tv Worldwide Exchange CNBC June 23, 2014 4:00am-6:01am EDT
creates the ultimate vectra motor home at the ultimate factory. creates the ultimate vectra motor home at the welcome to "worldwide exchange." i'm julia chatterley. >> and here are your headlines around the world. >> spit fortunes. pmi out of china shows the first expansion in factory activity in six months as autos surge, but over in europe, disappointing numbers hit markets. and ge moves one step closer to securing a deal on the energy business as the deadline for the deal looms. the french government securing the option to buy a 20% stake in boyd. france's finance minister urges authorities to push forward with a resolution to the bnp paribas probe, this as the latest report suggests the bank will pay between $8 billion and
$9 billion to settle. and aceos is back online. the fashion retailer gets back to business after a warehouse fire over the weekend, but the firm says it's fully insured. shares pair losses. well, a warm welcome again to "worldwide exchange" this morning, a bright, early monday morning. we do have some further pmi data out this morning, too. we had france and germany already this morning. now we've got the composite pmi coming. it was estimated at 52.8. it's coming in right now at 53.5. that's for june. so, compared to the estimates pretty much in line with forecast, but the pmi manufacturing estimate at 52.1, manufacturing coming in at 52.2,
so slightly better on the manufacturing. on the services, too, it's come in at 53.2, bang in line with estimates, of course. and we did have france and germany out this morning. germany pretty much in line as far as the manufacturing is concerned, weaker on the services, and that dragged the composite down. france weak across the board, both services and manufacturing, disappointing. that's europe. of course, china's factory sector expanded in june for the first time in six months. that's according to preliminary hsbc survey data. the pmi rose to 50.8 with new orders pushing the index into growth territory for the first time since december. er jeremy stretch joins us now in studio. jere jeremy, good morning. >> hi. >> start with europe. thoughts on these numbers? >> i think the particular interest is in terms of the weakness in the french data. i think that continues to cause some concern, because of course, we're seeing an increase aing divergence from france and germany, and i think that will
undermine, if that team or trend continues to develop over the course of the next couple months. >> we're looking at contraction in you, according to these numbers. >> indeed. it looks like gdp in france for the second quarter will be back in negative territory. that's bad news both for the french economy and also the eurozone, but also politically for president hollande. it's another headache, if you'd like, and of course, after the very weak performance his party had in the recent elections. >> at what point is the ecb policy action going to ride to the rescue? >> that is the issue, because of course, it takes time and they force measures to actually work through the system. and of course, in essence, easing rates from already low levels isn't going to materially improve or boost french sentiment in the short term. i think ultimately, it has to be a case of looking towards structural reforms, and i think that's going to be the debating point, because of course, as we know from other members of the eurozone, particularly the periphery, structural reforms, yes, can work, but they take
time and they're also painful. and of course, that also inflicts pain or difficulty on the unions. >> on the german side, weaker services data than expected. any thoughts there? >> well, that's a little disappointing, but we're still well in expansionary territory, so i think we have to keep that in mind. but in essence, what the data tells us is, of course, the eurozone is incredibly still reliant on germany to drag it along, with some of the other northern european economies moving at slipstream, but it is still a german-led eurozone. any fragility seen there would obviously play through in terms of the activity data relatively quickly, and ultimately, for the euro as well. >> triple highs for the aussie dollar against the greenback and the yen. we're not too far away from year's peak, around 9,461, i think it is. will we make a test on that. >> seems like we are predicated in that direction. i think the china story is proven relevant in that regard. the upcoming rba may signal again -- >> government concerns leaning on that -- >> exactly.
i think they will be mindful of the continuing strength of the aussie because of the impact that will have in terms of the economic data. and i think, of course, if we go back to the previous statement, not only is the highback the standard, but they added commodity prices and i think that's going to be another interesting point because over recent weeks we've seen some of the commodity index in australia weakening. if china is stronger, perhaps that provides a caveat for that, but that's another factor we need to monitor. i think at these sort of levels, the aussie does look gyrating. and we're seeing markets extending aussie positions to all different levels. >> we have important data in the u.s. this week, housing data that the market's focused on, also the pc inflation data on thursday, particularly important given what yellen said or didn't say or didn't do last week. what are your thoughts there? and if you bring this all together, how should we be trading? >> the data is fascinating, particularly in terms of the cpi data recently. question is, is that a
statistical blip or are we seeing some evidence of a small degree of not inflationary pressure, but certainly, a lack of disinflationary concerns, and i think that together, if we see those home sales data remain relatively supportive, and as we move through towards next week's payrolls report, then i think a combination of those factors remain relatively supportive. should provide the dollar with some support. the dollar index has traded back towards the 200-day moving average. at that sort of level, i think it remains supportive. if core pc starts to come in or head towards the top side, i think that will provide yield support for the u.s. dollar as well. >> what is the outlook for sterling? because the outlook will be tested tomorrow, arguably, when the matters of the mpc testify on the inflation report, i believe it is. was the pound to go much higher, possibly retest levels above 1.70? >> i think if you look at how the market is positioned, the data is historical, but we're back at levels we haven't seen since late '07, so markets
already have long positions in sterling already in place. that's not to say they can't extend further, particularly if the bank of england tomorrow, carney and others, including miles and mccafferty, don't stamp down on some of the rate expectation scenarios that have been playing up over the course of the last couple weeks or so. so, as long as they maintain the rate stories very much as the markets have been increasingly discounting, then sterling still has a potential to rally. i think possibly, necessarily, i would look away from trying to buy sterling at these sort of levels against the u.s. i would prefer to be short of the euro/sterling or sterling/yen may be another way to play the trade. >> we'll get feedback on potential measures to cool the housing market on thursday as well. jere jeremy, stretch, thank you so much, head of ethic strategy at cibc. coming up, not backing down. lululemon founder chip wilson looks to goldman to help take on the board as he battles full
company control. we're also watching you. google could soon be in our homes as the company nestlab with a home monitoring camera, start-up dropcam. >> and the rock star with tight pursestrings. sting denies his six kids the chance of easy money, as he says there will be no inheritance money for any of them. and finally, up and down or steady? we'll break down the numbers of our latest cnbc commodities survey with a look ahead on gold and the price of oil for the week. all that and more coming up. a pretty cautious start for european markets this week, despite some of the gains that we saw across the asian session. actually lost a bit of ground in the last couple hours. we're 82 right now reds to greens taking the euro stoxx 600 down 0.6%. a lot of things on investors' minds, talking about that in
terms of the pmi data this morning. cautious tone to be taken as far as the french data is concerned. weaker on the services side, weaker on the manufacturing side, too, an indication suggesting actually we could see a contraction in that q-2 gdp data for france. perhaps the french government should be less focused on m&a deals and more focused on economic growth performance and what to do to boost the markets. let's have a look at what happened on friday as far as the u.s. markets are concerned, because the momentum seemed to continue. minor gains as far as the markets are concerned in friday's session, but the one we're really watching is the dow, of course. 50 points now away from that 17,000 level. and we did see fresh highs for the s&p 500 and the dow in friday's session. so, the question is, given the sentiment we've seen in the european markets this morning, can the rally in the u.s. continue? asia? >> let's look at it, because the big theme was the data coming out from china. this is the flash hsbc manufacturing pmi. the first expansion in six
months. on the whole, the markets like that, with the exception of the shanghai composite, oddly enough. 2,024, down just a smidgen. once again it seems to be the story of new share issues that's bleeding liquidity from the list of shares, the established shares on the main board. one of the biggest beneficiaries of the upbeat pmi from hsbc, the aussie dollar, getting a lift. spaep asx 200 up almost 30 points. remember, the aussie economy is wired into the chinese in terms of their trade, biggest trading partners. nikkei 225, 15,369. the kospi having a reasonably good run today, 1,974. let's flip the boards and show you the activity in the credit markets. ten-year german bonds yielding just over 1.3%. it's going to be an important week for the gilts market and sterling because of what we were talking about earlier with
jeremy. we got mpc board members testifying tomorrow, including governor carney on that inflationary report. ten-year gilt yielding just over 2.7%.and the u.s. over 2.6% and the italian bond market a little bit weaker. over in the currency markets, we are seeing some giveback from the single european currency, because remember, at the french pmi, it was on the softer side as services sector contracted in germany as well. so, some weakness below that 1.36 market. aussie having a good day after the robust china pmi from the hsbc. dollar/cad under some pressure, 1.0719 and cable just over 1.70. julia? the world's leading fund managers and investors are gathering in monaco for the international fund forum.
karen is, of course, in monaco for us. i was looking at your shot earlier, and no offense to sri, but i have major location envy. what a beautiful backdrop to be discussing markets. >> reporter: yes, julia. i hope you saw that beautiful shot of the beach, one of the famous beaches just down the road. i hope that was the shot you were looking at. this is the playground of the rich and famous, but it is playing host to the largest annual mutual fund event. and many of those fund managers have already flown in, but it is a rather distracting backdrop, and some are off playing golf and having lunches today. that's the first day of the fun forum. it's about meeting with clients and discussing the markets. don't forget, it's been a very interesting quarter. we've had record highs across in the states, but also on some of the european indeces, so a lot to discuss. with all the m&a activity out there as well. joining me now is someone who actually hasn't gone off to golf or lunch yet. mark mobias with executive chairman of templeton emerging markets. great to see you, mark. thanks for joining us today.
