tv Worldwide Exchange CNBC November 14, 2013 4:00am-6:01am EST
hello. you're watching "worldwide exchange." i'm ross westgate. the markets getting a boost by janet yellen's comments. she says the bond buying program is the best way to get the economy back to normal. berlin has the last laugh in the battle with brussels and washington. it says gdp was driven solely by domestic demand. and dealing with a dp dp
slowdown on, weaker demand at home takes its toll as the abe government predicts a rebound. and europe's energy supplies warn of an impending crisis forcing cutting of costs. display you're watching "worldwide exchange," bringing you business news from around the globe. italian gdp, third quarter, minus 1. -- minus 0.1% quarter on quarter, which is what we were expecting. forecast minus 0.1%, as well. and we're getting the latest from the euro/dollar.
just tracking 1.3454. 1.3295 was the two-month low that we hit last week post the jobs. we haven't hit that again, but we were down on the 1.33 level towards the beginning of the week. we have the latest ia numbers out, as well. the ia is warning of up side price pressure. supply up 600,000 barrels a day in october. more on the ia, more on growth, as well. besides italy, france is sticking to its full year forecast despite reaction. the quarter on quarter data missed analyst expectations. it came in at minus 0.1%. although the finance minister said the contraction is not a surprise. more to analysts. german gdp grew 3% in the third quarter to stay in line. the country's fiscal efforts
appear to be fire ago shot against brussel's season with interesting analysis alongside its release. for more on that, annette is with us in frankfurt. they don't like people saying they have expected surpluses of the eurozone, annette. >> not really. but if you're looking at the euro set figures, then you see that germany has to expect a surplus for the eurozone. they're having a surplus for the rest of the world, i.e. china as well as united states. so that whole imbalance thing within the eurozone, that really makes sense. so then it comes to really -- if you look at the numbers, and those numbers now for the third quarter are most likely going down very well in berlin and not too well in brussels and as well in washington. because as far as first time i can remember is that growth is supported by household government spending and very importantly, i have to stress that capital spending of german
companies because during the run up to the elections, we heard a lot of companies complaining about high energy produces, insecurities, when it comes to tax hikes, and a lot of companies did want to spend inside germany, but they were threatening to go away. and this actually shows now that german companies invest in germany, as well, and that is a very good sign when it comes to investment demand. and also excerpts were a drag on growth, which is really surprising. but might be, as well, due to the strong euro, ross. with that, back to you. >> thanks, annette. joining us with his thoughts, christian sopes. a lot of money has flown from the united states into europe on the back of a recovery that now seems to be weaker than what we thought it was. >> well, it was probably weaker in q3 than in q 2.
but overall, it remains on track. i think the broad story is pretty much the same. germany is contributing to the eurozone country with its domestic demand. spain having an export led recovery. but there are some weak spots in the eurozone. italy is one and france, as well found out today, is another one. where these reforms helping in spain and pore dew tu gal and so on haven't been done and the support from domestic demand isn't as strong. >> two really big weak spots, they don't get much bigger than that. >> trou. the two of them together are about 40% gdp. while italy is clearly on an improving trend, even though it's not as strongly improving in spain, france is on no trend at all. it lasts -- the q2 growth was probably a one off blip.
i think overall it's stag nating, falling behind the rest of the eurozone. >> yeah. and we have this report on french competitiveness. it's warping that it falls behind southern europe companies that are leaner and meaner. what is the french prescription? >> well, we've been warning about france ever two years ago. we have sent out warnings because french costs are still deteriorating. that trend has simply continued. so spain is having a bit of an export miracle, if you like, where france is not improving at all. that makes the prescription pretty clear, as well. france needs to bring down the huge weight of the public sector. it has the highest public sector expenditure quota in all of europe. so the prescription is clear. more reforms.
but hollande still seems to be hesitating. all right, christian, stay there. i want to look at this story, as well. japan's abe-nomics era is flying low to the ground these days, china's gdp growth slowed by half. it's down from 3.8% the previous quarter. weaker consumption and slowing exports to emerging markets became a drag. japanese political leaders say the slowdown is temporary. christian, we're still waiting for this third arrow of abe-nomics to be fired properly. is it? >> there is a bit of an attempt to do something with that rise in consumption tax. not just structurally, but it's also the fiscal weakness that japan has in this case. and they are trying to start dealing with that. but, of course, in the short-term, that's going to have a negative impact. a rising consumption tax is
going to weaken consumption even further and the data we got is concerns are not really going anywhere in japan. if anything, it's construction investment both on the private side and the public side which is not really reassuring if you think that japan needs a more structural boost to the economy. >> and we'll get your thoughts on this story, as well. janet yellen is holing a confirmation hearing today to be the next fed chairman at 10:00 a.m. eastern. she's expected to defend the fed's aggressive bond buying program. in her prepared remarks, yellen says the u.s. economy has come a long way since the financial crisis, but there's more work to be done. she also says while unemployment has come down, it's still too high. she believes the fed needs to continue to support the economy by saying the surest path to returning to a more normal
approach to monetary policy. and the ceo of jpmorgan said a continued dovish approach is what investors fully expect. >> it would be stunning if she wasn't. as she's been sitting on the federal reserve board, sitting next to chairman bernanke, by the way, i think she's just a wonderful choice. she's a first rate intellect and a wonderful values driven human being. i think having a woman running the federal reserve for the first time is fantastic. no, i don't expect she'll be very different from chairman bernanke. >> the last time when bernanke mentioned tapering the markets, they just went wild. do you think it was an overreaction, what we saw and what do you think happens the next time tapering comes around for real? >> every now and then, the markets behavior like school children. they overreact, run around like crazy. we know we're going to have
tapering. we know we're looking in the state of excess liquidity right now. it's happening because the economy is recovering. the best result is the economies demonstrate they are recovering. it's a good outcome. if somebody is surprised by this over the next couple of months, and it will occur over the next couple of months, then shame on then. there's been plenty of warning here. >> do you think the evidence is going surface within the next couple of months. >> i think it's rebuilding. honestly, had it not been for the debt ceiling debacle, i think we would have had tapering right now. so i think as we get closer to a mini bargain, not a grand bargain, and some evidence that congress and the administration can come together, i think you'll see tapering. i would expect definitely in the first half of next year. >> do you think all the money out there has created asset bubbles? >> you know, it's -- that's a tough question. certainly the feeling in the emerging markets and having been in indonesia before today and singapore and now up through
hong kong and china, there's clearly a sense of that. but, you know, it was necessary. you have to take necessary steps to get the economy globally imbalanced. the next thing is global economies are recovering. the uk is aging months ahead of schedule. these are small term shocks for the market, but long-term very, very positive. >> christian schultz is still with us. christian, equities are up today because of yellen's soothing thoughts about, look, we need to remain fairly stimulative. the report is even if they did pay for $5 billion or $10 billion, the fed is still extremely stimulative. the markets are rather one way, they either think we're losing or we're tightening. what do you think is going to happen? >> first of all, it's very important janet yellen doesn't disappoint market expectations. she's living up to that
reputation that she is a super dove. that is reassuring for markets. the fed is certainly not going to spoil this recovery by tightening too early. but i think the real test for yellen will come with the same issue bernanke faced back in may and that is how to communicate correctly and smoothly that the fed will ultimately have to taper the flow of liquidity at some point. that will be the real challenge. if markets overreact again, then it could have an impact on the overall economy and that is clearly something where the fed doesn't want to markets to become too dependent on this quantitative easing. i think the real test for yellen is still to come. >> if you are dependent on economic data which is volatile and politics, which is even more uncertain, how are you supposed to communicate your uncertainty?
