i'm christine tan. in asia, japan's nikkei 225 rounds up the trading day with a fresh high on the year. but stocks are down. i'm becky meehan. gdp shrinks 1%. ecgu is increasingly divided. >> and i'm mike huckman in the states. retail sales were weak, but inflation remains low and industrial production could be growing for the first time in months. >> well, hello and welcome to cnbc's "worldwide exchange." let's start our market run today

with a quick look at the ftse cnbc global 300 index. here is where we stand. we're higher by 0.2%. we'll take a bit of a spike up. let's see how that transfers to the european bourses, as well. we are looking at gains across the board with the cac, actually, looking just about the strongest at the moment, pushing higher by almost 0.8%. a very consistent picture there right across the region. the ftse 100 is the lagger, if there is one. dollar/yen, standing at 95.16. euro/dollar, 1.4269. sterling is edging lower by 0.3% at 1.6529 while euro/sterling is standing at 0.8629. christine, how is it looking in asia? >> hey, rebecca. niece tan, by the way. here in asia, a mixed session so

far. at the end of the day, the fall mark with the sell-off in china taking some of the fall. some of the markets ended pretty mixed. nikkei 225 up 0.8%. a ten-month high. kospi up 1.7%. pretty good session there. lots of concerns of financials as the sectors were getting hit. the shanghai composite, 3% lower. and the bombay sensitive index down 0.2%. nymex light sweet crude is trading around the ranges of $70791. brent is trading along the lines of $74.33, up 39 cents. mike, good to see you. >> good to see you, too, christine. thank you. as we saw that spike in the

ftse, the futures at this very early hour, though, have perked up here in the estates, as well. we are looking at a flat to lower open, but knot now it looks like if the markets were to open right now, we would have a higher open. but again, we're about 5 1/2 hours away from the opening bell. let's move on to the treasury market where yesterday we had a relatively successful government bond auction. $15,000 worth of ten-year notes. we've got the yield picking up again at 3.6%. in gold, it jumped another 4 bucks yesterday. i think this was a three-day winning streak and it looks like we're building on that again today. right now, sitting at more than $956 an ounce. becky. >> let's get on to our first guest of the show. joining us, paul day and makio

camada from lgt capital. let's start by talking with, well, both of you about what's going on with this inflation/deflation picture. paul, let's start with you. do you believe we're in an inflationary or deflationary environment at the moment? >> well, i think that the inflation seem to be the ones that shout the loudest. my view is going forward for the next half of the year, deflation will be the big problem. it's something we've never seen in the west historically. so i don't think people have the perception of what deflation can do for the economy. if you look at the household deleverage, it's going to carry on going on in the united states. i feel that the deflation argument will continue. if you look at things, for example, the length of unemployment in the states seems at the highest level since 1958.

we've got many, many mortgage resets coming along at a time when real bond yields are at their highest level since around 1994. i think we will have sluggish rates. >> paul, where do you stand? >> i think i must disagree. we are -- if i had to make a choice, i would rather be in the inflation worrying camp. i'm not -- you know, we don't expect any hyper inflationary environment. we think the inflation expectations in general in the u.s. and also in other markets in europe in particular are quite normal. if you look at five to ten-year inflation linked government securities, they are, you know, around 2%.

they have risen to a level before the markets. going forward with the stimulus packages both in the u.s. and in europe, not having the large chunks, the biggest parts of these packages still not being affected, they still have to kick in, i think deflation will not be a worry going forward, certainly not in the next, let's say, 12 to 18 months. and we'll see how that recovery gains momentum in the two to three-year time frame that my colleague mentioned there. inflation, yes, it is a worry, but not in a hyper inflationary sense, just in a normal sense. we will have a fairly normal degree of inflation.

>> jobless claims are up and retail sales are down. why do stocks keep going up? >> you've got a huge amount of money being pumped at this problem. you've seen it in china, as well. when you're forcing banks to lend as they are in china, then this money is being channeled into commodities and things like that. we were at such weak levels the last couple of quarters that we can get some kind of bounceback. there was a lot of money sittinging on the side. i don't think it's necessarily a long-term bullish outlook for the market. i think you've seen china over the last couple of days. you've had the shanghai composite up 12% over the last three weeks. i'm not in the v-shaped recovery camp at the moment. going back to the deflation argument, i think because of the reparation of the balance sheets

of the households, the amounts of mortgage debt will increase as we go through to 2011. i think you'll see defaults stretching out along the curve into the prime mortgage space and i think we'll continue to have problems going forward. >> mikkio, paul just mentioned that he's not a believer in a v-shaped recovery. we did hear from the fed earlier this week saying that it believes that the economy is leveling out but that things are still weak. do you think that is the case or do you think there's a high risk of having an economic relapse, if you will? >> well, bernanke, by the way, also said -- i can it was a couple days earlier -- that the risk is that the economic recovery might be stronger than what they expect themselves. so the biggest possibility or

surprise possibility is that we will, indeed, have a v-shaped recovery rather than the sort of l-shaped thing that the majority or significant analysts and economists and investors continue to assume that it's the base case scenario. i think that's the biggest risk that we will see a fairly normal recovery from a recession which means we will have a short period of above potential economic growth which is good for equities. i think this is what the equity markets not only in the u.s., but mainly in the u.s. and most encourageagely in the u.s. because the s&p 500 is basically, you know, a quarter roughly of the global market capitalization. so it's the battleship of stock markets, if you will. if you know where that's going, you know where the whole fleet

