelez. if you're just tuning in, thanks for switching on this
5:02 am
morning. let's get you up to speed with how we're setting up for the u.s. markets today. a mixed picture before the open tod today. the dow, the nasdaq weaker but the s&p showing green on the charts after a bounceback for u.s. stocks yesterday. some of the earnings have been supported for the u.s. markets, the likes of bank of america and also yahoo!. but here in europe today, i must say the numbers have been fairly weak on the earnings front and that's been causing a bit of choppy trading action across the markets. if we switch on to the european indices, we'll look at the ftse, cnbc global 300 first, still holding out in the green. you can see it is just a marginal move for it. elsewhere on the european markets, german market weakest of the bunch today, pushed into the green. the numbers out from sap were particularly weak today, that's been dragging down the overall index. but the ftse 100 here moving forward by almost half of 1%. we had decent uk retail sales numbers out today, that's been somewhat supportive. but it is the periphery that has
5:03 am
been leading the charge. the likes of the ibex 35 extending its lead now almost just over .8% firmer and more than .6 on the move in italy. on the bond markets, fairly interesting morning. we had the spanish auction of 3s, 5s and 10 years. we saw the yields come lower across the board. we're currently firmer, though, still, on the level on the markets. 4.74%. curious to see the yields come down because we have all the issues in the backdrop about rajoy and whether he was operating a slush fund. these allegations have been logged and there has been enormous pressure from within his own party for him to step aside. it is not having an impact on the market, though. elsewhere on the call, we're seeing yields push higher and just over -- yields push lower, paper bought up and the ten-year treasury is below 2.5% and gilts 2.27%. foreign exchange markets, a little edge higher on sterling out, some of the numbers we had
5:04 am
on the uk retail sales, but back below the 152 handle we jumped to. a little weaker in session. the australian dollar between 92 u.s. cents. dollar yen supported as we come up to the upper house elections. eurodollar fairly stable in trade. also where across asia, to li sixuan for more. >> ben bernanke's dovish comments didn't do much to lift asian stocks but japan was the exception. at the nikkei 225 hit an eight-week high. a couple of big movers in tokyo. sharp climbed more than 4% today on reports that it will post a smaller than expected operating loss in the june quarter. softbank also gained 4% on news that china's alibaba has tripled its net income. and softbank has around 30% stake in this chinese e-commerce giant. chinese property stocks lost
5:05 am
ground today on worries they will face finance and difficulties in tightening measures. this after the latest data showed that despite size of moderation, china's average new home prices were still up nearly 7% in june compared to a year ago. south korea, samsung electronics launched its new storage technology to expand its footprint in this memory devices market as smartphone sales slowed down. the stock lost over 2% today on some profit taking after yesterday's rally. also weighed down by u.s. pier intel beat revenue forecast. lg shares tumbled 3% on concerns of slowing tv demand. back to you, karen. >> sixuan, thank you very much for that. let's give you a look at what is coming up on today's agenda in the united states. weekly jobless claims due out at 8:30 a.m. eastern. they're forecast to drop by 20,000 to total of340,000. little later on in the morning at 10:00 a.m., the july fed
5:06 am
survey and june leading indicators. it is another busy take for earnings with block rock, morgan stanley, united health, verizon, bbt, black stone and fifth third bank. after the close we hear from the likes of google, microsoft, capital one, and chipotle. so big day on the earnings front. ben bernanke is trying to soothe tapering concerns saying any winddown of the fed's asset purchases depends on the economy, not a preset timeline. speaking on capitol hill on wednesday, the fed chairman said the central bank would keep policy flexible. >> if needed, the committee would need to prepare all of its tools including an increase in the pace of purchases for a time to promote a return to maximum employment. >> joining us now on the studio is hugh grieves, manager at cf norton opportunities fund. the bernanke conversation yesterday was nice to see that we had enormous gyrations on the
5:07 am
stock market. does that mean investors are comfortable with the timing of tapering? >> he said what he had to say. he's there to keep markets calm, soothe and to make sure that -- to make sure he doesn't jeopardize the economic recovery. he made it quite clear, speech after speech after speech, that his prepared to stand by and do whatever it takes to keep the u.s. recovery on track. in light of that, what he said yesterday was a big deal. >> the part i found interesting wasn't about the macro economic recovery, about the fact that his motivation to speak about tapering initially was trying to head off any possible bubbles in financial markets. we had all been speculating about whether that was a key thing he was trying to do. what did he take away. >> it was a tremendous bubble building up in the corporate bond market. and take, for example, glaxo, which you featured on the program earlier, glaxo was able to raise what 30 year money at 1% interest, it is crazy. bernanke seeing the enormous