>> well, in retrospect, we could argue not the way that bernanke did it. or what you might even more say is the fed's communication in may and the subsequent month was not in line with the decision that they then took in september. they have been pretty clearly signaling that they would taper and then they didn't taper. these two things were inconsistent. i think the important thing for yellen is that she's also sure that they will actually act afterwards so that communication and decision are consistent next time around. >> okay. christian, thanks for that, senior economist at berenberg. let's bring you up to speed with what's going on with global equities today and that's helping the global equity market out. take a look at this on the dow jones stoxx 600. advancers outpacing decliners by nearly 9 to 1 on the dow jones
stoxx 600. we are at the session low, up . 0.6%. today we've rebounded a little bit, up by 0.7% on the xetra dax, 0.9% on the cac 40 and ftse mib up 0.3%, as well. take a look at the bond markets. ten-year treasury rates, volatile. we hit 2.79% on the ten-year yield on tuesday, down to 2.68% the yield during wednesday's session. gilt year, around 2.8%. we were going into the quarterly inflation report. they nudged up their growth forecast. we might have a sweet spot of growth without higher inflation in the uk. keep our eyes on that. commodity rates and currency rates, as well. euro/dollar, 1.3455 at the
moment. dollar/yen, 99.87 is where we stand. not far away from the 100 level. aussie lsh dollar still down at one-month lows and sterling just above the 1.60 level against the dollar, as well. and let's check in on commodities, too, for you as far as brent is concerned. have the latest iea report out right now. have we got them? maybe we don't. yes, we do. marvelous. brent up to 107.32. nymex, 93.67. sixuan has the latest for us out of singapore. >> thank you, ross. the better than expected dovish gdp data and janet yellen's comments helped markets in asia. also helped by comments by federal minister aso.
also some short covering and future chasing ahead of the year-end but clothing. so names like fast retailing, kedi, panasonic and isuzu motors are among the big gainers. meanwhile, china markets stabilized a bit after yesterday's default. the shanghai composite added 0.6%. the hang seng added 0.8%. meanwhile, south korea's kospi positive 0.2%. australia ended higher, again, thanks to yellen's dovish remarks. and i do want to show you some chinese banks in the midland. mid sized lenders extended yesterday's sell-off. this comes after the central bank refrained from pumping liquidity into the money markets
resulting in a net drain of funds for the second straight week. that's a look out of asian markets. back to you, ross. still to come, will russian steelmakers bend as concerns grow for falling bland for chinese importers? we'll speak exclusively about their results at 10:40 cet. finally, we go live to new york. we'll discuss the unprecedented demand for art prices at 11:20. plenty more to come on "worldwide exchange." welcome back. how is everything? there's nothing like being your own boss! and my customers are really liking your flat rate shipping. fedex one rate. really makes my life easier. maybe a promotion is in order. good news. i got a new title. and a raise?
broadcasting division. taylor wimpy, up 4.8%. it's confident it can deliver on full year expectations, the home on builder adding with the housing market in the uk, pretty healthy in the second half of the year. let's turn our attention back to prudential. its reported sales up 6% in the first nine months of the year. the stock up 2%. gains in the u.s. and asia offsetting a decline in the british market. earlier this morning, we also asked the prudentan ceo on if his company had any major announcements to cut. the four more important words at brew dent prudential is more of the same. there's an upside here. and we just have to continue to
produce results. i don't think anybody should expect any drama on december 10th. the baby boomers in america, 27 million of them, so we have to continue trading that way. and the uk. >> tidjane thiam saying that's okay for investors. the down side for the markets today is in the utility sector. centrica warning that earnings will stay flat over last year after reporting profit sales just shy of forecasts. britain's biggest household energy supplies taking heat. they own gas. and rwe down nearly 6%. the german manager firm saying it expects next year's profits to fall further. it's warning of a deep crisis in the energy. they've announced plans to cut more jobs and trim capital spending. all right. let's get the -- excuse me, i was about to sneeze. annette has more for us from
frankfurt. it's the energy crisis, annette. it has me all kertuffled. >> bless you, ross. looking at rwe, they are planning on reducing their cap ex to just $2 billion euros a year to 2,017. so no growth story at all. looking at their profit forecast for 2017, this is coming in at the lower end of what analysts had expected in addition to some quotes from their ceos saying a lot of their gas plans are not really profitable right now. and that is -- the biggest problem is, of course, germany. we have that renewable energy law which gives priority to feeding and renewable energy which, of course, is that -- waiting on prices on the wholesale prices. and wholesale prices among the
lowest in the eurozone in germany as we have this renewable boom. traditional utilities such as rwe and they actually missed the train to change their business models some years ago and suffering now tremendously. their gas plans are no longer profitable. a lot of them, at least. and now a lot of hope, as well, in the new government because they will revamp the energy law and there might be some concession for those utilities, perhaps some fee they might be paid for operating their gas plans because it should be there in case renewable energy is not reliable. so rwe isn't a bad place. but looking at the other side, they are the biggest winner here on the market as they are saying they are cutting costs by 2017, as well. and at the same time, they are
exceeding expectations for the third quarter. with that, ross, back to you. >> all right, annette, thanks for that. we got away without sneezing. eads posted a 7% rise in nine-month revenue. but they have warned a significant change in its jet liner. >> we are very cautious here, but it was strong with q3 orders. the british airways, lufthansa and the momentum continued very well in october, a very important order with jal. so you're right, end of october, we are about 1200 already. so our guidance says more than 1,200 for the year. so that leaves a bit of flexible upwards. we have six weeks to go and an important air show coming up next week. and then contracts in the
pipeline to we finalized. let's wait and see what it's going to be in six weeks from now. >> the stock is now noun as airbus. they can't combine the two, clearly. jpmorgan has counseled a twitter question and answer session after jpm became flooded with insults. some of them were like this. does jamie dimon pet a small cat and laugh ominously while he's ruining poor people's lives? and another said is the fact that he's paid over $500 million in fines since august a source of pride or are you embarrassed that it's not higher? not the sort of things they're looking for, really. so the bank tweeted tomorrow's q&a is canceled. bad idea. back to the drawing board. yes, i think so. meanwhile, james gorman
asked if he dare enter the world of social media. >> i do not. but thank you for asking. no, i don't engage in any social media. unfortunately i found people have tried to mimic me at different points. >> should they ride the storm, accept the occasional tawdry tweet? easy for you to say. if you want to join the conversation, get in touch with us, e-mail us firstname.lastname@example.org. more appropriately, tweet us @cnbcwex or direct to me @rosswestgate. still to come, japanese financials have raised full year forecasts as a rally in the stock market has boosted portfolios. but what's the underlying performance? more to come.
