tv Worldwide Exchange CNBC July 10, 2013 4:00am-6:01am EDT
welcome to "worldwide exchange." the headlines today, china's june trade data misses by a country mile. with surprise drops in imports and exports that will wear on costly growth figures throughout next week. italian bank stocks hit after the rating went from bbb and two levels above junk status. they cite concerns about economic resilience. it beat q-1 sales figures boosted by the spring summer collection in asia. and egypt's new prime minister gets straight to work on forming a cabinet as both
states funnel billions of dollars to the internal government. hello. welcome to today's program. plenty to get through on the show, including, of course, looking at oil. will middle east tensions keep driving up the price of oil. perhaps supply will yet outstrip demand? we'll talk about the price of oil in ten minutes. bank of thailand offered no surprise by holding its policy rate steady. the central bank warned a slowdown in china's affecting growth. we'll take the economic temperature of the country and its neighbors. brazil's central bank due to release its interest rate decision later today 11:20. we'll ask if the country can find the path to inflation and slowing growth and a weakening
currency. and u.s. food joint smith field agreed to a multibillion takeover. they'll seek assurances on the deal. can food safety be guaranteed? do sovereign issues play a part in a country's food supply? we have a panel discussion at 11:30 cet. right. also some italian industrial output up 1% in may. that's weaker than the forecast plus .3% as well. and we got any thoughts or comments about what we have got coming up today. e-mail us, email@example.com. we did get down as 127.54, three-month low on the back of the s&p downgrade of italy. as well as comments out from mr. asmussen which will likely try to withdraw meant the guidance would keep rates for a 12-month period. tried to qualify.
didn't actually mean to say that, but too late. it was already out. concern about china. june trade data shows growth slowing. imports were down. exports also missed expectations by a wide margin, down 3%. they were thought to rise .4%. this as china's first export decline in nearly 1 1/2 years. beijing is blaming weak external demand. this latest drop also comes after china's officials began a crackdown on illegal capital inflows disguised as trade bills that inflated earlier export figures. data having an impact on european activity. this is where we stand now. take a look at the heat map. weighted to the downside now.
7 to 3, decliners outpacing advancers on dow jones 600. the ftse was up another percent, buck the trend this morning. individual stories not too badly. burberry listed in london. we'll get into that. ibex is off two-thirds, the cac off four points. slim losses, of course. the focus on italy after that downgrade, citing weak negative outlook growth for italy is one of the reasons. s&p adding there was a one in poli three chance of another downgrade in 2013 or 2014. leta told local tv the cut was proof that the situation in italy is complex. rome is due to sell 9.5 billion euros at a t-bill auction today. we have btp sales coming up tomorrow. this is where we stand at the moment with some of the banks impacted by the rate cut.
look at the italian bond curve. you can see yields are higher across the board. the ten-year, 4.3%. the five-year, 3.25 as well. that did drag the euro down, down to 127.54, three-month low. above it at the moment as far as eurodollar is concerned. 128.14. dollar/yen, above the 100. hit the 101.54 late last week. aussie dollar was impacted by chinese trade data, but on the 148.12, the three-year low for sterling against the dollar. a little off that at the moment. the people now talking about 1.45 as targets. that's where we stand right now. as far as european traders are concerned, sixuan joins us with an update. >> thank you, ross. a mixed bag for asian forces as
markets reacted differently to that weaker than expected china trade data. japan's nikkei 225 and south korea's kospi ended marginally in the red. china markets rallied after dismal data spurred easing hopes. the shanghai composite jumped nor m more than 2%. brokerage and banks extend their gains in the afternoon session as we see that founder securities surged over 8%. and property developers also among top gainers. china merchant s jumped nearly 9%. and among the actives in hong kong, jewelry shops outperformed. shell soared over almost 13% after importing over 60% surge in its q-1 revenue helped by the gold rush after the price of
bullion plunged. consumer mood slipped in both japan and australia in june. index giant fast retailing waved on the nikkei 22 5 down 1.2%. in australia, retail chains were also broadly weaker. harvey norman down 2.4% today and surf ware company billabong plunged another over 10% falling yesterday's 16% tumble. back to you. >> all right. thank you for that. now, shares of burberry beat expectations with an 18% rise in retail revenue for the first quarter. they saw double digit growth where the latest collection received a warm welcome from rich chinese shoppers. burberry maintained fw eed guidr the year but warned of an uneven trade environment as they shift from wholesale markets into branded store sales in latin
america and asia. burberry group stock up 4.6% in london. now, on the eve of key signing talks in washington, regulators showing a willingness to play ball with the s.e.c. they say it will hand over all documents related to a u.s. listed chinese company, something the s.e.c. has been pushing for saying it hit roadblocks. csrc protective of state run business secrets didn't say which company's records were being leased and beijing is resisting request to open up se hearing at 2:30 on the planned takeover of smith field foods. the $4.7 billion deal would be the largest ever chinese acquisition of a u.s. company. lawmakers are expected to ask smith field ceo larry pope about food safety issues and foreign ownership. the deal's approval lies with the committee on foreign
investment in the u.s. which is chaired by the treasury department. smith field stock, in fact, still up .8% and no surprise up 30% over the last three months. so chinese trade dadia much weaker than expected today. exports down 3% on the year ago. imports down .7% on a year ago. is this to do with the external environment or a sign that the government is succeeding on cracking down on businesses that were overstating their positions? >> it is a little bit of both, actually, ross. on the one side, a lot of people were focusing on the numbers coming out of hong kong saying they were reflective of the fact that the government has been cracking down successfully on the fake invoicing in that special zone. on the other hand, people were focusing also on the external demand and how it doesn't look very healthy. the numbers that were -- we saw
for europe, for japan, as well as for the united states weren't very strong. and then on top of that, people were also looking at the it part numbers which also disappointed. we were expecting imports to rise 8% or so from a low base from the previous month. as you noted, it contracted. what was interesting also about the import number was that when you break it down, a lot of the weakness in the import number was from pieces of -- parts that were actually shipped here to china and then would later be exported. so that's actually the import figure that people said we saw some weakness in. however, the imports just for commodities and other imports that you need to feed the chinese economy, those imports held up a little bit better. it is not necessarily going to make people feel better overall about the chinese economy because it is quite clear at this stage that in the second quarter the chinese economy isn't going to be doing quite as
well as a lot of people had hoped. >> does it suggest that domestic demand is actually holding up better and, i mean, look, people are looking at this transition towards that side of the economy. >> well, if you look at that particular set of numbers with the imports, people are saying this is going to provide a little bit of relief. we're seeing here the commodities, the import commodities are a little bit stronger than the imports that were, you know, coming in for reexport. but at the same time, the overall trend that we have been seeing in terms of the trade figures, and all the manufacturing data, everything over the past couple of months, suggests that we're still trending towards a weaker economy. definitely for the second quarter, but possibly even into the third quarter. a lot of people here have been talking about the downside risks. >> thanks for that. good to see you. joining us on the phone from taipei is louis, chief economist at rbs.