is going eventually and that is what markets are telling us, that this is under relatively normal recovery scenario from relatively for somewhat deeper than normal recession. but i think that the depth of the previous recession was, to a large degree, also related to panic mongering and fear because we had a paradigm change in the financial system. i don't want to belittle that, but you know, not everything is as bad as it seemed to be just a few months ago. so i think overall at the moment things look like we're going to be more or less fine in a couple months time. >> what do you make of the sell-off we're seeing in the chinese market? if that continues, could it hold off any rally week sear in asia? >> that is a good question. to that point, i must agree with my colleague. whatever he mentioned about the forced bank lending, etcetera,

is true because in china, you have the only system muck the large economies sch is a command economy-type system where you can force the economy to order banks to do something. in the u.s., in europe and in japan, you had just a few months ago people were complaining that banks weren't lending, despite all the money they get, they get from the government and from the fed. but that's good. the reason they don't lend is they say if we lend it out now, we're going to lose money. in china, they did that because they were sort of forced to lend. i don't know where all that money went, but that is a reflect that is reflected in the market. i don't think it was affect the asian markets across the board. it will affect some sectors. it's certainly something that we need to he be cautious about. in general, i think asia will be fine, as well. >> makia and and paul, thanks so

much for your time. let's move on. the deal is done. volkswagen and porsche have agreed to integrate by the end of 2012. now bmw will buy a stake in porsche. the chief executive is expected to run the combined entity. shares in hochtief beat expectations in the second quarter and reiterated its forecast for 2009. they said it's considering selling shares in its concessions business. christine. >> in australia, investor sentiment getting a boost from signs the economy could be on its way to recovery. the reserve bank of australia,

the rba signaled rates could be heading higher as the economy merges from what may be one of the country's shallowest recessions ever. but rba governor did not indicate when the tightening would take place. >> there will come a time when the exceptional monetary stimulus in place will no longer be needed. it will then be appropriate for the board to do what it's done on past such occasions, namely to start adjusting interest rates back towards normal levels. >> well, the news initially sending the australian dollar to an 11-month high, right now trading at 0.8419 to the greenback. u.s. firms like plaque didstone group and goldman sachs are reportedly going to establish investment companies in china to raise rmb funds from local investors. according to the financial times, the move is a sign that

they're determined to improve stake in the country. the ft adds the move is tied to concerns about the dollar. >> thanks, christine. u.s. treasury secretary timothy geithner says the government won't allow wall street to return to its old habits. geithner pushes back against criticism. the companies that are profitable again are returning to business as usual. he says the weakest parts of the financial system don't exist any more. geithner says banks have significantly reduced balance sheets and are running with much less level raej. the obama administration is expected to charge big banks higher fees to pay for regulation.

reports are that banks with at least $10 billion in assets would pay more while community banks would pay the same they do did. mortgage lenders would be charged fees for the very first time to pay for things such as company audits. merrill lynch is ramping up recruiting as it seems to replace staff that left the company. merrill is offering bonuses 140% of their past 12 months of production and more if they hit their target over the next five years. >> you can get more news, videos and blogs on cnbc.com. becky. coming up on "worldwide exchange," are you a deflationist or inflationist? as government debt balloons, we'll ask when central banks should begin to tighten policy. plus hong kong, gdp data is out in about 15 minutes' time.

welcome back to the show. we are going to take a quick check of the global equity markets here. why don't we start here in the uk. looking at the best prmpers, we see a reelt theme coming out here. the real estate companies, property companies in the uk are getting a real bump up today. particularly british land, which is moving higher by almost 6.8%. reports in the daily telegraph newspaper here in the uk suggests british land is the target of interest from investors. possibly including mittal for a start. let me clearly send the show to british land itself higher, but giving a boost to some of their rivals. liberty international and ka zazmy's all moving higher on some of that news. basic resources are looking pretty strong.

we keep seeing these signs that economic conditions are improving around the globe and that certainly has been a bit of an upside for the commodities picture. we have stocks moving lower, of course. morrison, hsbc, friends provident. but if you take a look at the ftse 100 overall, the gains we're seeing amongst the basic resources and the real estate stocks are helping to see a positive session to round off a week. higher by about 0.5% in the first few hours of trading. let's see how the rest of the day shapes up. let's get around to some of the other motorcycles globally and move to patricia szarvas. >> becky, we have another earnings driven day in a positive sense. thyssenkrupp has been supporting the market when it comes to the numbers and the market is up substantially. up 3.7%.

why you might think because a it was already discounted. it seems that the restructuring story is still having legs moving forward and the latest comments coming through from thyssenkrupp right now are looking more stabilizing for the year 2010 and that is giving quite a bit of backing to that stock. after fantastic results yesterday, they just repeated what they had to say. a good set of numbers for the second quarter. hochtieh up about 4.7%. at the moment, volkswagen being the biggest underperformer after cinching that deal with porsche after the bell. over to carolin now. >> thank you, patricia. switch is higher by about 9.5%. that's after the company posted

a very good set of numbers for the first half of the year. net profit that was better than expected. it did fall around 28%, though. let me remind you, these are very tough times for the swiss watchmakers here, the toughest we've seen in 20 years. compared to its peers, it seems to be fairing much better. the outlook for the rest of the year, that seems very convincing. let's take a look at the other watchmaker here in switzerland. are higher by 5% on the back of bullish comments from switch. let's move on and talk about ubs. there's still a lot of positive melt yumm in the market. that is because a deal was signed between the government and ubs. according to the "new york times," saying around 150 u.s. clients from ubs in the states will face criminal charges, that's, of course, in relation to the u.s. tax evasion over in the states.

now let's go over to paris. stephane was what's up there? >> thank you very much, carolin. lvmh is the top company on the market. the luxury group grew 50% stake, 50% of chatau and the market's reaction is extremely positive. the stock is the best performer on the cac 40. the government has no plans for the time being to withdrawal the money that was lent to the bank a couple of months ago to help them face the crisis. however, she said she will meet the bankers on august 24th to make sure they are lending enough and to make sure they are applying moderation policy. on the downside, air france klm, biggest decliner of the air france klm.

