i'm christine tan in asia. caution sets in after a nine-day rally in the nikkei stocks and technology shares lose steam. >> profits fall by two-thirdses in the second quarter. >> and i'm bertha couples in the u.s., the central bank may have to hike rates sooner rather than later to keep inflation in check. hello, welcome to cnbc's "worldwide exchange." we had a pause today in asia, but in parts of europe the rally

continues. the ftse global 300 is up. the ftse 100 is up for a 12th session in a row, up 0.4%. if it stays at that and closes at that level or anywhere in the green today, it will set a new record for the number of gains that -- days that it made gains consecutively. the xetra dax is up 0.8%, up two-thirds force the cac. on the currency market, the dollar held at an eight-year low. the australian dollar has gone to highest level this year. dollar-yen, around the 95 mark. euro-dollar, 1.43. sterling as well against the gre greenback.

>> in asia markets took a breather after the rally we saw in the last couple of sessions. in japan the markets snapping a nine-day rising streak. a lot of caution ahead of the national elections this weekend which show the ruling ldp could lose position. the kospi continued its 11th consecutive week of gains. the shanghai, up. the hang seng a clear winner, and the bombay sensitive trading flat. markets are really stabilizing. it's a wait and see what's happening as far as corporate earnings are concerned and whether there's follow-through on the economy. on the oil markets, there is a plan to release a report suggesting that last year's volatility in crude prices was due to speculators. that's according to "wall street

journal." nymex sweet crude up 64 cents. brent is also putting on gains, up 45 cents, 71.26 a barrel. bertha? good to see you. >> good to see you. here in the u.s., the dow closing above 9100 for the first time since november 5th of last year. these markets have really climbed quickly. once again this morning futures are flat as investors really try to take measure. we have earnings out from coach to u.s. steel, also we will be watching comments from fed officials. one official talking about inflation that has people talking. futures up about 15 points ahead of fair value. the nasdaq up as well. s&p 500 futures higher. bonds right now, the ten-year bunt yield at 3.51%.

look at the ten-year note here in the u.s. market today bracing for record $42 billion worth of two-year notes set to auction. yesterday's tip auction went well. this is a record offering week from the fed. something people are watching closely and the yield continues to move higher. we are now at 3.73% as the market continues to have a greater appetite for risk and people move out of bonds. are they moving into gold? they are this morning. the dollar this morning at eight-week lows against a number of key currencies. joining us now to talk about what is going on in this market is christian tegland blogburg. and steven kokulis at td securities. steven, you say this rally that we're seeing appears to be liquidity-driven.

we have so many central banks pumping liquidity out. there people taking advantage of that you're not sure it can sustain the momentum, are you? >> it's not clear whether we will sustain the momentum. obviously it's encouraging to see optimism moving back through the markets but we have to have an assessment of how strong is the economy. we still generally have gdp figures in most countries still negative, looks like it's staying that way. unemployment rising just about every country in the world that i can think of. that will hurt consumer demand. while we may be getting hints of stability in the housing market, yesterday's housing start numbers were quite a deal. today we get the price shiller index. it's still not a scenario where the consumer which has driven the world economy for the last 15 years, is going to be spending, borrowing, for that reason we are just doubtful whether this stock rally can

continue. >> it's interesting, stephen, you make that note. if you look behind the headline number, up 11% from may it was actually down 20% from last year. the lowest number since 1982. you know, christian, do you think we make too much of these green shoots. >> i do looking at the economies as such, they are limited to the upside. but i want to make another approach. it's far more important to understand what has driven earnings or equities higher so far is the better than expected earnings. but if you look at what is currently priced into the dax and the s&p 500 or nikkei 225 regarding growth and companies earnings, one-year hit, it's around 20% for s&p 500, 27% for dax, and around 50% for nikkei 225. so far earnings are the better than -- better than expected

earnings have been released on the back of cost cutting. you can only cost cut to a certain point. markets will expect sales to grow. when you look at the sales opportunities to grow, you look at macro economic framework and that does not appear optimistic. regarding equities, i'm sure that we will see a retracement during the fall. >> stephen, you make an interesting point about consumer demand. when you hear companies reporting global sales down 25% in the april to june quarter, how much do you think global demand will get worse from here? >> it is probably not going to deteriorate, because low interest rates are helping the consumer, the cash flow, so i don't think it's going to get worse. the quo now we're grappling with, including the fed official s, is that the consumer is still under pressure from the fact that they are losing their job

and losing their wealth in terms of their major asset, their house. for those reasons the consumer is not going to be willing to rush back into the market and spend and borrow again. the other element is the banking sector is still fragile. for those reasons the banking sector still is not going to be as liberal, if you'd like, with the money it's going to be giving to consumers. we have mr. darling, again in the uk, pressuring banks to lend. they don't want to because they see risks out there. in that environment, even with rates at all-time lows, of course we will get slightly better data. does that mean we are in for a fully fledged recovery? i have doubts. >> christian what do you think? do you agree? >> i agree pretty much on everything that steve said so far. the point is that if you look at the u.s., there are facts that

show how much under pressure the consumer is. if you look at credit cards, new credit cards issued, year to date down 38%. the limit use in credit cards is down by 3%. also if you look at the restructuring of the american family, 25% of the households in the u.s. is a three-driven car household and they will deleverage, according to some economists to two cars. that also shows -- you can see the numbers in the car sales, down 30% that is below the replacement level. so what we are seeing in the u.s. is that the consumers are deleveraging on the back of partly fear of losing jobs, but also on the back that they could go bankrupt. so i think stephen is right in the sense that bank lending and consumers not spending will keep us at a low level recovery-wise. >> christian, here's the point,

right? you talk about this revenueless recovery. there is going to be growth, right? we're not going to be -- >> sure. >> however weak the growth is going to be, there's going to be some. if companies slim back and reduce costs, a tiny bit of growth could have a big impact on margins, couldn't it? >> definitely. i mean, they are sort of shaped the organizations and cut back on costs. so revenue growth will have a huge impact on margins. our point is that even though this should occur what is priced into equities 12 months ahead is unrealistic. it won't happen. not according to our book, but we could, of course, be wrong in that sense. >> what is the strategy, christian, base of your strategy then at the moment? >> based on my strategy we will go into defensive equities like

farmer, like utilities, and some telco and consumer staples. we will stay off growth equities because we believe they have been wearing off by now. >> we are seeing these treasury yields back up towards 3 3/4%. we like the bonds still. we think inflation is low. we are not at all phased by the amount of bond supply coming on to the market. we see these current level of yields being very attractive when inflation is still low. so the real return, investing in treasuries and generally bonds, is still good. >> stephen, good to see you. >> thanks. >> bp says it already exceeded cost-cutting goals of $2 billion and is planning an additional billion in savings. the announcement comes after

profit fell by nearly two-thirds in the second quarter. bp has improved its bottom line from the previous quarter. speaking to cnbc earlier, the ceo explained how the company is cost cutting so successfully. >> 5,000 people at the company last year. we have done a lot to significantly simplify the company. that's where costs are coming out. going forward what we expect to see is further benefits from the industry cost structure coming back in line. >> plenty more with tony heyward in about an hour's time. >> deutch deutsche bank has seen shares hit today. the bank saw its net profit jump 68%, the ceo says deutsche bank is well prepared for an uncertain environment for the rest of 2009.