5:08 am
amounts of money which they weren't using for an economic benefit stepped in with a few choice words and.a stop to the whole thing. >> it was something he was talking about. when it comes to the timing and tapering, some people out there are saying, well, it is not going to happen until 2014. it is not even going to be a story this year with tapering starts. what do you think? are we looking at some form of the program to happen in september? >> i don't think it really matters. at the end of the day -- >> why does it not matter? this is where the market was spooked. why are we saying it is okay. >> it is important to step back and look at the bigger picture. we live in this alice in wonderland world at the moment where everything is artificial driven by the fed. we need to get to position where the economy is healthy and interest rates are back at normal positions. exactly when we start to move to that position is not that important. important thing is we can actually move to that position as the u.s. economy --
5:09 am
>> by choosing a month? >> your guess is as good as mine. >> okay. you're staying with us. wo we'll continue the conversation. nelson peltz made some waves at the delivering alpha conference on wednesday. cnbc is reporting peltz who runs the trian fund management has amassed a big stake in dupont. investors have been frustrate with the chemicalmaker's low stock price compared to monday sant yes and basf. when asked about it by andrew ross sorkin, peltz was fairly tight lipped. >> you asked me in the green room about ten minutes ago if you say dupont, what comes to mind. remember i told you? i said paint. >> dupont also declined to comment on peltz's reported stake, but shares responded closing up more than 5%. and you can see the ten-year run-up of 28% there. you also notice a spike in trading volume on dupont between 3:00 and 4:00 p.m. yesterday
5:10 am
when news was first reported. actually fairly significant spike there. nelson peltz wants to shake up the snack food business as well. he wants pepsico to buy mondelez. peltz who played a role in the industry's biggest deal, says pepsico is at a crossroads. he says the company doesn't pursue the deal, it should split frito lay off from its drinks business. speaking at the delivering alpha conference, peltz says he plans to meet with mondelez's ceo but says pepsico isn't too receptive. >> pepsi right now doesn't love the deal. i'm asking all the shareholders of pepsi and mondelez, get your cards and letter out and send them to the board of pepsi and mondelez to back this transaction because, andrew, if the transaction is structured the way we suggest, pepsi, by 2015, our estimates say the
5:11 am
stock is $175. it is 80 something today. >> pepsi says it is confident in its ability to deliver long-term value as a food and beverage company. pepsico hit a new all time high going back to its merger with frito lay in 1965. hugh grieves staying with us. we heard a bunch of stock picks there. you have some names for us. tell us what some of the best players are in your mind. >> some of the most exciting areas at the moment is oil services and a lot of stocks, the evaluations have fallen because of problems that you've seen on the on shore north american market. and everyone talks about the growth in fracking, the growth in shale gas. everyone was fracking crazy in 2010 and the gas price went from $5 to almost $2, back now to $3
5:12 am
and people pulled back on the amount they're spending. until the gas price goes back up, people won't spend again. what happens in 2015, you see exports of natural gas from the united states. and if that happens in 2015, people will start drilling again in 2014 and at the end of 2013. these companies are well positioned for that resumption in growth. >> i think i see your logic on this having covered stocks in australia. it seemed as though in a bull market, the services companies that worked with the big giants were the ones where the money was made. >> yeah. look at big oil today, they find the oil, they finance the development of the fields, but the actual hard work is done by companies like baker hughes and halliburton. not the internal departments of the companies anymore. >> what else do you like? >> halliburton is great. national oil well varco is another name, not directly in the space, but it builds the --
5:13 am
manufactures the equipment for the rigs themselves, on shore or off shore. >> you're staying with us and we want to have a conversation too about small companies that you favor with more domestic concentration. hugh will be with us on the program for a bit. you can e-mail through to us in case you have any questions on some of the stocks as well. dell shareholders set to vote on a $24 billion buyout offer today, but will protests from carl icahn help stop a deal? more on that story after the break.
