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tv   Worldwide Exchange  CNBC  July 31, 2013 4:00am-6:00am EDT

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watching "worldwide exchange." i'm ross westgate. shares sharply higher. general motors is progressing more quickly than plans. shares of schneider electric trading higher. confirmed a $5 billion friendly takeover of the british engineering group inventis. super mario and friends struggled to sell wii consoles. the fed wraps up its two-day
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meeting. new gdt shows the u.s. economy slowed on an annual basis in the second quarter. okay. welcome to the program. plenty to get through today. plenty to talk about. coming up on today's program, india's biggest private bank reports. find out if the financial giant is weathering economic head winds in its home market. we'll be in mumbai. with the countdown to the fed's decision under way, we'll hear from one gold bull who says ongoing qe could support the precious metal. j.j. burn will join us from the states. and gdp growth, fred hawkman will be with us 11:40 cet.
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french carmaker peugeot, we'll have expert analysis from paris at 9:45. all of that coming up. we'll start off with earnings. bnp paribas slipped by 4.7% from a year ago. the drop smaller than expected. stock is flat in paris. let's get more on that. stephane is with us, he's been speaking to the ceo. stephane. >> good signal for the earnings season in france. bnp, the first bank to report for the quarter. expectations 1.8 billion euros for the net profit on the quarter. stronger than expected driven by the retail banking activity of 1%. investment solution also was dynamic, up 3.4%. and the corporating investment banking, almost flat on the
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quarter, with 0.4%. bnf confirms its final strength, one of the highest solvency ratio in europe. 10.4% at the end of the quarter. for the first time, the bank disclosed its leverage ratio. it is 3.4% and that's already above the regulatory level of 3% which will come into force only in five years. i caught up with the ceo of the bank for an exclusive interview. he told me he's not worried about the new round of stress tests in europe, from the european central bank and also about the banking unit. >> it is a complex move. it is essential. it is going to change the banking industry in europe and has to be done progressively, like you're doing in integration between two companies when you are merging bnp paribas with
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others, you need -- when you're merging 17 different regulatos,s it is not that big, that strong. totally normal to have those steps to understand everything step by step, and we're quite confident this is going to give additional strengths to the union, to the banking industry in europe. so we're very much in favor of that move. >> talking about regulation, do you think that regulators are putting more pressure to raise additional capital? >> it is difficult to say. we do not have any request in that respect, very high level ratios in terms of leverage ratio, for basel 3, ratio we do not feel any, i would say, complex or difficulty. we do not need to raise capital.
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>> interesting announcement also from bnp paribas. after three years of deleveraging when the bank reduced the size of its balance sheet, it is time to grow again. bnp paribas will expand business in germany, planning to raise its targeting revenue 1.5 billion euros out of the country. it is going to hire 500 people in germany. and it is also going to expand its asset management business by 10% over the next three years. so we're talking expansion again, ross. that's a good signal. >> yeah, interesting. the carmakers as well, stephane, with peugeot, this morning. we know, look, we know european car sales have been really tough. better news this morning. how are analysts seeing it? >> yeah, well, peugeot was still unprofitable on first half of the year. 426 million euros of net loss. but it is a sharp improvement compared to last year. on the first quarter last year, the net loss was above 800
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million euros. so it's been divided by two. in a statement, peugeot says the restructuring plan is going quicker than expected, and that there were some early signs of recovery for the company in the first half of this year. peugeot also is planning to reduce its negative cash flow by more than 50% this year, which is a bit more optimistic than the target to bring the negative cash flow to 1.5 billion euro this year from 3 billion euro last year. so that's good news. for the next year, the company is expecting very significant cash reduction and also there was a positive announcement yesterday evening, the european commission approved the support from the french states. it gave its dreamline for the french state to provide a financial guarantee for the financial need of peugeot. so all and all, better target for the negative cash flow and financial support from the state, that's the reason why the stock is where it is today.
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>> we'll be talking more about peugeot during the course of the program. let's talk about diageo, stock down a percent, but new strength in u.s. allowing the spread group to allow 5% in net sales for the fiscal full yoear and increase dividend. double digit growth in the emerging market may be hard to maintain. >> the emerging markets are going to be a rocky road. just in the results we have declared, brazil has been tough, nigeria is tough, china and india slowed down. however, we have still been able to grow at 11%. >> okay, that was diageo. the world's biggest beer brewer ab in bev, the sock up 6.8%. the maker of budweiser. eads up 1.7%. they're actually now renaming the group, air bus group, a
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major reorganization of the business. they reported a better than expected underlying profit for first half and raised its 2013 aircraft order target by 25%. we'll be getting rid of that name. and bayer today, it has admitted it is increasingly ambitious. the german company says four-year targets are more challenging because of conditions in plastics and chemicals markets. the second quarter adjusted came in just shy of forecasts. we'll speak to the ceo of bayer at 11:00 cet. that's the earnings. how does that play into the general equity session? we're cautious. around about 6 to 4. sorry. 6 -- yes, 6 to 4. 3 to 2. european equities flat to negative this morning as we opened up for trade.
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not quite at the session low. about an hour and eight minutes into the session. xetra dax is down about a third of a percent. disappointing retail sales numbers out today. german retail sales down in june, the biggest drop this year. ibex is down .4. cac quarante down about a third. now, inventis and schneider electric agreed to merge in a $5.2 billion deal. schneider says the takeover should allow cost energies valued at $200 million, the stock up 1.8%, schneider up 3%. i think investors feel they were lucky they didn't get involved in a bigger bid battle. and we'll have an exclusive interview with the schneider chairman and ceo. bond markets, we're in a wait and see. we have the announcement of the fed's meeting today. plus, u.s. gdp, second quarter
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gdp figures and adp as well. portuguese yields just below 6.5%. treasury yields, 2.6%. ten-year gilt yields, 2.3%. currency market, euro dollar around 1.3280. dollar/yen, below the 98 mark. aussie/dollar, back down to the 24-month lows at .9041. that's the european session. let's recap the asian trading day. li sixuan with us from singapore. >> trade in asia with mixed markets reflecting caution over what the fed might say about the tapering timeline. nikkei was the worst performer in the region, down 1.5% today, with a stronger yen weighing on exporter stocks. china markets trimmed some early gains, but still ended in the
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green. overnight, beijing promised to keep growth steady and fine tune the economy in the second half. the shanghai composite g gained .2% today and wrapped up the month 1% higher. the hong kong market taiex and south korea under pressure today. in japan, hitachi shares got a boost, closing higher by nearly 3% in today's session after raising its first half profit outlook. batterymaker gs yuasa soared over 7% thanks to better than expected quarterly results. but taiwan's htc took a beating, down almost 7%. the smartphonemaker had little sign of a turn around anytime soon. in china, property developers were the top gainers today as the company's politburo sounded a positive tone yesterday about promoting healthy development of
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the property market. china merchant jumped more than 4% today and the other two smaller players, they surged up by 10%. back to you, ross. >> all right, sixuan, catch you later. the fed is wrapping up its two-day meeting with a decision expected at 2:00 p.m. eastern. fed watchers will be looking for any clues on when central bank may start its tapering bond purchases, but they will stress any action, still conditional on the economy improving. a first glance at second quarter u.s. gdp today. growth is forecast to rise .9%, down from 1.8 in first quarter. that weakness is expected to be temporary as growth we think was held back by the sequester budget cuts that kicked in on march 1st and carryover from the payroll tax hike in january. we spoke about diageo, the new boss optimistic on growth in the united states. >> i love our north american business. it is very well positioned for
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the demographics in that marketplace. spirits are growing. and premiumizing and today generates over 40% of our profits. this is a real engine for growth for us. >> all right, joining us with his thoughts for next half hour, paul cavanaugh, senior market strategist at killen and coe. what do you make of diageo right now? >> it is interesting. only six months ago we were all excited about companies like diageo for their emerging markets growth. but that's certainly not the news of today. the news today is the growth has largely come from their north american department. they made a big point about the fact they're spending an additional 5% on marketing this year xeered ed compared to las. they have seen a 10% growth in the u.s. and cutting back in europe and the emerging markets. so quite a big transition. >> sort of reflects where the growth -- the fresh growth, the marginal change in growth has come from is north america.