and first half profits at ads fell 28% but they had a positive second quarter. earnings for eads jumped more than two-thirds, but the owner of airbus warns programs could hit profits in the future, that's after a 71 million ua charge after project delays. in europe viewer also be able to get an interview with the ceo of eads later today. japan's cannon has brought today's 72% fall in quarterly prof profit. for the april to june quarter operating profit came in at $471 million, well below the $1.6 billion earned a year ago.

canon raised its full-year operating profit by 6%. shares of cannon ended 0.3 lower in tokyo trade today, 3,370 japanese yen. japan's biggest electronicsmaker, hitachi tumbled down because of a sluggish shares of microchips. the company lost more than $817 millions in the april to june quarter, down from last year's profit of $331 million. it also stuck to its forecast for a net loss of $2.8 billion for the year to march that would be the third straight year of losses. hitachi confirmed it will spend $2.9 billion to buy out five listed subsidiaries in an effort to return to profitability. shares of hitachi lost 3.6% in tokyo trade today, 293 japanese yen. still in japan, toyota continues

to feel the industry downturn. for the april to june period, sales worldwide fell by more than 25% on year to 1.8 million units. toyota is ramping up its hybrid lineup. the company is launching a hybrid compact for under $16,000 in japan in 2011. toyota may produce the new hybrid not only in japan but also in france for sale in europe. toyota shares ended half a percent higher in tokyo today. bertha? >> one of the fed's biggest inflation hawks says the central bank may have to raise rates before too long to keep price pressures from getting out of hand. philly fed president charles plosser tells the "wall street journal" that the 1970s proved that the economy can have an inflation outbreak. he sees risks in at least 2010.

plosser is also expressing reservations about president obama's financial reform plan saying it could leave the fed with an ill-defined role as bank regulator making it less effective at its main job of fighting inflation. the commodities futures trading commission is expected to issue a report next month blaming speculators for wild swings in oil prices. last year the cftc pinned the volatile movements primarily on supply and demand but the "wall street journal" reports regulators now say analysis was based on deeply flawed data the cftc did not reveal preliminary figures from the new report. the agency is holding the first of three meetings today to determine whether to restrict speculative investment in commodities. and amgen's second quarter profits rose 20%. the company benefitted from a rebound in sales of its drug enbrel. amgen is boosting its full year outlook. the ceo saying concerns about

pressures from the recession is having on health care have moderated. amgen also struck a deal to have glaxo smithkline market an experimental osteoporosis drug waiting fda approval in europe. in frankfurt amgen is trading up nearly 3%. if you want to know more, check out the pharma blog. mike huckman writes about the latest and greatest breaking news in that sector. for everything else check news and video on cnbc.com. still to come on today's program, deutsche bank posted solid second quarter earnings but has raised its provisions for bad loans. we will break down those numbers. chi china's biggest ipo this year will happen tomorrow. and bp has had a 53% drop in its second quarter of costs. at 155 miles per hour, andy roddick

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over tpast 11 days they are up about 11%. so 12th day today, if you want to hang on to those green arrows. looking at some figures, sage is the biggest gainer today. higher about 4.9%. sage is a software company which makes software for small and medium-sized businesses. they said this morning that they expect costs to be in full line for the year after cutting back on costs. lloyds also on the move. higher by about 4.5%. lloyds announced the chairman of the company. the stock did well there, too. also bp, not one of the top movers, but a big story today.

bp came out with earnings a bit earlier on telling us replacement cost profits fell by about 53% to $3.14 billion. margins in the refining business set to decline. so we are seeing the stock trading lower by about 1%. patricia has an update on german trade. >> yesterday we saw the dax gaining about 0.4%. intraday high, 5,300. today if the momentum continues we could see that again. trading up 5.0%. volumes today at this time better than yesterday. deutsche outperforming after an upgrade to buy from merrill lynch. s siemens also in positive territory.

due to report numbers this week. the big downer today was deutsche bank, down by about 4.8%. we were down 7% earlier. the market is starting to get to grips with the numbers. long provisions are the worst. the net slightly better than expected. the outlook could have been more positive from joseph ackerman. today we have the supervisory board meeting. we still have that eavesdropping probe going on at deutsche bank. ackerman has a fully-packed schedule today as well as being invited to the probe this afternoon. the mid cap up 0.9%. the tech dax showing weakness, down about 1.4%. over to christine tan now. hi. >> asian stocks held on to ten month highs, but gains were kind of muted, limited as caution started to sink in. in japan stocks ended a nine-day

winning streak. the nikkei closed flat at 10,087. the shanghai market shares ended at a 14 month closing high as investors geared up for tomorrow's big ipo from china's state construction. 3,438. in hong kong, property stocks helped to push the market to its highest close since september, the hang seng up today. in south korea seoul, bargain hunters snapping up banks and transport stocks leading the kospi higher. australia stocks rose to the highest level since early november buoyed by improving sentiment towards the economy. 4,169 there. on that note, let met throw it over to you, bertha. >> investors today in the u.s. are bracing for a record $42

billion auction of two-year notes and a double dose of economic data. we'll start out with the latest s&p case-shiller price index, that's out at 9:00 a.m. new york time. an hour later, the conference board's release of consumer confidence number for july. analysts are looking for a reading of 48.2, down about a point from june. san francisco fed president janet yellen is in idaho to talk about the economy. that's at 12:30 p.m. new york time. in terms of earnings, viacom leads the companies reporting before the opening bell. we'll also hear from luxury retailer coach, advertising giant interpublic and u.s. steel. dream works animation will be reporting after the close. ge capital is holding an investor day which starts at 8:30 a.m. new york time. topic of discussion may be president obama's financial reform plans which could require firms to boost capital levels.

ge, of course a personal company of cnbc. reforms could force ge capital to put more money aside and lend less. some analysts have argued it could prompt general electric to spin off that business. that's your global stock watch. coming up on "worldwide exchange" -- asian markets take a breather after u.s. equities eke out a two-week rally. will today's rallies help maintain the upmovement? >> charles plosser says the banks may have to raise rates in the not too distant future? what sort of timing is that? íí

china questions the u.s. on its massive budget deficit. >> in europe, bp talks tough on cost cuts. profits fall in the second quarter. >> and in the u.s. a top fed official says the central bank may have to hike rates sooner rather than later in order to keep inflation in check.