5:14 am
5:15 am
5:16 am
these are your headlines today. corporate news back on center stage as a raft of earnings is released. german tech stock sap one of the biggest losers in trading so far. investors await nokia's results, pressure on the finnish company to upsales of its hand sets. in tech news, shareholders -- dell set to vote on whether $24 billion is the right price for the company. it is decision day for dell shareholders who are scheduled to vote on michael dell and silver lake's $24 billion buyout offer starting at 9:00 a.m. eastern. opposition has grown with holders of reportedly 30% of dell's stock set to vote no. dell could delay the vote to try
5:17 am
to win more support. but carl icahn, who spearheaded the effort against the buyout, says the vote should go forward. speaking at the delivering alpha conference, icahn says he feels good about his bet on dell and criticized the board as dysfunctional. >> things can be done. i mean, this is worse than, you know, where we had these dictatorships. i mean, you look at dell, it reminds you of a dictatorship. they say things wrong about the company, they got all these lawyers protecting them, and nobody -- they would have got away with it if i hadn't had a share -- a spare 3.5 billion around. >> intel's second quarter profits fell 29%, matching forecasts. though revenues just missed estimates. the world's largest chipmaker is cutting the four-year revenue outlook and scaling back capital spending as it adjusts to the continued slump in pc sales and
5:18 am
economic slowdown in china. intel fell 4% in after hours trade. in frankfurt, down 3.8%. ebay's second quarter profits fell 7% just missing forecasts. though revenue improved boosted by paypal and core marketplace business. however, ceo john donahue warns of economic head winds for the second half of the year. ebay expects four-year results to be at the low end of expectations. shares are down 5.5% in germany. sap shares are lower after they trimmed the software outlook. the group now says 2013 software and related services revenue of 10%. that compared to earlier forecasts in the range of 11% to 13%. the company struck a more positive note on the cloud market, however, speaking first on cnbc interview, the co-ceo said he was especially bullish
5:19 am
on the united states. >> in the u.s., the cloud business is now more than 25% of our total software and cloud business. so you really see how this acceleration to the cloud is happening. first in the u.s. and we're taking a leading role. >> there is a few bears around tech today. you've got a couple of names out there you dislike as well. ibm, oracle and apple. >> i think everywhere in tech there are huge amounts of problems. sap highlights it. you saw ibm last night, had its fiscal after declining revenue and made the number because of the tax and the whole industry is struggling to adopt to a whole world where they can't sell expensive systems or high margins anymore. >> pinpoint the issue further for us. it feels there is competition, margin pressure issue and china story raised today. what is the biggest threat or is it a whole series of things coming together in. >> i think two main parts. one, a lot of the large companies relied on emerging markets for years for a lot of that growth, and not just tech
5:20 am
companies that have the problem. emerging markets will not be the big growth driver for next ten years they have been for the companies for last 20 year and that story is totally different. the other problem is more technology specific in that the world is changing from selling big iron servers and very expensive software on it to cloud-based solutions. you got new companies coming out like sales force.com, workday, which are basically taking sales away from oracle and sap and ibm. >> thank you very much for that, hugh grieves is staying with us. still to come on the show, find out which legendary hedge fund investor is joining the bonds on u.s. housing. we'll discuss that after the break. i want to make things more secure.
5:21 am
5:22 am
[ 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. ♪ otherworldly things. but there are some things i've never seen before.