louis, good to see you. we have seen the breakdown of that. what are the implications of this for gdp and, indeed, for policy? >> right. yes. so i share that view that when you look at the export data, it is all pretty poor, which reflects weak external picture. also it reflects a pretty strong exchange rate. and then on the import side, we do see that imports overall are pretty weak. if you adjust it for profit, not as weak. and then if you look at the split between imports that are used for exports, then that latter part, the imports feeding into china, hong kong, they're holding up a little bit better. that provides some support that also probably will strengthen the case for those in beijing who are still resisting the --
which is something very interesting today that the market in china, they were responding favorably to the weak overall data because they were thinking maybe this will mean more stimulus. actually the government is holding quite firm on that mark. the senior leaders so far say we don't think the economy is collapsing. domestic growth continues to be okay and the labor market is holding up. therefore, for now, we don't want to give into those calls for stimulus. >> do you think they will need more stimulus? >> well, i think it all very much depends on how the data is going to look in the coming months. i think as of now, i think senior leaders have a good case to do what they are saying they want to do, working on reform and stimulus. but the picture is not looking good. and the export weakness, it is also starting to spill over into the domestic economy. all the industrial companies,
they are having shared capacity, profits are easier. so the longer this weakness is -- goes on, the stronger the case will become for stimulus. >> we saw yesterday the inflation numbers. there is mostly driven by food and pork prices in particular. how sensitive will the government be to increasing food prices? >> i think they will not be very sensitive because they do see that the overall setting for prices at the moment is one that is very weak inflationary pressures. we see core inflation very well behaved and commodity prices that are still coming down year on year. there is no setting for inflation. i think they will not have to worry and will not be worried about inflation. >> louis, thank you very much. we'll take a short break. still to come on today's "worldwide exchange," saudi arabia leading a share of support among gulf states for
the interior government. will it be enough to stave off financial instability? yousef will join us from cairo. the arab spring saw the brent crude price explode. right now, that spread has closed back. we'll ask why. ♪ [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ]
egyptian economist and former finance minister has been named interim prime minister one week after president morsi was ousted by the military. the same time saudi arabia and the uae are throwing their support behind the transition government with a combined $8 billion in aid. for the latest, you receive is in cairo. yousef, how important is this money, how long will it last for? >> well, several developments, ross. you mentioned the cabinet formation at least. the top tier of that, you have a new prime minister and veteran economics professor, he's going to oversee the transition and we understand he's reaching out to the islamist parties to take part in the transition and mohamed elbaradei.
still a long way to go. six months is what they're planning to keep this road map under the umbrella at least. and the pledges that have been made are critical in a time when the egyptian economy is in a very vulnerable, very weak position. no doubt about it. $8 billion in total. $5 billion from saudi arabia. two of that in fuel. and the other $3 billion in cash and loans. and then the united arab emirates, they're giving away some $3 billion, about a billion of that is a grant up front. so that support is coming now that the muslim brotherhood has fallen out. and is out of power. they're now coming in to infuse some stability. economists i speak to make it clear to me the government needs to move fast to address some serious structural problems in this economy. we're talking about a bloated budget deficit which doubled over the course of the last year. you're looking at dwindling foreign reserves, unsustainable
subsidies and wage will as well. if they don't burn that money in the transitional process, we're back to square one. >> how much of this pent-up frustrati frustration -- one fundamental problem was wheat delivery, food delivery, at an affordable price. is that the case? is that -- how much a factor is that? if that is so, what on earth is any interim government going to do about it? >> that's key, isn't it? that is the affordability of a lot of the regular goods if you will for most egyptians. and that has not really lived up to expectations thus far. it is that which moves the people, and the masses is when the brent prices start going up and when, you know, getting from one place to another becomes very, very difficult and fuel lines become much longer and the power cuts keep coming. the government has moved quite
quickly on that in as much as it can to begin with. remember the power cuts have ceased. and the long lines at pet role stations because of the arbitrary arrival of fuel in this country. egypt is a net fuel importer. that has come to a halt. but the violence is not making it necessarily easy. remember that in the early morning hours, northern sinai actually an attack on a checkpoint killed at least two soldiers and the militants went in there with rpgs. a sense of trepidation still, ross. >> yousef for now, thank you very much. we'll have more later in the show. natural gas and oil is leaking from an old inactive well in the gulf of mexico after a crew working to plug the well lost control of it. five-man crew was evacuated out of caution. the well is owned by talas energy and river stone holdings. u.s. coast guard says the well did not blow out and there was no explosion or fire on the platform.
a sheen of around four miles wide and quarter mile long, which is expected to evaporate. talas says the crew should plug the well today. week. prices are hitting a high the american petroleum institute says u.s. inventories fell by nearly 9 billion barrels versus analyst forecasts of a drop of 3.3 million. sopex due out at 12:30 cet. interesting has been the closing in the gap between wti and brent as a result. wti getting up to 104.6, which is a 52-week high for west texas and closed the spread against brent. joining us for more, hassan.
thank you for joining us. what is interesting here is the narrowing of the spread between wti and brent, is that on the basis that the global economy is actually fairly weak, but the u.s. economy is an awful lot stronger? >> that's part of it. but a bigger part of it really is they have been able to get that oil that is locked up in the united states from all the shale formation they're drilling out to places where it is required. we had bottlenecks there in terms of the pipelines all feeding into the middle of the united states. now the takeaway capacity is that much greater so they can start to get that oil out. what we really saw was a very depressed wti price relative to brent. now it is coming back to become more on equal terms as they get that takeaway. >> we now have more shale oil flowing and that means the price is rising. >> yeah, it is an odd -- well, the reason is that wti was
depressed relative to brent. brent surged on the geopolitical risk. we're seeing wti coming up to something approaching its normal paraty with brent. not so much a reflection of the united states, it is a reflection of geopolitics and wti is accessible elsewhere. that inventory drop we saw suggests that actually we're getting u.s. crude flowing more freely around the country. >> yeah. still not sure i completely understand greater supply means higher prices. you're saying because you get it out, people are deciding to buy it overseas instead of brent. is that -- i need to explain this, why more supply means a higher price. >> it is because -- brent has always been the global marker price. the price of wti has not reflected global situation of oil. it has been brent. so what we have seen is a big rise in brent on the basis of geopolitical risk in the middle east and syria and egypt and syria. and we're now seeing wti
beginning to close that gap with brent. so the reason is because now you can get it around the rest of the country. it is no longer depressed relative to brent. it is on paraty terms and what is driving the overall global market at the moment is geopolitics and also a little bit of possibility that we're getting stronger growth in parts of the united states, but i think that's a minor factor. >> do you think -- was wti for a long time was -- had a spread over brent. do you think it will go back to that? >> eventually. we're not quite there yet. we'll see more supply out of the u.s. still not able to be taken away. a few more bottlenecks to come. a little up and down but two or three years in the future, we should start to see that unusual situation we have had for the past couple of years coming to an end and, yes, wti at least the same as -- >> is it going to matter what the dollar does? the dollar is on a strengthening path. >> that's one thing keeping prices down. so i think that if the dollar
continues to strengthen, yes, we may see the oil price rises stopped a little bit, but i think it is really geopolitics leading this. not the economy. it is not the dollar. it is risk in the middle east. >> yeah, simon, good to see you. simon waddle. the infamous e-mail in which fabrice referred to himself as fabulous fab should be kept out of trial. he's charged with securities fraud for allegedly misleading investors about a 2007 mortgage investment that the s.e.c. says was designed to fail. in the e-mail to his girlfriend who worked at goldman's london office, he said the whole building is about to collapse, referring to the financial markets and there would only be one survivor. survivor, the fabulous fab. his lawyer says it is a personal note and is irrelevant to the case. so we want to share your most embarrassing e-mail story. do you have an e-mail that you never wished had gone out?
now is a chance to send it out again. e-mail us at firstname.lastname@example.org, tweet us at @cnbcwex or direct to me @rosswestgate. ree-mail us your most embarrassing e-mail. still to come, as taper speculation drives bond market volatility, find out why our next guest is warning about a potential rotation out of corporate debt. john stockford will join us. and before we go, check out what economists are saying about china's big trade data. head to cnbc.com. one says we can expect no export growth for the rest of 2013. also, commodities have seen a rough second half because of fears of a slowdown. but gold could actually benefit from a hard landing in the world's second biggest economy. it is all online. i want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases.