you are watching cnbc's "worldwide exchange." the ftse global 300 is higher today. up 21 points. in europe, an hour and a half into the session, we have gains on the board. the ftse 100 up 0.30 at the moment. if it closes up we will set a new record for gains at 12 days. up 11%. it is positive for the year. health care, construction, utilities and banks are the sectors performing best today. on the currency markets, the dollars take down their eight-week lows against the dollar -- sorry, dollar against the euro, 1.4283 is where we stand. sterling is 1.65 over the dollar. >> asian markets are taking a breather after so many days of

strong run-ups in japan, this market breaking a nine-day losing streak to end pretty much flat. kospi continuing its 11th consecutive run up 0.1%. the shanghai market gearing up for a big ipo tomorrow. the hang seng clearly a big winner today. investors piling into property plays. and the bombay sensitive index is trading 0.6% higher. bertha? >> thank you very much. today we will get a reading on the consumer. we will get housing numbers, the case-shiller index, consumer confidence from the conference board and hear from coach ahead of the open. looking at futures, they're modestly higher. kind of mixed. we have the dow about 15 points above fair value. nasdaq futures are just barely above fair value. s&p just a bit below. looking at the ten-year note, the market bracing for a record

$42 billion offering of two-year notes today. yesterday's tip auction went well. this week, we will see a total of more than $200 billion, a record week for auctions. so that's something everyone is watching closely. we have the yields now moving up, i think that's like a one month high, 66-week high at 3.73%. joining us now is phillip shaw, chief economist at investec. i want to start out with the comments from charles plosser. he's not a voting member of the fed this year, but he is sort of mocking mr. bernanke's comments about not wanting to preside over the second great depression by saying he doesn't want to see the fed presiding over the second great inflation. saying this could be like the 1970s with high inflation and high unemployment. is he just a little overly hawkish here? >> i think that's probably a label you can pin to mr. plosser

generally. he's one of the most hawkish members in the fed circle around the moment. so i think one has to take that into account. but it is interesting, though, that the central bank comments have been moving in that direction. we did get small upgrades to 2010 growth prospects. overnight from australia, the reserve bank governor glenn stevens was saying more or less the same thing. not so much hawkish, but upbeat and also mentioning at some point global's central bank will have to tighten policy. while i wouldn't share all of mr. plosser's sentiments, i do think that there is more optimism now in the global economy and perhaps thinking exit strategies will include perhaps deliberating when central bank als will put rates. >> do you think as far as the fed is concerned, is this good

cop/bad cop? is plosser playing bad cop to bernanke's good cop? or is there real disagreement at the fed? >> i think it's a mix of both. plosser is naturally hawkish. but it does serve the fed's functions in general that someone is making noise. it's about inflation, saying we will not let this happen. our own view is that inflation will not be a problem in the u.s. for quite some time. if you look at the wage increases, there seems to be absolutely nothing there with earnings growth more or less close to zero or just above zero. while we don't agree with mr. plosser's views on inflation, he is getting markets to remind that the fed won't let inflation take off, which in the grand scheme of things is useful. this is christine, speaking of hawkish, in australia we have

the warning that low housing rates could create a bubble. >> i think back in 2003 the rba was the first central bank in the cycle to put rates up. certainly, if you look at the australian economy, it's benefited from the rebound in chinese growth. there is some firming in domestic demands, consumer confidence in the australian economy such that the australian economy has not suffered two consecutive quarters of decline. so, yes, it's quite possible that the rba at some point, perhaps before the end of the year, begins to put rates up again. >> how close are you watching these discussions between the u.s. and china? particularly on a day when they have this huge $42 billion sale of treasuries? >> yeah, absolutely. the budget deficit is a huge

issue now for the chinese. i think it's prompted a change in the policy debate on capitol hill, such that the other day nancy pelosi was saying there isn't a need for a second stimulus bill. that probably helped by some more upbeat economic data and cooperate earnings. certainly we think that the emphases will be on the americans trying to dissuade the chinese that they have a credible fiscal policy and working towards that end in terms of trying to narrow the budget deficit once it's confident that the recovery is taking hold. >> do you have concerns -- $115 billion worth of debt auctions. any concerns they won't get that out of the way this week? >> in terms of individual auctions, i don't think the discussions with the chinese make a difference. the key battleground is longer-term outlook and whether they're there is still going to be big international demand for u.s. paper over the years.

>> phillip, you spoke of the chinese stimulus. are you worried at all that the money sloshing around in the chinese system could end up in a property market creating a sort of a bubble there? >> yes, absolutely. that is something that the people at the bank of china and other authorities are concerned about there. the peoples bank has been tightening money market conditions in response to the very high loan rates that we have seen over the past few months. and it is -- the lopsided nature of the recovery is a concern as well with the bits of the economy doing well. though they are relate to the fiscal stimulus. yes there are concerns in china about the shape of the recovery in general. but also in particular the amount of money that is circulating around that could form some sort of property or asset bubble. >> all right. phillip, thank you very much for

that. always nice talking to you. thank you very much for that. phillip shaw, chief economist at investec. >> we have been talking about china and the u.s. the strategic economic dialogue between the u.s. and china enters its second day today. beijing pressed the u.s. on its huge deficit as well as fiscal and monetary policies while washington says china needs to boost efforts to rebalance its own economy. let's get analysis from frederick newman, senior asian economist coming to us live out of hong kong. do you think anything significant was achieved behind the scenes that we don't usually focus on? >> i think it's more about talking to each other and perhaps smoothing the waves a bit. we know that the strategic partnership has perhaps changed over the past 12 months. we saw over the last several years the u.s. being a bit more aggressive. now it's more about dialogue.

i think ultimately they will prove more fruitful. there are no specific agreements we're looking for, but rather the two sides are talking to each other and hopefully that will curtail statements in the future of an aggressive nature and help to calm financial markets. >> how do you think the dynamics of the relationship between these two countries have changed or will change under the obama administration? >> i think the obama administration has taken a more conciliatory approach towards china it's less about lecturing the chinese counterparts working with them and what was interesting is that the name of the strategic economic dialogue has been changed to strategic and economic dialogue, to suggest that this is just very much strategic encompassing politics. the state department was brought in. it is not just treasury-led. perhaps the net context is easier to find accommodation

than specifically on economic issues. >> frederick, but the context of this week's talks takes place as the u.s. is also auctioning off a record amount of debt, over $200 billion. obviously they want china to continue to be a player there. what kind of dynamic does that add to the relationship? >> well, i think the shoe is a little bit on the other foot now. the americans for many years pointed out that perhaps the chinese currency was not correctly valued. they have toned down their rhetoric a bit because there's a realization that china is a big investor in the u.s. treasury market. therefore one has to tread a bit more carefully. i think that was a healthy balancing of the relationship. therefore we can now look forward and get more constructive steps rather than having a one-sided debate here.