citigroup lowered the recommendation on the stock from hold to sell with the same price target at 10 euro 13. now we have a negative session for the largest french production company which posted a 4% decline in sales in the first quarter. let's have a look at the asian markets with saijal in singap e singapore. >> hi, stephane. it's mainly a positive picture here in asia. because we're seeing data that shows improvement in several economieses, australia was one. we had comments coming from the rba governor saying they will start raising rates to a more normal level. that sent the asx to a ten-month high and the aussie dollar to an 11-month high. over in the greater china region, we saw a nice turn around for the hong kong markets which was in negative territory for most of the day. lee and fang reported results

late yesterday showing improvement for second half earnings. and remember, we'll get those gdp numbers out shortly, as well, and that could show hong kong is out of a recession, as well. the shanghai composite stayed weak. we had news from china merchant's bank, which is the lender, saying it could raise as much as $2.6 billion in a rights issue both involving h-shares as well as a-shares. and it's coming at a time, of course, when lending is being concerned, so there are concerns on when this market can absorb at least the excess supply. now back to mike in the u.s. good morning, mike. >> good morning to you or good afternoon. and thank you very much. here in the states, the consumer is very much in the forefront for investors today. the july cpi is out at 8:30 a.m.

new york time. prices are forecast to remain unchanged. the core cpi, which strips out food and energy prices is expected to edge up by 0.1% at 9:15 a july industrial production will be released. forecast to rise 0.6%. the capacity utilization rate is seen rising by half a point to 68.5%. then about 10:00, august consumer sentiment will be out. analysts are looking for a reading of 69. a pair of retailers top alternatings on today's calendar. jcpenney and abdomener comeby and fitch. they both report results before the opening bell. still to come on "worldwide exchange," u.s. retail sales fell unexpectedly in july. what will convince consumers to start spending again? >> plus, hong kong's second quarter gdp data is due in a couple of minutes. [ female announcer ] new swiffer wet mopping cloths

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i'm christine tan. in asia, japan's nikkei 225 hits a fresh high for the year, but stocks in china are down nearly 3%.

>> i'm becky meehan. in europe, a contrasting gdp increasing by 1%, is the eu increasingly divided. >> and i'm mike huckman. in the u.s., retail sales were weak, but today could bring better news. inflation remaining low and industrial production could be growing for the first time in months. 6/right now in hong kong, we are waiting for gdp numbers to break. reversing a 4.3% quarter on quarter contraction in the three months of the year and year on year, gdp is expected to be better in the first quarter. the data is still coming out, we are still waiting for it. let's get more from nu. good to have you with us.

hong kong is expected to follow singapore to pull out of a recession. how strong do you see this recovery here in asia? >> i think it's quite a decent economic recovery. i think q1 will mark the low points in the cycle. i think what's been happening in recent months is that we've seen an impressive rebound in ex ports. the world trade shop that really hurt asian growth last year is dissipating. certainly, you know, those economies that are very cyclical in nature and that react quickly to any turn around in ex ports, particularly the strong growth in incident tra asian ex ports that we've seen is all going to be good news. i'm expecting a decent number. we're seeing it elsewhere in asia. chinese growth is holding up really well. but i think domestic demand is strong enough to ensure and underpin that we get further growth going into 2010. >> and neal, we are getting

those numbers as we speak. hong kong gdp is down 3.8% versus a forecast of 5.5% and that's better than the 7.8% decline year on year. so it looks like perhaps year on year, things are looking better. we are still waiting for the quarter on quarter number, still coming out. what is your outlook for gdp coming from japan on monday? do you spec things to improve, as well? >> indeed. i think as we're seeing on the year on year growth rates coming through, the low points in the economic cycle is being reached and it can only get better from here. i think as far as japan is concerned, they've had a whole host of structural problems that tended to weigh on growth and, of course, we've seen recent numbers that have intensified. deflation pressures, a stronger yen won't help matters there. but i think there are indications of an improvement. we saw it in the tan kdz can survey. it's going to be fairly subdued. we've seen quite good economic

numbers coming out of japan, which i think will be quite good for investors and the uk economy. >> neil, we've also had recession data omg in the last few minutes. we're seeing repossessions down to 11,400 for q2. that's well down for the first quarter. where do you think we stand here in the uk compared to the rest of the world? >> well, if you believe what mervyn king said this week, we're in for a slow and protracted recovery. and i think unlike many of the asian economies or indeed some of the euro zone economies like germany and france that have reported good growth this year, that's very much cyclical economies. they're tuned into what's going on in terms of the global cycle. that's why france and germany have been doing quite well. they're outperforming the uk

because you can describe the uk as an economy that's been at the epicenter of the financial crisis. the consumer is being forced to deleverage, repay stock savings. the banking systems within those countries are credit constrained. they're going through restructuring their balance sheets. he think it's going to be difficult. i think the uk could underperform certainly for the rest of this year. >> to underperform, i guess germany and france are seeing emerging from recession. other countries are in difficult times, too. spain had their data coming out this morning. >> i think europe, a north-south divide, if you like, certainly countries like italy, spain, even the netherlands as we've seen in the recent euro zone gdp numbers have disappointed.