>> thank you. >> it's been an interesting year so far, first and second quarter. you focus on emerging markets. how different is this year versus last year? >> well, very different, because now emerging markets are out-performing the u.s. and the world indices, where's as you know, last year we were underperforming. the year before, outperforming. the year before that, underperforming. so, we've had a very checkered history in the last three years. now things are looking better. >> there was an enormous u fo euphoria around the brics countries. where do you still see the growth and opportunities in those markets? >> china is going through this incredible reform program, the ten-point program by the communist party. it's an amazing document and means tremendous changes in china. and that's why i think the 7% growth target is achievable for china. so, we see a lot going on.
in brazil, of course, as you know, the demonstrations against the government and the unhappiness with the infrastructure and so forth and so on i think could result in the change, not necessarily change in government, but that could happen, but a change in the policies of the government towards more market-friendly, towards more company-friendly attitudes. >> a lot of investors wade into emerging markets thinking they were easy pickings, easy gains to be made, and many people got burnt on some of those investments. how specific do you have to be with these emerging markets these days in terms of buying assets? >> you have to be very, very specific and very company-specific, not only country-specific. and you have to start broadening your scope into frontier areas, because if you look at frontier, frontier markets have out-performed even emerging markets, generally. so, the scope of our work has widened considerably over the last few years. >> when you say frontier, you're looking at the likes of africa. there's been enormous chatter about nigeria, now one of the
fastest growing economies in the african region. is this where you're focusing your attentions? >> africa is one of the most important and niger, of course, is the biggest in our portfolios. south africa's important for us because many of the companies in south africa are moving north to the rest of southern africa. but don't forget the middle east. the middle east is on a tear. the uae, kuwait, abu dhabi, all these countries are moving very, very fast. and then some countries in asia, such as vietnam, look very good. >> when you say the middle east is moving fast, other people may be thinking of a different connotation to that, meaning the events unraveling in iraq, the insurgency, the spike in the oil price at very low levels and low volatility. what does that mean for your portfolio when you look at middle east markets? because even some local fund managers are saying i'm not touching exposure to iraq now? >> well, it's true that iraq has got a problem, but then if you
look at kurdistan, the kurdish areas, you'll see a lot of good things happening there, and drilling for oil is one of the most important things they're doing and pumping that oil to turkey and other parts of the world. so, i think you have to look at, again, either within a country like iraq, specific areas where they might be very good things happening. >> perhaps it could help if you would flesh out your russia exposure, because this is a good example, world markets sold off the nysex, which recovered, but concerns about ukraine and russia. you're still invested in the country, the type of assets you were buying and looking to add more. we saw just the other week, jpmorgan kaz no changed to buy on equities and some people felt that was too late. are there still opportunities in russia, and where do you see the best place to play those investments right now? >> well, it's certainly not too late because the russian ruble is down against the u.s. dollar. so, u.s. dollar investors have a
good opportunity. and the market has not done that well. there's been a little bit of a spurt, but there's lots of opportunities there. a company that is not only nickel but palladium, and demand for palladium is going through the roof in china and other countries that use gasoline engines and need catalytic converters using palladium. so, there are lots of things there we can look at. >> quickly, last week we saw a lot of inflation go on after the fed suggested interest rates are going to stay low for much, much longer. is there room in your portfolio for those types of inflation pages or do you think it's just an irrelevant issue right now? >> it's not irrelevant, because inflation will hit some countries and will have an impact on interest rates, of course, but at the end of the day, if you look at the correlation between the movement of markets and conflation interest rates, it's not that high. so, you have to look at each individual company specifically on how they're going to be impacted. >> mark, it's exciting what's
happening this week. very glamorous. anything you're doing in the french rivera today? >> i have a few speeches, but other than that, i hope to enjoy the sun. remains to be seen. >> mark mobius, chairman of temp templeton emerging markets. julia, let me toss it back to you. we're going to cool off and perhaps have a little paddle in the water there next to us. >> very nice, indeed. >> we officially hate you. >> hardship sign if ever i saw one. >> punishing. thanks, karen. >> all right. >> beautiful. >> send us a postcard. please do. >> exactly. interesting comments there. >> i think it's a great point about inflation mark makes, and i'd say two things about that. emerging markets, of course, especially deficit countries like india, which is a net importer of crude oil. but it's not just oil, the headlines coming out of iraq, it's the price of food as well. remember cpi -- >> absolutely. >> -- in china. pork is such an important component of the food basket.
so, watching el nino, watching food price inflation as well. >> and china, 7% growth is achievable. thought it was a legally binding target, but we have to take a quick break. >> so sad, beijing. coming up next, has the french government squeezed the best possible deal? stay tuned as we cross the palace. spokesperson: the volkswagen passat is heads above the competition, but we're not in the business of naming names. the fact is, it comes standard with an engine that's been called the benchmark of its class. really, guys, i thought... it also has more rear legroom than other midsize sedans. and the volkswagen passat has a lower starting price than... much better. vo: hurry in and lease the 2014 passat s for $199 a month. visit vwdealer.com today. we stathat the kid onhe thought the back of the bus might have a song that he has in his head
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in an 11th-hour deal, the french government has agreed to buy 20% stake in alstom and clears the way for ge to get the energy assets. stepan, feels like a rabbit out of the hat moment for the french government with the 20% stake, but given that the deal is vastly different from the initial proposal from ge, i wonder how they'll feel about their alliance. >> absolutely. small like an alliance, it's at least what the economic minister say this morning. it is far from the original deal and the most surprising part of this announcement was the 20% stake that the government is going to buy in alstom. willing to discuss this deal with our guest.
thank you for being with us today. you say that any deal is better than no deal, but still, do you think it's a good deal for alstom and for the french? >> yeah, definitely, the facts that emerged presenting the new deal from ge give us the impression that it's all in all a positive for alstom, because on the one hand, alstom receives little less cash as it needs to reinvest in joint ventures, in energy joint ventures. but on the other hand, it gains access to the signaling business of ge, which it had been interested in for a while, and this had been mentioned. so, it's also the global alliance in the rail business, which would provide synergies. so, all in all, a good deal for alstom, maybe not as good for the cash element. ge will keep all the synergies from the gas business, the power business. so for the government, we will
see, but we can say that the government helped alstom in a way to obtain at least the signaling business and maintained its focus on france, actually, because the french assets of alstom will stay through the joint ventures or stay french. >> reporter: ge will bring its rail signaling business. still, it's far from creating the rail like they wanted at the beginning. >> that's the case, but actually, an alliance with the rail would have been extremely difficult because the assets overlap to a great extent technologies that are similar. and actually, the deal with ge is more interesting because there's more -- the technologies are more the same. ge is active in the business and will offer alstom the option to do some servicing of its freight business. >> reporter: what about the largest shareholder of alstom?