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sales numbers boosted by the perform apps of tance of the sp summer collection in asia. a showdown with germany as it proposes to hand itself the power to wind down failing eurozone banks. talk about that and more debt in a few moments. we have some numbers -- statements out of the bank of italy. may bank loans for the private sector down 2.4% on the year. s&p citing a concern about growth as reasons for downgrades. european equity markets are sluggish today. the ftse 100 up nearly a percent yesterday, .2 today. ftse in italy down 1%. yields are slightly higher as well. t-bill auction today out as well.
yields on treasuries, 2.63%, away from the 2.75 which is what we hit in the aftermath of the jobs report. and on the currency markets, dollar/yen around the 100 mark. moving away from 101.54. euro/dollar, 127.54 earlier. 128.15. and cable, a three-year low, just above it at 148.98. more concerns about china's economy. this time it is the june trade data, which has people thinking. it confirmed growth is slowing. imports way below forecasts. expectations were for those to grow 8% and exports missed, down 3%. reuters looking for 4% annual increase. china's first export decline in nearly 1 1/2 years. beijing is blaming weak external demand, and rising labor costs.
latest report came after chinese officials began a crackdown on illegal capital inflows as trade bills. joining us with his fews, john stockford at invest tech. china's equity markets have been a pretty poor place to be as well. what have they been telling us? >> they rallied today despite the worse than expected data. generally you're right. they have been on a fairly consistent downward path, confirming the sense that chinese growth is struggling to recover. policy is moving away from being outright stimulative to focusing a bit more on the quality of growth rather than the quantity. >> in the long-term, this is the right thing to do, isn't it? >> definitely. >> when will investors reward them? >> i think it is short-term pain versus long-term gain. investors inevitably often have quite short-term time horizons.
we're getting to a point where chinese stocks are starting to look very cheap. and if they can't turn the economy around and put it on a more sustainable footing in the medium term, they should do quite well. >> when you combine u.s. monetary policy and stronger dollar with a weakening chinese economy, how toxic is the mix for em? >> i think it is quite difficult. so a lot of emerging economies are export dependent. a lot of them are commodity price dependent, both of those are pretty influenced by what is going on in china. generally they have been beneficiaries of a weak dollar and tied to u.s. mondetary poliy doesn't help that. we're seeing some reversal of hot money out of emerging markets and some repricing of expectations. in the long run, that looks healthy. in the short run, it can be favorable. >> you have to work out when is the point at which everything has got cheaper now.
>> certainly our view is most emerging markets is on the cheap side of things. but you can't rule them out going cheaper, particularly if you get a harder landing in china. >> s&p downgraded italy sovereign credit rating from bbb to bbb plus. it added there was a one in three chance of another downgrade this year or next. prime minister aleta said it is proof that the situation in italy is still complex. rome is selling 9.5 billion euros at a t-bill auction today. what are investors to do at the moment with the ongoing sluggishness of the eurozone economy? >> well, i mean, for the moment, investors have been shrugging it off. if anything, it has given mario draghi more excuses to keep policy easy and to talk things down. and that's probably beneficial. so a weaker euro, lower interest
rates are helpful. but the underlying message of the s&p downgrade is the problems haven't got away. >> asmussen, tried to rein back in his comments that rates staying low is more than 12 months, but i know he didn't mean it, but we all believe him, do we? and what are the implications of that? >> i mean, the ecb is trying to play the same game as the feds did and the bank of england are now, which is to try and manipulate market rate expectations and push yields further out on the euro curve down a bit to extend monetary easing. the problem is, the ecb's mandate is a little more rigid in terms of what they can do. they're walking a fairly tight rope in terms of how much they can guide the market on a forward basis and still stick within their mandates. >> is there a danger of the ecb
losing out to fed -- losing control because of -- >> i think clearly the u.s., you know, the u.s. fed is probably still the most important central bank in the world. and europe can try and differentiate itself, but it is hard to complete -- >> everything will be driven by the cost of u.s. money. >> to a significant extent. the fed has set the agenda so far in terms of extraordinary easing and i think it is now doing it in terms of the beginning of the withdraw of that. central banks that think their economic situation is somewhat different are trying to -- trying to influence markets and differentiate their position from the u.s. but how successful they'll be, we'll have to wait and see. >> we have the minutes released today at 2:00 p.m. eastern. we'll also be listening to bernanke speaking out of conference outside of boston just after 4:00 p.m. eastern. what is going to be the key in the sense of what he has to say? >> i think the market will be more focused on the minutes to get some of the nuance of the
discussion going on in the fed. the perception the market has is that they have become somewhat more hawkish in terms of qe and they'll be looking for signs of that in a minute. bernanke's speech is a more general speech. he might drop some hints about differentiating between qe tapering and actually rate increases and make the point those are still some time away. >> they'll keep beating that point. if you're not buying as much as you were, then direction of travel has changed. >> i think so. we passed an inflexion point in the market and it recognized it. all they can try and do is manage how aggressively the market begins to price in future rate increases. at the moment, they're saying they're not going to raise rates until early or mid-2015. >> will we get a bigger steepening? >> there is scope for that. if you look how they traded historically, we had flat interest rates, and they have
traded between 2% and 4% above fed funds. they're at the lower end of that range. definitely scope for them to price in a higher level of yields and steeper curve beyond perhaps 2014. >> tapering start in september? >> i think so. there is a risk it could start earlier. definitely -- >> that's what we're trying to glean from the minutes. >> the minutes will show that some people are calling for it in the latest meeting. >> they were pret the jobs report. good to see you. >> thank you. >> thanks for that. european commission will today propose it should be handed powers to wind down failing banks. the so-called single resolution authority would walk alongside the ecb to close the 6,000 banks that hit financial trouble in the eurozone. the proposal is likely to face fierce opposition from germany. the eu is expected to publish its third review of spanish banks today, giving a closer
look at the state of the sector. it comes amidst growings near new capital regulations would spell more trouble. and jpmorgan ceo jamie dimon will immediate with the eu internal market in brussels. he's expected to discuss his concerns about proposals for european wide banking reforms that might hit the wall street giant overseas. ubs replaced bank of america as the biggest private bank in an annual list compiled by scorpio partnership. they saw a 9.7% growth in overall assets to $1.7 trillion. that compares with 9.5% growth at bank of america. it is a coup for ubs as they try to scale back its investment banking division. shares of ubs today just off a quarter percent with the market. over in japan, consumer confidence slipped in june for first time in six months. so is this a bit of abenomics
fatigue? more in tokyo. >> consumer confidence fell to 44.3 in japan last month as the stock market roller coaster ride rattled consumers. despite tumbling from 45.7, the prime minister's office is not worried. shinzo abe's office says the level of the index fall is negligible and point out that the stock prices have been regaining recently. the bank of japan seems to share the optimistic view. the central bank is expected to revise its assessment of the economy upward for the seventh consecutive month at its two-day policy board meeting starting today. the boj said in a june report the economy has been picking up. it will consider whether to use the word recovery for the first time in 2 1/2 years for this month's report. we'll also assess such risk factors as increasingly uncertain economic outlook in china and turbulence in emerging