growth on the year. that's much weaker than expected. there was a consensus of 0.1% and up 3% on the year. we're flatten up 1.3% on the year. consumer spending has groan for much of this year despite inflation outstripping wage growth. data showing inflation coming up 2.2% in october. earnings are 0.7% in the three months to september, as well. so rather disappointing closing sales. in particular down 2.8% on the month. that probably r. tess mild weather officials are suggesting. we had hot weather which spurred heavy spending in july before tightening the purse springs. but there was no rush to buy big, thick woolleys. because the weather was unusually mild. that may change this month.
reports of fronts coming into the uk. now, portuguese gdp, third quarter gdp contracting 1% year on year. it has grown 0.2% quarter on quarter. so portuguese gdp up 0.2% quarter on quarter and no longer in recession. as far as european equities are concerned, that's the data. we are rebounding a little bit today after the sell-off yesterday. the ftse having its one-day fall in august. cac 40 off 11%. the ftse mib up 0.5%. bund yields today, treasuries in particular, down 2.68% on the yield yesterday. 2.79% the yield on tuesday. currently yielding 2.7. gilt yields back on 2.8%. as far as currencies are concerned, the dollar index weakened by janet yellen's comments. the dollar is up near fresh two-year highs, 99.96, weaker
against most other things. euro/dollar, 1.3457. sterling coming back a little bit on that retail sales number. and a reminder of the headlines today, as i say, investors getting a boost from dovish comments from janet yellen ahead of her senate confirmation hearing. she says the fed's bond buying program is still the best way to get the economy back to normal. the ceo of morgan stanley said the reaction to tapering isn't always rationale. >> every now and then, the markets behavior like school children. they overreact, they run around like crazy. we know we're going to have tapering. >> growth in germany slows in the third quarter, but berlin has the last laugh and it's back with brussels in washington. gdp is driven solely by domestic demand. japan is dealing with a gdp slowdown as exports weaken. but the abe government predicts a rebound.
plus, europe's biggest energy supplies warn of an im spending crisis in the industry, forcing rwe to cut costs and forecast low growth. shares in both utilities lower. and it's been a fairly big day for japanese financials. strong equity markets helping earnings forecast. yukako has more for us from the nikkei. >> hi, ross. mitsubishi upgraded today their earnings outlooks for the current fiscal year through march. both expecting net profits to increase on the year. mitsubishi expects the first $9.1 billion and mizho up around 7% respectfully from the previous year. both banking groups had previously been forecasting profits to fall. but the strong stock market
stirred by prime minister shinzo abe's abe-nomics boosted securities businesses as well as listing the value of stock holdings. incomes for the first half of fiscal 2013 jumped 83% of mitsubishi and increased some 230% at mizuho. they raised the first year outlook earlier this week. now the renewed forecast at the nation's three largest banking groups have all outperformed analyst expectations. the aggregate net income of the three groups is set to beat that of fiscal 2012 and reach the highest level since the 2008 financial crisis. that's all from nikkei business report. back to you, ross. >> all right, yukako, thanks for that. joining us with his thoughts, david marshall. senior analyst, asia pacific financial in singapore. david, nice to see you. bank results pretty good.
how sustainable is it? >> well, not very i think is the short answer. as your correspondent mentioned, the stock market has been very buoyant, so the japanese banks have an equity investment. they've increased in value. lots of brokerage businesses. people buying stocks in investment trust. that's very nice. it can only be sustained as long as the stock market is buoyant. another set of information in this half is the loan loss reserves. normally the banks are putting money into their loan loss reserves. but since they did a lot of that during the financial crisis, what we're seeing in japan is almost what we've seen in other countries. the banks are now taking money out of those reserves and putting money back into profits. that's not a very sustainability factor. one of the things we were looking forward to is seeing what's happening with lending, loan growth and net interest margins. it looks like there was almost no lobe growth in the first
half. i think there were, in fact, a little bit of a domestic loan growth. most of what we've seen was, in fact, coming from their overseas business. within japan, loan demand is weak, but also the interest margins in japan are coming down on their lending. and that's actually pushed down the interest income they learn from japan. not entirely surprising. one way abe-nomices was supposed to work was the bank of japan flooding the market with liquidity means the banks will earn less, lower interest on their loans. but they can't really pay lower rates on their deposits because they're already almost near zero, about 5 basis points they're paying on deposits. so short-term, the margin squeeze, not much loan growth. we're weight to see, really, whether abe-nomics will succeed in lifting the economy and lifting the income they derive from their core banking business in japan. >> is it hard to say abe nomics is working unless we get an
increase in loan growth? >> i think that would be one of the things that would go with an economic recovery. you would expect to see companies starting to invest. japanese companies do have a lot of cash on hand, actually, so they would be able to use that to fund any investment they wanted to make, perhaps for a while. but, yeah, i think you would expect to see a rise in a growing economy, you would expect to see more loan demand by japanese companies and individuals. and i think from what i can see, everybody is remaining cautious so far. inflation has picked up a little bit, but i think mainly due to energy prices going up. but i think companies are holding back from raising wages until they see, you know, a more sustainable pattern for economic growth. so it's that catch-22 situation where they need a break through to lift the growth and to get over this hesitation in the caution which i think seems to be there in japan and increasingly in the markets. i noticed that after the first
flush of enthusiasm, i think they're now waiting to see further action to stimulate further growth and to assure that is going to be transplate lated into a higher earnings. >> how do we push push ourselves over the finish line on that, david? what's the trick? >> right. some say they need structural reform, more women in the workforce, more immigration to offset the fact that japan has a slippinging workforce. but, of course, other people argue that deregulation is in itself can be somewhat deflationary because it will increase capacity and possibly even drive down wages. it's a difficult balance that they're trying to achieve, some combination of reforms and deregulation for longer term growth. but somehow, they need to steer the economy through the short-term.
so that that doesn't have too much of a negative impact. >> david, good to speak to you. thank you. have a good evening, david marshall joining us from credit insight in singapore. profit is down in china global resources enterprises. profits dropped nearly 20% in the third quarter to just under $120 million. shares closed 4% higher as the firm said it would step up its push into medium tier cities. and cisco's first quarter earnings beat forecasts by 2 cents, but revenues rose 1.8, missing analyst estimates and the company's own projections of 3% to 5% growth. cisco is warning that second quarter revenues will drop 8% to 10%. the ceo john chambers says orders the company expected to land in october never materialized, especially in emerging markets, such as brazil, india, mexico and china.