5:23 am
this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪ the rise in chinia's home prices appears to be slowing. june data shows average new home prices in 70 major cities moderating for the third month in a row. analysts say that's likely due to the current liquidity squeeze. prices were still up 6.8% last month compared to a year ago. market watchers say that underlines the tough challenge that beijing faces in taming
5:24 am
prices without disrupting stability in the market. speaking at the delivering alpha conference yesterday, john paulson said he remains bullish on the u.s. residential real estate market. >> housing starts were up 50% from the trough and that's what is creating a lot of excitement, however, the peak was 1.8 million and we estimate you need about 1.2 million new single family homes a year to meet population growth and replace demand in the u.s. while we're up 50% for the lows, we're still only half what we believe is the long-term trend. >> still with us is hugh grieves, manager at cf mitan opportunity funds. a third of s&p revenues from oversea, we're talking about china, is this china related? is that why you don't want to go near the exposures? >> it is part of a wider theme. a third of the revenues come from overseas.
5:25 am
half of growth comes from emerging markets. so emerging markets slow down, which they are, asking questions about what the growth rate is going to be for s&p stocks. >> so why are small companies with domestic concentration, why not some of the larger companies doe midwee domestically focused. >> you had the rise of the multinational over the last 25 years, coca-cola said i want to buy the world a coke, that wasn't just a marketing strategy, that was their global growth strategy. and that's now coming to an end. >> let me play devil's advocate. larger companies tend to have access to credit markets more in lower funding costs as a result. we're now in an environment where it is probably going to be a slightly high yield environment going forward if qe comes off in the states. smaller companies are, i guess, negative position compared to big companies on this basis, aren't they? >> i'm not sure they are. for larger companies, the top line isn't growing, it isn't growing, doesn't matter what your funding cost will be.
5:26 am
if smaller companies carry on growing the way they do, if they have solid businesses, good cash flow, strong margins, they'll be able to raise financially attractive rates. >> want to give us more names in terms of small companies to look out for, the profile that people should consider? >> one of the names that we get excited about, which we talked about earlier was truly ia. >> you put the details of what you're looking for, a search site. >> absolutely. in the states, two main companies. both growing very fast. and the issue that these companies have this is they haven't owned the listings themselves, they had to buy them in. trulia will be able to own their own listings and take a larger share of the bull market and the sites. >> this is a company that ip oxo'd in recent years and came to the
5:27 am
market. why is this one different than facebook or some of those other companies out there, linkedin for instance. >> what is different about these is you've seen the model work in the uk. you can look at right move and see the model is proven and you can see the tremendous value they add. facebook when it came to the market was a new business. >> and just before you go, can you tell us any holdings in the companies for disclosure purposes? >> we have a position. >> thank you very much for that. hugh grieves, manager at cf cf mitan opportunities. after the break, our panel of experts previews the dell vote. we'll leave you with a look at how futures are trading ahead of the open on wall street. mixed across the charts. still some green arrows for the s&p 500.
5:28 am
5:29 am
5:30 am
welcome to "worldwide exchange." she these are your headlines from around the world. bernanke didn't move markets but corporates around the world are. tech earnings in focus in europe with sap one of the biggest losers as the german software giant warns softer growth in china is hurting sales. >> we see the slowdown of the economy in china affecting the countries around china. we have reiterated our guidance for the full year on operating income, which means we're
5:31 am
managing to the situation in asia. >> challenging conditions in asia also drag on ericsson as the mobile network equipment supplier disappoints with weak second quarter earnings. the market also waiting for nokia numbers with the happened set maker expected to confirm that losses have narrowed. it is decision day for dell as shareholders are set to vote on the company's buyout offer. carl icahn got the last word here on cnbc. >> i've never seen one as bad as this, i really mean it. i've never seen anything where they actually go out and they scare their own shareholders. >> and another big name in investor causes a stir at cnbc's delivering alpha conference. nelson peltz calls for a shake-up in the food industry, urging pepsico to merge with mondelez.