the state is going to buy 20% at what price? that's the question. >> well, the price, i think they will likely get upside from this deal, which there is upside, in our view. so, there has been discussion maybe using an option price, the strike price of 35 euros, which seems like a fair price to us. >> reporter: the fact that the government stepped in and at the end took 20% of alstom, what kind of message do you think it is sending to international investors? >> well, the government has shown a bit more active, maybe not interventionist, but a stronger political, sending a stronger political message. but on the other hand, it obtained from ge significant assets and significant concessions, and also, you must be reminded that the state has been invested in alstom in the past. it has been a good investment for the state. so, maybe the state will also
benefit from this investment. >> reporter: thank you very much, thomas. thank you for being with us live outside alstom. julia, for now, i send it back to you in london. >> thanks so much. we'll catch up with you later on in the show. in corporate news, the website of fashion retailer asos is back online after a fire at one of its main warehouses over the weekend forced it to suspend operations. in a statement, the online retailer said that initial estimates show that about 20% of its total stock have been compromised in the fire. however, the firm assures it is ready for the loss and none of the technology or structure of the building has been affected by the fire. we can see the stock relatively unchanged in trading, but as you can see, it's been a bit of a pushing three months for that stock, profit warning down just shy of 50% over the last three months. >> gives new definition to hot pants, doesn't it? okay, no more. no more. that's it. that's it. anyway, let's move on. >> inappropriate. lululemon founder chip wilson has reportedly hired
goldman sachs as he seeks to shake up the yogawear retailer. the "wall street journal" says wilson is considering options, such as a proxy fight or joining with a private equity firm in a buyout. wilson has a 20% stake in lululemon and eare earlier thish he unsuccessfully tried to remove two board members, including the one who replaced him. he said they were too focused on short-term growth. they warned second quarter sales would be weak and cut their outlook last month. this is where we're standing in the german trading session. lululemon, up just a tad. all right, we mentioned this earlier. british rock legend sting is sending a -- ♪ message in a bottle, yeah -- to his children. >> you were dying for that opportunity. >> telling them the need to make their own way in the world. good man. speaking to "the mail" newspaper on sunday, the star said his
kids won't be inheriting much of his fortune, as he doesn't believe in trust funds. neither do i. in any event, sting, estimated to be worth nearly 200 million pounds -- >> wow. >> ca-ching. said there won't be much left of the money soon, as he is spending it all! >> you're not going to leave all your millions to your children, sri? >> absolutely not. >> really? >> millions in indonesia terms? because i don't have that much money. i'm going to mooch off my kids. anyway, do you agree with sting? is passing on your wealth to the younger generations a bad idea? and do kids need to learn the value of money, ambition and hard work? join the conversation here on "worldwide exchange." get in touch with us by e-mail or by twitter, @cnbcwex or directly to us. >> they're not exactly children. that's the other thing. i think if they were going to get a trust fund, they would have perhaps had it by now. 37, 32, 30, 28.
>> average age of most of these trustafarians who hang around the coffee shops in noting hill, talking about the film script and the film that they will never make. anyway -- >> i can see that you actually care about this! >> i do. i feel very strongly about it. >> i'm loving it. >> yeah. >> okay. so, there you go. if you're doing that, quick, get to work. you're watching cnbc. still to come on the show, on the defensive. as uk drug-maker looks to protect itself from takeover bids from u.s. rivals. we'll be talking about that after the break. stay with us. ♪ ♪fame, makes a man take things over♪ ♪fame, lets him loose, hard to swallow♪ ♪fame, puts you there where things are hollow♪ the evolution of luxury continues.
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split fortunes. pmi data out of china shows the first expansion in factory activity in six months, as autos surge. but over in europe, disappointing numbers hit markets. ge moves one step closer to securing a deal on alstom's energy business as the deadline for a deal looms. the french government securing an option to buy a 20% stake in buoygue. france's finance minister urges authorities to push forward with a resolution to the bnp paribas probe, as the latest probe suggests the bank will pay between $8 billion and $9
billion to settle. and asos back online. the fashion retailer gets back to business after a warehouse fire shuts down its website over the weekend, but the firm says it's fully insured, and shares pair losses. we've got some commentary out of the bank of england this morning on the state of the lending markets. they said that banks made more loans available for house purchases and unsecured credit in the second quarter of this year. they expect to see demand for secured credit to increase again in third quarter and that actually banks reporting demand for that secured credit increased significantly in the second quarter of this year. they say demand for business lending, too, increased significantly in the second quarter of this year. and actually, the cost of loans to smes apparently falling in the second quarter of the year, too. so, no actual update as far as numbers are concerned, but they're suggesting that there's an improvement in credit availability and that will improve further in the third quarter of this year.
meantime, european markets are on the defensive. we're following some stock-specific stories involving alstom, siemens, of course, and bnp paribas, but the broader sentiment is quite negative after the pmi data really seemed to be fairly underwhelming for france, and on the services side for germany as well. and of course, the broader overlay is we continue to watch what happens with the price of oil and the conflict in iraq, and that, again, is keeping sentiment in check. >> some of the stories as far as bond markets are concerned. a slight big tone to the bond markets. you've got the spanish ten-year yields taking around three basis points, so trading around that 2.72 level right now. u.s. treasury, of course. plenty of data coming up this week to watch, including the pce inflation data. right now the ten-year inflationary trading. >> sterling especially, 1.7020 as well. we're standing off of the data julia awas talking about.
and of course, sterling is going to be in focus because of the mpc board. members testifying tomorrow on the inflation report. it will be interesting to see what they have to say about the outlook for rates and if they back up governor carney. elsewhere, dollar/yen 101.83 is where we stand on that cross. we got durable goods orders and the case-shiller home price index this week, so that should inform trading on the greenback and the dollar crosses broadly. euro under some pressure after the pmi data and further slippage, julia, below 1.36. >> uk drugmaker shire is expected to announce its strategy to more than double its annual sales in an attempt to bolster its defense against a 27 billion pound takeover bid from u.s. rival abvi. kathleen joins us on set now with details. katherine, we've got astrazeneca in this announcement of defense. how credible is it going to be?
>> i think pretty credible. shire's get a credible management team. they've built up a substantial portfolio and made kind of a clever move a couple years ago. they really had their sales really bolstered and they were known as adhd specialists, but then they went and pursued these particular orphan drugs for quite small patient population diseases but that actually, you know, those are the kind of diseases where you can get drugs approved a little bit more quickly. and of course, you've got a patient population out there, it's quite easy to persuade governments to pay for that kind of thing. so, they've had a successful strategy so far. shareholders who have bought in over the past few years will have enjoyed that. but having said that, looking at the kind of prices that are being talked about for shire at the minute, there seems to be huge premium in there. it's already a company that listed for just 100 million pounds 18 years ago and it's now rejecting these takeover offers, but there does seem to be some sentiment in the market that this could finally be the point at which it loses its independence.
but of course, management have a duty to shareholders to if they are going to vebtaleventually go lose their independence to get the highest price hike possible. >> and do you think they come back with a higher bid? because they rejected the bid, didn't they, on friday? credit suisse raising their price target to 42 pounds, i see. >> and there is talk in the market that the second bid may need to be even higher, because of course, there is a bid premium in there, about 30%, but astrazeneca, which is a company that's not growing -- >> absolutely. >> -- and as quickly, walked away from a 45% bid premium. of course, there is the added tax inversion and using, really maximizing their tax efficiency. so, there's definitely a lot of talk that there could potentially be a much higher bid right there. >> love the comparison. thanks, katherine. another big story in the m&a space we're following, shares in alstom surging this morning after the firm came to an 11th-hour agreement with the french government. that clears the way for u.s. giant ge to acquire alstom's energy assets. the french state has agreed to buy a 20% stake in alstom from
buoygue and calls the potential alliance not a takeover. joining us is habdil rahman. this is a victory, is it not, for the french government and securing french jobs and interests? >> it is, because they've actually secured a better deal for alstom, plus, they've secured existing jobs and they've also gained a commitment from ge for an additional 1,000 jobs over the next three years, and they can also penalize ge if it doesn't stick to that commitment. so, in terms of france, it's a good deal. >> what do you think siemens has learned from this, because they failed to convince the french government of the importance and the vitaminality of their bid. they're going to come away from here with some lessons learned. what do you think it's going to be? >> well, i think siemens kind of came in because they were almost invited by the french governments. they kind of knew that they had an advantage. so, i think they kind of played that advantage, but it actually didn't go in their favor.