they're not quite geared up to participating in the export cycle. so it is going to be two speed, north-south. i think that looking forward into next year, certainly a lot of european economists in the market have been revising up their economic growth forecast. the ecb still has a very cautious, cautious view. but i suspect that the forecasts that are introduced in september will highlight a more optimistic outlook. >> neil, this is mike huckman in the united states. how surprised were you by the unexpected decline in retail sales yesterday and mavg does it say? >> i think as far as the u.s. is concerned, mike, that again, an inventory rebuild, the impact of fairly massive fiscal stimulus has helped prompt a recovery in the manufacturing sector. but the consumer is a very

different story and i think the picture there, if you look at retail sales on any sort of metric, whether it's ex autos or patrol, the numbers have if he will fed into the consumer spending. it's not very good. and retail control has been declining at 1.3% annualized rate. this is very dependent on an inventory rebuild as far as the states are concerned. the consumer still is cash strapped. unemployment is still an issue. hourly wage growth is still declining. americans are saving more, spending less and repaying debt and i think that's going to be the picture of the times going into the early part of next year. >> okay. so but in the near term, what should investors focus on today in terms of the economic data that we're getting? we're going to get cpi, we're going to get consumer sentiment, we're going to get capacity utilization, some factory

numbers. what's most important, in your opinion? >> well, i think the industrial production will be better than expected. i think the increase in auto production that we've seen for a start will be helpful. but the increase in industrial production will be a function of the inventory cycle. we're seeing an inventory rebuild. so i think there will be a good number there. capacity utilization, we've had a lot of slack in the u.s. manufacturing sector. that should ease off a little bit. but i think that the absence of pricing power, both in the corporate sector and in the labor market suggests that cpi inflation pressures will remain subdued for a while. so i think that the fomc's conclusion that we saw that concerning interest rates is that they're likely to remain low for the next period. and i think that while the futures market is giving a 50% probability to a rates hike in january, i think that looks overdone for now.

but i think inflation is certainly not a problem at least for the next six months. >> neil, thank you so much for stopping by. let's go back to the markets and take a check on where we stand now. the ftse cnbc global 300 index is still trading higher, just off the highs of the session, though, higher by 0.15%. as far as the european bourses are concerned, still looking positive, but certainly off the highs that we were looking at just a half an hour or so ago. we are looking at gains of over 0.had% for the ftse and the dax in the uk and germany. the cac and smi are moving higher by just over 0.6%. let's take a look at the forex markets. we are looking at declines of the dollar against the yen. 95.14 is where we stand there. euro/dollar, 1.4277. sterling/dollar, 1.6538. mike, ohio is it looking in the u.s.? >> well, becky, essentially, we

seem to be following what's going on in the european markets. we did see them perk up at the top of the hour. they are still pointing to a higher open five hours from now, but they are off their highs of the morning and we have a bit of a mixed bag going on right now. so it looks like they're still trying to find their way. moving on in the treasury market on the back of a relatively successful government debt auction yesterday, 15 billion worth of 30-year notes, on the ten-year note, we saw the price go up yesterday and the yield come down, but today that looks like it's continuing course with the yield sitting slightly lower at 3.6%. >> hey, mike, we're getting hong kong gdp data. just to recap, hong kong is now officially out of a recession. fresh data showing that the economy expanded 3.3% when compared to the previous quarter. on the year, q2 gdp fell 3%,

better than the 5% contraction economists were forecasting.ñ for all of 2009, the hong kong government has revised its full year gdp forecast to between minus 3.5% and 4.5% compared with the previous forecast of contraction of at least 5.5%. the hong kong government saying they're seeing encouraging signs of economic recovery. but the government has cut its 2009 cpi forecast to a rise versus 1%. so that is the latest coming out. hong kong is now officially the latest economy to pulling out of a recession. the world's second largest economy is widely expected to snap five straight quarters of contraction to post games of 1%. let's get more from naomi finck. how do you expect japan to do in the second quarter?

>> i personally think that growth is going to come in on the high side of expectations. the upper end of the range is an annualized 6.4% and i'm looking for 6.3%, so quarter on quarter, that should be about 1.6, slightly under. and i'm fairly positive on japan in coming quarters. the only caveat i would present here is one of the biggest sources of support may come from inventories due to a downgrade in q1 inventory data. net-net, we might get some fairly scary negative numbers for q1 revised again and then get an offset in q2. >> all eyes will be on personal consumption. we know that makes up about 60% of the economy. how much of a pick up do you expect that to have given all the measures from the japanese government? >> well, looking at household

spending data, we did see a small fill up for consumption there. so quarter on quarter, we are likely to see a small recovery and given that it's about 60% of the economy, that should also help the positive growth figure. however, there is still a lot of questioning going on about the permanence of that fiscal stimulus upon consumption. and the 12,000 yen per household handout households themselves say is unlikely to make them extremely confident. so we're still dependent on external growth which is increasingly volatile. so i think there has to be much more done to shift japanese growth before we see a sustainable return to positive growth.

>> this is mike in the united states. the government yesterday successfully auctioned off a total of $75 billion of debt in this week alone. is japan still a buyer of u.s. debt or is the country losing its appetite at this point? >> well, that's a very good question. in recent quarters, we've seen a loss of appetite for unhedged u.s. debt among japanese investors. instead, many investors such as life firms and asset management firms have gone for fully hedged u.s. debt and this is still very profitable because the steepness of the u.s. yield curve. so i would expect so long as the u.s. yield curve remains steep, there should be some appetite continuing for u.s. treasuries. will that appetite meet the increasing issuance? i'm very doubtful about this,

especially given the rise in japanese dividend yields and the availability of other higher yielding ras ets such as japanese subordinated debt. so basically, treasuries do have some competition now in the fixed income and equities space for where japanese investors are concerned. >> naomi, we'll have to leave it there. naomi fink. let's join ayesha in mumbai for the indian business report. >> thanks for that, christine. we're hovering around a good 70 ban. similar is the skas for the sensex, as well. it's interesting to note the tug of war that we are seeing in trade. oil and gas bank is holding up