5:32 am
if you're just waking up in the states, and tuning in, thank you for joining us here today. let me show you how we're setting up for the trading session on wall street. we're chasing a mixed picture, a little choppy on the open. still some gains on the board, but the s&p 500, but a little selling anticipated for both the dow and the nasdaq. this comes after we saw some positive numbers by the finish yesterday, supported by earnings number out from the likes of bank of america and yahoo! but so far today, the earnings from this side of the world at least have been somewhat negative. that's been just causing a little bit of choppy trade over this way as well. momentum has picked up, though, just in the last 30 minutes or so. we show you the ftse cnbc global 300 index, you see the curve has slightly improved, though we are off the highs of the session. we're just in positive territory. european markets today, the xetra dax backing in the red is trying to push into the green, but all these weak earnings coming out on the tech front have been very negative for the general market sap in particular with the warning about the
5:33 am
chinese growth story. across the rest of the charts, the ftse still higher by .4% but retail sales in uk suggested there is still a momentum on the high street here, that's been positive for the market, overall sentiment. where we have seen most of the gains has been on the trif peri. ibex 35. just coming back a little bit now, the cac is firmer in front today. the question is how do you make money in in these markets. here is what some of the experts have been telling us this morning. >> the point is, within those ranges it is about the valuation, the fact that peripheral spreads have come in so much that the iryo he is heug above 130. you have the ecb talking dovish and political issues going back to the periphery, at some point you're set up for peripheral expenses to widen back out again, for the euro to pull down to 125 and below that as we get into next year.
5:34 am
>> my concern about japanese corporates is basically that i want to see them repatriating their profits to japan and investing in japan for the medium term. i'm not clear how you're going to do that without cutting corporation tax, which is certainly one of the ideas which has been floating around in tokyo and would encourage repatriation and investment in japan. >> we're still not so upbeat. we're still looking for eps falls this year. my consensus is looking for strong eps growth. in uk, great value place. we like growth, we like emsa as a nonconsensus play. >> it is decision day for dell shareholders who are scheduled to vote on michael dell and silver lake's $24 billion buyout offer starting at 9:00 a.m. eastern. opposition has grown with holders reportedly 30% of dell stocks set to vote no.
5:35 am
these reportedly include vanguard, state street and black rock. here are some of the biggest investors. dell could delay the vote to try to win more support, but carl icahn who spearheaded the effort said the vote should go forward. icahn says he feels good about his bet on dell and criticized the board calling them a dictatorship. >> most of these boards, i mean, they're completely dysfunctional. but i've never seen one as bad as this. i really mean it. i've never seen anything where they actually go out and they scare their own shareholders. i mean, one guy wrote a headline perfect, but he said they scared the dell out of shareholders and they -- one guy wrote it. i didn't write it. i -- i had thought of it. >> icahn says companies can be turned around if you have the right management on board in place. he says he has a ceo candidate in mind if he comes out on top. and here is a look at how dell shares have been performing the last session, drifting off 1%.
5:36 am
just slightly firmer for the last six months but overall pretty plat performance if you take out the peaks. joining us in the studio is the ceo of prequinn and on the line larry officialson. mark, you followed a lot of the deals. what are the chances of success? >> i think it would be a very brave or foolish man who predict the outcome at this point. i think -- >> this is what you don't want to see if you're a private equity company to have the hedge funds against you. >> i think the fact that it is as close as it appears to be means that probably this is their -- the right price, you know. if you look at what dell was trading back in november, december, it was at 9 bucks. it is now 13.65 the offer. the dow moved forward 10%, 15% since that period.