so, i think at the end of the day, what they learned is if they really wanted the asset, which i really do believe they wanted the gas turbines business, it was the key draw, and now ge has full control of that, the gas turbines business, that they have to come up with the goods, basically. >> is this really a good deal for alstom shareholders? seems like they've been a real side issue here when the french government have been working out national pride issues. we've had decision-making in tech, who's going to be involved in the alliance. it feels like alstom shareholders have been, well, the last thought in this entire process, really. >> well, the french government, the key issue for them is keeping alstom french, keeping key french industries and also securing french jobs. >> but if you want to improve a business, sometimes you need to strip things out. >> absolutely. >> you want to improve efficiency. it may be good for the french government and french jobs, but i'm not sure -- i mean, i don't know what needs to happen with this business ultimately, but their hands are tied. >> understood, but basically, what you've got is a much stronger alstom. if you speak to any credit analyst, they'll tell you that this deal actually provided the best deal for alstom versus the
siemens/mitsubishi deal. bu what you've got is a stronger turbines business in wind and renewables and nuclear -- sorry -- and you've also got a recapitalized transportation business and slightly larger transportation business. i mean, once alstom pays down its debt, they'll have some cash left over. they were going to return cash to shareholders and i think shareholders were expecting a windfall, but that may now be used to expand the transportation business. >> i'm just curious, how much of this is going to be a blueprint for future deals that do involve strategic european assets? >> i think, basically, anybody doing a major deal in france with a major french company that employs thousands of french people will know that they have to consult with the government at an early stage. in this deal, they didn't do that, and i think that was one of the key issues that montberg had, that the government were not consulted. when we spoke on a previous deal, they said we would not have gone far in this process had we not spoken to the french
government first and gotten their approval. >> french government has ultimate veto power as well. so just tlay. >> heba abdelrahman, editor at special situations at deal reporter europe. all right, elsewhere, the wheels already starting to turn for apple's iphone 6, expected later this year. hong hi precision is reportedly hiring over 100,000 people in mainland china to produce the newest iphone. according to taiwan's "economic daily news," the manufacturer of pegatron is expanding its mainland work force by 20%. honghei will produce 70% of the phones, according to the report. pegatron is set to produce the remaining 30%. european apple supplier arm holdings is also enjoying a bump up in trade today as well. there you can see the london listed stock up by about 2.25%. julia? meanwhile, a massive recall due to a faulty airbag is being
increased with nissan, honda and mazda announcing an additional recall of over 2.3 million vehicles. we have the story live from tokyo. >> the initial recall last year affected 3 million vehicles that use the same airbag produced by a major japanese auto component manufacturer, and takata alerted owners that they could be affected by the airbag's inflater on the passenger seat side, which can cause a fire. honda will recall a total of over 2 million vehicles globally, and nissan will recall 755,000 cars worldwide, and mazda is recalling 160,000 cars globally. toyota had already recalled some 2.3 million vehicles that use the same airbag. according to the firm's financial reports, takata's customers include volkswagen, general motors and renault and airbags are mounted to about 40%
of total sales. and that's all from me. back to you. >> thank you. all right, let's stay in the region, because in hong kong, over 600,000 people voted in an unofficial referendum for democratic reform over the weekend. and with such high demand, voting is now extended until this coming sunday. that's despite the fact that the vote itself has been deemed unconstitutional by both the hong kong and chinese governments. the unofficial referendum comes a week after beijing released white paper in which it reasserted its authority over hong kong. currently, beijing picks the top leader in hong kong loan as the chief executive but has promised to allow hong kongers to vote for the position by 2017. we have to take a quick break, but still to come on the show, ireland is crowned the most entrepreneurial country in europe, according to a new study. of course, nothing to do with the tax rates, but what's behind their success? we'll bring you all the details after the break. spokesperson: the volkswagen passat is heads above the competition,
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trial, having been accused of belonging or assisting a terrorist organization, broadcasting false news and also working without a permit, and it does appear they've now been jailed for seven years. we'll bring you any further developments on that story. >> you can expect more furious developments on the diplomatic front to try and secure their release. >> absolutely. now let's focus on the commodity markets. canada produces 1.3 million barrels of conventional oil a day and exports more than half of that amount. speaking earlier on cnbc, canada's finance minister, joe oliver, highlighted the importance of a dependable source of energy. >> canada presents itself, because it's true, as a reliable source of energy to the world, and that includes europe. we have a prospective pipeline which would move 1.1 million barrels a day to the east coast. and you know, i don't have to tell europeans that there is a strategic advantage to diversification, particularly from a market that is stable,
friendly and honors its contractual obligations. meanwhile, brent crude is hovering near nine-month highs as the insurgency in iraq's escalated over the weekend. the iraqi government has released footage of air strikes of suspected militant hideouts in mosul, as sunni extremists tighten their grasp of the western frontier, seizing a town 19 miles from the jordanian border. they also secured cities in western anbar. arriving in jordan, u.s. secretary of state john kerry said the u.s. would not choose the leadership in baghdad, this as iran's extreme leader accused of united states of exploiting sectarian rivalries in the region. >> so, the big question is, what's the upside potential on the oil barrel due to these tensions in iraq? now, according to our latest cnbc sentiment poll, the answer is up in the short term.
brent crude, which is most vulnerable to middle eastern unrest, set to grind higher this week. two-thirds of those asked are bullish on crude prices. only eight are bearish. let's get more now with the senior commodity strategist at saxo bank. we have talked about this. if brent surpassed 120, 125, will we see a respond from either saudi or the international energy agency? >> i think we will, because we've seen in previous occasions in 2011 and '12 that it had a negative impact on growth, and that really is a major concern for the global economy at the moment. so, yes, if we don't see it even before we get to that level. >> do you think that will only happen if the southern oil flows are disrupted? >> yes, because that's really the key at the moment is that vast majority of iraqi plies are coming out of the south. and obviously, it's shiite controlled. so, as long as the situation there remains relatively stable
and flows are coming through faster, then the oil market doesn't have a problem. at the moment, we're all trading on the back of fears of what could happen. >> how does the current positioning of the market play into this? right now we're trading around $115 a barrel for brent. is the bias of the downside for all, particularly if we see a breakthrough in improvement in the situation? >> then there will be increased risk. just look at the recent data from the u.s. oil markets. there's more than 350 million barrels of speculative net long at the moment. we saw again both after the libyan war and after the sanctions were introduced to iran, we saw a $20, $30 sell-off. so, obviously, we have to be aware of that. at the moment, the level to keep an eye on is really one of five and 111 in brent. i don't think that's a major concern by those holding long positions at the moment. >> the macroeconomic picture in china, the pmi numbers measured
by hsbc, first expansion six months, but in my mind, it's really not consistent with what you are seeing on the iron ore market especially. >> no, that's right. we're seeing iron ore prices down by a third this year. there's a bit of a slack there in demand at the moment in china. i think oil in china at the moment's really a story about strategic reserve building. there has been some speculation that the recent record in the months were more than a quarter going into strategic reserves. so, it's difficult to gauge what is actually consumption and what is going into reserve at the moment. but obviously, as we have a pmi above 50, that would obviously give a little bit of attention as well to the demand side. because we've all been looking at the supply side over the last couple weeks. >> and for the bouillon market, we saw last week a breakout post spread in the price. is that going to continue? is the bias to the down side? >> so, which, sorry? >> on gold. is the breakout going to
continue or is the bias to the down side? >> well, we need to see probably around the 1330 area. we need to get above that, then i think we have clear air above us up to the mid-60s. silver really seemed to have been the main driver last week, but if you look again at the numbers, we had the biggest reduction in etfs since december last year. also, the speculative short was as a record, so so far, it's really been primarily short coverings, so we need to stick up here for a while really to attract some genuine new buying into the market. >> wonderful. thank you very much indeed for dropping by. senior commodities strategist at saxo bank. julia? let me recap breaking news out of eenlt. an egyptian judge sentencing three al jazeera journalists who have been on trial for four months up to seven years in jail, after being found guilty on charges including helping a terrorist organization by publishing lies. the three members include an
australian, a canadian, egyptian national and the bureau chief of al jazeera also. i know looking back over this that, actually, the australian prime minister tried to intervene on their behalf. there was criticism, too, of the canadians, that they perhaps hadn't said anything right now. so, we have to wait now for some diplomatic efforts on this front, not that they haven't been ongoing over the last six months while on detention. now let's move on. a new report has put together statistics on the most entrepreneurial country in the world, and the winner is? did you guess it? india. the global entrepreneurial report published by oracle capital group examines everything from opinions and attitudes towards start-ups to actual activity. now joining us is martin graham, chairman at oracle capital group. >> good morning. >> good morning. so, just how are you gauging -- we mentioned it there briefly -- but how are you gauging entrepreneurial spirit and activity in these countries, firstly? >> fundamentally, we develop nine key measures, which we think are the key things behind
promoting entrepreneurialism. and we've used a very rich data set to rank each country against those measures, and we calculate from the individual measures an overall score. >> so, uk and germany are way down the list compared to the likes of ireland and india. >> right. >> what sets them apart? >> the winning countries tend to be developing countries, okay? they have a very, very positive attitude to risk. they desire to be entrepreneurs. the problem with the more developed countries is people want to be entrepreneurs just so they can earn more money or have less time or so they can work for themselves rather than the boss. in places like india, you're driven by necessity. there's far better feasibility in terms of the ability to set up companies. as more desirability, as i say, there's more experience. >> i was just going to say, ireland then, because you can't call ireland a developing economy. why is ireland so high up on the list, in your view? >> the really interesting thing about ireland is the image of entrepreneurs is very, very strong, number one.
number two, there's a lot of experience in terms of setting up companies in ireland. also, i think -- >> tax rate? >> the tax rate helps. the tax rate undoubtably helps, but the government's also done some very useful things. it's encouraged companies that do exports. it's also encouraged specific industries like farming, fishing, tourism. so, i think there are two things. you need a government which actually reduces the costs to industry, to start-up companies, reduces regulation, and you need access to finance. those two things are huge helps to entrepreneur. >> back to india, do you think the new modi administration is going to help push and incentivize entrepreneurs in that direction, because he's made it clear he wants to cut red tape and make it easier for business. >> yeah, i think that's a fantastic development. the best thing that happened in india is in 2000, they created a collateral-free guarantee fund, and that's had a huge impact on businesses. they also encourage banks to
give special consultation work to small companies in things like finance and taxation. they have national awards that actually lured entrepreneurs. >> a quick question because we're running out of time. what about the conversion rate? because fine, if we are more risk-averse, we're less likely to fly at something and try and do something entrepreneurial without actually converting it. so, aren't wie more successful, in fact, because the number of people that are more successful in start-ups are higher than those who go out and don't actually achieve? >> in the uk? >> i'm talking about generally, compare the uk with india. >> the uk's got a very poor conversion rate if you look at the number of start-ups. >> interesting. >> that fail is about 95%. >> and india? >> india is about 50%. >> wow. that's super interesting. >> what's behind -- >> we don't have time. do we have time? can we do it? go on, then. >> we've always got a pound of flesh. who's lagging behind and who needs to step up their game? >> japan, the uk. the uk is doing the right things with the new business bank, but there's a lot more to do in
terms of reducing red tape, encouraging investment, making life -- >> so, economics hasn't unleashed any entrepreneurial spirit? >> no, haven't gotten down that that level. >> interesting. very exciting. martin graham, chairman at oracle capital group. great to have you on. still to come on the show, could french lender bnp paribas be closer to a deal with u.s. prosecutors over sanctions violations? we'll be discussing all the details right after the break.