customers appear to be spooked about inconsistent numbers about the global economy. >> it isn't just high tech. it's consumer companies of our customers, the people who sell into brazil or sell in an india or manufacturing who sells in those areas. what you're seeing is the gdp slowed. and as they've slowed, and you and others have talked about it for almost six months, then confidence begin toes drop. if they're looking for the u.s. to lead them out of this scenario, clearly the last month or two has not instill a lot of confidence. >> cisco as a result down nearly 10% in after hours. similar falls right now in frankfurt. inflation in india continues to soar past expectations, thanks to rising fuel and fuel prices. the benchmark price index jumped by 7% in october, an eight-month high, and a substantial rise from the 6.5% gain in september. the weak rupee hasn't helped. it contributed to higher energy
import costs. rheema is joining us. >> hi. thanks so much for that. well, indeed, inflation for india continues to remain a problem for the wpi for the month of october has come in at 7% versus 6.4% month on month. what disappoint today street? and is that in the month of august, the wpi inflation has been devised higher. it now stands at 6.94%. that's a pretty substantial revision that we've seen in the august upi inflation. that's the reason why if you watch, it's about 50 points in the high point it's nearly about -- of a percentage point. the rupee was hovering around the 63 mark. it's closer to 63.2. and we saw some reaction in the
ten-year, as well. so the october numbers came in in line with expectation webs but it's the upward revision. core inflation, which has been coming lower, lower, spiked up a bit to 2.6% on the core inflation, versus 2.1% on a month on month basis. but largely, the key reason why inflation has been high for india, very high towards articlesen flagz. food articles inflation has come in at 8.94%. and still water continues to remain a stop in the market. one of the few steeler measures has managed to stay in profit. but they're now warning the industry is on the brink of another crisis. we'll speak to the firm's cfo about solving the slump when we come back. welcome back. how is everything?
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quarter. the company expects similar results for the time quarter of the year. it comes as key players have called on the sector to hammer out an agreement to cut output warning the industry risks falling into deep crisis. joining us now, alexey kulichenko. better third quarter than analyst had spec'd. how tough is the market at the moment? >> we testify natalie see that market today is significantly weaker. towards the average year goal and year goal is not a great market. so we see overall overcapacity creates a huge pressure on the margins of the steel producers across the globe. >> you do better than most because you have self-sufficiency in iron ore and coal. so how much more cheaply can you
produce your steel as a result? >> concentrating on cost savings is our key priority today. how we could manage, basically, the company in such price environment. and we believe that we have ourselves room to go. we could expect to see a good improvement going into next year, as well. >> how much capacity do you think needs to be taken out of the industry? >> today, we think that we see capacitity utilization is around 8%. so -- >> that sort of level. because presumably, every steelermaker is trying to do what you're trying to do. let's streak out or restructure plants that are inefficient.
so everybody is doing that individually. why do you think it might be better? mr. mordichef said we need an aluminummaker. why would that be better than just individual companies, do you think, doing their own thing? >> i think individual company eventually is very limited and our results today considered to be a good one if we compare that to the rest of the industry. but if you look back to a couple of years ago, 15% for the first nine months is not something great in general and definitely way below what we get used to see towards a more balanced and healthy situation in the industry. so we believe each effort is not going to bring the efforts combined. >> do you think there is a desire? do you think others in the industry share this desire? have you had some feedback that, yeah, maybe actually we should
all talk? >> i think it's generally shared, but when it comes to the individual actions, it's, of course, much more diverse. >> yeah. and maybe needs to be done at a government level, as well. otherwise, everybody would say there's some sort of collusion going on which isn't really the point. we know the western car market has been fairly weak. where do you see a bright spot? where is steel demand stronger than you thought? >> actually, both markets, russia and u.s., is doing relatively well, especially in the segments where we are creating. russia, despite the slowdown in gdp and steel consumption showing relatively strong results year on year and that will allow us to improve both the market share compared to fails and also our mix of products which we deliver to low income markets. and, actually, we see overall
the signs that u.s. economy is recovering and showing quite a good -- great, great -- >> and there is the expectation that global ddp next year is going to be better. do you share that? and despite the production, is it overall going to be better? >> yeah. in terms of demands who believe the signs are there and for them to condition in 2014. in the same time, we think that overpass level is still too high to be able to for the demand side to fix it in one year. so we think it will get longer. >> thank you very much, alexey kulichenko. now, a reminder of what's on the agenda for tomorrow, leaders will be gathering in sri lanka for the 2013 summit meeting. canada and india will be no-shows. caroline kennedy is set to
arrive in japan to start her new job. and we're expecting foreign direct investment figures out of china for october. also, every day this week, we're checking out how new innovations are improving city life in which up and coming investors should be tracking today, urban living and a healthy lifestyle might not seem like natural bed fellows. but new technology is helping residents keep personal track on their health. tom mckenzie has been investigating. >> in 2007, ford released its sync system, a voice activated system that allows users to do things like change radio stations, check the weather and get health reports on their vehicles. but in 2012, ford released a new feature which allows app integration for in-car wellness,
not for the on machine, but for the people who are in them. >> the people invested in that technology are the car companies themselves. people want to be diagnosed before these problems ever occur. ford has a perfect analogy for that. >> ford using gps to pinpoint the driver's location and provides up to the minute data levels on things we may be allergic to. we have one app which enables the consumer who might be concerned with asthma or breathing conditions to get the pollen count in their regional area as well as what the forecast of what the pollen count is going to be. >> and they're given alerts for the flu index and knowing the risk for ultraviolet rays. it can also help save your life. >> the real idea came from an internet where i was having lunch in a deli and was surprised by a crew arriving to a cardiac arrest happening next
door that i wasn't aware of. and we knew all that time while the crew was traveling to the scene, we could have measures in place sooner. >> a organization develops and run tess app that has the potential to turn any of us into a life saving good smar tip. >> at this point, it is a mobile application that alerts those who are cpr trained of nearby cardiac arrests so they can get cpr started while the crews are still en route. >> subscribers receive a notification and a map that alerts them to and shows them where someone is having a heart attack. statistics show where the service is available, more people learn cpr. >> apps are going to change the way we interact with our health care providers. today, we're monitoring ourselves, our activity, to an extraordinary level. and we can use that information
to change our behavior and engage in healthier practices. >> and the mobile health care app says it's growing. research firm market to market estimates it could be worth $21 billion by 2018. and our innovations cities coverage concludes tomorrow when we take a look at the new technology to keep dwellers secure. to catch up with all of our special reports this week, join in the discussion on twitter using the #innovationcities. jeff morgan canceled a question and answer session after the #jpm became flooded with insults. twitter users overwhelmingly sent jokes to the bank instead.
another said is the fact that you've paid over half a billion fines since august a source of pride or are you embarrassed it's not higher? as a result, the bank tweeted tomorrow's q&a is canceled. bad idea. back to the drawing board. so should politicians, business leaders say away from social media to avoid abuse? should they ride the wave .expect they're going to get abuse in tawdry terms, as well? get in touch with us, e-mail us, world would email@example.com, tweet @cnbcwex or @rosswestgate direct to me. now, as we go to the break here, let's remind you of where we stand with european equities.