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>> well in fact, you can take the story wider and say this is how corporates are managing the global problems at the moment. they got that ability to be able to sort of transition themselves around the world, and focus on those areas of growth and just rein back the spending where obviously things are flat lining. overall, good set of numbers. i think what was more cheering is not necessarily the line, but the ability to grow the operating profit through pricing -- pricing -- positive pricing and better mix. >> it is -- i sort of think of the likes of diageo and unilever, consume er focus, glol markets, are these -- they generate a lot of cash, sustainable dividends, one supposes. these sort of nice, solid -- >> they are. what we have to recognize is that all of those companies you mentioned, because of their stability, predictability, their price earnings ratios now are up towards the top end of the range. the reason for that is that people are looking not
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necessarily at dividend yields, but the earnings yields of these predictable earnings streams. and where they're coming to a little bit of buffering recently, particularly unilever, has been the fact that the u.s. ten-year yield has pushed up from u to 2.6%. and as all of these asset classes are relatively priced, that has created a little bit of a head wind towards the higher price earnings ratio. so where macro meets corporate, today could be very interesting. >> you mentioned the macros. clearly waiting for the fed today. gdp numbers, marketplace worried if there is a push-up in treasury yields. >> i think overall today is going to be less interesting than probably the previous two and indeed how september pans out. these gdp numbers today are not going to be, i suspect, that inspiring. but as you pointed out earlier on, there has been some head winds to the economy this year that should begin to unwind and growth is forecast to accelerate going forward.
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what would be of more interest, i suspect, is how they calculate gdp. there are changes taking place and we may hear a little more about that today in terms of new presentation. and also in terms of qe programs, while i think the real focus is on september, there are some outliar bets out there as to whether we'll be discussing a tapering program at some point, even today or over the course of the next few weeks. >> paul, thank you very much for that. stick around. more to come from you. official, schneider electric and invensys are parg iring up. we'll get more on that merger today. [ 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.
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right. invensys and schneider electric agreed to merge in a $5.2 billion deal. shares in both companies are higher. stephane has the breakdown on this. have they snared their target? >> 3.4 billion pounds, that's the price schneider will take for the british company, the french group is offering 5.2 pence per share in cash and shares. that's a 14% premium on the closing price of july 11 that was just before the story became
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public. invensys shareholders will receive 372 pence in cash, plus 0.0529 new shares of schneider for each of their existing shares. in a statement this morning, schneider said that the deal will increase its services to customer. it is going to expand its business, its exposure to north america, and will give the group the opportunity to sell more low voltage devices, that's the statement. schneider is targeting 160 million euros in operational annually by 216 and significant tax savings, 400 million euros for first five years of the acquisition. the integration will have an impact on the earning per share. schneider is expecting a low to midsingle digit cash eps, earning per share, in 2014. market reaction very positive.
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ross, we'll have an exclusive interview with the head of schneider, jean-pascual tricoire. see it tonight in "closing bell." >> catch you later. what do you think of the significance of this deal? >> i think invensys was always a sitting target. they resolved their pension issues, they saw some of the noncore businesses, they ended up with a focused and valuable asset. i'm surprised others haven't thrown the hat in the ring on this, names like anderson have been very active in this market in the past, on the m&a side. it is not too late. they have tabled their bid at the moment and for holders of invensys, it is pretty relaxed now to hold the stock in the event that as we see from the screen there, schneider shares are up 3.7% today, there is a shared element to it, which will take the stock a little higher than that headline 502 figure. and as i say, i suspect that
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over the next week or two there may be rumblings of somebody else. >> that's what we presumed when it was announced. haven't heard anything yet. >> no. for anybody who is interested, i'm sure they want to see somebody make the first move. so as i say, i think that while i don't think the chances are sort of short, i think there is still a chance somebody else entering the fray. >> there is -- there seems to be more big deal m&a going on. you think that will continue? >> i think the environment is conducive for a little bit more m&a. as we go through the q-2 season, what we have seen is that there are more head winds towards the revenue side of the profit and loss account. certainly earnings going forward, coming in slightly better than expected, better cost control, which is continuing to extract out better profits. stock prices are also better valued now. we had a stock market that is up 20% or so year to date, or over the course of the one year.
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as more confidence enterz the stock market, it means management has to look. if you look at the invensys still, they were highlighting 400 million pounds worth of revenue synergies to bring to bear on that. as it goes to the revenue side, you'll look at bolts on acquisitions and possibly mergers that could be defensive moves to try to protect the pnl. >> all right. stick there. we'll come back. little bit more to talk about, including earnings. taylor wimpey, the company posted a 42% rise for first half of the year. the stock in the company up
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nearly 2%. quick word about this, paul, they said benefiting from the government's housing scheme, are we going to have too much of a good thing? >> i think housing transactions still remain pretty low. the thing about these house builders is they are taking increasing market share. as house prices are falling across the country, it is much more difficult for the secondary market, people selling homes, to adjust to that environment. they probably still have two inflated expectations of what the house is worth. a new house builder can adjust the build to accommodate lower prices. they are taking market share at the moment. and as we have seen, government so much behind the building of new houses and start to stimulate that past the economy in the same way the us has done. for the companies, they're in this weak spot. >> i know mine's worth $10 million at least. >> absolutely. >> i've seen it. it is. >> yeah. it is the moat that costs -- where the value is. bank earnings back in focus
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again tomorrow in the uk. lloyds reports on thursday, followed by rbs on friday. and we also, of course, have barclays yesterday. your view, just on the uk banks, we think the government will -- i think it has been up 40% this year. what is your pick of the bunch? what do you like? what do you avoid? >> lloyds is the pick of the bunch at the moment. they certainly seem to have got their house back in order at the moment. they're well capitalized and the cost cutting program has obviously benefited the group. i suspect when we hear later this year they prefer the cost cutting and what we're also looking at is a pretty high distribution ratio on dividends coming through over the course of the next couple of years. it is a very stabilized picture from lloyds. in contrast, royal bank scotland has a lot of work to do. as we know, they're without a boss now as steven hester is going to be stepping down. so there is a little bit of uncertainty around who is going
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to take on the reins with that group. and it has a lot of work to be done on the investment banking side. we're seeing investment banking contracting right across the -- >> and the bid, still seems to be a groundswell of political support for breaking it up, turning it into a community bank, and all things, if you do it, we should have done it four years ago. >> absolutely. and, of course, it is that level of uncertainty that still really evades over the rbs group. lloyds very much, the uncertainty over the government's stake, i was interested on barclays yesterday, sort of nipping in there, with their rights issue. intriguing fact is they're itemitem actually not launching that rights issue until the autumn but made the announcement yesterday. for the underwriters they're on the hook for a reasonable period of time here. while that is under way. but it feels like barclays stole the thunder in terms of that capital raise ahead of what is expected to be --
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>> paul, good to see you. thanks very much for that. paul cavanaugh at killik and co. facebook shares closed higher yesterday. the stock is now more than 40% its reporting earnings last week helping to silence many critics of the social network. we want to hear from you. after this rise, is facebook valued, have you missed the boat? join the conversation on "worldwide exchange." get in touch with us at e-mail,, tweet us at @cnbcwex or direct to me @rosswestgate. peugeot, spending cuts starting to pay off. we'll talk about that and other carmakers right after this. ♪
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and these are the headlines from around the globe. the french automaker reveals its turn around plan including general motors is progressing more quickly than planned. plans to rebrand the group as airbus in a bid to raise competition with boeing. this as they report a better than expected underlying profit for the first half. in japan, panasonic profit jumps
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thanks to a move away from consumer electronics. and the fed wraps up its two-day meeting today, new gdp data is likely to show the u.s. economy slowed in the second quarter. european equities are a little softer today. there is a bit of a risk, mixed really. really caution involved in currency markets as well ahead of the fed, results of the fed meeting and q-2 gdp or gdp data out of states as well. that's reflected in yields. ten-year higher, 2.6%. currency markets, dollar/yen, below the 98 mark. pretty much where we closed in european trade on friday.