i believe this is the beginning, this particular dialogue we have now in the u.s., and going forward, i believe the two sides will see each other as partners more than one side just talking to the other. >> yeah. frederick, just looking ahead at the central bank today, inflationary expectations will be merging, pressure from imports was also building. is this something we have to wipe out or not? >> well there are, i think, signs that cpi inflation in china might perk up again to the end of the year. we expect the bottom in the third quarter and gradually it will rise again in part because of the year over year effects become more challenging. what's interesting here is the asian growth is driving up global commodity prices. you saw oil climb back towards $70 per barrel. asia is also importing this inflation via higher commodity

prices. central bank seems to be sensitive to headline inflation coming through in the fourth quarter, not just in china but across asia. >> all right. we'll have to leave it there. thank you very much. frederick newman talking to us live from hsbc in hong kong. let's jump to india, we have the india business report. >> thank you very much for that. very flat in the indian markets. the broader markets are faring better. the mid cap index is showing a gain of 0.41%. some key indexes while flat, the broader markets were outperforming. the big story is that credit policy was announced about two hours back. the key rates are unchanged. the crr is unchanged at about 5%. the government is committed to

provide liquidity to stimulate credit growth. they believe the risk to inflation remains but will contain it via monetary policy. that was the key highlights of the credit policy. there was no reaction from the equity market. everyone believed that the policy rates would not be changed. so the equity index markets are still absolutely flat. couple of stocks that are moving quite well. numbers came out yesterday on the operational front, opm is the highest it's recorded in the last five years. that stock surged ahead. real estate as an entire pack is doing well. the stock there is unitech, 7% gain for that.

numbers are up about a percent and a half yesterday. it showed a gain of about 6%. on the losing side, that stock down about a percent and a half. >> thank you very much. >> iphone fans in china will have to wait a little bit longer to get their hands on the sma smartphone. the company has yet to reach a deal with apple to bring the iphone to china adding that talks between the two companies are still going on. unicom is responding to a news record which said the company won exclusive rights to supply iphones in china for three years. apple declined to comment on the report. >> japan's canon posted a 72% fall in the second quarter. operating profit came in at $471 million, well below the $1.6

billion earned in the same period a year ago. canon raised its full-year operating profit forecast by 6% to $2 billion. more than what analysts expected. shares of canon ended 0.3% lower in tokyo trade today, 3,370 japanese yen. japan's biggest electronics maker, hitachi warned finances remain weak and it will consider a wide range of fund-raising options. they were weighed down by sluggish shares of microchips and consumer electronics. the company lost more than $817 million in the april to june quarter. that's down from last year's profit of $331 million. it also stuck to its forecast for a net loss of $2.8 billion for the year to march. earlier hitachi confirmed it will spend $2.9 billion to buy out five listed subsidiaries in an effort to return to

profitability. shares lost 3.6% in tokyo trade today, 293 japanese yen. >> bp says it has already exceeded its cost cutting goal of $2 billion and is planning an additional billion in savings. profits fell for the second quarter. they were hit by the dramatic hit in oil prices. bp has improved its bottom line. the co has been explaining how the company is managing its cost cutting. >> 5,000 people at the company last year, we have done a lot to significantly simplify the company. that's where the costs are coming out. going forward what we expect to see is further benefits from the industry cost structure coming back in line. >> and we'll have more from that interview with tony hayward in a half hour's time on "worldwide exchange." >> shares of the landover

supermarket are up today. the recession forced consumers to hunt for bargains. restructuring efforts helped to boost sales. executives from 25 leading mortgage businesses are set to defend their record. they are meeting today with top officials from the treasury department, hud and federal housing administration. the government asked lenders to boost resources beyond what they planned to with rising defaults and foreclosures. the industry claims it is overwhelmed trying to help consumers. one in five u.s. homeowners is now under water, meaning they owe more on their mortgages than their propcy erty is worth. >> and chris dodd -- both were

aware from the state that they had been put on the friends of angelo list. congressional ethics rules bar lawmakers from getting special deals not available to the general public. senate ethics committee is looking into the matter. whether it's news, videos, blogs, anything is moving the markets today, and there is plenty, you can find it at cnbc.com. coming up, philly fed president charles plosser says inflation must be higher on the central bank's list of priorities. could this help revert a double-dip recession? frnlg>> you have questions. who can give you the financial advice you need?

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okay. turning our attention to the currency markets. euro-dollar 1.4272. sterling firmer at 1.65. for more we go to the european head of global currency research

at ufj. equities continue to rise. despite the rally t seems that we have not quite seen the same amount of increase in the euro and the pound against the dollar. i wonder where the correlation we have had may beginning to break down. >> i think certainly there is evidence of that and clearly the strength of the link has weakened. i think an important aspect to explain this is fed policy. in the past when you had good news, inflation expectations have risen. there's been concerns about the fed dragging their feet, being slow to respond, ultimately that has proven negative for the dollar. last year we have seen ben bernanke in a "wall street journal" article laying out clearly the exit strategy, which was then repeated again in the

semi-annual if you go back to the minutes from the week before that, from the meeting at the end of the june, one subject tackled was the potential negative perceptions in regard to easing when recovery takes hold what the fed are about now is trying to change the perception about their ability to manage policy during recovery. again, we had plosser talking about the potential for rate rises. he's not a voter. i don't think we're close to raising rates. but if the perception starts to change in regards to how the fed can respond that will be a supportive feature. >> the dollar index has gone weaker over the last few weeks. i wonder -- it's been -- equities up, dollar down. it's been as simple as that dollar and yen down, equities up. if equities keep going up, what then drives the dollar? >> good news from the united states. like i think a lot of what's driven the u.s. equity markets is the very strong corporate

earnings we've had. it's not so much that sales revenue has surprised, it's the fact that corporates have had a good ability to cut costs. ultimately the aggressiveness in which the u.s. corporate sector has slashed labor costs ultimately is a positive when you get to the stage of recovery. if we're at that point in time there is potential for confidence to rise and ultimately for business investment to pick up. for that to fuel recovery at some point over the next 12 months. >> derek, if you look at the charts, we did see on the equities charts the major indices, we moved past resistance and to new levels to the upside. the dollar index f we bring that back up, seems to have held in the 78 range. do you see that support holding? we seem to be range-bound, or do you see us pushing lower? >> as i mentioned, i do think there's better features for the u.s. dollar as we move forward.

we have had targets of euro-dollar something in the region of 1.45. i'm reluctant to push that higher than that target. i think we are approaching the end game for the period of dollar depreciation. i think as we move forward f we can get stronger u.s. data that signals out performance of the u.s. economy relative to places like the uk and the euro zone, then i think we can start to see the u.s. recover independently on its own strong data. that's tied into fed policy and the confidence in the markets over fed policy. >> this is christine here, the aussie dollar getting a boost from hawkish comments. do you think australia could be the first to hike rates? >> australia has surprised not just the central bank but the markets as well. we had positive growth reported recently. they avoided recession.

they still have positive annual real gdp growth and to have inflation very much above zero yes, on the circumstances of what's gone before, they are in a much better position. the aggressiveness on which they cut policy, fiscal stimulus on top of that has seemed to work well. if china continues to recover, then the prospects for australia look good. on valuation, the aussie is beginning to look stretched again. the rba are intervening. nobody really wants excessive currency strength including australia and new zealand. i would be reluctant to forecast aggressive further gains. >> you mentioned china, are you surprised that the u.s. is not more forceful to let currency appreciate more rapidly?