very well. companies like reliance industries, these companies are holding up very well. icic bank, technology counters, all of them are deep down in the red. but the clear action is in the liquid universe where you have the entire education space which is holding up smartly. for days now, we are seeing the entire education space. there are talk bes some sort of reforms or announcements from the government like nitc international, telecom, all these numbers are holding up smartly in trade. meantime, another ipo in the offing, energy will be coming up with its ipo. the holding company is jsp holdings, up by almost 14.5% in trade. with that, it's back to you, christine. >> ayesha, thank you very much. >> korean air says it swung to neat profit in the second quarter, snapping six straight

quarters of losses. lower fuel costs and currency linked gains gave support to its bottom line. profit at the world's largest air cargo carrier came in at $63.5 million, lower than analysts forecast as revenues slumped 16%. but the road ahead looks promising as exports start to improve and travel demand recover. korean airlines are up 0.44% today. the largest oil company surprised investors today by posting a better than expected rise in q2 profit this morning based on larger profits from palm oil. wilmar says it remains fairly optimistic for the rest of the year. they expect a quarterly drop in revenue. wilmar shares in revenue are looking like this, trading down

1.1%. 6.51. >> christine, the worl's biggest biotechnology company, amgen, gets backing for one of its most important drugs. a food and drug administration here until the states has voted for perolia. the panel did express some concerns about serious infections and potential long-term risks urging against giving the drug as a twice a year injection. it rejected most cancer related uses that amgen the asked for. amgen shares fell 2% ahead of this decision, then another 0.5% in after hours trading. and in frankfurt right now, they are down almost 4% even though a deutsche bank analyst this morning is telling clients that the market is getting the wrong. 2008 was a very good year for blackstone ceo steven

schwarzman. he became the top-paid u.s. ceo last year according to a new study of the corporate library earneding $72 million. the vast jrt of that came from proceeds he received when blackstone went public in 2007. it also paid off to be in the energy industry. seven of the top ten highest paid ceos run an oil or natural gas company. becky. >> well, the deal is done. volkswagen and porsche have agreed to integrate by tend of 20 1. the finance deal, volkswagen plans a capital increase of shares in the first half of next year. vw's chief executive, martin vintercorn is expected to run the combined entity. finally, if all the

excitement of the summer rally proves too much, this is the story for you. a new report shows a nice cup of tea calms britains down in crisis. 68% of uk citizens turn the kettle on which facing a dilemma. tea really does have neurochemical properties that help relieve stress and it could remind us of earlier times when we've been looking after. do you really need a record from university to tell you that kind of thing, christine? >> becky, to get more news, videos, anything moving markets today, a cuppa at cnbc.com. >> still waiting to get my starbucks when they open in an hour or so, coming up on "worldwide exchange," is wall street back on its own tricks? tim geithner thinks bankers can and will be made to change their ways. is he right? >> plus, the aussie dollar is

anything but going down under. we'll get the latest on the currency markets coming up next. stay with us.

welcome back to the show.

on the currency markets now, why don't we start by looking at some of the live data there. dollar/yen, 95.12. euro slshl dollar, 1.4279. we are joined by david johnson, from halo financial, to talk us through some of the these stories. why don't we start by talking about the euro slshl dollar. we've had strong euro zone data. we've had this morning strong euro zone gdp. where do we go next, do you think? >> well, it's interesting. one of your previous speakers, neil mckinnon was talking about this two-phase euro zone economy. i don't think we're seeing very much a position like that. but also within the euro zone economies we're seeing a slight unphasing of euro zone against retail. the french figures are interesting because they're showing a recovery in the manufacturing side of things. but certainly the retail market isn't picking up as quickly. i wouldn't be at all surprised to see euro/dollar push slightly higher from here and certainly

with the u.s. dollar weakening as funds flow out. then i don't think we can get over enthusiastic about it. i think we have to see a lot more confirmation that the rest of the euro zone will be dragged along before the euro will pick up huge amounts of strength. i don't think we're likely to move out of the ranges that we're in. support at the moment is just below about 1.40 itself. strong support about 1.39 12k3 resistance at about 1.44/1.45 or thereabouts. >> we did just mention before the break the aussie dollar, as well, comments coming out from the reserve bank of australia. and i know that you've been looking at the aussie dollar against sterling, as well. what's going on there? >> we have quite a bit of exposure for our clients on that pair. and the australian dollar has

been quite strong. it certainly is picking up strength from the carry trade flows, picking up strength because the commodities are moving up and australia obviously is a major exporter to china and places like that. aussie dollar is doing very well at a time when sterling is being hit by the bank of england, sudden injection of 150 billion pounds. so we're seeing that pushed down to the levels that, you know, there's a chance it will push through to levels we haven't seen since 1996. and sadly for a large number of our clients, that's the only way for it to go. but nevertheless, the hedge to hedge of that is not such a problem. but it will be a question of whether it bounces from there or whether we start to get into historically low levels going back into the 1980s. >> david, this is christine. is risk aversion in the currency markets being gradually influenced by the sell-off of what's happening in the china markets?