markets. back to you. >> thanks for that. that's the latest from the nikkei in tokyo. the national storm center says that chantal may be weakening and turning into a tropical wave. this is the national hurricane center, i meant to say. apologies. due to hit land in florida on friday. in mexico, the situation is heating up as smoke continues to come from the most famous volcano. the volcano east of mexico xie is spitting out clouds of ash and smoke going as high as two miles. mexican authorities are watching closely and have raised the alert level to yellow. though they have yet to call for an evacuation of nearby towns. still to come, the bank of thailand held rates steady this morning despite some signs of a slowdown. what is the outlook for the
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is still a european crisis. they stand ready to react to new developments. at the same time, ecb says the s&p to be downgrade underlines a need for a banking union and for structural reforms as well. over in asia, lackluster debut for the biggest budget carrier down from its issue price of 1.25. asia x raised over $310 million after pricing the flow to the low end of its range because of difficult market conditions. singapore press holdings is reviving its plan for a reit listing after a three-weak delay because of soft market conditions as well. they listed two through a real estate investment trust. if successful, it would be the city state's third biggest ipo
this year. in hong kong, carlisle backed new century reit kicked off trading today after cutting its ipo by 66%. didn't help performance. the reit fell in trade. with the tight bart, bank of thailand kept its benchmark interest rate unchanged at 2.5% as expected. it was a key factor in last month's decision to cut rates. the recent outflows over fed tapering concerns of change has helped the outlook. do we now think that the 2.5% rate is now the flow? is that the end of the cycle? >> i think it depends on how the domestic growth conditions span out. we have seen weakness in the underlying private consumption and private investment
indicators. given the fact that central bank cut rates by 50 basis points in the last six months, it is difficult to envision a scenario where global rates are rising and push domestic rates even lower. it brings about risks of financial stability and the fact their decision was unanimous today to hold rates sort of underlines that point of view. >> still concerned about credit growth and property, but how much has the events of the last month, inflows dissipating, currency strength dissipating as well, how much has that changed the game? >> well, i think it has definitely had an impact, even though the central bank has not outlined it completely and the monetary policy statement. it will definitely play a part in the role. thailand is extremely cost intensive economy. and given the situation where oil prices are slightly trending higher, we are seeing the
currency strength turining into significant currency weakness. inflation, even though it remains benign, will reman a point of concern. and the credit cycle has been -- so even though we're seeing some signs of moderation, it is still going to remain a point of concern for the central bank. >> the rates on whole for the rest of the year and then look for hikes next year? >> well, as our base case scenario we're looking for rates to remain unchanged through the rest of the year, i think given the fact that the central bank will be looking for slower growth in 2013, they indicated they will pull their growth forecast down below 5%, if we see even further weakness, i think all options are on the table in the sense that if domestic growth is weaker, they can cut rates more. but if the financial conditions deteriorate further, there might be a point at which the central bank will start considering rate hikes. >> when you've got a fed that is
causing u.s. yields to rise, and the dollar to get stronger, and chinese policymakers that are trying to change the growth in china, we have a slower economy there. how much of those two factors combined making life difficult for the likes of indonesia and other countries in the region? >> well, i think it is a big challenge, but it is something that the central banks are fairly cognizant about. china's growth slowdown has not been something of a huge surprise, i think, in terms of the broad direction, almost every central bank understands the growth rates are going to slow down. i think the tapering will probably catch them by surprise, but still it is something that as long as domestic markets remain functional, i don't think they're concerned about tapering as such. up wi one thing that works is trade relations for japan have very close. so the japanese economy recovers at a margin.
thailand can get some raise out of that growth engine. but i think their concerns are probably more around financial stability, rather than just looking at the impact of these more structural dynamics on the growth side. >> yeah. bear in mind that close relationship with japan. what happens if the yen now is on a steady weakening path? >> well, thailand runs a trade deficit of around 7% of the gdp just for japan itself. so a weaker yen is not necessarily a bad thing for thailand in the sense that they will still be able to source intermediate goods from japan at a much cheaper cost. some of that benefit has been eroded by the weakness in bart, but i think if the thai -- if the japanese economy is doing bet, thailand is going to be a source of -- source for fbi destination. they will be likely get more capital inflows from that side and those trade relations are
only getting more deeply entrenched. so from a more medium term perspective, still remains fairly positive for the thai economy. >> all right. thanks for that. good to speak to you. that's the latest from singapore. more from the ecb's mr. cure. publicly supplied liquidity can create distortions in the economy. it is not inflationary. keep your eyes on that. also some other things on the agenda in asia tomorrow, no less than four central bank decisions on tap. all expected to hold steady. we could see an interest rate hike from indonesia. in japan, retail companies surpassing third quarter earnings. the ntsbs is the pilots of the jet that crash landed in san francisco this weekend were relying on the plane's automated control equipment.
investigators say the they assumed the auto throttle was controlling air speed but it hadn't been activated. they realized too late the plane was flying too low and too slow. the president arrived on tuesday and was mobbed. he met with passengers and family members. the financial stability oversight council designated aig as important nonbank financial firms. move which had been expected will subject the companies to stricter oversight by the fed and higher capital requirements. both aig and g aren't contesting the designation. both stocks off in frankfurt. 50 billion apps after its inception, the apps store is celebrating the fifth birthday. jon fortt put on his party hat and filed this report.
>> it has been five years to the day since apple opened up the app store. though it has become synonymous with the iphone, it actually opened up a year after the iphone went on sale. it has gone on to clock more than 50 billion downloads in that amount of time, and has become a big business too. in the past yeern a half, apple paid out more than $6 billion to app developers through the app store. arguably at this point making the app store a bigger business than apple selling ipods. a big question is where the business goes from here. as apple continues to sell iphones, ipads, ipod touches. the app store increasingly important part of apple's ecosystem. they even opened up a mac app store to mimic what they have been able to do on mobile, but competition is increasing from samsung, google and amazon. android app stores coughing up quite a bit. one advantage apple still has is
it has a single app store for all of its ios operating system. keeping that experience unified where as others are fractured. google has its own google play store. amazon has another. apple has a single group of devices it is designing for, other app stroores have many devices. after a while, a lot of critics argue this advantage will start to run out as apps take on new attributes as more apps are built for the web. with ios 7, new version of the operating system that apple is coming out with in september, october time frame, we'll see how much they're able to push this concept forward and whether they'll continue to win these digital distribution wars in the future. for cnbc, i'm jon fortt. >> apple may be celebrating but someone is having less of a
fabulous time. fabrice toure says the e-mail where he referred to himself as the fabulous fab should be excluded from trial. he's charged with securities fraud for allegedly misleading investors about a 2007 mortgage investment that the s.e.c. says was designed to fail. in the e-mail to his girlfriend, who worked at the london office, he said the whole building is about to collapse, referring to the financial markets. and there would only be one survivor, the fabulous fab. he says it is a personal note, and is irrelevant to the case. we have been asking you, have you got any embarrassing e-mails you've seen or wish people hadn't sent? what is your biggest e-fail? share us, e-mail us, email@example.com, tweet @cnbcwex or direct to me, @rosswestgate. ahead of the u.s. open today, european equities are softer. down near the session lows.