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sterling slightly weaker, 152 handle. turn around for some japanese consumer electronics group, but for panasonic, it may be due to their exit from the space. they beat estimates jumping 66% as it targets industrial consumers like the auto sector and pulls back on some consumer offerings. nintendo stuck to its guns when it comes to wii consoles. despite meager first quarter sales, it expects to sell 9 million this year. super mario gamesmaker narrowed its operating loss and squeaked out a net profit over the quarter. joining us for more, alex simmons, uk editor in chief of the game website, and ed rogers, ceo of rogers investment advisers. alex and ed, welcome to you both. alex, let's talk with you, and talk about nintendo, swinging to a profit. how concern ready you about the sluggish sales of the wii you
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console. >> the console has been out for almost nine months now. and in that time, the problem we have seen and this is what i think is probably down to the slow sales is just aren't that many games for it. there are not many reasons for you to go out and buy a wiiu. the games are coming, my concern is it may be too late. >> by the time they'll come, you'll have fierce opposition from exports, playstation 4, a lot of choice out there. >> this shows you actually the games are more important than the consoles? >> i think they go hand and hand. nintendo has a rich history and strong brand support for games like mario, zelda. what we have seen is probably for the first time one of its consoles launching without one of those key titles to support it. as i say, they're coming, but they're not coming until christmas.
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>> where are they in competition with sony at the moment? >> if you look at nintendo being supported by the 3ds handheld console. that really is supporting it. in terms of the home console unit, it is struggling against the likes of -- >> should it be reinventing itself and offering games for tablets, smartphones, other platforms? >> i think that's some way off. despite the kind of rise in competition from ipad, iphone, et cetera, it is still holding its own in the mobile market. it offers something different in the 3ds. >> let's bring you in, as well, i mean, intenintendo is keepingt of its cash in foreign currencies. the weaker yen inflating paper fwan gains on its reserves and leads to losses. how important is what the yen is doing at the moment for all companies, not only the tech
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space? >> well, sort of across the board we think we have seen the major boost in foreign exchange earnings come already when we move from 75 up to the 100 level and we expect the dollar yen to stay in the 95 to 105 range. we think the major gains that were to be had from foreign exchange have been had for moment. so now companies are going to start to be evaluated on a product by product basis, on an earnings by earnings basis. so sort of back to the orth nall comments, it is what it's in the game that will help itself. >> look, how would you compare from an investment point of view, so much going on around sony at the moment as well. getting a lot of pressure from their biggest shareholder right now. what do you make of the tech guys in japan? >> the tech space in japan is interest interesting. the fact of the matter is the rising tide of abenomics will
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not lift all boats. it will lift some boats and it will really demonstrate that other boats have major holes in them. sony is a corporation with a great history, but the recent history is not one of outstanding management and not one about outstanding product delivery. so can that be fixed? certainly it can. are they taking steps to fix it? i don't know. it is a very interesting situation with dan and how that's going to play out. we think that what we're starting to see now is a lot of differentiation among the companies themselves, who is going to be a winner and who is going to be a loser is very much driving individual price movement. >> at the end, they have to make great -- they make great products that we want to buy, better than everybody else and reliable. they got to go back to trying to crack that egg, design and function. >> sure, but we live in a
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different world now. it is not just about manufacturing a great product, it is about understanding how that product fits in. so, you know, as a proud father of four children under the age of 11, super mario brothers is a fantastic game. the children love it. the question of whether that's going to be successful is can you now expand that, the platform for using that game across the kindle, across all these different products for delivering it. sony has to figure out whether they're a television company, well, that didn't work very well. are they an entertainment company? maybe they are. but the message is really not clear to the market of what they're trying to be good at and what they're going to be excellent at. just making a walkman type product isn't going to move the needle for them anymore. they have to have a product like that -- they haven't had a product like that in decades. >> what do you think they should concentrate on? >> if you look at what they have done with their structure in the last few years, the guy who
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headed up playstation heads up the whole of the consumer electronics department. if they can merge and make things like playstation integral to the tv, so you get maybe a built in playstation with the tv, that's the excitement for playstation comes in and the lead over it has x box and nintendo. >> thank you for that. we'll talk a little bit more about autos. big day for japanese auto da and sub aru all reporting. the weekly yen and recovering sales in the u.s. lifted japanese automakers earnings to record highs in first quarter through june. mazda said its profits jumped by 24 to $367 million. its highest ever q-1 earnings. about 70% of the company's
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vehicles are produced in japan, a ratio higher than rivals. sales of subaru cars increased abroad, especially in the u.s. but honda's net profit sank 7%, despite a 5% increase in operating revenues. it booked exchange losses on foreign exchange contracts which overseas sales could not cover. mazda and honda kept their forecasts unchanged, fuji banked on a more profitable future, operating profits operated by 10% to $2 billion, up by more than 60% from the previous year. that's all from nikkei business report back to you, ross. >> thanks for that. ed, that's the view. what do you make of the auto
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sector? >> well, for a good two years now, we have been pounding the table about the attractiveness of the auto industry globally. and in particular for the superior japanese car manufacturers. cyclically, you have the united states now moving back to replacing the 11-year average age car. we're going to maybe hit 15, 16 million units in the united states this year from a low tick of 11 million. china is on a run rate from 22 to 23 million units of car purchases. you've got asian significantly increasing the purchase of cars. the car story is the story of the rising middle class in asia, and the recovery of the middle class in the united states. and that's a wonderful story. so we think that it will continue to see some very strong numbers out of the leading car manufacture manufactur
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manufacturers. >> clearly, as you say it would apply to them, the yen story, they have seen the benefit of that. what is interesting in the states is how well the u.s. manufacturers are still doing in sort of the truck division. they seem to be applying a lot of pressure on the likes of toyota in that space. does that worry you? >> well, the pie is getting bigger. truck sales in particular have been driven by the shale gas story. a lot of construction going on in the united states related to that space. and that specifically has driven a lot of truck purchases. the u.s. car manufacturers have made a significant comeback. there is no doubt about it. >> rather than trucks, i meant the suv, the pickup trucks segment and suv segment is what i meant, rather than loris. >> sure, okay.