>> i think there is -- it's an interesting sort of -- there's a double play we're seeing. the risk seems to be a very positive word for a lot of the carry trade investors and we're still seeing this flow from u.s. safety into currencies, etcetera. but i certainly think there's a nervousness about that move and that's probably the reason we're seeing less volatility. the markets are trading at much higher ranges than they've done for quite a bit of time. i was reading from here calculations on the total volatility that we're seeing and the chart has narrowed immen immensely. while i think there are sizable flows of funds out there that can move into the higher yielding currencies, higher yielding assets and probably chak the rise in commodity prices and oil prices and strength in the canadian dollar, i think there is a nervousness behind that and that investors, while they may move into those market, are likely to pull out quickly the first sign of

nervousness elsewhere. certainly, that's what we're seeing. it's sort of short-term spikes in these currencies as investors pull away. >> david, good to talk to you. thank you very much for that. have a good weekend. >> thank you. >> david johnson, halo financial limited. coming up in the next hour of "worldwide exchange," we will bring you up to speed with all the top stories making headlines across the globe. >> plus, deflation versus inflation. as central banks ponder their exit strategies, we're going to ask what the biggest threat to the global economy is.

i'm christine tan inspect asia, hong kong is officially out of the recession. the economy expanded 3.3% in the second quarter compared to the first quarter. >> i'm mike huckman in the u.s. retail sales were weak, but today could bring better news. inflation remaining low and industrial production possibility growing for the first time in months. and i'm becky meehan. in europe, a contrasting growth picture shrinks 1.3%. is the eu increasingly divided?

>> and if you're just joining us in the united states, welcome to the start of your global trading day with "worldwide exchange," broadcast live from the u.s., asia and from europe. in the u.s. right now, we have the futures pointing to a slightly higher open in about 4 1/2 hours time after the s&p 500 closed yesterday at its highest level since last fall. yesterday we did see the yield on the ten-year t-note hit its lowest level since the end of last month on the back of a successful government auction of $15 billion worth of 0-year notes. this morning, we have the yield on the ten-year note ticking in at 6.3 %. becky. >> let's take a quick check on some of the data which is coming out. first of all, let's check on the cpi data. euro zone cpi down year on year.

the reuters forecast was for a decline of 0.6% year on year. we'll come to a bit more on that story later on. let's check on the ftse cnbc global 300 index. we are looking at 0.1% higher on that account. let's take a look at how that translate to the european bourses, as well. we have seen a bit of positive action for all of the major equity markets here in europe today. still the case, we have coming off the highs that we saw a little earlier on, about 0.4% higher and the dax and the uk in germany respectively. while the cac is higher by 0.6% and almost 0.7% higher for the smi. let's take a look at some of the forex action, as well. in terms of dollar rates, the 5.16 for dollar/yep. euro/dollar, 1.4280. sterling/dollar, 1.6553. christine, what is it looking like in asia? >> here in asia, becky, looking

mixed at this point in time. asia did get a chance to react from those good gdp numbers coming in from france and germany. the sell-off got people nervous taking money off the table. the nikkei 225 in japan ticking up 0.8%. the kospi up 1.7%. the shanghai market, a lot of sell-off there on nervousness of new shares coming on to the market. pushing this lower 3%. hang seng index up 0.15%. the territory has now pulled out of recession, second asian economy to do so. and the bombay sensitive 30 index is down 0.3%. in terms of oil, putting on gains the last time we checked. nymex light sweet crude is trading around the ranges, $70.85 a barrel. up 33 cents. and brent, as well, tacking on gains following nymex, as well.

brent right now trading along the ranges, $74.30. up 36 cents. rebecca. >> yeah. let's take a recap of what we've heard from that deflation data. euro zone july deflation down by 0.7% month on month, which was negative 0.6% estimates previously. what does this data mean, though? joining us now is ian devitt and we have two sides of the debate in the studio here today. paul, let's get you to set out your thoughts on the deflation side. >> yes. i think what i'd like to start with is people are debating whether the outlook is for inflation or deflation. through zone inflation has been falling negative 0.7% year on year. across the euro zone, it goes as

low as minus 6%, although it's an island year on year. in the uk, the rbi is falling, the cpi is up. u.s. and japan inflation rates are negative in both those countries and china, as well. so i think it's the -- you know, the onus is on the government. there are many good reasons why deflation is ahead. >> ethan, how would you counter that? we're seeing deflation and besides that 0.7%. why would we see inflation at this stage? >> we've seen deflation because of what we've seen in terms of commodity prices falling and the lagging indicator that that might be. also the fall off in demand. so i think we have to factor in why we have seen deflation. i think it was certainly the specter of a long scale deflationary cycle which most are now discounting because it seems commodity prices are ticking up. so from the supply side, we'll see that pushing inflag.

if we look at china and the steel story, we see demand picking up for vessels on the energy side and certainly that is behind the driving force in demand for commodities today. so we're going to see the effect of the massive liquidity indpoougz fusion. we all know the stimulus package will take at least 6 to 12 months to filter through the economy. we're very much advising our clients with their investments to build an inflation hedge in the medium term. in the short-term, we think there could be continuing deflation that trickles through of factors that we mentioned earlier. >> this is mike huckman in the states. and i'd like to get both of you on this, but we'll start with paul as far as answering this question. we had an economist on the show earlier who said that he expects interest rates to remain low for quite some time. that may be the fed would make a

move to raise rates starting in january of next year. what's your take on when the fed or if the fed is going to make a move in terms of tightening, especially given your opposing viewpoint on deflation versus inflation? >> i really don't think there's any likelihood in the near future of any interest rate rises. the central banks have used up all their ammunition on that front. what they're trying to do now is stimulate demand through other measures like quantitative easing which has taken place in the u.s. and the uk and other economies. but what this method is very unprovu unproven whether this is working. if you go back to a speak made by federal reserve chairman ben bernanke in 2002, he said the fed could always create inflation by a range of measures, first by trying to cut interest rates and lastly trying to control bond yields. but i think it is open to question whether the central bankers will be able to skeet in creating the inflation that they