the ftse 100 is rebounding somewhat after yesterday's losses, up about 0.8%. other european equity markets have been firmer than that. 0.9% for the xetra dax and the cac 40 despite the fact that growth today is disappointing for the third quarter. we'll get the full print of eurozone gdp. are we still stuck in contraction territory? we'll find out in a few moments' time. the uk is certainly the standout country in terms of growth in a few moments, as with well. we'll going to break the data when we come back. the second hour of "worldwide exchange" coming up right after this.
hello. this is "worldwide exchange." i'm ross westgate. investors getting a boost from dovish comments by janet yellen ahead of her senate confirmation hear. she says the bond buying program is the best way to get the economy back to normal. this as the ceo of morgan stanley told this channel the reaction to tapering isn't always rationale. >> every now and then, the markets behave like school children. they overreact, they run around
like crazy. we know we're going to have -- >> berlin has the last laugh and it's back with brussels and washington showing that gdp wag driven slowly by domestic demand. japan is dealing with a gdp slowdown. exports leading. the abe government is predicting a rebound. and cisco fired a warn shot, saying sales will drop sharply this quarter. john chambers told cnbc customers are more cautious now than he's been for quite some sometime. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. right. we have the latest eurozone gdp. it's weaker than we might have thought this morning.
profits releasing the following estimates of gdp growth and they're saying the third quar r quarter -- if i can get this right for the eu 28 is 0.11% and for -- i'm trying to check. the eurozone flash estimate growth 0.1% quarter on quarter minus 0.4% year on year. we did think it would be 0.2%. france actually contracting in the third quarter. minus 0.11%. we thought that would expand. i had 0.5% growth in the secretary kwarer. euro/dollar as a result is down to the session low of 1.3345. in the beginning of the session, the dollar had been weaker overnight because of the janet yellen comments. kit joins us. it's weaker than what we
thought. >> yeah. i think, aside from what the print is on the third quarter, the impression you get from data at the moment is that the european economic recovery is begin to go top out. >> pretty low. >> pretty low positive sort of rate. that's the impression is that we're softening out a miserably low rate and the european forecast growth accelerating towards 2% over the next couple of years, are beginning to feel as if they're going to need some help from policy figures. >> yeah. when you take france and italy, 40% of the eurozone together, they both contracted in this last quarter. it sort of makes you wonder, with all that investment that we've had into european equities over the last three months and the cyclical recovery basis whether they've slightly got over -- overpositive. well, you could say that everywhere. the cost of money is very low. some of the money that's coming into europe is flooding from the
united states because european equity markets lag u.s. equity markets so much. the falling wages that we're seeing in a lot of on euro for boosting profits, even at the expense of not doing a lot in terms of economic activity. so the equity valuation stories not necessarily the same as the growth story. and we can see -- >> it really is. no, it's a qe stretch into the financial markets. so up to a point, i just sort of shrug and live with it. >> you mentioned qe, so let's mention janet yellen. she's holding a confirmation hearing to be the next fed chairman. she's expected to defend the fed's aggressive bond buying program. in her prepared remarks, yellen says the u.s. economy has come a long way since the financial crisis, but there's more work to be done. she also says while unemployment has come down, it's still too high. it's suggested the fed needs to
continue supporting the economy, saying that the surest part to return to go a more normal approach to monetary policy. what's the chance? what's the balance of risk here despite those comments we might get a tapering in december. >> we might. i don't think she's on anything to encourage you in that. >> no. the markets yesterday, the reaction was great, we don't have to worry about it. >> we'll see how the q & a goes. i think the fed use like us to differentiate between tapering and tightening saying, look, we have to slow our bond program down. >> i think they're struggling with that. so i think if you'd ask them what they would like to do, they would like to taper and not have bond yields go up. >> is that whittling in the wind to some degree? >> feels like it this morning, unfortunately. but that makes march much more
likely than december. because getting us used to do idea that tapering isn't such a big deal takes time. when you've got ten-year yields which rose to 3% in the summer have come back. they're at 275 this morning or so. >> a lot of volatility, because we went from -- before the jones report from 2.6 to 2.75. down to 2.68 yesterday. back up. there's a lot of volatility in that. >> it's moving around. i think we're settling in the 2.5% to 3% range. it's already quite a lot higher than 3%. but the markets priced in quite a lot of fed tightening over the course of the next three, four, five years. it's priced, so i don't see why the bond market should get annihilated from here on tapering. every time somebody opens their mouth, we get a reaction and we're getting used to it. >> and the question is whether -- look, we just had our
36th record close on the dow. people keep wondering at what point do elevated bond yields crimp the equity markets. >> i think the equity market will get crimped by the prospect of fed tightening being much more imminent as opposed to a particular level at the moment. i don't think treasury res going to head off 2% to 3% until tapering is happening. i think we're in a range in that regard. what's bizarre is, you know, i think back to the emerging market assets have definitely not just charged on higher. they failed to recover -- >> well, the feeling is if not now, it's going to happen at some point in the future. let's talk about dollar, dollar slen y dollar/yen. >> japan's gdp down by 0.5% in the third quarter. weak consumption, exports still a drag. but inflation did beat expectations and leaders in the
country said these slowdowns are temporary. are you still waiting? after that big depreciation of the year when we launched abe-nomics, we sort of haven't gone any further. and i know the yen is only one side of the story, of course. >> yeah. look, the economy did better quicker than you could have believed possible. we got promises of policy changes from abe-nomics that delivered gdp growth at the start of this year just on the back of sentiment. we're getting a correction on that in the same way dollar/yen went up 25% very far and settled into range. we could break through 100 today. but we could break through anytime through 100 in dollar/yen and i think we are set, therefore, for the bank of japan to be the one country that isn't tapering. they're increasing the size of their balance sheet all the time. >> so the yen should weaken on that basis. >> it's weakened too far too fast and we have to time the moment when the next round of weakeni ining comes through. but it's coming. let's bring you up to speed
with where we stand on equity markets right now. we kick off with a look at the future. dow up 70 points yesterday. it was 36 record closes as i say, the s&p up 14 points. another record close. that's up on fresh 13-year highs. as far as futures are concerned right now, this is where we stand. currently some 30 points above fair value. the nasdaq at the moment some 5 points above fair value. the ftse at the close yesterday had its biggest one-day fall since august. right now, we're up 0.8%. as is the xetra dax and the cac 40. the ftse mib is the lagger, fairly flat. we talk about u.s. treasury yields and how volatile they've been. currently yielding 2.717%. wednesday, 2.97% was the high on the yield for the ten-year on tuesday, as well. we were just talking about the currency markets. we'll skip over those and get
straight to singapore. sixuan wraps up the markets there. >> hi. thanks, ross. better than expected gdp numbers and comments from janet yellen helped markets in asia. the dollar/yen is inching towards the 100 handle, spurring exporter stocks and some short covering in future chasing ahead of the year-end book closing. so names like kggi, panasonic and isuzu motors among the biggest gainers jumping some 3% to 5%. china markets stabilized after yesterday's sharp sell-off. the shanghai composite added 0.6%. the hang seng index gained almost 1%. south korea's kospi ended marginally higher after the bok kept rates steady. i want to show smu chinese banks. in the mainland, mixed price lenders extended yesterday's
sell-off after a sharp rise in rates. this comes after refrain from pumping liquidity into the markets. earnings news also in focus in hong kong. tencent had an earnings due to expand its messaging app. but investors still cheered a 35% gain in its online gaming revenue and shares jumped almost 5%. meanwhile, retailer and beermaker china resources enterprise gained over 4% at its underlying q3 profit grew 36% from last year. back to you, ross. >> sixuan, have a good evening in singapore. still to come, we have more from our exclusive interview with james gorman. what does he think of the tightening regulations on banks? those views, to come. opportunities aren't always obvious. sometimes they just drop in.