>> not at all. that's understandable. the focus has shifted the other way. now it's more about china putting pressure on the united states to instill confidence in its currency given the size of u.s. asset holdings in china. of course we have already had significant appreciation on a real effective basis. if the dollar is to recover again going forward, we will see renewed appreciation. it's very much down to the dollar stabilizstabilizing. >> i guess the tables are turned now. thank you very much for your views. good talking to you. coming up next, in the next hour of "worldwide exchange," we'll bring you up to speed on the top stories making headlines across the globe. >> plus new u.s. home sales leapt 11% in june.

is the market recovering or are builders just cutting prices?

in asia, shanghai shares hit a 14 month high. >> bp talks tough on cost cuts

after seeing profits fall by two-thirdses in the second quarter. >> in the u.s., a top fed official says the central bank may have to hike rates sooner rather than later to keep inflation in check. if you are just joining us in the united states, hello and welcome to the start of your global day with "worldwide exchange." we broadcast live from the u.s., asia and europe. here in the u.s. this morning, futures have been fairly flat. we have a lot of news ahead. lots of earnings. we'll get a read on the consumer from luxury retailer coach. we also have consumer confidence coming out from the conference board and the case-shiller home index. lots on tap. at the moment we have seen the dow futures fall about 7 points below fair value. nasdaq futures also slightly above -- let's call it a flat

day since a lot of folks are waiting to see what the day holds. looking at the ten-year bund, in europe trading at 3.49%. fallen about one basis point there from the last hour. and the ten-year yield is at 3.73%. we're in the middle of a very big week for fed auctions. the fed today will announce the results of yesterday's $128 billion term auction facility results. they will also be auctioning off $42 billion in two-year notes. the market seems to hold its breath every time we get one of these big offerings, and they are watching them slowly, especially against the back drop of u.s./china talks this week. >> just a small auction there, that 42 billion. ahead of that global equity markets today tried to be firm. the ftse global 300 has come

back from the highs we hit an hour or so ago. it just dipped below the flat line. if it can get back to positive territory before the close that would be a new record for the days up. xetra dax, cac, smi all slightly firmer. we have got on the currency markets euro near eight-week highs against the dollar. sterli sterling-dollar about 1.65. christine? >> markets here are taking a breather. profit taking was limited because there is still a lot of optimism about corporate earnings. nikkei 225 finishing flat.

kospi up 0.13%. the shanghai composite finishing up at a fresh 14-year high. the hang seng up. investors piling into property plays. and the bombay sensitive index trading down at the moment. in the oil markets, the u.s. commodity futures trading commission has reportedly planned to release a report next month suggesting that volatility in last year's crude prices was due to speculators, that's according to "wall street journal." this is how light sweet crude is trading, pretty much flat. 2 cents higher. brent is also range-bound as well, up 20 cents, 71.01 a barrel. >> a little caution set in. let's put all of this into perspective. joining us justin. in the uk, we are terribly

excited to see if we can hit that new record of 12 up days in a row what does this rally mean? >> it's a range. >> i thought we got out of a range? >> we're only a little bit above it i'm not wildly convinced by this. fundamentally we all know the story of what's happening now. out come the figures, the bottom line look good. the top line looks not so good. companies have been peeling back the bar. you can only peel it back for so long otherwise you kill the tree. there comes a stage where you have to reverse that. we need to be aware as to where the growth is coming from at the moment. i'm not convinced. >> justin, it's bertha here in the u.s. i'm tempted to say red tie embraces should the market take warning. one of the things that seems -- it seems almost like a

decoupling. reminds me of 1999. yes, the economy is still struggling. no, peoples earnings are not moving up yet. estimates are moving up. the market is moving up. is this a bit of irrational exuberance going on? >> dash of realism. ask where is the growth really coming from? we have a banking system in america and the united kingdom which is hobbled. if we're coming out of recession you need to have sufficient liquidity in there. we have the issue over housing. hut housing data yesterday, lovely good headlines, but you look at the values, still lower. clearing out a lot of assets. all of this means with rising unemployment, i'm afraid we will be fooled into having too much of a rally yet. volumes are still quite week. i expect that to continue over the next few weeks, the dog days of summer. it's nice having these little

rises coming up we are excited maybe the 12th record day of rises, but are we really seeing a fundamental change? the answer, in my view, not yet. >> to go back to the 1999 analogy, everyone was investing on internet stocks. i didn't because i didn't understand them. i missed out on a big rally. should we sit on the sidelines here? >> the question is -- this is where you have to separate out your trading pots, this is a nice time to be in there. watching the lines every day to be seeing whether you should be taking profits out and your defense lines further up with it. if you're dealing with the longer term, you're dealing broader allocation, you are looking at exposure at this any way. even though this is a rally that may come back again, as far as you're concerned you've probably been adding more weight to your equity markets. they've been rising any way, that's encouraging.

but weighting outside of uk, also probably more outside euro zone more towards asia. i think one area that's been of particular interest to me is the russell 2000, to see how the smaller caps there are moving quite nicely. that i can see as an area which is a better value for us all. >> christine here, we have a viewer e-mail. we will get to that later. in china the ipo market seems to be getting a new lease of life. do you think the chinese stimulus package is creating a bubble in the stock market. >> i was talking to my brother in singapore who is in shipping, it's interesting to see there how quickly it fed through in terms of the shipping coming through the straits. their concern was one of, actually, y the stimulus package has come through s that sufficient to just actually set fire to the rest of the economy or is it just a chinese fire work on its own? it will need the support of the states to keep it globy whe glo.

the ipo market, yes, it will be a lot of enthusiasm. i'm concerned, again, it's overheated. we have come a nice way, indeed. but i fear that we may, over the next few weeks, see some of that pull back. i think i would be not getting too excited about those ipos at the moment. >> justin, let's go to this viewer e-mail. how come inflation -- this is from thomas -- how come inflation is a measurement of prices yet food and energy is not included? it must be easier to exclaim that there will be no inflation when we refuse to measure the two greatest drains on income. the treasury secretaview on tha?

>> inflation -- the problem with inflation and the trouble with any government set inflation is what do they include and what are you measuring? if you are taking a fairly narrow view of it, you have to fairly well discount it you must include areas like food, softs, all of those elements to see what is driving real price rises and what impact that has on key parts of the economy. particularly when it comes to softs and food that effects consumers directly. with the american economy, that's by far and away the strongest element to the drive of it. the viewer is right. they must have a broader view. as investors, don't take what the central bank says, have a look at the broader picture. if you are concerned about those other areas of inflation, you are quite right to do. >> you're sticking around, as we say. >> yes, thank you. >> some of the other stories we'll be following, cheap oil and falling demand have hit profits at bp but the group is

planning another $1 billion of savings this year. after the break, an interview with the ceo.s elp. one suggestion is to make your shipping more efficient with priority mail flat rate boxes from the postal service. call or go online for a free supply and up to $160 in offers from authorized postage vendors. shipping's a hassle! weighing every box... actually, with flat rate boxes you don't need to weigh anything under 70 pounds. if it fits, it ships for a low flat rate. ok, but i ship all over the country. you can ship anywhere in the country for a low flat rate. ship international, too. yes, but i ship hundreds of things, in all sizes. great, because flat rate boxes come in four sizes. call now and we'll send a free supply, plus up to $160 in offers. when you're ready to ship, we'll even pick them up for free, no matter how many you have. priority mail flat rate boxes only from the postal service. a simpler way to ship. call or go online now to get started.