5:37 am
we're looking at a premium of 25%, 27%. it is a significant premium. is it enough? we don't know. and the fact that it is so close, and it really looks very close, means it is probably thereabouts. >> larry there is some dispute on the pricing. you make the point, you look at carl icahn's bid, perhaps it isn't the highest offer if you take out the pricing of the warrants, $20 is, you think, a little far fetched if you look at the metrics. >> i think the $20 warrant is way far fetched. i think the $13.65 is more than a fair offer because if this thing went to appraisal in a delaware court, it could be in the $6 to $9 range. we're talking about a business that is in total decline. 50% of the business was in the pc business. that market is declining and going down. so the truth is, i don't think dell could actually exist on their own. i think they have to go private instead of the markets because they'll continue to tank. i think somebody like a cisco or oracle needs to come in
5:38 am
eventually to go private and bring back public is the only way because they need to roll it under them. the perception of dell is bad. and if you look at the numbers, look at the perception, i don't see the turn around. nobody is talking about what is the turn around story here. and that's the problem. >> i totally agree with larry. i think you -- we heard this morning about the weakness in tech earnings, globally, you know, today. if anything, that's, you know, going to encourage some of the waivers toward excepting more than rejecting. don't know if it is going to happen but it is good news rather than bad news for michael dell. >> does anybody feel about the future of the company now? >> this has become a trader's delight. what is going to happen is, you know, the stock could go down and you could see some heavy shorting if this doesn't go through. and then the shareholders could really get hurt here. so, you know, it is a real problem. i think if they take the deal at
5:39 am
the $13.65, they can get out of the public limelight and shareholders will get some value. if it doesn't, it can get a lot worse. >> give us the flavor on the deals that silver lake has done in the past and what they're likely to do if they do get to success with the dell deal. >> absolutely. the dell deal is clearly a very big one. but other than the sheer size, this is right up silver lake's street. what silver lake does is invest in big, mature tech businesses and they do that very, very successfully. they're a big firm. they raised 27 billion capital over the last ten years. they got 12 billion of dry powder. it is a big deal, but it is not out of the ballpark and right up their street. so it is an interesting deal. >> larry, you think this deal will go through today. >> i will make a prediction, i think the deal will go through. i do. i think the whole opposition was
5:40 am
looking for them to come in at a higher price and take it down to a higher price. i think the deal will go through. i believe it is the right deal and i believe if they peel it back, and they look at the actual business this is the only way that they can go. otherwise, they'll spiral downward. >> quickly, mark, is the window closing on these types of deals? you got the fed talking about tapering. do you think time is closing for these types of deals to get ahead? >> absolutely not. i think we're seeing an uptick in deals. i think in first half this year we have seen 146 billion of buyout deals, roughly the same volume of exits. i looked at some of our data and in terms of deals above $1 billion, buyout deals, how many do you think there have been historically? i'll give you the answer. over 1,300 deals above a billion. deals above 10 billion, 49. so this is the big deal, but not
5:41 am
out of the ballpark. interestingly of the 49 deals by which i mean bids and completed deals, 23 were completed. so the batting average is about half get completed. >> i was looking at a lot of your data earlier when we in berlin, a lot of leverage deals playing out in the states, in particular with the sentiment across europe was weak. thank you for coming in to join us today. elsewhere, the activist shareholder nelson peltz made some waves at the delivering alpha conference on wednesday. cnbc's reporting peltz who runs the trian fund management has amassed a big stake in dupont. and investors have been frustrated with the chemicalmaker's low stock price compared to rivals such as monsanto and basf. when asked about it by andrew ross sorkin, peltz was fairly tight lipped. >> you asked me in the green room about ten minutes ago if you say dupont, what comes to
5:42 am
mind. remember what i told you? i said paint. >> dupont also declining to comment on peltz's reported stake. but the shares responded closing up more than 5%. it also noticed a spike in trading volume on dupont between the hours of 3:00 and 4:00 p.m. eastern yesterday as significant spike when you look across on the bar chart, when the news was first reported. peltz wants to shake up the snake food business. he's calling for pepsico to buy mondelez for about $35 a share in a deal worth more than $62 billion. peltz, who played a role in the industry's biggest deal, says pepsico is at a crossroads. he says the company doesn't pursue the deal, it should split frito lay off from its drinks business. speaking at the delivering alpha conference as well, peltz admits he can't compel pepsico to make the transformational deal.