a recap of the headlines today, markets cheer fed chair nominee janet yellen as she reinforces her dovish reputation. economic numbers in the eurozone come in just flat in the fourth quarter. france and germany showing signs of a slowdown. the outlook is -- for cisco, warning on sales in emerging markets. and the ceo and chairman of morg morgan stanley has been talking about the impact of the volcker rule on banks. >> keep the changes that are at the heart of the volcker rule before the volcker rule came along. because we thought that was the right thing for our particular business model. i don't want to speak for others, but for us, using less about shareholders capital, in fact, almost none of our
shareholders capital to support morgan stanley's performance, which is the essence of the volcker rule. don't engage in activities with the shareholders capital. i had lunch with paul volcker and i don't think even he would recognize the rule. jack lew is right, we need to get this thing finished. we need to get the rules written and we need institutions to understand exactly what they can and cannot be doing. but with morgan stanley, i think most of the large institutions have anticipated the state and are already complying with that. >> what do you think a successful bank will look like once the bank regulators are finished? >> there is no single business model. a lot of people look at the industry and look at it as we're ordering the same thing. we're not. there are custody banks, commercial banks, trading houses and so on. you know, what successful banks look like, it doesn't matter
what business you're in. it's give your shareholders a return above the cost of capital. create an environment where employee committees feel like they're special and they're delivering something with enormous value. .morgan stanley has been around 77 years. the heart of our dna is living through various devicing activities and that's really the essence of success. >> but it's very different compared to before the financial crisis. and you've overseen that at morgan stanley. you've gone from many of the riskier businesses, you're now focused on the steadier revenues there. i mean, do you think that is going to be the key to future success of stability? >> well, i think the financial system is essential and that's why we've had the regulatory changes that we've had. how each firm adjusts their business model is up to their capabilities, they're assets and so on. for us, it was an easy call. we were already very large in the wealth management states.
but we saw an opportunity to become a very, very significant part of the -- to provide balance. we were very large in security advisory, m&a, equities in fixed income trading, but we wanted to focus on our client activities. >> too big to fail? >> well, that depends on the country and the markets and the institution. but i think if you look at the regulatory changes that have taken place, it has dramatically changed the outlook for financial institutions and their health and regulators should be complemented on it. >> james gorman from morgan stanley. meanwhile, jpmorgan captioned a twitter session yesterday after #jpm became flooded with insults. twitter uses overwhelmingly decided to send jokes to the bank in response the bank tweeted tomorrow's q&a is canceled. bad idea. back to the drawing board. sometimes it just ain't worth
the hassle. so we've been asking should politicians, business leaders just not bother with social media to avoid abuse inspect should they rise to the storm and accept the occasional tawdry tweet or maybe social media companies should step in. let us know what you think. get in touch with us, e-mail, firstname.lastname@example.org, tweet @cnbcwex or direct to me @rosswestga @rosswestgate. still to come, rival sotheby's have held an auction that broke records. we'll have more on the sudden scramble for art next. bny mellon combines investment management & investment servicing, giving us unique insights which help us attract the industry's brightest minds who create powerful strategies for a country's investments which are used to build new schools to build more bright minds.
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greece shows the country still contracting year on year, down 3% in the first quarter on the year. and unemployment rate is still stuck at 27.3%, although they're going to just collect the august figure. this is after the eurozone gdp just rose 0.1% for the third quarter compared to the second quarter. that data out in the last 20 minutes or so. we also have some news out from air france klm. it's not going to subscribe to air italia's capital increase. says its necessary but measures
are still not met. so they're not going to stump up. right. other news we're following, u.s. secretary of state john kerry has been in the uae, united arab emirate these week and when asked about the ongoing scandal, he insisted the heads of other nations have been fairly understanding about the revelations. harry fwamble is in dubai with the inside scoop on that story and joins us now. hadley, i'm all ears. >> good morning, ross. you know what's interesting is the question i'm hearing from everyone. how much did president obama know and when did he know it? a source at google has said it's quite clear that the president would have had to know that google databases are being mined. and someone quite close to the president in the past, his former national security adviser, i got the chance to ask him about the outrage we're hearing from international leaders over the nsa surveillance programs and what
we're hearing from companies like cisco and google, as well. >> there is no doubt in my mind that we presented in our capability and our sharing of intelligence with our friends and allies several major attacks on different capitals, especially on the degree of dependance that other people have on our intelligence network and that we share with them to alert them to possible attacks in their own homelands is a matter of record and something that we should feel good about. i'm quite sure that to the extent that there may have been unintended policy consequences that we wish to fix, i think we'll fix them. we should not necessarily top rate a lot of hypocrisy on that. every country has its own intelligence information gathering network, whether it's industrial, whether it's national security, whether it's
military. you know, governments exist to defend the homeland. >> there you hear president obama's former national security adviser general ben jones, something that we already knew, that governments spy on other governments, it's just the fact that most governments don't get caught. >> thanks very much, indeed, for that, hadley. plenty more coming out. now, the highlights of a record night avenue sotheby's was the andy warhol's silver car crash. it sold for on $105 million, the most ever achieved by the late pop artist. for a grand total of $380 million, the highest in
southby's history and the blockbuster sale came a day after christie's smashed numbers by coming up with a single work of art. marian, thanks so much indeed for joining us. how much more did this sell for than we thought, this car crash? what was the estimate? >> the estimate was around $80 million and it sold for a similar -- a green car crash that sold for about $70 million. i think about five, six years ago. so i mean, there's a significant appreciation taking place not just in the warhol market but in the whole contemporary art market. >> what is driving that? >> two things. liquidity and the global expansion of collectors and buyers. more .more people are buying art at the high end. you saw it and william achavelo is the one who bought the
francis. he bought the giauccimetti last week, which was the other top lot. and he was making it known to everyone he was the buyer, which means he needs the new collectors to see him as the agent to buy through, which suggests that the old network has been broken up and there are new buyers out there that even the pros are desperate to find and market to. >> i'm not sure this liquidity and this search for alternative assets is being driven by central bank easy money, by policies like the fed qe. >> i don't think you can say that's got nothing to do with it, but i think it's more a product of the leverage business owners have. people who generate a lot of cash by owning a business have very few places to put it. and i would caution against seeing these very high numbers as investments. these kinds of trophy pieces
rarely pay off when you try and resell them later on. what they're really about is buying something like a yacht or an airplane and, in fact, there was a recent census of billionaires that showed the hobby that was most popular among billionaires was art collecting, slightly above, you know, aviation and their boats. so it has a broad appeal even if the boats and the airplanes are still a bit more expensive than most of the art that's bought and sold. >> that's interesting. you're saying they're not investments. although you previously said the prices are up 20% on last time. >> yes. the prices overall are up, but they are often for different pieces. that silver car crash hasn't been seen for 20 years. the best works that come up once in a generation are the ones
that turn up high prices. the works that get turned over often, steven cohen was selling a recently bought gerheart richter work. but cohen had bought his for pretty much the price it sold for. just two or three years ago, maybe even a year or two ago. though cohen has done well in turning over art that he bought recently, mostly by get ago guarantee for southby he, it's not really a place you would go for your best trades. it's a place where you buy something that's significant to you and it is much a personal purchase as it is any sort of investment. so it may hold its value and might want be a bad place to park money if you've, you know, basically filled up the other places you keep your money. >> they may be facing some large
fines, so maybe people thought he was a -- i think he's short of cash. marian, good to see you. thank you very much indeed for joining us. >> my pleasure. and now to diamonds. they may be a girl's best friends, f friends, but the most expensive one has been snapped up by a man. the pink star diamond sold for over on $83 million in geneva. it took two years to cut. i'd say that was a little bit big to put on a finger. now, from the shiny to the grimy. facing a different prospect, piles of stinking rubbish. a strike by rubbish collectors means the city has not been picking up trash for nine days. this comes after a proposal to
cut jobs and seize pay of the refuse workers. still to come on the show, walmart reports results in around about 90 minutes. consumers are still feeling financial pressures, so will they be willing to spend this holiday season? will they have the ability? we'll get a preview as we do so. could it be the 37th record close for the dow today? futures are up right now.