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the well, again, the united states surprised a lot of people with the strength of the car industry there and domestic manufacturers making a significant comeback. we don't think they're necessarily going to entirely displace the toyota, however, in the long run. >> all right. ed, good to see you. thanks for that. ceo of rogers investment advisers have a good night there in tokyo. we'll stay with the autos theme. vw said it seized 2013 operating profit. at the same time, peugeot is topping the stock 600. the group one of the most shorted stocks in france said it cut its net loss by half in the first six months of the year. they now aim to reduce the pace it burns its cash by half. on tuesday, the european commission included the financial assistance that france
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has given peugeot, doesn't conflict with rules on state aid. thomas joins us on the phone from paris. thomas, okay, look, better news for peugeot. still not making money. are you confident they can turn things around enough? >> no, we're not. in our view ton the cash front, they finally massively reduced the amount. in the first half, they reduced by more than 700 million euros, which was more than the target they had for the full year at 600 million euros. it also helps by big capital swings and factoring of the subsidiary. if you look at the underlying, it remains with investors from a fundamental standpoint.
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there continues to be loss-making in most regions. >> the stock has been extraordinary. i think we're up yesterday at 65% or 40% in nearly a month. is that short covering and what does it mean now? >> i think it tops european carmakers to date. peugeot sales have lost more than 85% of their value previously. that move still puts the stock at a low level compared to historic levels. it is behind the share price move the last month, and has been short covering, speculation around personal changes on the shelving structure and you've probably seen reports of the company seeking cash in all kinds of respects, and eventually seeking partners.
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and the final, the fact we are finally seeing clear signal that we could have a european automated cycle as we have had for the last three years. european demand, european production has increased lately and with consumer confidence rising from the past levels, this is the very strng suppoong for the european sector. and concerns moved from europe to emerging markets, china in particular. all companies have done fairly well. and peugeot can be seen from the outside as a possible european recovery. i think the key reasons for the move and specifically over the last month. >> vw has come out and said first half operating profit of audi luxury division down 8%. underlying earnings of the core
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passenger brand down. you think they're being overly cautious, do you? do those numbers concern you? you have a buy rating on the stock. >> yeah. we have buy ratings and reduce on peugeot. on vw, q-2 results, ahead of expect takings as you said earlier and the cash flow was very strong, despite rating capex, different story. 6.6% growth margin. only declining slightly from the third quarter last year. the company is still going through the implementation of a major industrial change in its systems. the famous mqb system where they will be producing a vast majority of the vehicles in the coming years and one of the
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reasons why, we see peugeot in this industry. >> thomas, thanks very much for that. good to speak to you. let's stay in france. the eads confirms the decision to rebrand. the announcement comes at the company reported a better than expected underlying profit for first half. it also raised its 2013 aircraft order target by 25%. stock today in paris up over 2%. in india, a fairly good run. the company did post a fall in its june kwert profits, the stock up 66%. 9.6% drop wasn't as much as forecast thanks to better operating profits in its domestic market. it continued to post losses abroad, especially in its
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african operations. and more loans and stronger revenue from fees and commissions helped india's second biggest bank. icici bank was up 25% on the year, which was in line with estimates. the stock is down around 2%. we'll take a short break. still to come, silvio berlusconi's trial spills in a second day. will the disgraced politician avoid jail? we'll have the latest from milan.
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shares of htc down 7% today after issuing a sales warning for the third quarter. the firm says revenue could drop by 30% from the second as it struggles for market share in the competitive high end smartphone business. profit margins were shrinking and other costs were rising. the same time, analysts said that htc is the latest casualty of the smartphone wars and will struggle to reverse fortunes. get that story on you can also follow us on
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twic twitter at @cnbcwex. the ndrc says china needs a strong effort to reach its 7.5% growth target this year. and the politburo called for more forms to keep growth steady in the next six months. as for the agenda in asia tomorrow, japan's earnings parade rolls along with results due from sony, sharp, suzuki and others. china's july pmi results also likely to take center stage, given the latest growth concerns. also get inflation updates from a couple of emerging markets as indonesia and thailand release cpi figures. semens will seal the fate of its ceo today. the german industrial titan is expected to vote out peter loeschia four years before the end of his contract. jay caser is tipped to replace him. it comes after the company issued another profit warning
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last week. the stock price today up around a half of 1%. and in italy, the supreme court is due to hear from silvio berlusconi's defense team today, so a hearing continues. comes a day after the prosecutor called for a reduction of berlusconi's ban from public office to three years. following the trial, jules is in milan. nice to see you. what is happening snowed what is likely to go on? >> well, quite rightly, as you said, the defense team will put their case ahead. what we heard last night from one of berlusconi's lawyers is that he might be too tired to make his summation at the end of today. so the chances are actually we're not going to get a verdict until thursday. the supreme court has been in session today. if it goes to tomorrow, a record, the longest supreme court hearing italy has ever seen, oh, the berlusconi effect. that's what it is going to to come down to. we expect to see one year
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community service and potentially a three-year ban from public office if that's what the senate votes. it is interesting, the press has been talking about potential negotiation if he's found guilty, and 18-month stay away from public life. that would bring him back in 2015, right on time for the next general election if this coalition government makes it. we have been hearing from both sides here, comments like the judicial issues in italy need to not leak into government issues. some might argue 20 years too late as far as mr. berlusconi is concerned. politics need to be put aside. so we're hearing the right noises from both sides for the continuation of this coalition. right now neither party is in a position to shift that even lib rum. we have to take a message from the markets and strong option we saw yesterday. the country doesn't have to raise more debt until september. likely to be noise around this
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case, but ultimately the markets are immune to a political issue in italy and the broader eurozone, of course. waiting on the results of this case. back to you. >> nice weather to wait in, jules. thanks for that. >> absolutely. >> looks good. catch you a little bit later. german opposition leader criticized angela merkel's austerity drive and called for a plan b for struggling european economies. steinberg suggests funding stimulus measures with eu polls and a tax on financial transactions. the sdp leader says he wouldn't support further aid for greece. on the corporate side, facebook shares closed shy of its ipo price of $38 a share. the stock is now rallied more than 40% since reporting earnings last week, which helped silence some of the critics of the network.
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what do you think of the value of facebook? is it too expensive? time to get on board? join the conversation on "worldwide exchange," get in touch with us, e-mail,, tweet @cnbcwex, or direct to me, @rosswestgate. the stock is back to near just about where it floated. seems a while it is taking to do that, of course. a little bit of news out from the fca, four arrested in an fca insider dealing investigation. the fca says at rests are not linked to any other ongoing insider deal. still to come, markets are something of a holding pattern. what might investors expect from the fed? we'll preview it, the second hour of "worldwide exchange" continues right after this. [ male announcer ] i've seen incredible things.