you're watching "worldwide exchange." here are your headlines from around the globe. surprise drops in both imports and exports could weigh on costly growth figures. they're out next week. italian bank stocks down. downgraded to two levels above junk, citing concerns about economic resilience. burberry rallied to the top of the british market, had forecast beating q-1 sales numbers, boosted by the performance of its spring and summer collection in asia. and egypt's new prime minister is working on forming a cabinet as gulf states funnel billions of dollars to the interim government.
if you're just joining us this morning state side, welcome to the start of your global trading day. yesterday, the dow up 75 point, s&p up 11. futures indicating a negative start. the dow is currently some 21 points below fair value. nasdaq at around 6 points below fair value. s&p around about 4 points below fair value. as far as the ftse global 300 is concerned, it is still up 6 points despite the fact that european equities have been negative. and are down on the session low at the moment. the ftse was up over 63 points yesterday. currently down .4. the ibex is down 1.25. the cac ron down half of 1% as well. s&p downgrading the country as sovereign credit rating from bbb to bbb plus.
it added there was a one in three chance of another downgrade this year or next. the prime minister telling local tv the rating cut was proof the situation in italy is still pretty complex. hit the banks as you can see. the same time today, italy is selling 9.5 billion euros at a t-bill auction. we got a bp auction tomorrow. btp auction tomorrow, sorry. ten-year italian yields are higher. as far as the rest of the bond market, treasury yields ticking a little lower at the moment. spanish yields on the italy downgrade, bucking the trend, up towards back 5% at 4.8%. at currency markets, euro/dollar down to three-week lows.
three-month lows. 127.54. had comments from mr. asmussen from the ecb saying forward guidance meant rates would stay low for 12 months. the ecb tried to back track then. sixuan is in singapore with the update on the markets in asia. >> thank you, ross. china's trade data was the key factor that drove asian markets today. the nikkei 225 gave up all early gains after exports declined the first time in 1 1/2 years. kospi ended in negative territory. but chinese shares saw their biggest gain in four months, a hope that beijing will lose in policy to support growth. the shanghai composite climbed over 2% to end above the key 2,000 level. over in hong kong, the world's biggest jeweler soared in nearly 13% after the company posted a
63% jump in its q 1 revenue. and other jewelers also went along for the ride up sharply. samsung electronics climbed for the second straight session after the sell-off last week. but asiana airlines down as the probe continues on the crash landing of one of its jets at the san francisco airport. back to you. >> all right. thanks very much indeed for that, sixuan. that's the latest in asia. comments out from the bank of italy following the downgrade. they say they still have got concern that -- they must continue to strengthen the capital base, cut costs and continue to lend to companies. they think credit market condition tensions will continue the next few months as well. you heard sixuan there talk about china trade data. more worrying signs just
confirmed that imports came in way below forecasts, down .7%. forecast to rise 8%. exports also missed by a wide margin, down 3%. they're expected to come in up around 4%. it is china's first export decline in nearly 1.5 years. eunice has been monitoring action in beijing. we know the government has been attempting to discourage firms from overstating their position. how much of an impact has that had versus the fact there is a weaker external environment for china? >> well, it seems there is a combination of both. there has been a lot of attention put on the fact that the government has been cracking down on the false invoicing in certain export zones in the south of the country. that has been having an effect. saw a major effect in may. people were talking about how we're seeing the similar effect in june. we don't know whether or not we'll see an added effect in the
coming months, but the short-term we are seeing an impact of the government crackdown. on the other hand, we're seeing a weaker global economy. the shipments to europe in your part of the world and the u.s., japan, all of them were pointing to weakness. and a lot of that was because of the fact that the demand for goods all over the place really isn't very strong. now, what another focus of today's numbers was the import data. and the import data also disappointed. a lot of people thought we would see a jump because of the low base effect, but we didn't. you break down the import numbers what people have been focusing on is the imports that were used to be reexported, those were the -- those are the imports that saw the most weakness again because of weakness in global demand. but the imports that were used to fuel the chinese economy, those ones were holding up relatively well.
so maybe a blilittle bit of a bright spot. the numbers are indicating a weakening trend in the chinese economy. definitely for the second quarter. we'll get the numbers on july 15th, but also going forward as well. ross? >> yeah. meanwhile, while we look at that trade data, we have talks between beijing and washington being held in the u.s. political capital today, the fifth strategic and economic dialogue. i'm wondering, you know, we'll be talking about cybersecurity, investment currency manipulation. are those talks going to go better, do you think, since the leaders met in california last month? >> well, that's what the big hope is. a lot of people have been talking about how president xi and president obama were trying to set a different and more informal tone that the two have gotten past the elections so maybe they could get down and get some business done. so that's what they're all hoping for that we're going to see a different type of
relationship. >> grab us a handful. >> when the u.s. ambassador in beijing takes time off his diplomatic duties to market imported american cherries at a sam's club, it is clear, china is important to america. >> more interaction between all of our people, at every stage, from academia, students, scientists and policymakers, business people, is critical. >> the two largest economies depend on each other and are trying to reboot thais. nearly a fifth of china's exports go to the u.s., while american exports to china jumped nearly sixfold since beijing joined the world trade organization over a decade ago. the two do as much bickering as trading arguing over market access, foreign policy and industrial espionage. >> when it comes to the theft of commercial intellectual
property, that is a huge problem and it is one where china is clearly culpable. >> many people here in china believe the united states may like to -- may try to block china, that's why we see this kind of mistrust, deep seeded mistrust. >> even though china is growing in strength, it relies on the u.s. for growth, jobs and investment. this chinese auto partsmaker sends three-quarters of exports to america. almost all of these car parts were made for american companies and shipped out every single day. we want more americans to buy our products, this factory worker says. the more our company earns, the more money we make. and the more american goods chinese will be able to afford. eunice eun, cnbc, beijing. and, ross, there is a lot of political rhetoric on both sides, both beijing and washington. but what the political rhetoric
really misses the bigger picture and that is that these two economies are so interdependent that they have no other choice but to get along. >> let's hope that is the case, right? that's the whole point, isn't it, promoting greater trade, that your relationship is so symbolic, you can't come to blows. we'll hope that really is the case. good stuff. thanks very much for that. that's the latest from beijing. want to check out what other economists are saying about china's big trade data, head to cnbc.com. one expert says we can expect no export growth for the rest of the year. also, china commodities have seen a rough second half because of fears of a slowdown. barclays thinks gold could benefit from a hard landing. both those stories on cnbc.com. don't forget, you can follow us on twitter @cnbcworld. there is the agenda. let's talk about that. may wholesale trade numbers out at 10:00 a.m. eastern.