you're watching "worldwide exchange." i'm ross westgate. janet yellen says the fed's bond buying program is the best way to get the economy back to normal. meanwhile, morgan stanley's ceo says the reaction to tapering isn't always rationale. >> every now and then, the markets act like school children. they're overreact, run around like crazy. growth in germany slows in the third quarter, but berlin has the last laugh. is sa it says gdp driven solely by domestic demand. export growth wanes and weakens at home. but the abe government is predicting a rebound. and cisco fires a warning shot.
it says sales will drop sharply this quarter. customers are more cautious now than we've seen in quite some time. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. if you've just joined us in north america, a very good morning to you. we are called higher on the dow, currently trading some 28 points above the close. the nasdaq is below fair value at the moment by some 6 points. and the s&p 500 at the moment, also at a record close at the moment is currently some 4.5 points above fair value. european equities have been fairly firmer during the session. the ftse cnbc global 300 is up
about 0.3%. disappointing growth out of the eurozone today. for the whole group, 0.1% in the third quarter. contracted, minus 0.1%. that was weaker than expected. italy contracted 0.1%, as well. you've got to remember, they are 40% of the eurozone economy. the ftse 100 up around 0.7%. there was a fallback in retail sales, as well. they fell 0.1%, as well, for the last month. they had a lot of warm weather in the uk, so nobody went out to buy their winter woolleys. that is going to change, let me assure you. xetra dax and the cac 40 up around 0.75%. what are investors to do at this particular moment? here is a recap of what some of our guests have told us today on cnbc. >> it is going be a big more comfortable with viewing the dollar as a growth currency. it's a theme markets have been
trying to pursue for the better part of two years now. it hasn't really worked. but if you look at the months heading into september when we were initially priced in tapering, bond yields went up and also stock markets were okay. so i think that's going to be the best environment to taper. now, we asked heading into that direction, as well. >> every single uk fund manager tends to hold the performance as a fairly steady holding. .you get these events. you've got to have a bar bell somewhere that qualifies as not too stodgy, not going back too far and does the job as far as buying. >> the challenge they have is it's rather stoked up expectations as something a bit
dramatic as we talk two years ago about setting itself for targets. it's mostly achieved by now and certainly achieved the others by the end of the year. >> meanwhile, cisco has failed to slow down is getting even deeper. and the company, seen as a bellwether for corporate i.t. spending is giving an unusually grim forecast for the future. courtney reagan is joining us with the details. what has john chambers been saying? >> hi. good morning to you, ross. it's not such a great quarter. the fiscal quarter earnings beat forecast i by 0.2%. the company's own projections of 3% to 5% growth. cisco warning second quarter revenues will drop 8% to 10%, saying it expects business to be challenging for the next few months. ceo john chambers says orders the company expected to land in october haven't materialized, especially in emerging markets such as brazil, india, mexico
and china. chamber's customers appear to be sending mixed signals about the economy. ceos are probably more cautious about next year than he's seen in quite a while. >> it isn't just high tech. it's the consumer companies of our customers, the people who sell in a brazil or sell in an india or manufacturing who sells in those areas. what you're seeing is the gdp slowed. as they've slowed and you and others have talked about it for almost six months, then confidence begins to drop. and if they're looking for the u.s. to lead them out of this scenario, surely the last month or two has not instill a lot of confidence. >> well, cisco fell nearly 10% in after hours trading today. in frankfurt, shares are down 10% right now. a little more than that. chambers gave some clues about his future of the company. he tells cnbc he's likely to stay on as ceo for the next two
years. >> when i went through with a number of our board of director members, the transition we're in, the game plan, etcetera, the first three i talked to asked the same question differencely. one of them said, john, we're counting on you to lead us through this. the other one said, john, we expect you to stay. and the third one said, and that was a compliment, i would never leave this company during a tough time. >> it's also interesting, ross, when the ceos come out and talk publicly about their plans to stay and go and the stock prices react. i always feel a little bad when that happens. back to you. >> yeah. courtney, thank you very much, indeed, for that. >> thanks, ross. >> have a good day. now, poor results from walmart in the last quarter could be replicated when the company reports its third quarter figures today. we'll get a few preview after the break.