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welcome back to "worldwide exchange." i'm julia chatterley. >> and i'm sri. here are your headlines around the world. >> a record high for wall street as the dow nears 17,000, but soft pmi data keeps european markets in check. ge is closer to securing a deal on alstom's energy business. as the deadline for a deal looms, the french government securing an option to buy a 20% state in buoygue. >> shire trades lower as the uk pharma group scrambles to bolster its defenses against u.s. bidder abvi with a plan to more than double sales. >> and france's finance minister urges authorities to push forward with a resolution to the
pnp paribas probe as the report suggests the bank will pay between $8 billion and $9 billion to settle. if you're just tuning in, thanks for joining us here on the show. a quick check on u.s. futures as we head towards the start of the u.s. equity market trading session. and after making fresh highs for the dow and the s&p on friday's session, we do seem to be giving a bit of ground as far as futures are concerned. seven points lower on the dow futures, just a point or so on the s&p 500, and six points or so on the nasdaq right now. 1% gains or more than 1% gains across the board in yesterday's trading session, but we are seeing a loss of momentum as far as european markets are concerned in this morning's session. as we mentioned, the pmis, the composite pmi a touch weaker than expected. france the real laggard there. services and manufacturing data there, service data weighing, i
think, on the markets here, losing around 0.7% for the french markets. german markets, similar story. the service sector weaker also. and the italian markets always the underperformer, down 1.4%. sri. we've got pmi data in the asian region as well, and jolly good it was, too. this is the hsbc flash number for june. it's the first expansion in factory activity in almost six months. oddly enough, the shanghai composite is on the defensive right now. 2,024. it's largely down to the new share issues leading some liquidity away from the established listed companies on the main board. but the s&p asx 200 as well as the aussie dollar is having a good day after that robust pmi reading from hsbc on china factory activity. 5,453. elsewhere, the nikkei and the kospi are stable as well after settlement. flip the boards and show you what's happening with the bond
market. ten-year in the u.s. yielding just over 2.6%. remember, as far as the data docket is concerned, we've got durable goods orders and the case-shiller home price index that's going to form trading in the credit markets and fx as well. ten-year german bonds yielding 1.33%. and gilts are going to be in focus this week. of course, remember, tomorrow's going to be quite a critical day with the mpc members testifying on the inflation data. all right, let's take a look at the currency markets as well. euro is under pressure because of the read in term of the pmi numbers. the french numbers were weaker than expected. also, we saw a contraction in german service sector activity. elsewhere, aussie, as i said, having a good day today because of the robust china pmi. dollar under some pressure against the cad and sterling holding ground above 1.70. julia?
>> thanks, sri. just to recap what sri was saying, china's sector expanding in june for the first time in six months, according to an early survey. flash pmi rose to 50.8, pushing into new territory. joining us is the global economist at wells fargo security. jay, thank you for joining us. your take on the china pmi stats overnight? >> yes, so, overall, i'd say it's encouraging to see this starting to rebound. it hit a low a few months ago, and our expectation would be that china would start to stabilize. i think we're starting to see some of that right now. keep in mind, china's never going to grow 10% again, you know, but 7%, 7.5% will take them. >> i can't help but feel a disconnect between the 7.5% growth for china and what's happening on the micro level and lack of growth drivers, particularly investment, in the regional level in particular. do you get any sense of that? >> well, keep in mind, the income growth in china's actually been pretty strong over
the last few years. and so, you know, we tend to think of china being this export powerhouse, and certainly it is, but there is much more to the chinese economy than just exports and the housing market. so, as consumer spending continues to grind along at decent sorts of rates, that's helping the factory sector there. and you know, the government has also had some mini stimulus, there's been a mini, on the margins, loosening of policy as well, and that's kind of helping to stabilize the situation over there. >> does the chinese economy need more targeted stimulus, jay, to keep it on an even keel? because as you pointed out, there are still challenges in the broader economy coming from the housing market and also coming from the shadow banking sector. >> you know, i think if you take up a long-run view of china, i don't think you want to see a lot of stimulus. maybe marginal stimulus -- >> no big bang? >> no big bang. china is an unbalanced economy. half of the growth there over the last number of years has been from capital investment, and they really need to target it more towards consumers. so i don't think you're going to
see a big bang. >> that's what they're saying, isn't it, we're going to keep it incremental to see how far we go? >> that's the messaging from beijing. >> jay, you're staying with us. let's look at what's happening on today's agenda in the united states. we have june flash u.s. pmi out just before 8:00 a.m. eastern. an hour later, we get may existing home sales, forecast to rise more than 2% to an annual rate of 4.75 million. just a pair of earnings reports today. micron technology and fast-food chain sonic. now, let's take a look at our other top stories. alstom has come to an 11th-hour agreement with the french government, clearing the way for u.s. giant ge to acquire its energy assets. the french state has agreed to buy a 20% stake in alstom from buoygue and has called the potential venture with ge an alliance and not a takeover. the u.s. firm is set to acquire alstom's gas and steam turbines for power plants and hoping to enhance the transport offering.
sales in siemens, which tailed a bit to mitsubishi to rival ge's offer trailing to the down side today, down just over 1.1%. we've got buoygue down about 0.5%, so caution from buoygue investors, but of course, the french markets are also down slightly more, so bear that in mind. gve ge trading in european markets up 0.3%. oracle is reportedly in a deal to buy microst investments, a premium to friday's closing price. the stock surged earlier last week over reports that the companies were in talks. the "wall street journal" says the deal could be announced today. mycross makes point of sale hardware and software for hotels and restaurants. this would be oracle's largest acquisition since it bought sun microsystems for $5.6 billion back in 2009. let's take a look at micros and oracle sales. these are the frankfurt listings. both those stocks doing reasonably well.
micros up by almost 3%, oracle up by 1.2%. google's nextlabs is buying dropcam, the maker of home monitoring cameras. on friday, the price tag was reportedly $555 million. the companies confirmed the acquisition but didn't specify price. google is increasingly expanding into new areas, ranging from high-speed internet to self-driving cars. it bought nest, which makes smart thermostats and smoke ala alarms last year for $3 billion. looking at google trading in the session, higher and out-perming the german market. phil francona, who runs harbinger group, is set to make an offer for central garden and pet, the u.s. lawn care and pet supply companies. reports say falcone will offer a
premium. he has already made known his displeasure with the way the company's being run. earlier this month, he sent a letter encouraging the board to explore a sale. now, still to come on the show, the rock star with tight pursestrings. sting denies his six kids the chance of easy money as he says there will be no inheritance for any of them. should we call him stingy? oh, dear. >> oh! >> quick, take a break. see you after the break.