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the fed wraps up its two-day meeting as gdp shows the economy slowed in the second quarter. shares of peugeot are sharply higher. a turn around plan including the likes of general motors is progressing more quickly than planned. shares in schneider electric trieding higher. a $5 billion friendly takeover of invensys. in japan, panasonic profit jumps, thanks to a move away from consumer electronics. nintendo struggled to sell wii u consoles.
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if you just joined us, warm welcome to the second hour of "worldwide exchange." we kick off with the latest unemployment data out of the eurozone and inflation. inflation for july first of all has come in at 2.4%. sorry, 2012, we'll come back to that in a second. the unemployment, 12.1%, versus 12.1% in may. unemployment rate, 12.1% versus revised 12.1%. we thought that's near the record high. we thought it would be 12.2%. but they revised that one down for june. so june number down as well. got a little bit of figures coming out of fiat as well.
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i don't have the data. confirmed the 2013 guidance, net profit 328 million. industrial, the group trading profit 633 million. trading profit was seen by 580. better than expected. the shares is ticking higher as a result. all right, stay with autos. peugeot cut the net loss by half for the first six months of the year and wants to reduce the pace at which it burns cash. the financial assistance that france gave the firm doesn't conflict with rules on state aid. the stock up 7.8% this morning. and the world's biggest beer brewer ab inbev petition expectations despite selling less beer.
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quarterly profit rose 5.8%. it came in at $3.9 billion. its stock up also 7%. eads will no longer be calling eads, it is rebranding the group as airbus. and a major reorganization. the announcement comes as it also reported a better than expected underlying profit in the first half. and raised its 2013 aircraft order target by 25%. stock up 2%. and bayer up 3.7% today. the company is back to 2013 view but admitted it is ambitious in the face of tough conditions in both the plastics and chemicals market. those comments come as the second quarter adjusted was just shy of most analysts' forecasts. joining us now, mario decker, ceo of bayer. nice to see you again. why is the environment as we said, though, becoming a little
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more challenging? what is going on? >> well, as you can see in our earnings release, we have in our life sciences business still continue very good performance also in the second quarter, in health care, the pharma, new products very good introductions, and better than expected sales, also, signs continue to have great momentum in the second quarter. material side was somewhat disappointing. the demand for our products, our polymers is lower than we expected in comparison to where we thought we would be at the beginning of the year. particularly in china, the market is somewhat weaker than expected. and when you take this all into account, we're able to maintain our guidance for the year, but as we said, it is increasingly ambitious due to the uncertainties in the material science area. >> what is happening on sort of
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input costs there? and if you got great competition, is there a price -- are you getting higher costs and lower prices? are you getting margin squeeze? >> yes. material science, what we are seeing at the moment is that raw material prices that are based on oil prices and, of course, energy prices that are based on oil prices are higher. more for political reasons, i think, than particular demand reasons. and in addition to that we have some overcapacity with certain products and that combination squeezes the margins. that's the result of lower profitability in the second quarter from material science compared to previous year quarter. but i have to say, subsequently in comparison to the first quarter we saw an improvement, so we're making progress, but it is still year over year, a tough comparison. >> interesting your comments
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about energy prices, oil prices have driven higher, but we know in u.s. oil has been impacted by big drawdowns in stocks. we have inventoriy data out today. you seem to be of the view perhaps that demand doesn't support these current prices, which means you may think it may weaken. >> trouble hearing your question, i'm sorry. could you just -- >> juit was just on oil prices d energy prices. you think it is not current prices are not justified by level of demand? >> yeah. certainly not on the basis of the -- i don't think it is justified. i think there is, as always, with oil prices in the last 20, 30 years, an element of political uncertainty. that drives the prices up. not justifiably so, given the demand in the chemical industry for sure at the moment. but this is something that we
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have learned to live with. it gets harder, a situation like that, when there is some overcapacity in the market, and it makes it harder to pass on these higher raw material prices to our customers. >> all right, let's turn to -- you're driving growth in pharmaceuticals. what is the latest update on your -- how are sales foruming against your expectations? >> we are extremely optimistic about our new products. altogether we said originally we were going to do a billion euro of sale on the three new product s that we have introduced in the last months or year. but we are now raising that outlook for 2013 by 40% to 1.4 billion. and this is really -- in an early stage of introduction of
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those products, very, very good sign because we are very optimistic for pharma growth in the next few years. and actually expect a total of 5.5 billion of our new products in terms of market potential of sales. so very good start for us. >> all right. i'm sad we have to go. good to see you. thank you for that. that's the latest from bayer. as far as equity markets are concerned, futures now somewhat cautious. the dow at the moment, above fair value by 45 points. we finished down just 1 point yesterday. the nasdaq is about 8 points above fair value. sorry. we moved on very quickly there. didn't get a chance to show you that. i'm not sure what the nasdaq was, i was looking at the xetra dax by the time we focused on it. sorry. it is about 8 points above fair value. lucky. the s&p at the moment is about
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5 1/2 points above fair value. european equities, we started a little lower this morning, we have turned around, green on the board. ftse 100 up the best levels of the session, up around two-thirds. been all about the individual earnings. ibex down half a percent. the cac quarante fairly flat. number of companies worth mentioning at this stage. invensys and schneider electric degreed to merge in a $2.5 billion deal. schneider up 4.5%. invensys up 2.5%. now that we have the details of this deal out, there may still be an account offering and people talk about looking at invensys as well. now they know the terms of what is go on that deal. we'll see whether we get another player coming out. bond markets, really no one wants to get ahead of the story today, which will be the fed and the same quarter gdp. yields in the u.s. higher 2.62%. ten-year portuguese yields
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lower. currency markets, dollar yen, below where we were last week. and euro dollar, 132.86. as far as the asian markets, one lady can tell us what is going on. li sixuan in singapore. sixuan? >> thank you, ross. a pretty soggy finish for asian markets this july with the major indices ending on a mixed note. the nikkei 225 dropped 1.5% today as investors await more policy cues from the fed's meeting. this is the third straight month of the japanese index finished in the red. and the hang seng hong kong also under a bit of pressure, but it did deliver a pretty solid monthly gain, up about 5% this july. overnight, beijing promised to keep growth steady and fine tune the economy in the second half. the shanghai composite gained a modest .2% today and wrapped up
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the month about 1% higher. the big mover in hong kong today, china resources went, the for climbed 3.4%, thanks to comments from china's top officials on promoting healthy development of the property market. mainly listed, van kechlt and poly real estate up sharply. positive earnings gave the boost to japanese battery maker gs yuasa, the stock jumped 7% in today's session. htc tumbled, down more than 6% in after the smartphonemaker delivered a surprise profit warning. that's a look at the asian markets. back to you. >> thanks for that. tropical storm gill is located off the southern tip of baja, california. could become a hurricane on thursday according to the national hurricane center. maximum sustained winds of 85 kilometers an hour. it is -- keep our eyes on that.