are desperate to see. we know that the fed has doubled its balance sheet size or more than doubled it since the lehman collapse in september last year. but that is still -- those figures, you know, hugely are not sound. i think we're talking about nearly $is trillion. still pretty small when compared to the overall debt in the u.s. economy, which is around $52 trillion or $54 trillion. and that debt is becoming a heavier and heavier burden on the overall economy because it's thankfully reaching 400% of gross domestic product, which is a heavy burden for the u.s. economy to carry. and we see a similar situation in many other economies. anglo-saxon economies are probably the worst. but it's a similar situation to what we saw happen in japan from 1989, 1990. i don't really see any reason why it should be any different now. >> i would agree. >> i would like to get ipin's

take on this. he said he cited something from bernanke back in 2002. but we're in a different world now, right? >> it's going to be a different period since we see interest rates kicking upwards. irng the fed is going to see meaningful signs of inflation before they start to reign in liquidity in that sense. and any sign of interest rates and tightening in that way would we think send too much through the economy and that's not something they're going to want to risk at this stage. however, it will allow consumers to essentially inflate their -- their debts will be smaller burdens in relative terms. and we know the fixed income is deflationary in times and a little bit of inflation we think will be embraced and then tightening will follow.

>> i can see the argument you're making, but if you look at the inflation rates that are discounted by the difference between conventional bond yields and inflation linked bond yields, most of the economies are saying we'll have an inflation of around % or 2% the next couple of years. but i find this hard to believe. i think we're either going to get -- for the central banks to achieve their objective, they'll either have to create much higher inflation to try and inflate the debt away or they're going to sail and we'll see the debt removed another way, which is through a series of bankruptcies and basically the government being unable to prevent et through bailouts because the governments have to fund those bailouts and then we're looking at spending cuts and tax increases. so i think we're facing a very uneasy balance and uneasy truth, as it were. but i think the -- what the markets are currently building in in terms of 1% to 2% inflation is probably the least likely outcome.

i've talked about this at length, as well. my sense is that the arguments are very much in favor of the deflationists and that's the most likely outcome. >> hey, paul, this is christine. you talked briefly about comparing the deflation scenario to what's happening in japan. how would you make the comparison? is there a danger that this could happen again? >> in japan? >> i mean overall. how would you compare this situation with the japan scenario. >> well, i think japan started from the same basic situation which is that they had a debt of 300% of gdp at the end of the 1980s, around 1990. in the u.s. and uk, it's probably worse than that. in japan, the debt was mainly in the corporate sector. in the anglo-saxon economies, it's the household sector carrying the majority of the debt. we're seeing the government handle it in different ways that they're trying to commercialize the debt.

we as taxpayers are covering the costs of the banks'makers. but that's shifting the debt from one pocket to another, as it were, from the private sector to the taxpayer and there it has to be covered in another way. so the overall effects are going to be the same way. >> i think it's unfortunate that you -- >> i think we're going to have to leave it there. paul, you're leaving us, so thank you very much, the editor of index universe.eu. epin, you're saying with us. still to come after posting solid profits in the secretary quarter, banks are pick up recruitment. who is hiring? we're going to tell you in just a moment.

welcome back to "worldwide exchange." u.s. treasury secretary tim geithner says the government won't allow wall street to return to its old habits. in an interview with the wall street journal, geithner pushes back against criticism that companies that are profitable again are returning to business

as usual. he says the weakest parts of the financial system don't exist any more. geithner says banks have significantly reduced their balance sheets and are running with much less leverage. he says president obama's financial reform plan is on track, predicting congress will give the white house most of what it wants. speaking of the white house, the obama administering is planning to charge big banks higher fees to pay for tighter regulation. reports say banks with at least $10 billion in assets would pay more while community banks would pay the same they do today. mortgage lenders would be charged fees for the first time to pay for things such as company audits. merrill lynch, meantime, is ramping up recruitment as it seeks to replace key staff that left the company. to lure top advisers, merrill is offering signing bonuses of 140% based on their last 12 months of production and 200% if they meet their targets over the next five years.

spain's economy has shrunk more than expected in the second quarter unlike france and germany. spanish gdp dropped by 1% quarter on quarter. that was more than forecast. well, here in asia, hong kong has pulled itself out of the recession. fresh data shows the economy expanded 3.3% when compared to the previous quarter. on year, q2 gdp fell 3.8%, but better than what economists were forecasting. the government has revised up its full year gdp forecast to minus 3.5% compared to the previous forecast for contraction of at least 5.5%. u.s. firms like blackstone group and goldman sachs are reportedly

going to establish investment companies in china to raise renminbi funds from local investors. the move is a sign that beijing is determined to improve corporate management within the company. meantime, plaquestone's equity in china will be worth $517 million. as the move is part of government efforts to promote the use of the renminbi in part tied to concerns about the dollar. >> let's talk about some of the stories of the day that we've been looking at. we had gdp figures on top of what we heard from germany and france. hong kong also appears to be coming out of recession and spain is lang wishing worse than economist hesitate expected. what does this tell us about the way the global economy is emerging from this recession? i think it very much

establishes, i think say, the role of china, certainly in asia. not even a two-track europe, it may be a four-track europe. and also the large rate of unemployment. that certainly has been the case with some of the european countries. the commodities story is loud and clear today in terms of demand in china. we've seen the effect of the stimulus package. we even hear it in the next story looking for investment opportunities in hong kong. the fortune of hong kong are tied to the fortunes of china and it's the window through which most external investors would use. back to the property market, we've seep property and development companies rise to meeting the markets there as well as financials which are a lot more secured than their