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welcome back. here are your headlines. the dow within striking distance of 17,000, but data drags on the european markets. ahead of today's deadline, ge takes a big step towards its purchase of french firm alstom, and uk pharma firm shire lays out its plan to reject takeover advances from u.s. firm abvi. so, key pmi data has acted as a brake on european markets this morning. underwhelming french numbers show the country slipping into a deeper contraction. meanwhile, german manufacturing remains in growth, but the output increased at its weakest rate since september. now, as spain tries to steer
itself out of the economic doldrums, the company plans to reduce its corporate tax rate, designed to stimulate investment and make spanish companies more competitive. earlier on the channel, u.s. billionaire wilbur ross said he'd like to see something similar in the u.s. >> i think it was fascinating that spain, as it's trying to emerge from its own crisis, has decided to cut corporate taxes. we'll see how well the eu likes that, but it's fascinating to me that they're going to take it from 30 down to 28 and then down to 25% in a couple of steps. i think that's the preferable direction for the u.s. to go. >> jay bryson obviously still with us. you were nodding there. do you want to comment on what he was saying there or should we get straight to europe? >> yeah, i certainly agree with mr. ross. i think there is room to bring our corporate tax rate in the u.s. down, and not clearly in europe as well. i'm afraid we're not going to
see that in the u.s. any time soon. maybe 2017, but not any time soon. >> even then. >> yeah. >> bring it back to europe. we were just talking in the break, when you actually compared europe to japan and said actually you struggled to find anything to get you excited about europe right now. just fill that out a bit for us. >> yeah, so i mean, i'm not bearish or in the sense that i don't think europe's going to go back into recession any time soon, but i don't think you'll see a huge acceleration there either. in the first quarter, they grew less than 1% at an annual yized rate. here in the second quarter, maybe more like 1.5%, but it's slow numbers. reminds you of japan in the '90s or even 2000s, very slow inflation rates there. what the ecb has done is good on the margin, but it's not a silver bullet. hard to see acceleration going on there. >> the region's banking system is so central to all of us, isn't it? how would you characterize the state of the lenders from a capital point of view as we head into that all-important ecb
asset quality review? >> yeah, so, i think that's the key. and i would say it's cautious at this point. you know, you start seeing any signs of banks really extending lending at this point. you know, the ecb's policy to try to encourage more lending, we'll see how good that is. i'm not real optimistic that you're going to see a surge lending any time soon. i think you have to get through the asset quality review later this fall, and that's a number of months away yet. >> that's why they've staggered the cash injections, the ltros. they don't even come into play until later this year. >> right. >> so they are trying to time it so one plays into the other and the benefit isn't just used up in the asset quality review between sort of then and now, now and then. >> we'll see. jay will be sticking around. thank you very much for that. jay bryson from wells fargo securities. now, british rock artist, some might say legend, sting is sending a -- ♪ message in a bottle excuse me for that. anyway, to his children, telling
them they need to make their own way in the world. speaking to "the mail" on sunday newspaper, the singer said his kids won't inherit much of his fortune, as he doesn't believe in trust funds. sting, estimated to be worth nearly 200 million pounds, says there won't be much of the money left soon as he is spending it all. now, do you agree with sting? is passing on your wealth to younger generations a bad idea? do kids need to learn the good, old-fashioned value of money? join the conversation. join us, and we already have some feedback. thomas tweets, "both are possible. some will pass on wealth to their kids unless they spend it all, which is not a good example either." >> good point! >> tony tweets, "absolutely. wealth should be meritocratic." i know tony and i know his kids and he brings them up well. linda tweets "perhaps not cut off entirely, but give incentives that they will get more when they succeed more on their own." >> can i quote warren buffet? >> please do.
>> of all the people who have done a similar thing, he said "i want to give my kids just enough so that they would feel they can do anything, but not so much that they would feel like doing nothing." >> no entitlement closuulture. >> tweet us. we'd love to hear from you. still to come on the show, could french lender bnp paribas be close to agreeing to a deal with u.s. prosecutors over allegations the bank hid transactions, violating american sanctions? that was a bit of a mouthful, but we'll get the latest right after the break. we needed 30 new hires for our call center.
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makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter.com/offer2. all right, sunday saw the world cup action continue. portugal were looking to get their campaign back on track as they faced the united states. they were helped early on, thanks to a defensive error. manchester united's nani capitalize and the second half heated up. u.s. leveled with a 25-yard strike from jermaine jones and clint dempsey put the americans in front shortly after. >> the equalizer! >> portugal waited until the 90th minute to level the match 2-2, thanks to a header from sylvester varela.
belgium progressed the last 16. they beat russia 1-0 in rio de janei janeiro. and south korea fell to algeria and they sit second in group "h." today includes a lame duck encounter between australia and spain at 1800 cet and the netherlands faces chile at 1800 in sao paulo, whilst cameroon play the hosts at 2200 cet at the estadio national in brilla. did you like that? >> i liked that, almost as much as just singing. >> one tries. i do it just for you, julia. >> i know you do. i'm loving it. right, let's take a quick look at u.s. futures moving swiftly on. and as you see, losing a little bit of ground as far as futures are concerned, but we're a few hours out. fresh highs for the dow and s&p on friday, third in a row for the s&p 500, but what we're watching is the dow, around 50 points away from that 17,000 level in particular.
now the french finance minister says he hopes an agreement between bnp paribas is close, saying they cannot continue in the in-between situation. he made the comments in an interview on french radio, hours after the "wall street journal" reported the bank is likely to pay between $8 billion and $9 billion to settle a probe into whether it hid transactions which may have violated u.s. sanctions. now, david inrick, european banking editor at the "wall street journal," joins us now on set. thank you so much for joining us. so, $8 billion to $9 billion, a touch less than we were perhaps anticipating a week or so ago, and we're talking about a suspension, perhaps, for a period of time on u.s. activities, too. what does this mean for the bank? >> well, it's not as bad as some people have been fearing. the u.s. had been seeking penalties of more than $10 billion, so this is relatively speaking, i guess a bargain. still a lot of money, and it's way, way more than bnp has set
aside to cover the 1.1 billion euros they've provisioned for, so it's going to require a huge loss in the quarter for them -- >> do you think it history the dividend? >> i think it's going to have huge implications for them from a capital standpoint. whether that means they do some sort of rates issue attached to the settlement or cut their dividend or stop all buybacks, i'm not sure. there is definitely big capital implications. i think that's part of what shareholders are concerned about. >> there is talk that it's going to seriously affect their operations in the u.s., and they may be temporarily banned from trading in u.s. dollars. are you hearing the same? >> yeah. it sounds like the likely counters of the settlement include a temporary ban on dollar-clearing operations in the u.s. so, sounds like it's probably going to be in the range of a couple of months or a few months, maybe, not permanent, but it's potential for serious damage. that's one of the things bnp has been fighting aggressively. >> the french government also weighed in, said this has far broader implications than one french bank. >> yeah, and the u.s. answer to that is that this is a temporary
thing, it's a period of months. there are ways that bnp can kind of navigate around it by getting other banks to pick up the slack with its clients, but it's more or less unprecedented, so no one really knows what the implications will be. >> the potential settlement could include bnp paribas pleading guilty to a criminal charge. at the end of the day, do you think anybody's going to go to jail for this? >> i don't know is the short answer. i don't think so would be my prediction. part of what the u.s. or what the head of the new york regulatory agency is pushing for is for a number of bnp paribas employees to be punished somehow, and it sounds like what that is going to mean is that 30 people will either leave or will have left in connection with this. and this is a little bit murky, because -- >> what about ceo management? and bonife's job? >> i don't think he or the chairman are likely to lose their jobs, or at least certainly people inside bnp paribas do not think that they will. you know, there is a question, though, about if you're pleading
guilty to a serious crime, paying a massive penalty, having huge implications for your u.s. operations, should the top management be punished? i don't know. i think some people would probably think so. bnp does not. >> u.s. has been investigating european banks for more than five years about potential sanctions violations, and they've still got some outstanding. so, is this kind of the thin end of the wedge or do you think this is actually as bad as it gets, given the extent of the problem at bnp? >> i think this is probably as bad as it gets in terms of the sanctions cases. i think there have been a dozen or so of these now. the u.s. seems to think that bnp's conduct was far worse than others. there still are a number of other outstanding probes, though, including two other french banks, but i would be very surprised if they reach this level. >> sure. >> david, got to leave it there, sir. thank you very much, indeed, for that. david enrich, european banking editor at the "wall street journal." u.s. secretary of state john kerry has landed in baghdad in the last few hours for an unannounced visit. kerry is in the iraqi capital to hold talks with prime minister
maliki along with other leaders. this as the iraqi government has released footage of air strikes on suspected militant hideouts in mosul. they saw sunni extremists tighten their grasp of the nation's western frontier, seizing the town 90 miles from the jordanian border. so, is the iraqi government making any real headway against the insurgency? nbc's richard engel filed this report from baghdad. >> reporter: the iraqi army today tried to show it's making progress, distributing videos to journalists of government troops on the move, conducting air strikes against isis militants. but u.s. officials say iraq doesn't have much firepower. its offensive capability is extremely limited. and isis is taking advantage of it. in the last 48 hours, the sunni militants have captured two new areas, walid and keim, a small