how you could start saving. okay. bp today says it has already exceeded its cost cutting goal of $2 billion and is planning an additi additional billion of savings.

ross? >> the cost savings, which tony hayward to his credit started long before we saw this decline. the costs have not gotten down to the same kind of levels that they were, but they have hit a couple of points. the replacement cost which is pretty much the net profit figure, $2.94 billion that was better than expected. the production was up 4% that is whooping some industry peers out. there the increase in cost savings, very important. let's hear what tony hayward had to say about that. >> 5,000 people at the company last year, we have done a lot to significantly simplify the company. that's where the costs are coming out. going forward what we expect to see is further benefits from the industry cost structure coming back in line. between 2004 and 2008 the industry cost structure doubled

as the oil price went to 150. we are now back down at 60, 65, 70. it's halved. so costs will and need to halve. they have not gotten close to that yet. it will take time. typically it takes a couple of years for the lags, as contracts are renewed, for the costs to come through. >> you have been successfully cutting costs but also adding new capacity, especially upstream. how difficult is it investing in the right projects when you have oil oscillating from 150 down to $30 now up to $70 a barrel. >> i think, for the people with the balance sheet, all of us have taken the view that we will invest through the volatility. so bp has continued its investment program into enp, into major upstream projects. and we have allowed our balance sheet to take the strain as the

industry cost structure adjusts to the new realities. i think that's the only way you can work. you can't plan a business based on the short-term oil markets. you have to take a long-term view. our long-term view remains 60 to 90 is a sensible range. clearly we expect it to be closer to 60 over the next period of time. will i suspect continuing volatility. >> recently you had a bit of criticism for paying top dollar for access to iraqi fields. why isn't access getting easier despite the conditions for international companies to find new oil? >> we are confident we will make good returns in iraq competitive to the rest of the portfolio. why do we think that? we understand it better than anybody else. we have been working it five years. we discovered it originally back in the '50s. the second thing we have done is set up what we think will become

a quite noinnovative relationsh to give us access to the chinese supply chain. we deal with the subsurface, the chinese supply chain deals with the surface, we execute through the iraqi capability on the ground. so it's a sort of almost like a tnk/bp model, if you'd like. based on that view, we are confident that we will make a decent return in iraq and at the end of the day it's the return on the investment you make rather than any idea about dollars per barrel. >> we also spoke at length about u.s. energy policy and the difference that obama has made. he believes obama has made an enormous difference and doesn't believe that copenhagen will deliver significant changes to companies such as bp. what he thinks needs to be done,

u.s. energy policy needs to be less adversarial, they need to open up domestic resources. there's 100 billion barrels on this ocs, the outer continental shelf. >> what do you make of bp for investors? still throwing out a lot of cash. tlefrnlgts ca >> they are cash generators. the fascinating thing we want to hear from bp is how they're developing with these other resources. because it's getting resources now, access to those, and then the delivery. that most exciting line was the china supply chain. get involved in that, that's good news. >> iraq, as well, he alluded that it's like getting involved with russia, very political but it gives them access. to china on the downstream side but also to the massive fields

in iraq which some say could be as much as saudi in terms of oil to be produced from under the ground. lots of things to be done, but positioned nicely. >> it will be fascinating to see what happens with the obama administration. there is a feeling they will start easing some domestic exploration. the outer fields, also off california where they have been strict about not allowing drilling there. that may start to change. i think that's going to be very interesting. >> that could provoke some discussion, couldn't it? steve, thank you very much for that. justin is sticking around. christine? >> still to come, deutsche bank earnings beating the street but as bad loan provisions surge over $1.4 billion, is the bank bracing for a double-dip recession? tell us what you think. e-mail us at worldwide@cnbc.com.

that will bring us with where we are on the global equity markets. trying to make it 12 out of 12 for the uk and it's failing. >> we're stuttering at this stage but don't give up hope yet. we have managed to stay in positive territory for much of the day but we've been losing steam for much of the morning, now we are trading lower by

about 3 points or so. all is not lost. let me tell you what is moving behind these changes. on the upside, sage proving particularly resilient today. sage is higher by about 4.5%. a maker of software. they came out with a trading statement in which they said they expect to be in line for the full year. also we are seeing declines coming through for the basic resources stocks. they seem to be dragging us lower. xstrata, rexam all falling. bp also coming out with figures today as well. shares of bp are a smaller mover on the uk market, but replacement costs profits down by 53%, $3.14 billion. refining, they say the outlook is challenging, margins set to decline. shares are trading down. patricia now in frankfurt. >> losing ground out here.

at the moment trading towards intraday session lows. there is a lot of negativity moving into the shares. it is deutsche bank now down about 7.2%. the negative momentum is a bit more not only because of profit taking but because of a bit of whether disappointment for the second quarter. ubs also cutting deutsche bank to neutral from buy after the figures released. dime le daimler coming through with their numbers this week. down 1.76%. deutsche borse down 0.89. another thing i want to mention, dow jones reporting on sources with regard to magna and opel, the latest on the story is that magna is willing to pay about 350 million euros worth in cash,

issuing about 150 million euros of convertible bonds. over to christine. >> patricia, asian stocks holding ton ton to ten month hi. in japan, stocks ended a nine-day winning streak. the nikkei closing flat, 10,087. in shanghai, investors are gearing up for tomorrow's big ipo, the world's largest in a year from china state construction. that is a company to watch tomorrow. the composite edge moving up 0.1%. in hong kong, property stocks pushing this market to its highest close since september. the hang seng up 1.84%.

in south korea, choppy session, but gain hunters snapping up banks. finally in australia, stocks rose to the highest levels since early november supported by improving sentiment towards the economy. the s&p 500 up. on that note, over to you, bertha. >> the big thing today in the u.s. that a lot of investors will be watching is that massive $42 billion two-year note auction. that's at 1:00 new york time. ahead of that, economic data the latest s&p case-shiller home price index, that measures prices in the 20 major metropolitan areas. that's due out at 9:00 new york time. an hour later, the consumer confidence numbers for july. analysts are looking for a reading of about 48.2. the san francisco fed president janet yellen will be talking

about the economy at about 12:30 new york time in idaho. and viacom leads the earnings parade that continues this week. before the opening bell we will hear from viacom and coach, interpublic and u.s. steel. dream works animation is on tap to report after the close. a big day for ge capital, it's holding its investor day starting at 8:30 a.m. a big topic of discussion will like lie be president obama's financial reform plans which could require firms to boost capital levels that could force ge capital to put more money aside and lend less. some analysts have argued it could prompt ge to eventually spin off the business as a result. ge, of course, the parent company of nbc universal and cnbc. coming up next on "worldwide

exchange" -- many companies have beaten expectations thanks to cost cutting rather than revenue growth. while this may work in the short-term, are markets in for more trouble as heavy cutbacks affect long-term performance? welcome to the now network. population: 49 million. right now 1.2 million people are on sprint mobile broadband. 31 are streaming a sales conference from the road. eight are wearing bathrobes. two... less. - 154 people are tracking shipments on a train. - ( train whistles ) 33 are im'ing on a ferry. and 1300 are secretly checking email... - on a vacation. - hmm? ( groans ) that's happening now. america's most dependable 3g network. bringing you the first and only wireless 4g network. sprint. the now network. deaf, hard of hearing and people with speech disabilities access www.sprintrelay.com.