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that could be a hurricane by thursday. for investors, big focus on the fed. wrapping up the two-day meeting. the decision is expected at 2:00 p.m. eastern. fed watchers looking for any clues on when the central bank will start tapering bond purchases. cnbc has full coverage, it starts at 2:00 p.m. joining us with his thoughts, j.j. burns, president of j.j. burns and co. how are we going to trade through today? >> i think it will be relatively flat if i had to look into my crystal ball. possibly up. i think that the fed has very much signaled and i think the fed is smarter than many of us probably think. i think the bubble that the fed is looking at is kind of -- come out of the market. they're looking at the taper to say here is our numbers, this is what we're looking at, we're not going to make any bones about it, we know we're going to ultimately reduce the taper as time goes on.
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they have signaled this to the market. we feel it is clear. and we also feel that the economy and the markets are starting to perhaps behave in a more normal type of way. >> are they? are you saying we're getting -- we're going to get used to the tapering? is that what the fed has been doing? by the time it actually happens, the markets will be over themselves? >> yeah, you know, ross, i would actually argue that the markets are probably already over that. but let's not mince words when i say that the fed is clearly focused, that we -- they know we're in a slow growth economy. we have gdp figures coming out today, we have gdp being revised today over the one three-year period. the gdp numbers that are coming out today will be very, very interesting because they will actually send some signals to the fed that we're likely to be in a much slower growth type of quarter than we have been.
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remember, we have the payroll numbers that have expired, the holiday payroll expired in january. we have a full quarter in the second quarter of likely very slow gdp. and we're also going to see that some of the gdp figures are going to be revised going forward, which is going to allow for research expenditures to come into the gdp figures. on the one hand, you've got gdp which may look a little bit declined for the second quarter. but there could be hopeful points coming in that the likelihood that we're spending a little bit more money than gdp actually budgeted into its figures. a face-lift happening for the gdp, i believe. >> okay. and we got the story running on this morning, that says the fed will lose control of interest rates. could see yields hitting 5% in 24 months. can you see that happening? will the fed lose control? >> no. we don't see that the fed is going to really lose control.
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and look at what is happening, just from the guests you had on this morning, we're having challenges with domestic as well as foreign investment. most companies don't believe that there is some type of growth trend in. they're not restocking their shelves to any large extent. they're not looking to make huge domestic investments. since interest rates have been declined, you find more u.s. corporations are not investing in research and development and growth and adding on jobs, but more paying down the debt and taking back their stock in the broad markets. so make no mistake about it, investors need to be aware of this and there is also unforeseen opportunities that are happening from this. look what happened to things like gold, from june -- from july 1st to today. look at other asset classes, where diversification did not play a role in the market from january through june 30th, but is playing a role today. >> all right. we'll look at gold fairly shortly, j.j.
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stick around. get a cup of coffee, tea, whatever is your poison. we'll be back with j.j. recap of the headlines, taper talk as we have been saying, back on the agenda, as the fed wraps a two-day meeting. peugeot drives to the top of the french market after reporting earnings. and nintendo confirms its forecast. we'll focus on takeover and the outlook for m&a as well for the second half of thor . [ 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.
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the wall street journal says it is unclear whether there are other souters. both companies are major players, and the plan would expand the consulting business. accenture stock in frankfurt up about 8%. the same time, cubist pharmaceuticals is buying a pair of companies. that deal helped boost the drugmaker's portfolio. they are paying $15.75 a share for optima contingent on whether the company meets certain sales targets. it is a 19% premium to tuesday's closing price. also paying $15.50 for trius,
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32% premium. all those individual stocks, cubist up 6, optima down 7. j.j. burns is still with us. j.j., we don't know how much cash rich companies are. we are stunned to see a pickup in m&a activity announced today with schneider and invensys. what is your outlook for corporate mergers? >> i think corporate mergers are going to continue to happen at a much faster pace. we're going to have cheap money, ross. we'll have cheap money for a long time. the fed is committed to having lower interest rates and, by the way, all your g-4 nations, which really matter, which also affect the emerging markets, are going to maintain a very, very stimulative policy, just because bernanke speaks about potentially taking away taper. it doesn't mean $85 billion a
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month is going away. it may slow. we're going to have the likelihood of lower interest rates, which also takes out the inflation genie and puts the inflation genie back in the bottle because inflation is probably not going to be an issue as has been witnessed by gold coming down, as well as many other commodities and input prices to raw materials coming down. >> yeah. as i said, want to talk about gold. i want to talk about equities in general. diversification not working for the first half of the year. does that mean to say that trend continues in the second half? >> no. actually it is changed, ross, but you're spot on. from basically the second quarter, if you were not primarily involved in mostly u.s. stocks, small, mid and large, you probably made very little money. u.s. treasury bond went from 266 to 166 or i should say 166 to
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266. almost a one-point swing there. that relates to an 8%, 9% decline in the u.s. treasury bond. at any type of preferred type of stock, carrying a dividend, also likely to climb. so if you weren't in u.s. stocks, emerging markets didn't perform, but if you take a look going forward from the june 30th end quarter to where we are today, you've got emerging markets up 2%, 3%, 4% in a matter of two or three weeks. even some active managers up 4%, 5%. you have other asset classes and gold has rebounded from being down some 24, 25% to maybe only being down 17% or 18%. that's a pretty significant rebound. if investors are looking at diversified portfolios, it is working now but wasn't working before. >> you like gold, j.j. we'll talk about that, still to come in a few moments time. biggest monthly gain since january last year.
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yep, investors keeping a watch on gold prices ahead of the fed decision. that gdp report, gold at 1330. j.j., you're bullish on gold. just explain the reasoning
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behind that, because clearly you don't think qe is going to create any inflation. it hasn't. >> we view -- yeah, ross. we view gold as an asset class. and as a wealth management firm, we look at global activity and determine how can we best preserve and grow assets? so gold, we feel, plays a role, it might be a limited role, but it plays a role in portfolio management, and when we see a commodity decline more than 20%, which has a global reach everywhere and is a valuable currency, and a valuable hedge against lots of things, not just inflation alone, we feel it is warranted to take a look at. in addition, keep in mind that gold miners also have been battered through this entire process. you've got gold mining companies down some 20, 30, 35, 40%. you're seeing gold mining companies at near book value levels, and we believe that that could very well be a continued
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unforeseen circumstance that has been battered by gold, that could be a good investment in the future. >> kind of hard, if the dollar is going to strengthen, a lot of people think the dollar will strengthen in value, that will make it difficult for gold. the other thing is if equities start performing as well, you get paid for equities, you don't get paid for owning gold. you can understand the arguments against it. >> notwithstanding, i think that it is important to really take a look at how much gold people have in their portfolio. you go back to the beginning of the year, you have people chasing the gold bug because that's what's working right now. and getting back to that theme of diversification, that's what we see missing from the individual investor. they're either all stocks all the time, or no stocks at anytime. they're either all gold all the time or not gold or they're in cash or chasing after the next
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best investment. that's not really good prudent portfolio management. when gold is down 20%, 30%, and looking out over 5 to 10 year period and making an assumption that we have already seen the lows in interest rates, inflation leads what can happen to interest rates going in the upside. what if we have not seen the lows in interest rates as yet in this secular market of treasuries and interest rates? that's the most interesting thing, what can cause halfic to po a portfolio and managing it. >> thank you. have a good day. still to come on "worldwide exchange," the countdown to the fed decision continues. plenty more to come.