town that was the iraqi government's last foothold on the border. the militants now have an open, unobstructed line between the bases in syria and front lines in iraq. the u.s. is sending advisers to iraq to help the fight, but today, iran's extreme leader said he strongly opposes that, calling it a u.s. plot to control iraq. instead, iran wants a cease-fire, but the sunni militants are not likely to pay any attention. they're closing in on baghdad, so why stop now? people are leaving baghdad. flights out of here are booked solid for the next three weeks. some travel agencies are hoarding tickets, charging up to four times the original price. anyone who can afford it is getting out of town. assad jasim arubayi sits alone in his comfortable home. he sent his family to europe three days ago. he didn't want them around. but he had to stay to run his
stationary store. there is hardly any business these days, but he stays open, he says, so his employees keep their jobs. "the situation is very bad," he said. "the terrorists are threatening to come to baghdad next." assad is a shiite, but he does not support the shiite-dominated government here. "our prime minister, maliki, is responsible for a lot of this. if any one person bears the blame, it's him," he said. at home, assad tends his birds, resigned that far worse days here may be coming. both the united states and iran have committed to helping the iraqi government, and an air traffic controller told us planes from both countries are already coming in with supplies. humans. even when we cross our "ts" and dot our "i's",
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welcome back to "worldwide exchange." i'm julia chatterley. >> and i'm sri jegarajah. here are your headlines from around the world. >> another record high could be in sight for wall street as the dow nears 17,000. but soft pmi data here in europe keep markets in check. ge moves one step closer to securing a deal on alstom's energy business as the deadline for a deal looms. the french government securing an option to buy a 20% stake in bouygues. shire trades lower as the uk pharma group scrambles to bolster its defenses against
u.s. bidder abvi with a plan to more than double annual sales. france's finance minister urges authorities to push forward with a resolution to the bnp paribas probe as the latest report suggests the bank will pay between $8 and $9 billion to settle. if you're just tuning in, thanks for joining us here on "worldwide exchange." a quick look, as always, at how the futures are heading ahead of the u.s. open. and after managing to hold on in the green in friday's session and eke out some minor gains, we are seeming to lose a little bit of ground here. the s&p 500 relatively unchanged. dow jones indicating lower by around eight points and the nasdaq four points lower, too, following some of the sentiment we're seeing right now in the european markets in particular, shrugging off that six-month
high for the china pmi data. the first expansion, in fact, in six months above that 50 level. what we have seen, though, is much weaker pmis here in europe. the french in particular indicating that we could see a contraction in that market in the second quarter of this year, so that's certainly weighing, i think, on european sentiment this morning, sri. >> with all that in mind, julia, how do you make money in these markets? here is what some of the experts have been telling us this morning. >> well, capital's flowing out of the middle east, that's for sure. but what we've seen in our report is this move away from home markets into a sort of more global way of investing, and that's an indication that there's much more confidence in the global economy than there was before. >> if you look to the way sectors are behaving, you'd think the market was down with utilities leading and defensives leading and so on. so, i think what we have is we have a market that's holding on
for its last gasp. it needs a shake-up. >> i think interest rate hikes are actually closer than the market thinks. >> yeah. >> and actually, i think the federal reserve's own forecasts for when they're going to do that are too conservative. and i don't think that's going to kill the market. in an 11th-hour deal, the french government agreed to buy 20% stake in alstom, clearing the way for ge to acquire the company's energy assets. stephen is in paris with all the details. a bit of a bolt out of the blue as far as the french concern is made here with the 20% stake. so, how are ge going to take this alliance? because it's very different from what they originally proposed. >> reporter: so, yes, it was actually the surprising part of the deal, this 20% stake that the french government took in alstom. it's going to buy it from bouygues. the alliance was very important.
ministers said on several occasions that the government would support an alliance, rather than a straight takeover of alstom, and that's actually the reason why ge modified its original bid last week, and this bid has been approved over the weekend by the board of alstom. the french, as you say, the french government took a 20% stake. at what price? that's the question. bouygues wanted at least a 35 euros per share, but the government wanted to offer 28 euros. that was the closing price on friday. at the end of the day, we got a kind of mixed deal. the government will have 20 months to actually buy this take from bouygues. and in the meantime, bouygues will lend that stake to the french government. now, what does it tell us in terms of french capitalism? because it seems to be very difficult to do some business in france when you are an international investors. according to an analyst we spoke to this morning, it is perfectly acceptable to have the french state involved in that
operation, given that we are talking about sensitive activities, such as nuclear power. but at the end of the day, the deal was still between general electric and alstom. and if you compare to what nicolas sarkozy did ten years ago as finance minister, he blocked a potential deal between siemens and alstom. and even if we have a socialist government in france, you see that ge was able to sign a deal with alstom. so, perhaps the french market is not as closed as some people would like to say, sri. >> stephen, thank you. let's get you up to speed on all the m&a news stories we are following. uk drugmaker shire is expected to announce its strategy to more than double its annual sales in their bid to bolster its defense against a 27 billion pound takeover offer from u.s. rival abvi. according to media reports, the uk pharma group will outline details of how it sees its most lucrative drugs performing over the next five years in a call with investors and analysts this
afternoon. it will also set a new sales target of $10 billion for 2020. abbvie announced on friday, you'll remember, that shire had rejected three bids. the last one valuing it at 46 pounds a share. oracle is reportedly near a deal to buy microsystems for $5 billion or $67 a share. that's a slight premium to friday's closing price. micros stock surged last week on reports the companies were in talks. the "wall street journal" says the deal could be announced today. micros makes point-of-sale hardware and software for hotels and restaurants. this would be oracle's largest acquisition since it bought sun microsystems for $5.6 billion back in 2009. let's take a quick check on micros and oracle trading in the german session. micros perhaps unsurprisingly up just shy of 3%. oracle also higher, up 1.3%. so, significantly both out-performing the german market session today. and google's nest labs is
buying dropcam, the start-up that makes home monitoring cameras. frid friday, the price tag was reported to be $55 mi$555 milli though it's unconfirmed. they're expanding their businesses. it bought nest last year for $3.2 billion. google shares, frankfurt listing up just slightly. now, we have to take a quick break, but coming up, the founders of two struggling retailers say they're not going down without a fight. the latest on the battles of the boardroom at lululemon and american apparel, coming right up next. we needed 30 new hires for our call center. i'm spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast? go to ziprecruiter.com and post your job
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welcome back to "worldwide exchange." these are your headlines. the dow within touching distance of 17,000, but data drags on european equity markets. ahead of today's deadline, ge takes a big step towards its purchase of french firm alstom. and uk pharma firm shire lays out its plan to reject takeover advances from u.s. firm abbvie.
a pair of north american retailers have recently had a public falling out with their founders, and the headlines may be about to get even nastier. courtney reagan is at cnbc hq with all the latest. the lawyers are rubbing their hands together, courtney. >> oh, exactly, julia. this one just keeps getting juicier. lululemon founder chip wilson is reportedly gearing up for a battle with the yogawear retailer that he founded. the "wall street journal" says wilson is talking to goldman sachs about a host of options, including a proxy fight or teaming up with a private equity firm on a buyout. now, he hasn't signed a deal with them yet. wilson, who stepped down as chairman of the board last year, still owns a 28% stake in lululemon. earlier this month, he tried unsuccessfully to remove two board members, including the chairman who replaced him. wilson has lashed out, saying the board is too focused on short-term results. lululemon, though, continues to struggle with weak performance since last year's massive recall of black yoga pants that were
too sheer. last week, the company warned same-store sales are slowing. the stock has lost a third of its value this year. well, dove dov charney is threatening legal action if he's not reinstated. the "wall street journal" reports at a meeting last wednesday, he was given two options, resign but be paid severance and stay on as a consultant or be fired with cause. when you refuse to resign, the board stripped charney of his title and moved to fire him as ceo within 30 days. the american apparel board has been investigating charney for misusing company funds. reports say he allegedly booked flights for his parents, used corporate apartments when not on business and helped arrange the release of naked photos of a former employee who was suing him for sexual harassment. charney has been known for years as a controversial ceo, embracing sexuality as a tool to sell clothes and staging
explicit photo shoots at his mansion. through his lawyer, charney calls the charges baseless. he owns a 27% stake in american apparel and reports say he has no plans to sell it. both of these founders are holding on tight and not going down without a fight. back to you. >> thanks so much, courtney. now, staying in the sector, the website of online fashion retailer asos is back up and running, this after a fire at one of its warehouses forced it to suspend operations over the weekend. in a statement, asos said initial estimates show that about 20% of its total stock had been compromised in the fire. however, the firm assures it is fully insured for the loss and that none of the technology or structure of the building has been affected by the fire. the stock has had losses after opening nearly 3% lower, but as you can see, it's been a pretty tough three months after that profit warning, down just shy of 50% in the last three months. concerns about inflated home prices in canada haven't abated.