2:00 p.m., the minutes from the last month's fed meeting. fed chairman ben bernanke speaking at the national bureau of economic research conference in cambridge, massachusetts, after the closing bell. his topic, a century of u.s. central bank. earnings, look for numbers from family dollar and for the open and yum brands after the close. chevron is also reporting interim second quarter results. looking ahead to that carefully. a look at the other stories we're following today. the ntsb says the pilots of the asiana jet that crash landed in san francisco this weekend were relight on the plane's automated control equipment. investigators say the crew assumed the auto throttle was controlling the air speed, but actually hadn't been activated. and they realized too late the plane was flying too low and too slow. the asiana president arrived in san francisco from south korea on tuesday. and was mobbed by the media on
his way through customs. he met and apologized to passengers and family members. we have a t-bill auction result from italy after the s&p downgrade. they sold 7 billion of 12-month t-bills. the average yield 1.078%. as you might expect, higher from the .962%, the 12th. the yield is higher. it was expected to be higher. at the same time, the bank of rome has been talking about banks must continue to strengthen the capital base and cut costs as well. same time, the european central bank stepped in to clarify comments from asmussen. yesterday, he told reuters the move could extend beyond 12 months. the ecb said he hadn't intended to give any guidance on the exact length of time, but
investors believed his comments. to break, a reminder of where we stand. european equities, down to the session lows. decliners outpacing advancers by 8 to 2. more to come on "worldwide exchange." i want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business? i need help selling art. [ male announcer ] from broadband to web hosting to mobile apps, small business solutions from at&t
italian banks taking a hit after cuts to the long-term rate. jpmorgan chief jamie dimon weighs into the regulation debate in brussels. in egypt, the economists and former finance minister has been named interim prime minister one week after morsi was ousted by the military. saudi arabia and the uae are throwing their support behind the transition government with a combined $8 billion in aid. yousef is in cairo with the latest. what do we know about him and how quickly can he move to form an interim government that is stable, yousef? >> well, ross, at this point we're cistill waiting for the formal cabinet announcement. they only mentioned the
76-year-old veteran economics professor, he worked for ten years with the arab monetary fund in abu dhabi and formerly minister of finance. hard to get if you're looking for an interview. but he's been described as a liberal economist in terms of policies and views and he's expected to run the technocrat transitional government which the army hopes will be over in about six months after parliamentary and presidential elections. it might be a bit of an aggressive timeline. a lot of it will depend on whether the muslim brotherhood plays along. at the moment, they're not. they're defiant, saying they would like to see mohamed morsi be reinstated as president. you have the interesting development of $8 billion from the gulf. $5 billion from saudi arabia, which includes $2 billion in fuel. and $3 billion from the united arab emirates, one of the largest exporters in the region. $1 billion is an up-front grant. i have spoken to several economies and we have seen this before, aid pledges shortly after the fall of hosni mubarak.
and a lot of it did not come through. so we have to wait and see what this has to do with the frosty relationship that morsi and his government had with countries like saudi arabia and the united arab emirates and whether they will use that money to actually change certain things in this economy. there is some structural challenges including the subsidy bills, the wages that are unsustainable. the budget deficit has mushroomed, doubled in fact over the last year, the foreign reserves have constituentle co dwindled. the reaction on the stock market is positive for the most part. continuing the upward trend that we saw yesterday, ross. >> okay. yousef, thank you very much for that. that's the latest from cairo. natural gas and oil is leaking from an old well in the gulf of mexico. around 75 miles off the coast of
louisiana. this is after a crew working to plug the well lost control. the five-man crew was evacuated out of caution. u.s. coast guard says the well did not blow out and there was no explosion or fire on the platform. flyover revealed a sheen around four miles wide and quarter mile long. the crew should plug the well today. u.s. crude prices hitting a 14-month high after a report showing a bigger than expected drop in stockpiles in the last week. the american petroleum institute says u.s. inventories fell by 9 million barrels versus analyst forecasts of a drop of 3.3 milli million. you can see wti trading 104.64, 52-week highs. brent crude up 108.10. the spread narrowed fairly
sharply. a short break, still to come, brazil's central bank undu under pressure to curb inflation. we'll preview it after this. ♪ [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ]
to release the monthly interest rate decision later today. brazil's central bank raised its rate twice this year as inflations crept up to a 20-month high. calls for tighter policy increased on the pack of a weaker rial. joining me for more, maya. they surprised us last month with the 50 basis point hike. what is the risk today that because of the weakness of the rial they have more than 50 basis point hike? >> good morning. you're quite right. last time the last move was pigger thpig bigger than markets expected. the consensus are expecting 50 basis points today. i think that's what we'll get today. my judgment. i think what is interesting with brazil is what is priced in after this.
we have the local prices in another 100 basis point hikes this year followed by another 170 next year. a lot more to come after today. that's not what our economists at citi expect. their forecast is a peak of 9.25%. and lower than what we suggested by the numbers i just gave you. i think today we probably get 50. we at citi have question marks as to whether we'll get what the market is expecting after today. >> how much is policy going to be determined by the movement of the rial from here and if the movement is being determined by what the fed is doing, it suggests brazil doesn't have a lot of overall control. >> what is happening is a good lesson in be careful what you wish for. as we have discussed here, the year before us, brazil wanted very much a weaker currency and
much of their efforts in the last two or three years have been in that direction. they have been trying to stem strength and discourage inflows into brazilian markets. we're taking a bit of a back step here. we had the dax from x to 0 and we had intervention. and indeed, we have rate hikes, all part of an effort to prop up the real. to be honest with you, i'm not sure the measures will work. we have a similar view in indonesia. we also have rate hikes and intervention in an effort to cut currency weakness. it feels like a little -- too little, too late. and now we're in a situation where emerging markets are out of flavor. so it is going to be that much harder to attract capital into
brazil or to the real. >> how much of a problem is this going to be for the president? she sort of promised to keep borrowing costs lower than they had have been. we have higher inflation. we have the middle class demanding better public services. seems like she's in a bit of a tight spot. >> absolutely. the two risks that i would highlight to inflation, which i should say we expect year end inflation at 6.2%, we expect it to come down from the current 6.7 and come down within the central bank's target range, but, you know, i think there are two risks to that. one is dollar -- what happens to the currency, and the other is, of course, what happens to fiscal policy. i think one of the big constraints on monetary policy, if you like, is that fiscal policy is quite easy. and the demands are to keep it easy. now the government expects a primary surface of 2.3%.
our economists expect rather less, looking for 1.5%. and, you know, they're essentially pointing to the inflationary effects of that. fiscal slippage on their assessment as well. i should add they reckon that you have every one percentage point deterioration in the structure of primary balance adds 50 basis points. .5% to inflation, which is rather a lot more than what the central bank seems to be working with, which is .15 as opposed to .5. >> thanks for that. thank you very much. now the lawyer for former goldman trader fabrice tour says the e-mail where he called himself the fabulous fab should be excluded from trial. in his e-mail, he said the whole building is about to collapse,
referring to the financial markets and there would be one survivor, the fabulous fab. his lawyer says it is a personal note and is irrelevant. so we're asking viewers, how about sharing your most embarrassing e-mail story. i bet you can't wait. do you have an e-mail you witness had never gone out and do you want to resend it on air. e-mail us firstname.lastname@example.org, tweet @cnbcwex or direct to me, @rosswestgate. not sure how many we'll get. still to come, can the smithfield deal stay on the table? as the u.s. senate scrutinizes the takeover today. one guest says china will bring home the bacon. another calls the country the wild west.