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"worldwide exchange." i'm ross westgate. recap of the headlines from around the world. the fed wraps up its two-day meeting today. new gdp data is likely to show the u.s. economy slowed in the second quarter. shares of peugeot sharply higher. a turn around plan including the likes of general motors is progressing more quickly than planned. and eads confirmed plans to regrand itself as airbus to try to raise competition with boeing as they reported a better than expected underlying profit for the first half. shares in schneider electric
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trading higher confirming a $5 billion friendly takeover of uk engineering group invensys. welcome, u.s. futures are a little higher this morning. the dow is 39 points above fair value, ahead of the fed and gdp data. the nasdaq is around about 8 points above fair value. the s&p is 4 1/2 points above fair value. european equity markets were lower at the stock. xetra dax is flat, the cac quarante is flat. and we have news out of semens, it is being confirmed that the ceo has resigned. and left the board of semens by mutual agreement. as we thought, joe caser will be the new president and chief
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executive. he's been the chief financial officer since 2006. now designated chief executive officer. peter loscher, four years left on his agreement, the new cfo to replace mr. caser will be appointed in due course. the stock rallied on monday on reports of this is what was going to happen. and indeed that is what has happened. follows semens second profit warning in the year last week. global investors on the fed, it wraps up its two-day meeting today. the decision expected at 2:00 p.m. eastern. particularly we'll look for any clues on the tapering debate, when we'll start tapering bond purchases. officials will likely stress any action as conditional as ever on the economy improving. and probably want to avoid the market meltdown triggered when ben bernanke outlined the fed's tapering plans for the first time in may. cnbc will have full coverage of
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that decision starting on street signs at 2:00 p.m. eastern. joining us now from charlotte, mark vintner at wells fargo. mark, good to see you this morning. thanks joining us. what do you think they're going to sigh. what statement might we get? will we get anything different from last month? >> the statements don't tend to vary that much from meeting to meeting. i think what they may try to do is provide more clarification as to what may trigger a rise in short-term rates. if they can dampen the expectations a little bit, it takes some of the sting away from tapering. and tapering is mostly priced into the market, most folks are assuming they're going to reduce their securities purchases by about $10 billion a month beginning in september. and so unless they hint that they're going to do more than that, the market should be able to digest that. what would help is if they were
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reassured that short-term rates, the federal funds rate will not start rising until at least the middle of 2015 and it may be even a little later than that. >> if they highlight the improving jobs market, how will that be interpreted? >> well, i don't know that -- they may highlight the improving jobs market, i think that that is more likely to happen is they're going to back away from the unemployment rate as a trigger for raising short-term interest rates. because the drop in the unemployment rate is mostly coming from folks dropping out of the workforce, particularly young people, particularly young males that have dropped out of the workforce. it has not been -- it has not been because of retirements. and so the drop in the unemployment rate doesn't mean the same thing that it meant in previous business cycles. if they back way from the 6.5% target a little bit, and say we also have to see some improvement in labor force
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participation, i think that may soften the blow from tapering. >> back away from it, how then will they replace -- can they back away and not say anything or will they have to replace it with other measures by which they can give market players and investors a sense of what are the key numbers and levels we're looking for? >> i think they might specify they would like to see more growth in full time employment, a lost jobs we have in the first half of the year were part time in nature. two-thirds of the jobs we added in the second quarter were either in leisure and hospitality, which were mostly restaurants, retail trade, temporary help, or home health care. and all of those jobs pay less than $15 an hour, most of them are part time, very few of them have benefits, that's not the type of job growth that the fed is looking for right now. any message that drives that point home, that the improvement in the labor market that we have
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seen so far is not consistent with the drop in the unemployment rate and that they're looking a host of measures, quality of jobs, number of hours worked, and also what is happening with labor force participation. i doubt that they would nail down one indicator and i think it was a mistake to nail down the unemployment rate, which they did in the past. i think they give us a variety of measures. >> all right. mark, stay there. we'll talk about the gdp and growth side of the economy as welfarely shortly. jcpenney, procter & gamble with varying levels of success and failure. now they may be eyeing a new investment target. bertha knows and she'll tell us from cnbc hq in the united states. >> big ackman is hoping to put his money where his mouth is. wall street journal reporting ackman who runs pershing square
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capital management, will announce a $2 billion investment in a big company today, one with a market cap of at least $20 billion. the targeted company stock has underperformed the broader market over the past several years. the journal reports ackman won't push for a breakup, but will advocate for operational changes. one company that could fit that criteria, and has been speculated as a possible target by ackman is air products. it has a market cap of $22 billion and stock is up 11% over the past five years. that's right. just 11 prosecution over the pa past five years. the company is a supplier of hydrogen and semiconductor materials imposed a poison pill, used to discourage hostile takeovers. air products says the plan was adopted because unusual activity in its shares. other companies that have been speculated about as mystery targets include fedex and adt. in frankfurt, those companies at
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this hour are all trading modestly to the upside. adt, that one is up 2.3%. two key directors at mckesson face a shareholder challenge at the annual meeting today. activist investors are taking aim at alton herbie and jane shaw. the challenge comes amid complaints mckesson overpaid ceo john hammerlin and didn't heed calls to split his chairman and ceo roles. the company is reportedly taking the issue seriously. the wall street journal reporting that the board has dispatched outside directors to meet with investors. mckesson this hour is -- i can't see it on my board at the moment. but we shall see how it trades today. there we go. right now it is down fractionally trading there in germany. ross? >> okay, good to see you, bertha. thanks for that. have a great day. mark hurd is doing his best to put the koy bosh on rumors
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he's set to leave oracle. he's locked in a buyout battle with pcmakers michael dell. he wouldn't comment on whether he's been contacted by icahn but said he's happy at oracle. >> i've been very clear that i have no interest in any other job than oracle. i'm oracle and that's what i'm doing. i'm happy and excited about it. >> there you go. fairly clear. still to come, more than three years since president obama issued a challenge to double the level of u.s. exports. that deadline approaching at the end 20614. we'll have an update on the progress towards that goal.
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recap of the headlines, taper talk back on the agenda as the fed wraps up its two-day policy meeting. semens confirmed the ceo has resigned as the german industrial giant gets set to report earnings today, a day early. peugeot shares drive higher after earnings suggest its turn around plan is reaping rewards. president obama is challenging republicans to reach across the aisle and create a grand bargain to create jobs and boost the u.s. economy.
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during a tour of an amazon distribution center in tennessee on tuesday, the president outlined a 5 point framework that includes rebuilding infrastructure, and exporting more goods and services overseas. the president's speech came on the same day that the u.s. export/import bank outland the challenges facing american companies in the global race to remain competitive. joining us is fred hawkford, chairm chairman, mark vintner with us as well from wells fargo. fred, good to see you. it is interesting, we look at the gdp today, we might get some trade data suggesting imports increasing by 11% annualized, exports only increasing at half that pace. what is going on? how tough is the export becoming? >> exports are tough. we have got some -- the economy and the global economy is increasing but somewhat unevenly. so we have some severe head winds.