it is half past the hour. here are the top business stories from around the globe. in the u.s., a top fed official says the central bank may have to hike rates sooner rather than later in order to keep inflation in check. >> bp talks tough on cost cuts after profits fall in the second quarter. >> and shanghai shares hit a fresh 14 month high ahead of tomorrow's debut of the world's biggest ipo in a year. hello, welcome to "worldwide exchange." if you are just joining us in the u.s., the futures have been fairly flat. we have a lot of news ahead. we will get the case-shiller home index, the consumer

confidence reading, also a slew of earnings including luxury retailer coach and a lot of health care. we will hear from wellcare. yesterday we had bad news from aetna, so hmos could be under pressure today. dow futures down about 16 points below fair value. nasdaq is just below as are s&p futures. looking at the ten-year yield, a massive $42 billion auction of two-year notes today in what is a record week of auctions coming from the fed. that will be taking place at about 1:00 new york time. markets likely to hold its breath a bit ahead of that massive offering which comes just as the u.s. is talking to china and hoping china will continue to buy. the ten-year yield now, down a couple basis points to 3.70%. ross, how is it looking in europe? >> we had a good start today, but we are now two and half hours into the session, we just

dipped down to negative territories. plenty of investors are hoping we could make a record today of 12 successive gains for the ftse 100. at the moment may not happen, but a long way to go. on the currency markets, the euro and pound firmer against the dollar. the dollar just dipped a bit against the yen down to 94.54. euro steady at 86. >> ross, markets taking a breather today, pausing for breath after the recent run-up. but profit taking was cap limited as people stayed optimistic about corporate earnings. in japan, this particular market finished flat. the kospi managing to rise for the 11th consecutive session. the shanghai market gearing up for the big ipo, china state construction bank tomorrow, finishing up at a 14-year high. the hang seng up 1.8%. and the bombay sensitive index trading down 0.3%.

in terms of oil, we are watching u.s. commodity futures trading commission. they are planning to issue a report next month suggesting that volatility in last year's crude prices were due to speculators. that's according to "wall street journal." sweet crude is up 9 cents. brent is also tacking on gains, trading at 31 cents higher at 71.12 a barrel. bertha? >> with the markets having rallied quite substantially as of late s it time for a pause? for some market strategy and perspective, john haines is joining us, a strategist at rensburg shepherd, and still with us is justin stewart. john, we have seen the markets come up quite a bit. we have a number of analysts moving estimates up for the first time. are people getting a little overly enthusiastic here?

we are not really seeing the economy turn as quickly as the markets would suggest. >> i think you're right to point out that we're -- the auction is getting thinner as we start to head in the u.s. towards 1,000 on the s&p. that already discounts a fairly robust earnings outlook for 2010, which is really where the attention is being directed. clearly we are taking encouragement from the fact those numbers are beginning to be edged up somewhat. but i think our own perception is that whereas in the near-term there is support for doing that, that will become more challenging as one moves into 2010. it's not that we see the world deteriorating from here, but the improvement, we think, may take longer and be harder work in the new year. as i think we would agree with the sentiment that you implied when you asked me the original question which is the three to six month outlook will be more

challenging, but equities overall, on an investment term horizon, 18 months, three years, still look attractive. government bonds don't look good. cash, you are getting nothing on. your alternatives are really looking far too expensive. we do think equities will ultimately generate decent returns. >> interesting that you touch on government bonds. i want to put this question to justin. we have that massive two-year auction today. every time we get one of those, the market holds its breath. so far they have gone well. but it is still -- it makes one nervous. >> all the fingers crossed, if you can. we have had the issue with the chinese ones, concern over that, and back here with britain, same thing as well. an awful lot to try to be sold. it is really asking a lot to have all of this absorbed around

the world. so i agree with john, the fixed interest market at the moment won't be attractive. and there's going to be more pressure there. i think there's going to be stuttering of this if governments keep on coming back and asking for more, particularly, as in the case of britain, where there is not a clear policy as to how they will pay their way out of it. and i think that's a big concern for all investors. >> what about corporate credit market? take away the rally of equity markets in the last two weeks, the best performing thing has been corporate credit. >> there has been some thinking that corporate credit looked to be a place to be, and it has proven to be right. corporate credit delivered you better returns on a risked a justed basis than equity has. at the moment it's a little less easy to call. if you want to get returns in corporate credit, you have to move out towards the financial end of the spectrum which is clearly more challenging in terms of news flow.

the higher grade corporate earning now is actually -- the spreads have narrowed to the extent where i think performance will be more dictated by performance of guilt than the credit performance of the companies that back their -- their bonds. so, think the risk/reward ratio in high grade corporates is a little less easy. >> over the past few months it was that classic case where you start getting taxi drivers talking about bonds, you know there's something wrong. the high yield ends, if you are selective, but what you are beginning to see now is a bit more clarity in terms of what those companies are doing and how they're behaving. as these figures come out, how much they're cutting costs, where they're cutting costs and will they be viable going forward from there. within the high yielders, there's still good value. >> john, let me jump in.

sticking to corporates, when you look at cost cutting measures that they're putting in place s there a risk of companies cutting costs too much? effecting long-term performance? >> i think it certainly is difficult to see how margins can be sustained by cost cutting. in the end you impact demand and if you like the whole level of the economy comes down. i do think the current level of earnings we're generating out of the u.s. market in particular, you need to be careful about the pe multiple you put on that. if i'm looking for a bellwether to judge whether corporate credit is going to continue to get better, i look down the private equity space. i'm not advocating buying private equity, but that's where the rubber meets the road. if you watch the behavior, their performance, you will get an idea as to whether or not the credit environment is continuing to improve at the more speculative end and i'm -- at

the moment, things look to be stable. so i'm encouraged by that. >> justin, what do you think? >> actually, these forward-looking figures are crucial. it's all about cutting costs. stripping bark off a tree does not help much because you end up killing the tree, but you look forward to where the growth indicators are for them and that's looking thin at the moment. i can see the level of enthusiasm for the figures, but what happens next? i'm not convinced by that story for the moment. i'm going to be holding there. >> john, thank you very much for being with us. john haynes. let's look at where the tokyo market is headed now. let's check in on the trading day there.