watching "worldwide exchange." i'm ross westgate. the headlines today. china's trade data misses by a country mile. the surprise drops in both imports and exports that will likely wear on growth figures due next week. italian bank stocks hit after the sovereign rating two levels go above junk. burberry doing pretty well, top of the british market on forecasts beating sales boosted by the performance of its spring and summer collection in asia. jpmorgan ceo jamie dimon sitting down with the top dogs for the financial markets. the eu sets out new plans for failing banks.
good morning to you. the dow is up 75 points. the s&p up 11. right now futures indicating a lower start at the open right now. the s&p 500 is currently some four points below fair value. nasdaq five points below fair value and dow jones, actually just some 20 points below fair value. futures were lower around an hour or so ago. ftse is up. we had been stronger asian markets despite the weak chinese trade data. european equities lower during the course of the session. and we're down about nearly half a percent for the ftse. ftse in italy down a percent. italian banks hit after the s&p downgrade.
so plenty of comment already today on the channel. here is a recap of what the experts are saying. >> last quarter of this year we'll see a depreciation. and that's the question we talked about in washington at the moment. u.s. and china talks. the americans want to avoid that. a lot of other things they're talking about, cybersecurity and so on. but no longer a runway bet, certainly. >> we like to look another this one on basis and credit sweeps. the trend is pretty clear. the long-term trend is for ubs to rerate. every so often they get to a standard defendtiviation on a tr view. the long-term trend is ubs is fairly stable. >> it does feel like thaperhaps
there is good numbers, they had done well from the back of the last trading days. i think they deserve a re-rating. >> that's the trade of the day. the details of the single resolution mechanism there to deal with failing banks across the eurozone. it falls under plans for a regional banking unit. we get the initial flashes out on this says the eu will allow exceptions from the rules if there is a financial stability. banks must present full restructuring plans, receive state aid and bank owners, junior creditors must contribute as first resort before public funding comes into play.
what will be of most interest is the conflict that there will be generate fwd from this. the brussels is going to have a plan for control over all 6,400 banks within the eurozone, a broad and ambition mandate which will meet german savers will be put on the hook. and it would mean the european commission has the power to shut banks in germany as well. so we wait for more details on that. meanwhile, u.s. senate is holding a hearing today at 2:30 eastern on the planned takeover of smithfield foods. the $4.7 billion deal would be the biggest ever chinese acquisition of a u.s. company. lawmakers are expected to ask smithfield ceo larry pope about food safety issues and foreign ownership. the approval ultimately lies with the committee on foreign investment in the u.s.
cfi u.s., chaired by the treasury department. joining us from washington, rick quinn, principle at fda imports.com. thank you for joining us. rick, are you broadly in support of this takeover? and what is it that you think the committee should focus on? >> well, i think the committee should focus on its mandate, which is to implement the exxon florio provisions of the reduction act, to evaluate whether potential foreign investment in the united states represents a threat to national security through the acquisition of, quote, critical infrastructure. and if you look at the language of the statute, the statute itself defines critical inf infrastructure primarily in terms of defense technology. it does not address the broad policy question of whether food
security amounts to a national security risk. >> what is the food security issue for you? >> there is a couple of different layers of food security. we think food and how food is produced should be considered part of our critical infrastructure in this country. just because this is the first time this commission looks at this, it is not going to be the last. we know there is more interest in foreign ownership of u.s. food production. and that's a very important long-term consideration for national security. we also, you know, we have to look at things like smith field supplies a large amount of pork products to the u.s. military. we expect that to come up. and then we also need to have a better conversation about what this means for the food system in the u.s., for rural communities, for farmers and consumers if we take a huge piece of the pork produced in this country, the stated goal, and export it to china, what does that do to consumers here? it could change the economics of the food supply here.
>> no security issue, is there, with u.s. pork being exported to the chinese. what is your concern on security? you worried that we might get chinese infected produce into the food system? what is your real concern? >> with the short-term, the companies say they want to send a lot of pork to china. we're worried about longer term if the situation reverses and we import pork products from china. we're already experiencing that pressure to be allowed to import processed poultry from china which we think is a bad idea based on the track record there and we're seeing a chipping away at the u.s. standards for how we regulate imported meat from other countries. china has a track record extremely worrisome and we don't think involving yet another part of the food supply and making a big company like smithfield even bigger and then less accountable with foreign ownership helps that situation at all. >> rick, would smithfield be less accountable, less liable to
u.s. laws and safety standards? >> no, they wouldn't. in fact, it makes for an interesting policy argument, but it defies the economic logic of the merger and if you look at shangwi's ceo's remarks in the press, he indicates the rational for acquiring smithfield is to supply the chinese market, the growing market in pork. it is not the case that they spend $4.7 billion on smithfield so they can start selling pig's feet to virginians. >> is there a -- are you concerned there is -- within the story there is a slight nationalistic attitude getting in the way that is clouding the debate? >> of course there is. in fact, people in the policy side of the debate have made statements such as the chinese seem incapable of following food regulatory compliance regimes.
so that, of course, is utter nonsense, however to point out the obvious fact that it is a developing economy with respect to regulatory maturity is something close to obvious. but it does ignore the fact that the majority of food recalls which have represented significant health safety risks to americans have been from domestic food production, not foreign food production on the one hand. on the other hand, even if the u.s. regulatory authorities had the authority to do more with respect to chinese imports as if that were a significant problem in this case, they don't have the resources to do so. so to single out shangwi and smithfield is not terribly useful to support that basic policy objective. >> patty? >> well, we agree that the regulatory agencies here are not able to keep up with imports.