the country's central bank says the probability of a sharp correction in house prices is small, but it's still the number one risk to the economy. now, in the u.s., the mortgage bankers association says lending for home purchases will fall just shy of the $600 billion mark this year. should that estimate prove true, it will mark the first fall in three years. at 10:00 a.m. eastern today, existing home sales data for may is released. all right, let's get more with jay bryson, global economist at wells fargo securities. he's still with us. a lot of data on tap this week from the u.s., jay. durable goods orders, case-shiller home price index, pc, deflation the key ones. how constructive will they be? >> in general, i think you're going to continue to see estimates of second-quarter growth somewhere in the 3% to 4% range, which would mark a snapback from another thing we're going to get this week, is the third look at first-quarter gdp, and that will, you know, initially came out essentially
flat, then it was revised down to minus 1% at an annualized rate, maybe minus 2% before all's said and done. but in general, we are looking at stronger growth in the second quarter and we think that's going to probably continue throughout the rest of the year as well. >> what does this mean for the fed? because i get the sense, especially when you look at the recent inflation data, the market, perhaps, is underpricing the risk of rate hike perhaps happening sooner rather than later. >> right. i mean, i would say, our view is that the fed probably won't start to move until middle part of next year. the first thing they have to finish up is their tapering of bond purchases, and that will be done either in october or december of this year. at that point, then, they'll move to start hiking rates. we think that won't be until, you know, again, midpart of next year. but i think for me, at least, the interesting thing is how fast does the tightening actually have to come? because to get to, say neutral, on the fed funds, that's probably 300 basis points higher than we are right now. and so, you know, is it a 25 basis point per meeting sort of clip or is it faster?
and i think you could make the argument that it potentially could be faster, once we reach that point. >> all right. i guess we need to see escape velocity in the broader economy as well. >> yeah, absolutely, and get that unemployment rate down even further. >> jay, thanks for sticking around with us today. >> thank you for having me. >> jay bryson from wells fargo securities. now, you may remember last week we told you about the 26th annual world's ugliest dog contest taking place in california. that's come back to haunt us quickly. well, just in case you had spent the whole weekend in suspense and in the dog house, here is the winner. peanut. yikes! the 2-year-old is thought to be a chihuahua/shih tzu mix and has won $1,500 in prize money. that's enough for a good makeover, isn't it is it. >> just say the name of that dog again? >> chihuahua shih tzu. >> okay. >> his owner says she doesn't see him as ugly. clearly a face only a mother could love. >> doesn't look like he's alive. i'd just like to know whether that dog's actually alive.
oh, how convenient. hey. crab cakes, what are you looking at? geico. fifteen minutes could save you fifteen percent or more on car insurance. now, let's just keep you updated on breaking news out of egypt this morning. the egyptian courts have sentenced three al jazeera journalists to seven years in jail. this is after finding them guilty on charges including helping a terrorist organization by publishing lies. the three include an australian. we've also got the bureau chief of al jazeera english and the canadian egyptian national, too. the prosecutors were asking them to jail them between 15 and 25 years. in fact, what we know right now is they have been jailed for seven years. right now the prime minister of
australia had appealed to the egyptians to try and lessen the charges. we have to wait for further diplomatic efforts, i'm sure, as a result of this sentence. we'll keep you updated. let's take a look at the european markets broadly on the defensive. as you can see, there is widespread disappointment at the state of the pmi numbers coming out from the eurozone broadly, but also, the services sector activity contracted in june in germany and the french numbers were disappointing as well. the ftse mib in italy is the loss leader, down by more than 1%. and julia's very clear that oil prices standing at close to nine-month highs for brent, keeping the markets on defensive as well. >> just one of the things that we're focusing on right now as well as the fundamental, the macro outlook with this pmi this morning from europe, of course. now, let's look at what's on today's agenda in the united states, too. june flash u.s. pmis out just before 9:00 a.m. eastern and then may home sales expected to
rise 2% to an annual rate of 4.75 million. then just a pair of notable earnings reports today. we've got micron technology and fast-food chain sonic. quick look at the u.s. futures this morning, too. we managed to hold in the green on friday with 0.2% gains across the board. fresh highs for the s&p and the dow, and of course, we're focusing on that 17,000 level for the dow in particular. right now, actually, we've changed direction. we were losing ground earlier in the session, now indicating slightly higher for the s&p and the dow. so, that's quite interesting. a seat change as far as these futures are concerned, but plenty of time, of course, until the u.s. equity markets open. now, earlier this morning, famed investors wilbur ross told this channel what he thinks will be the biggest risk to markets. >> the ultimate bubble, when we look back a few years from now, is going to turn out to be sovereign debt, both u.s. and other, because it's way below any kind of reversion to the mean of interest rates.
>> now, ben liechtenstein, president at tradersauto.com joins us from chicago now. ben, we were talking about the amount of data to come this week. we've got the pc inflation, we've got a lot of housing stats. what particular are you focusing in on and how's it likely to impact the equity markets? >> well, we're focused most on the housing numbers. we do have that gdp number in the middle of the week. i don't expect it to be a major market mover, but really, the technical aspects, the levels you mentioned the dow 17,000 level? what we're noticing right now is we're starting to see the russell pick up the slack, if you will. it was really lagging relative to the other majors, the nasdaq, s&ps and the dow were exhibiting that bid activity. now the russell's starting to join in. but for the most part, still very low volume, summertime-type trade, very low participation, but certainly, you have to say there's conviction to the upside. zero rejection of these upper levels in the s&ps above 1,900
so far. so, for the most part, the benefit of the doubt is given to the bulls. >> speaking of which, is there enough conviction to take s&p to 2,000, possibly beyond? >> oh, yeah, i think so at this point. i mean, there's really nothing standing in the way at this point. again, aside from the fact that it's very low energy, but it's been a grind to the up side. i think we're going to know if anything changes dramatically. but again, for the most part, it really has been bid session. that goes without saying. and again, as i mentioned, there's really nothing standing in the way of this market at this point. >> we've also got pc inflation data this week, particularly important after what we got last week from yellen. it could actually come in at the low end of the 2015 forecast. if it does, is there a risk of a spike higher in rates here? >> no, i don't think so. i think for the most part, the market right now is coming off of the coattails, if you will, or the dust settling, if you will, from the yellen last week. i think the market feels as if status quo remains the situation. again, we have yet to see any
rejection of these upper-level prints. the market continues to be in this characteristically kind of slow grind to the upside. i don't see that really changing. we did see some movement in the bonds last week. we saw some movement in the gold. it's my opinion that until the dollar starts to move around, everything else is kind of just noise, again, to the up side. it's not so much noise, if you will. there's certainly conviction to the upside in the stocks, but we really need to see something with some initiative-type activity in the dollar. and for the most part, it's been right around that 80, 81 area. until we see a major shift in the dollar, the situation that we've seen at hand over the last couple years will continue to be the case. >> and the market seems to be doing a reasonably commendable job of climbing this wall of worry, especially with iraq. the headline risks still lingering, ben. how long do you think that's going to continue? >> again, you know, we're in a situation where we're already under unprecedented, you know,
upside activity. everybody out there is predicting some sort of a change, some sort of a sell-off, some sort of a correction, but it really, you know, again, it's very basic, it's very simple that the market will continue to go higher, price activity will continue to the upside until the perception of value is no longer higher. clearly, right now the perception of value is higher. so, while it is weighing on the market to a certain extent, crude, the energy prices. again, this market is just kind of in its own world, if you will -- >> we just have to keep watching it, ben. that's the bottom line. thank you so much for that. we have to wrap it up. thanks, ben. >> thank you. okay. >> rock star sting is sending a message in a bottle to his children, telling them they won't be inheriting much of a fortune and have to make their own way in the world. >> how right you are. how right you are. >> we've had all sorts of people coming in and saying the most sensible words to come out of sting since his "fields of gold"
album. that was safari pit. thanks for your comments. that's it for today's show. see you tomorrow. have a great day. in my kitchen.ough time [ female announcer ] need to hire fast? go to ziprecruiter.com and post your job to over 30 of the web's leading job boards with a single click; then simply select the best candidates from one easy to review list. you put up one post and the next day you have all these candidates. makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter.com/offer2.
good morning, and welcome to "squawk box." the march to dow 17,000 now just over 50 points away from that milestone as stocks shrug off concerns of which there are many and power forward. general electric and alstom move ahead with a deal, but the french government now going along for the ride. and drama at the world cup. portugal ties the u.s. in the final seconds, setting up a big game versus germany. it's monday, june 23rd, 2014. and "squawk box" begins right now.
good morning, and welcome to "squawk box" right here on cnbc. i'm andrew ross sorkin along with joe kernen. becky is out today. we are still mulling over that tie last night between our little country and portugal. among our top story this morning, it is official, general electric is buying alstom's energy business. i think you called this right, joe. the french government backed that transaction after it secured the option. this is statism at its best. the option to buy 20% of alstom from a paris-based construction group. a lot of chatter about the back-an back-and-forth leading up to this deal. here's what jim cramer tweeted over the weekend. he said the ge saga caused ge to sit out the largest part of the rally. if you look at ge's stock, you will see exactly what he meant by that. but here's a deal where,
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