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a share in revenue, just under $117 billion. same-store sales are expected to rise 0.3%. patrick mckeefe is managing director at mkm partners and joins us this morning on. patrick, a very good morning to you. what's going to be key for you from what walmart has to say? >> key, ross, for me will be what has been happening with store traffic. it's been tough for walmart. store traffic or same-store traffic has been negative this year. so i'm looking to see if that has improved from the trend and, of course, beyond that just hoping to get some comments about the upcoming holiday season and thoughts from management, updated thoughts from management. >> what do you expect to see about that? we all know that there's less days this year between thanksgiving and christmas. and as a result, a time of retailers are getting competitive with their promotions. do you think walmart will have to do the same? >> i do.
and i think they'll tell us that they're going to play a leadership role there. in terms of just getting out early, they're opening their stores -- they're starting their black friday specials at 6:00 on thanksgiving evening this year. that's two hours earlier last last year. they're being supper aggressive with price. if you pull up the website, it looks like it's almost the holiday season. and i guess it is. we're not too far away. but they're going out earlier. they're going out even more aggressive than they have in past years, hoping to get that customer to spend earlier to offset the pressure from having six fewer days of holiday shopping this year. >> what's going to be happening with margins as a result? >> probably under a little bit of pressure as they have been. you know, walmart has been more or less a flattish operating margin story over the past several quarters. the company has talked about 100
basis points of sg&a leverage over the last five years or so. but they've delivered a little bit on that late last year, but this year it's been a little tougher. they've not delivered that sg&a leverage. that's another area that i'll be focused on because it is very important for us story that they've able to leverage their expenses and they have not done that much of late. >> they've been closing 50 poorly performing stores in brazil and china. wa do you expect them to do with their global operations? >> well, what they've done globally is they've pulled back a little bit from their aquisitive streak. the last acquisition they did was for a south african retail chain. so they've slowed thing down overseas. i think what they're doing now is focusing on shoring up their existing portfolio, improving
profitability at their existing stores overseas and they've decided to close about 50 underperforming stores in brazil and china, which have been two problem areas for them. they're also sort of, you know, getting out of some businesses that are not core to them. they're selling their restaurants, more than 250 of those in mexico. and they're taking some other actions to improve returns at walmart international and returns have been a bit of a sore spot for the company. >> okay. good to see you. thanks very much, indeed, for that. nice to see you. >> thank you. meanwhile, some of the other stories we're following today, the rough start to president obama's health insurance program has been confirmed. the government says around 106,000 people enrolled and selected a plan in october, but only a quarter of those were through the federal healthcare.gov website. the majority signed up on state run marketplaces. the obama administration's original forecast was to have 500,000 people enrolled through
healthcare.gov in the first month. numbers weren't broken out by age group or how many enrolled online. boes boeing's machiing's mas rejected a new contract offer. the movement could cost thousands of jobs in washington state, securing years of work on boeing's income generation plane. the deal would have terminated pension plans and raised health care costs. boeing will consider building parts of the jet in nonunion u.s. states or in japan. still to come, she beat a whole host of qualified candidates to become president obama's choice to replace bernanke at the fed. can janet yellen win over the senate, too?
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let's take a look at today's jae agenda in the united states. forecasts dropped by 5,331,000. city fed president charles plosser speaks about the economy at 9:00 eastern. reports on the open, after the close, we'll hear from applied materials and nordstrom. and janet yellen faces her confirmation hearing today in front of the senate banking committee. she's expected to defend the fed's aggressive bond buying
program. in her prepared remarks, yellen says the u.s. economy has come a long way since the financial crisis. but there's more work to be done. she said while unemployment has come down, it's still too high. yellen suggests the fed needs to continue supporting the economy, saying that that is the surest path to returning to a more normal approach to monetary policy. u.s. economics editor at the economist and joins us for more. greg, very good morning. always good to see you. >> good morning, ross. >> the take away from the prepared statement, greg, was the balance of records shifted back towards a march taper. is that necessarily the right way to read it? >> i don't think it is, actually, ross. i think you should basically read this. >> very easy, it would imply continued quantitative easing, continued interest rates at zero.
it eventually pulled away from those two policies and that will be the main thing we're going to be watching in the q&a. when somebody is being confirmed to be the chairman of the fed, they're not going to try, number one, to pretend they're already the chairman therefore make new policy or try to get ahead of their colleagues in the federal open market committee. so i think yellen will try very hard not to make new ground specifically when tapering will begin if at all in the next few months on. but she may not have much choice. because i think a lot of the questions from the senators on the panel will zero in on that issue. >> yeah. she's going to be tested, isn't she, quite a lot. particularly from the republicans. there's not much in the prepared statement. what will she say about inflation? >> the inflation is a good one because she has a reputation as being a dove, that is somebody who cares more about unemployment than inflation given a certain set of circumstances. so on the one hand, she's going to want to dispel the impression
that some people have that she's easy on inflation, without sounding so hawkish that the markets react so badly and sends long-term interest rates up sharply. so i think what she will do is emphasize her adherence to the fed's 2% inflation target and claim authorship of the policy that put that 2% inflation target in place. the benefit of that is that, number one, she sounds tough and sta stallwart and then she can point out inflation right now is below that target and still working harder to boost the economy, maintain easy monetary policy and fully consistent with getting the inflation rate back up and staying on target. >> this is a tough job here, greg, for the fed let alone janet yellen seems to be to say, look, we probably would like to start tapering. but to convince investors and markets that the beginning of tapering isn't a reversal of policy, right? and -- >> absolutely. >> the market res s are so bina.
how on earth do you square that? >> i don't really know because i don't think they've figured it out yet. and they've been trying that, at least since may, when bernanke first put on the table the possibility that in coming months they would start to taper. and the response was a rapid long-term run of interest rates, a lot of breakage in the financial markets and the fed feeling too nervous to actually pull back. so you have to sort of circularity where every time the economy thinks they're doing well enough they can start to taper, they talk about it, long-term rates shoot up and they no longer feel comfortable talking about doing taper. so i don't really know how they get out of that box. i think for yellen, the challenge today is less specifically talking about taper and more responding to concerns, especially from republicans on the panel that the fed has no exit plan, that it's qe to infinity. i would like to hear her basically explain how she can reassure them that, in fact, there is an exit plan that at
some point there will be a point when the benefits of qe are no longer justified by the costs, whether those costs are more reach for yield and speculation in the financial markets or the threats of future inflation. being able to convey her awareness and sympathy for the possibility that those costs are there is the key thing while not suggesting that they're so immediate that she has to deal with them right now and, therefore, bring about tapering. >> greg, good to see you, as always. have a good day. greg is the editor at the economist. earlier we asked you whether politicians and business leadership stay away from social media to avoid abuse, this is after jpmorgan canceled a twitter question and answer session when #jpm became flooded with insults. great to see a dialogue of the social network means abuse is likely. he realizes that a twitter
good morning. the day's top stories, fed chair nominee janet yellen heads to capitol hill for her confirmation hearing. in corporate news, cisco shares are getting slammed after the tech giant warns of revenue could dive as much as 10% this quarter. and rejected, boeing, the machinist, turned down a labor contract extension that would have let them build the company's newest jet liner in washington. the decision could change the course of the company's presence in that state. it's thursday, november 14th,
11-14-13. it doesn't make sense any more to do that. i'm going to stop. "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. cisco is our top corporate story today as joe was just talking about. that stock was under severe pressure after the bell yesterday. you can see right now it's down by more than 10%. this came as a huge shock to analysts that sales could drop by as much as 10%. they were looking for a gain in sales this time around. jon fortt is going to join us with more of his conversation with ceo game chambers in a moment. janet yellen will appear before the senate banking committee this morning. she can expected to defend the central bank's aggressive monetary easing. she'll say, i believe supporting the recovery today is the shortest path toet