5:43 am
>> you've talked about this. >> i have. >> my understanding through my own reporting is you a meeting planned with irene rosenfeld, the ceo of mondelez in the next couple of weeks. >> i do. >> what has been the response from pepsi? >> okay, pepsi right now doesn't love the deal. okay. and i'm asking all the shareholders of pepsi and mondelez get your cards and letters out and send them to the board of pepsi and mondelez to back this transaction. >> pepsico says it is confident in its ability to deliver long-term shareholder value as a food and beverage company. mondelez says it looks forward to meeting with peltz. mondelez shares rose 2.1% on wednesday, pepsico hit a new all time high going back to its merger with frito lay in 1965. peltz also had some harsh words for the mondelez brand name. take a listen. >> the name mondelez i hate. okay. i think that hurts us in two multiples of pe, okay. and then -- >> really?
5:44 am
>> oh, it sounds like a disease. suffering from mondelez. >> can a name make or break a company? if you want to join the conversation on "worldwide exchange," get in touch with us by e-mail at worldwide@cnbc.com. just a background for you, you may know a whole bunch of these names under the mondelez banner, cadbury, trident, chips ahoy, is mondelez the right name to represent those brands. also twitter, our handle @cnbcwex or get in contact with me dire direct @cnbckaren. some big names in tech are calling on the u.s. government to shed more light on its secret surveillance programs. more on the specific demands coming your way next. [ male announcer ] it's time.
5:45 am
5:46 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.
5:47 am
corporate news back on center stage as a raft of earnings is released. german tech stock sap one of the biggest losers in trading so far. investors await nokia's results, pressure building on the finnish company to upsales of its hand sets. and the tech news continues, shareholders and dell set to vote on whether $24 billion is
5:48 am
the right price for the company. several tech giants are teaming up with civil liberties groups to demand the u.s. government shed more light on the secret surveillance programs that were uncovered last month. cnbc's hampton pearson is live in washington with the latest. hampton? >> hello, karen. apple, google, microsoft, yahoo! and twitter are part of a broad alliance of tech companies investors and nonprofit groups that are expected to send a letter to president obama and congress today. they're urging the the u.s. government to ease restrictions that keep companies from reporting the number of surveillance requests they receive from intelligence agencies and law enforcement for national security reasons. it is the most sweeping push to bring more accountability to governments buying in the wake of last month's revelations by nsa leaker edward snowden on the top secret collection of phone and internet data specifically the companies are asking it be
5:49 am
allowed to regularly report on the number of individuals, accounts or devices for which information was requested. and the number of requests seeking the content of e-mail or phone conversations. this coalition is also asking the u.s. to start issuing its own transparency reports. the letter published in today's washington post says, quote, this information about how and how often the government is using these legal authorities is important to the american people who are entitled to have an informed public debate about the appropriateness of those authorities and their use. now, the move comes amid rising concern on capitol hill about the nsa's programs. at a hearing on wednesday, several house members said they sent a letter to attorney general eric holder and director of national intelligence james clapper asking they give companies more room to publicly disclose information on surveillance requests. the story continues to grow. karen? >> hampton, thank you very much for bringing us the latest
5:50 am
there. coming up, morgan stanley is set to report second quarter results in just about an hour's time. will fixed income be a sore spot for the bank as it has been for rivals? we'll preview the numbers next. ♪ ♪ [ male announcer ] some things are designed to draw crowds. ♪ ♪ others are designed to leave them behind. ♪ the all-new 2014 lexus is. it's your move.
5:51 am
a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel.