that's quite clear. whether it is meat supply, usda or other foods and the fda, they're outgunned by imports. why are we going to increase the ability of other foreign firms to have access to our market, which we think is the ultimate goal in this deal, just because it is not the stated goal now, we don't think that is the case in the long-term. we have seen this in lots of other production platforms that the u.s. does become the marketplace because costs are so much lower in china. and then even if that doesn't happen, let's say they stick to their short-term stated goal, there are downsides to this deal for u.s. farmers and u.s. communities that have not fared well under smithfield's model of production. ramping that model of production here to keep the waste and all of the downsides of production in the u.s. and then send the product out to china adds insault insult to injury to a lot of communities. several hundred people sued smith field this week for the nuisance, not a fair term, for
the impacts they have on their lives from the hog production and the way they do it here. so ramping that up, under a privately held company that is foreign owned and less accountable is not good news for the communities either. >> well, i'm sure the debate is going to wage. thank you for now. still to come, word of a leaking oil well in the gulf of mexico had some people along coast on edge as the bp still pretty fresh in their minds. the latest on the incident and what is causing the spike in crude still to come on "worldwide exchange." [ male announcer ] it's time. time to have new experiences with a familiar keyboard. to update our status without opening an app. to have all our messages in one place. to browse... and share... faster than ever. ♪
sima has more. >> the well is located about 75 miles southwest of louisiana, operating in the shallow part of the gulf in about 146 feet of water. the well is owned by talas energy. the company says a five-man crew was trying to plug and retire the well when a combination of natural gas and oil started flowing to the surface. the crew was evacuated out of caution and two other wells on the flplatform were shut. the well did not blow out and no explosion or fire on the platform. a flyover reveals a rainbow sheen of four miles wide and three-quarter miles long, expected to evaporate. they expect to seal the well in the next day. the leak is tiny compared to the deep water horizon spill which dumped 4.9 billion barrels of oil into the gulf in 2010, it is one of the first reported
incidents since then. the platform installed in 1972 has been cited a dozen times for regulatory infractions since 2008, most involve maintaining and operating equipment in a safe manner. u.s. crude prices are at 14-month highs today following an industry report showing a bigger than expected drop in u.s. stockpiles last week. the american petroleum institute says u.s. inventories fell by nearly 9 million barrels versus analyst forecasts of a drop of 3.3 million barrels. the eia releases its weekly inventory report today at 10:30 a.m. eastern. checking oil prices at the moment, around 108 barrels at this moment. back to you. >> thanks, sima. still to come, investors may get fresh clues about the fed's timeline with the release of the latest minutes. and a speech from ben bernanke this afternoon. we'll try to read between the monetary policy lines next. ♪ norfolk southern what's your function? ♪
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[ static warbles ] more worrying signs from china's economy today. june trade data shows growth is slowing. imports below forecasts from a year ago. expected to rise 8% from a year ago. exports also missed, down 3%. analysts were looking for 4% increase. it is china's first export decline in a year and a half. beijing is blaming weak external demand, and rising labor costs. latest drop comes after chinese officials began a crackdown on illegal capital inflows disguised as trade bills that inflated earlier export figures. in europe, italy's one year bond yields head a high earlier. this is the first debt sale since s&p downgraded the
country's long-term credit rating. the average yield on 7 billion euro sale of 12 month bills came at 1.078% compared to 1.96% at the most recent auction in june. and bank of italy governor reacting to the s&p downgrade by saying banks must do more to boost capital and reduce costs and continue to lend. he warned that italian gdp would likely contract nearly 2% this year and that credit conditions could worsen even as the recovery gets under way. those comments came as the official data show the percent of nonperforming loans and bank balance sheets up 22.3% in may from the same month last year. the vat rose in may for the first time in a long time. vat take and we also got calls here from the party, they want to take a three-day break from parliamentary affairs as well.
has political significance. european equity markets meanwhile are down today with the ftse yesterday up another percent. off about a third at the moment. ftse down a percent, italian banks the weakest sector because of that downgrade. u.s. futures are indicating low, not by much, after yesterday's gains. now the dow is some 40 points below fair value. the nasdaq is around five point business low fair value. s&p, three points below fair value. as far as the agenda today, may wholesale trade numbers due out at 10:00 eastern. at 2:00, the minutes from last month's fed meeting and fed chairman ben bernanke also speaking at the national bureau of economic research in cambridge, massachusetts. that's after the closing bell. his topic, a century of u.s. central banking. he will be taking questions from the audience. joining us with his thoughts from washington, greg ipp at the economist. greg, always good to see you.
we keenly await the minutes today. i suppose the key thing is to remember they were before last week's employment report. how key is that? >> well, the employment report did -- so close to expectations and i suspect the fed's expectations. it probably doesn't change much about what we thought the fed was going to do. frankly, ross, that press conference from bernanke a few weeks ago, such an eye opener. it leaves you thinking, well, what possible new news can we get out of the minutes. but all that said, i think there is a few items we still have big question marks about that i'm looking for in this afternoon's minutes. number one, all the talk about them beginning to taper from their $85 billion a month in bond purchases starting in september. well, just how united is the fomc around that date? would they like to go later than that? like to go early? that's the first thing i want to see. second of all, how much do they start to cut? that's one thing we heard nothing about. do they cut by 5 billion a month, 10, 20, 40?
i would love to have a little information on that. with the market. and finally, do they start to cut more on the mortgage-backed securities or treasury securitys? they're buying roughly equal amounts of both. we would like to have a hint as to what they're thinking in terms of do they begin to pull back more on one or the other? >> yeah, we do need more information. do you think there will be anything there, any discussions about at some point some years down the road whether they reduce the size of their balance sheet by actually selling treasuries. after they stopped buying them, they just hold the stock for a while. >> that's a good thing, a good point. in the view of the fed, how stimulative the policy is, the fuchks of how big the balance sheet is and how long it stays at that size. at the press conference, bernanke says they're still thinking about how to frame their exit strategy which evolved somewhat in the last couple of years. he didn't give us much new then other than to say they did
anticipate not having ever to sell mortgage-backed securities. maybe the minutes will tell us whether they have come to a similar view about treasury bonds. i think essentially the default view is they would not sell treasuries, they would hold on to them, just let them mature naturally and therefore let the balance sheet shrink slowly. >> greg, i said bernanke speaking today about the backward looking sort of thing. but there is a q&a there and i wonder whether he'll be tempted to also talk about the backup in yields has gone too far, beyond what they wanted or expected. >> yeah. i think the topic 100 years of the federal reserve, and everybody in the audience will say, mr. bernanke, enough about the 100 years what about the last 20 minutes. i wouldn't be surprised if he gets a question about that. i suspect he's actually going to try and avoid making news or talking about that. this is an academic audience. people there will be his former
peers, people from the top teaching universities around the country and around the world. and i suspect they'll probably ask him rather obtuse questions about, well, how did the panic of 2008 look like the panic of 1907? for real news, i suspect we'll have to wait until next week when bernanke gives his semiannual monetary policy testimony to congress. >> great. do us a favor, crash the audience and ask a question for us, okay? >> they'll know my face. they'll be sure not to take my question. >> you can talk your way in. thanks for that, greg. good to see you. greg ipp at the economist. that's about it for today's edition of "worldwide exchange." coming up next, "squawk box" and the countdown to the opening markets state side. whatever happens, we hope you have a profitable day. eliot spitzer on "squawk box" 2:30 ces, 8:30 eastern.
good morning. china reporting dismal trade data, falling far short of expectations. in the u.s., feds in focus on the fomc meeting, will top today's economic agenda. stocks on a four-day winning streak with the s&p 1% below its all time closing high. it is wednesday, july 10th, 2013. and "squawk box" begins right now. good morning. welcome to "squawk box" here on cnbc. i'm andrew ross sorkin with joe kernen. becky continues to have the day off. have to say she'll be missing a great lineup of newsmakers including black rock's peter fisher. we'll talk to him about the economy, yields and much, much more. and the man who runs all of city
group's hedge funds eric siegel at 7:40 eastern time this morning. and then joining us for a full hour at 8:00, former time warner chairman and ceo, and former citigroup chairman dick parsens. and then media matters with aol chairman and ceo tim armstrong. and watch this, in the last half of the show, the man everybody is talking about this week, eliot spitzer, the disgraced former new york governor, trying to mount a political comeback, he'll make his pitch to us at 8:30 eastern time. we have a lot to talk about. >> there you go with the mounting again. do you -- do we -- i was thinking about that yesterday. we call him governor, don't we? >> i want to show you