>> toek dwro stokyo stokes ende today. it closed slower by 0.01%. but the topix was up 0.2%. after starting in positive territory lifted by wall street's rise and a stronger dollar, investors turned to lock in gains amid caution over the rally's pace after the nikkei gained over 11% in the past nine sessions. jfe holdings shares jumped and hit the intraday high. the steelmaker announced its projection of full-year operating profit to be 80 billion yen. it was better than the analyst forecast of 56 billion yen profit. shares rose 3.9% after it was up graded to the highest rating. hitachi has officially announced it will launch offers between

august 20th and october 8th for subsidiaries to make them wholly owned units, but shares fell dilution fears. finally, century holdings plans to acquire the soft drink business of japan's leading frozen food company, nichirei next spring for an estimated price of slightly more than 1 billion yen. suntory is currently in talks in operations with beer breweries. the pair produce relatively few fruit and vegetable drinks so suntory looks to strengthen this

area. back to you, christine. >> thank you very much. bertha? >> still ahead, investors are bracing for today's $42 billion sale of two-year treasury notes. before that, here is a look at how u.s. futures are shaping up right now. lots of discounts on car insurance. can i get in on that? are you a safe driver? yes. discount! do you own a home? yes. discount! are you going to buy online? yes! discount! isn't getting discounts great? yes! there's no discount for agreeing with me. yeah, i got carried away. happens to me all the time. helping you save money -- now, that's progressive. call or click today. the gold delta skymiles credit card... from american express... it's the official card... of the world's largest airline. and it's the only credit card... that earns miles on delta.

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welcome back to cnbc's "worldwide exchange." here are some of the top stories we've been watching. the commodity futures trading commission is expected to issue a report next month blaming speculators for wild swings in oil prices. last year the cftc pinned the volatile movements primarily on supply and demand but the "wall street journal" reports regulators now say that analysis was based on "deeply flawed data." the cftc did not reveal preliminary figures from the new report. the agency is holding the first of three meetings today to determine whether to restrict speculative investments in commodities. amgen's second quarter profits rose 40% beating forecasts. they benefited in a rebound of sales of its rheumatoid arthritis drug enbrel. the ceo says concerns about

pressure have moderated. in frankfurt, amgen shares are up just about 3.3% at this hour, 43.94. bank of america is planning to cut about 10% of its retail branchs. the "wall street journal" said management discussed the idea at a meeting last year. b of a has expanded quite a bit in the last few years, but the journal says the time frame for the move is unclear as is how many branches could be closed. changes customer preferences with more online banking is the driver behind that move. ross? >> the deutsche bank has been in news, shares hit after second

quarter results show it sharply increased provisions for bad loans. $1.4 billion was put aside for credit losses in the quarter, compared with 193 million for the same time last year. it saw net profit up 68%. the ceo says the bank, though, is well-prepared for an uncertain environment for the rest of this year. >> india's central bank held interest rates steady as expected keeping borrowing rates at 3.25% and lending rate at 4.75%. the bank also raised inflation estimates to 5% from 4% for the fiscal year citing rising prices of food grains it said it would have to plot an exit strategy to subdue inflation expectations but hinted it will maintain easy liquidity and that it was too early to tighten monetary pol y policy. >> we will get a final thought with justin stewart here. so, we talked about whether this rally is fairly sustained, once

the cost cutting is gone it will be difficult what other areas are you focused on and looking at with opportunity or risk? >> i think opportunity in terms of following it down, maybe chasing it down, will be what happened to sterling. for the past three month swres had the ugly sisters competition between dollar, euro and sterling. at different times they all looked unpleasant. sterling has the opportunity of looking like a real hag. why? we have this level of debt. two, i can't see defined policy and, three, the politicians behind it with an election coming up. we concerned that we might lose the rating which will increase the cost of money, if there. >> so no glass slipper for the pound? >> no, no. just a glass floorboard which they are liable to go straight through. i'm concerned about that one. >> good to have you today. >> thank you very much.

>> have a great holiday. sounds good. all right. let's find out what's coming up on "squawk box" carl is with us. >> we're on the way. a show of political power players today. our guest host, former new york mayor rudy giuliani, we'll talk politics, health care, taxes and baseball. randy levin will talk to us about tourism and consumer spending at the ballpark. and u.s. states at the front lines of the financial crisis. pennsylvania governor ed rendell will drop by and we will check in with the man who wants to be new jersey's governor, chris christie trying to unseat jon corzine. the economy the biggest issue on the campaign trail. from wall street to washington, we will cover the issues of the morning with famed business leader steve forbes. we begin at the top of the hour. may i say you looked fantastic

yesterday, fascinating to watch all of those stadiums go up. 2012 will be exciting. >> it is. it is. we had the british summer weath weather, rain for everybody. >> yes. >> was good, just to get you prepared for that. >> we will hit the pubs, you know that. >> yeah. that's part of the training, the intense olympic training. >> oh, teach me, oh wise one. >> grasshopper, i will. carl, look forward to it. >> all right. >> boy does that sound like trouble. we still have more on this program. up next, viacom has a big earnings report to look out for.

with ed lewis, partner atlantic equities. thanks for joining us. first, your take on charles plosser's comments about the fact that the fed may need to raise interest sooner rather than later. is the market going to pay attention to him? >> any commentary around the

interest rate also be focused on by the market because it has such a significant impact on long-term equity valuations. i think what ben bernanke was saying last week on the hill, where he sees a lot of opportunity still for slack to be taken up which would be less inflationary pressures. i think certainly where we are at the moment we would not expect inflation pressures to weigh on the market at the moment. but lots of treasury issuance going on at the moment with $235 billion coming on just this week. it will be an area of focus. after the rally we had, people worry about what might be around the corner. >> 42 billion in two-year notes today in the auctions. how much are equity investors looking at this? how is it sort of trading back in? >> last -- it was early june that we got the ten-year treasury ticking up to 4. that raised peoples worry

levels. i guess provided we get a lot of interest from overseas investors as we were in previous auctions that will be okay. if things are not going well and there are objections from people around issuances, it will raise peoples worry levels. >> ed, do you think the case-shiller home price index will provide us with some clues about whether the housing market has turned a corner? >> the case-shiller looking at 20 metropolitan areas in the u.s., so it's more of an index that has had issues with the b subpri subprime, with foreclosures. any improvement on that will please people. housing last week went positive for the first time, and the housing data we have had has been more positive than negative. certainly if we get case-shiller, the declines looking less, that would certainly provide support for the recent rally we're seeing in

housing-related stocks. >> ed, quickly, we have got viacom, coach, u.s. steel all ahead of the open. which one are you watching? >> looking at shares of coach. that's been an interesting company that has changed its strategy after not necessarily trying to address the high-end bag purchase, going to more of a mid-scale angle and looking more like the 200, $300 handbag and adjusting cost base to that level. that's an interesting one. it's done well. interesting to see what kind of traffic they are having and what confidence they have in numbers going forward. viacom that will be an interesting read on advertising. it's more of a specialty advertising company with its cable networks, not so mainstream as some other areas. viacom may not be -- >> sorry to jump in, but we are running out of time. we'll leave it on that note. thank you very much for joining us. for all of us here at "worldwide exchange," thank you for joining us.