5:52 am
delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ let's catch up with european markets. it has been a rather choppy trading session. tech numbers have been suitably weak across the charts and a lot of optimism coming up to earnings that europe would have an okay season as so far with the slim number of companies reporting. there have been beats and also in line with expectation numbers. today has been a disappointing one, which is why the german market is lagging because many of them are listed, so we're just on the flat line currently. holding on the ftse, the ibex
5:53 am
has been one of the strongest performers on the periphery. .7%. u.s. futures have been a little choppy this morning as well. the nasdaq showing some negativity, but the dow building, moving to the green, with the s&p 500. these mash et markets tracking yesterday. yahoo! giving the stock market a bit of a boost. speaking of banks, another big day for u.s. bank earnings with morgan stanley leading the reports before opening bell. the company reports second quarter numbers at 7:15 a.m. eastern. analysts expect the bank to underwhelm because of the ongoing troubles in fixed income trading, which hurt the industry due to the sudden spike in interest rates. joining us on the phone, from portland, maine, gerard cassidy. set the scene for us. what are you expecting from morgan stanley? >> i think we're going to see some strength in their equity business. that's always been the area that
5:54 am
they have had success in. if you look at citigroup's numbers that came out last week, very strong in the equity trading area. we expect to see possibly the same for morgan stanley. we also expect to see the stronger investment banking fees. all of the companies, goeldmald morgan stanley, all reported strong banking fees. >> you've done a chart and if you look at the first quarter, the quarter by quarter comparisons for the first three months suggest the numbers were declining for most of the investment banks, but the second quarter, the numbers we're now looking at, seem to show an improvement, so what is different? >> i think what we saw in the second quarter and you pointed it out up until the last month of the quarter it was a very robust quarter for dead underwriting and then the markets fell apart after the chairman bernanke spoke about the quantitative easing tapering off later this year.
5:55 am
but up until that point, the underwriting business was very strong in the fixed income markets and equity markets was also pretty good. >> going forward, what is the expectations? if you look at the equity perform apance for one, it has n a remarkable time as investors trade on the tapering talk and also trying to get in on market rallies. equities going to be the area that will be supported for banks for the rest of the year? >> i think it might be. the reason being is the u.s. economy continues to grow and there seems to be an increasing confidence, not only with consumers, but with businesses. and we're already seeing the ipo calendar start to build up here in the month of july and the third quarter is starting off, though we had a rough fixed income market on the equity side it is starting to pick up again as we're seeing by the daily -- the daily action in the markets. >> a quick one too, emerging markets a concern. this is raised with the citigroup earnings. is this what investors are
5:56 am
looking for? >> i would say that the emerging market was a volatile period for the month of june, citigroup in particular navigated it very successfully, even though there was some very volatile moves during that period. i would say people are not avoiding it. they know it is volatile and they have been around the big investment banks in the countries for years. i think you'll see them continue to have a real presence there, because that's where the growth is over the long-term. >> thank you very much for gerard, setting us up for morgan stanley numbers. nokia releases second quarter earnings in just the next couple of minutes. this comes after a week of showcasing its latest lumia hand set with the 41 megapixel camera. this has been seized upon by the analysts. dow jones expect the hand setmaker to narrow losses with an average net loss of 276 million compared to 1.4 billion euros the same period last year. stick around for the numbers coming your way shortly.
5:57 am
thank you very much for joining us. european viewers, remember, live breaking analysis of nokia. thank you for joining us on "worldwide exchange."
5:58 am
5:59 am
good morning. ben bernanke returns to capitol hill to face another round of questions about monetary policy. a mixed story on tech. shares of intel falling, while ibm rallies after both companies report their quarterly results late yesterday. and delivering alpha, nelson peltz, carl icahn, john paulson and many more sharing their best ideas with cnbc. it is thursday, july 18th, 2013. we want to wish becky a very happy birthday. i think it's -- it's her eighth
6:00 am
or ninth, maybe seventh birthday turning 29. "squawk box" begins right now. ♪ you say it's your birthday it's my birthday too yeah ♪ ♪ you say it's your birthday >> thank you, guys. thank you, joe. thank you, andrew. good morning, everybody. withing to "squawk box" here on cnbc. i'm just going to read right over you. >> can't wear your birthday suit for you today. >> oh, i did. i'm becky quick with joe kernen and andrew ross sorkin. today's top stories, fed chairman ben bernanke heads back to capitol hill for second day of a semiannual monetary policy testimony. he'll be appearing before the senate banking committee. speaking before the house yesterday, bernanke reiterated that the fed would likely begin tapering later this year, but he also stressed policy would remain accommodative. >> we're using asset purchases and the resulting expansion of the federal reserve balance sheet, primarily to increase the near term

189 Views

info Stream Only

Uploaded by TV Archive on