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we have seen a lot of success in satellites, transportation, industries such as that. we have seen a slowdown in areas like mining. so it is uneven and we're seeing different areas stronger and some that are a little weaker now. >> where are we on this president's initiative to double exports by the end of next year? >> we're making progress, but we're certainly got head winds. two ports of the goal, one is exports, and the other is adding new export related jobs. i think we're doing a little stronger on the jobs front than the export front. >> yeah. look, you have come out with the speech about the importance of the bank, that's your job, that's what you've got to do. but you've got to say we shouldn't be ending export credits. you talked about how big a competition u.s. private companies are with foreign governments. just explain that. >> well, you know, i was just in
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prague last week, got back on saturday. and westinghouse is bidding for new nuclear power plant that the czech republic is looking to build. we actually financed first one in 1992-'93. our stiffest competition is from russia. backed fully by the russian government, offering terms as high as 100% financing. also offering equity participation. so that's an uneven playing field for a private company in the united states to try and compete with russia inc. that's some things we're trying to level on the playing field. >> okay. let's come back. i want to bring you in, mark. you're listening there, trade going to be a huge part of the gdp number today, going to be 1% annualized. what do you think is going to happen, mark, to the fwroegrowt data? will it pick up later in the year? >> well, we're hoping that the trade will pick up a little
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later in the year. in the second quarter, it looked like it shaved .4 off of growth. we have a 1.2% number plugged in for our forecast. should have been 1.6. the problem in the second quarter was that we saw a big desell ration in china. europe is still a bit sluggish. our exports didn't hold up that well. a lost produt of products we ex capital goods. that's really hurt our exports disproportionately. we don't export a lot of consumer goods. so when the economy picks up, and consumers in china and if china goes from exporter to consumer led economy that doesn't help our business that much. >> is that fair, fred? how do you challenge that? >> i think mark has it right. when we excel is in capital goods. power plants, transportation, mining equipment, farm equipment, construction equipment. those are very strong. what -- as the global middle
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class grows and according to brookings we'll have 200 million more people eachi year for next 10, 20 years, they need power, better hospitals, better health care, airports, ports, locomotives. those are things we do sell and do export. and are strong. i think mark has it right. the slowdown in europe is a factor. the slowdown in china is a factor. china announced 300 million people will be moved from rural areas to cities over the next decade. that's going to create enormous pressure in china, one, to keep manufacturing more, but hopefully a much larger consumer marketplace for the united states to sell to as well. it could work out. we're in a period of transition. >> all right, fred, always good to speak to you. thank you for now. mark, thank you as well. nice to see you this morning, mark vintner from wells fargo. we'll take a short break.
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we're going to talk about the pulse of the u.s. housing market following a slew of key data. david blitzer will join us right after this. [ male announcer ] come to the golden opportunity sales event to experience the precision handling of the lexus performance vehicles, including the gs and all-new is. ♪ this is the pursuit of perfection. ♪
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to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ] just recap the latest news from semens. the company says the ceo has resigned. the cfo is replacing him. he's the former cfo. the new cfo will be decided in due course. fiscal third quarter results at about 9 minutes time. we'll bring that to you as well. semens stock posts that confirmation, down 2%. it had jumped on monday, on speculation that this was going to happen. as far as the agenda is concerned, the u.s. today,
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besides the fed, the july gdp employment report. private esector payroll is expected to increase. 8:30, first look at second quarter gdp growth expected to ease. also, 8:30, we have the second quarter employment cost index released. and at 10:00, july chicago pmi. in terms of earnings, comcast earnings before the open as does mastercard, hide hotels, philips 66 and sodastream. after the close, we'll hear from allstate, cbs, metlife and dreamworks animation. big day. we had the fed, futures are indicating slightly higher. right now, dow futures somewhat -- 40 points above fair value. the s&p 500 is about 4 1/2 points above fair value. other corporate news, insurance
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ratings firm am best is putting sac capital on review with a negative outlook. it comes less than a week after the hedge fund was hit with criminal insider trading charges. am investor is uncertain about whether the company's invested assets can be managed now by sac capital. and mary jo white is reviewing possible insider trading rules for commodities. told a senate panel on tuesday the agency is looking into whether wall street banks should be allowed to own physical assets like oil tankers and metal warehouses and trading on the products. the move comes after j pcpmorga announ announced. two top directors at mckesson face a shareholder challenge at the annual meeting today. they're taking aim at alton herby and jane shaw. the challenge comes amid
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complaints mckesson overpaid the ceo and didn't heed his calls to split his chairman and ceo roles. the company is reportedly taking the issue seriously. the wall street journal says the board has dispatched outsider directors to meet with one on one investors. mckesson stock in frankfurt is pretty flat, down half of 1%. the president is making a rare trip to capitol hill today to meet with house and senate democrats ahead of their month long summer recess. he's expected to discuss items on his forward agenda including immigration reform, implementing the affordable care act, or his health care law that kicks in october 1st and his latest push to rebuild the u.s. middle class. u.s. home prices jumped 12.2% according to the latest s&p case-shiller index. shy of expectations for 12.4%. put prices in cities like dallas
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and denver surpass other levels. david blitzer joins us from new york. david, good to see you. housing clearly in a recovering mode. how much more can we expect in terms of home price gains? >> i think we'll see continuing home price gains. i think it is going to gradually ease off over the next several months, and the year or two from now we'll be looking at more normal market with prices creeping up 1% or 2% a year. >> clearly the fed, whenever they start their tapering, will want to make sure short-term rates are going to stay pretty low. is there a threat to the housing market from the potential of higher mortgage rates or not? >> it will partially, based on past experience, a lot of home buyers will shift to adjustable rate mortgages from fixed rate which means their mortgage, when it starts, will be key to short
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to intermediate term rate and ten-year treasuries. able to buy down a little bit. but as interest rates go back to normal, it has to begin to buy into housing, won't kill it off. but these kind of mortgage rates are unbelievable still for most americans. >> will go up a long way to change that. existing homes slightly more robust than new construction. is that going to continue to be the case? >> i hope not. though it certainly continued for quite some time. there isn't that much strength in the new home market yet. and the difficult part is it is new homes that add to gdp. buying and selling existing homes doesn't do much for gdp at all. but that's probably going to take at least another year before it normalizes. we're still not building up in houses in the united states to keep up with growing demand. >> david, good to see you. david blitzer. "squawk box" will kick off
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in a moment. in europe, we'll stay a little longer to look at siemens. 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. it's time to do everything better than before.
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good morning. the july adp employment report, a first read on second quarter gdp, a lot of corporate earnings, and big ackman reveals his firm's largest ever investment. it is wednesday, july 31st, 2013 and "squawk box" begins right now. >> good morning. welcome to "squawk box" here on cnbc. i'm becky quick with joe kernen. andrew ross sorkin will be back tomorrow. it is a busy morning ahead at
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8:15 eastern time today. we'll be getting july's adp employment report. forecasters say the economy likely added 183,000 private sector jobs during the month. that would be down slightly from june's 188,000. then coming up at 8:30 eastern time, the advanced reading of second quarter gdp. they're looking for a reading of .9%. also today, the government will adjust how it measures gdp and revise its estimates back to the 1929 numbers. all the way back to 1929. among some of the most notable changes, money spent on the arts will count as gdp. that means hollywood will have a much bigger role. later this afternoon, the fed will be wrapping up a two-day meeting with a policy announcement at 2:00 eastern time. no change is expected, but the markets will look for any hints of tapering later this year. >> the gdp numbers will be changed retroactive so much that it is going to be


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