western counterparts. we've seen in hong kong the focal point of the asian recovery story is underpinned by strong domestic demand. >> if you take a close look at the european picture, the likes of spain, the likes of ireland, which have been particularly hard hit by the recession this time around, how long do you think we should expect them to continue to lag? are we still looking at the property market, the housing market as the crucial factor which needs to turn around? >> that certainly is going the be the key anchor of consumer confidence. as far as those country res concerned, it is extremely difficult to see when they're going to emerge. there's the loss, we believe, of the banks that have not taken any hits in either of those countries. in the irish financial sector, for example, there have been very few redundancies in comparison to the city of london. we think that's an element of pressing the pause button on the inevitable and that there will have to be sharp pain, sharp

medicine taken there before there will be a recovery. so i wouldn't be optimistic about them leading the charge and we expect them to follow and it's going to be more pain to come. >> epin, thanks for that. we'll talk with you a bit later in the show. christine. >> we have plenty to chew on, whether it's news, videos, blogs, anything moving markets today, find them all at cnbc.com. in the meantime, watchmaker switch says it sees signs of a recovery sending shares higher in zurich. and it's a friday. we would love to hear from you. do you think the market rally vung out of steam? e-mail us.

let's take a check on our equity markets now. simon, it looks like the property companies, the real estate companies here in the uk really are getting a big boost here today. >> yes, a nice bit of interest from the world members of the world community and the big boys

are coming in and taking a slight slice of the pie. >> simon, we're seeing a gain in the basic resources stocks, as well, all the usual suspects in the basic resources space are pretty strong today. can we expect to see that strength continuing? >> it does depend, on obviously, the gdp numbers. germany and france are looking like they're coming out of a repossibly, depending on how you read the numbers. obviously, if that happens, then demand will continue to grow. and yet the shares that are involved in that sector should do well. it does depend on the fourth quarter of the year. if we slip back, it might be foretallen. at the moment, everybody seems to be quite confident.

there doesn't seem to be any sell-off at the moment. >> the ftse rule is edging a big higher sport week, as well. simon, thank you very much for joining us. so that was the uk. let's talk about germany now with patricia szarvas who is standing by in frankfurt. >> we're looking fairly positive at face value. there's hardly any kind of volumes. about 18 million shares have traded. nevertheless, we have big gainers out here on the back of quarterly news, quarterly numbers here. thyssenkrupp, up about 4%. it seems that the restructuring story is what is tending to be more positive for the stock this morning. the numbers are below expectations. the guidance for 2009 was lowered. however, people think that the savings in 2010 will definitely take a positive impact on the company. also good numbers coming from

hochtief. and porsche, at the moment, up a staggering 13.5% on the news we had yesterday that probably was clenching the deal was porsche. so we do know now where it's going to go and how the deal is going to get done, more or less. so this is very positive for the porsche automobile holding up more than 13% as we speak. volumes tend to be rather low. >> 50% of chateiu blon. there is market speculation that two champagne producers could merge. the company says it has no

comment to make on that market speculation. s&p equity raise the stocks to strong buy of cmh up 7% right now. we have a positive session for the bank after the french finance minister said that the government has no plans to withdrawal the money that watts lent to the bank a couple of months ago after the relation between the french banks and the government became regarding the bonuses to lenders and the lending conditions to companies in france. now to singapore for a quick view of the asian markets. >> thanks, stephane. a positive picture here in asia, starting to see at least hopes of a recovery in the global economy. we just had data out not too long ago. hong kong, gdp are officially out of recession. the q2 gdp growing 2% or 3% from the market in terms of beating

expectations. the hang seng index did turn around a little bit, closing up 0.2%, seeing a recovery in both of the blue chips. very different picture for the shanghai composite. but that's being dogged about concerned by excess liquidity. the lender is saying it's set to raise up to $276 billion via rights issues through h shares and h-shares. as for japan, the nikkei closing at a ten-month high again. we'll be getting the preliminary figures out on monday. we could see growth in japan for the first time in five quarters and australia, a similar picture there. we're starting to see a bit of a recovery and the rba saying rates could be raised soon. aussie markets going to a ten-month high, as well. now back to mike in the u.s. >> thanks, saijal. have a good weekend. the consumer is very much on the

forefront for investors here today. july cpi is out at 8:30 new york time. core cpi is expected to edge up by 0.1%. july industrial production will be released. the capacity utilization rate is seen rising by to 68.85. by 10:00, august consumer sentiment will be out, estimated to come in at 69. jcpenney and abercrombie and fitch earnings will be out today. that is your global stock watch. coming up, getting back to business. timothy geithner says wall street is changing. plus u.s. retail sales fell unexpectedly in july despite the cash for clunkers scheme.

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low and industrial production could be growing for the first time in months. >> i'm becky meehan. in europe, consumer prices fell more than expected in july bringing deflation to germany and italy. >> and here in asia, hong kong is officially out of the recession. gdp expanded in the second quarter compared to the first quarter. >> and welcome back to "worldwide exchange." here in the united states, four hours ahead of the opening bell, we have the futures holding steady, but pointing to a slightly higher open this morning after the s&p 500 closed at its highest level yesterday since last october and it is up a whooping 15% for the march lows. but this rally locks like

there's no moving up. moving on to the treasury market, we had a big bond auction this week. the yield on the ten-year treasury note hit its lowest level since the end of last month yesterday and this morning it is continuing the downward trend sitting at 3.60%. becky. >> let's take a che on the european bourses, see what we can see. we have been looking at positive action this morning. we are grudgingly coming off the highs of the day. still, though, we are seeing green arrows. ftse 100 up 0.25%. xetra dax higher by 0.3%. the cac is 0.5% higher and smi higher by 0.7%. dollar/yen, 95.10 with the dollar coming off about a third of 1% there. euro slshl dollar, steady at 1.4281. sterling/dollar, 1.6556. euro/sterling, standing

aat at 0.8625. increase teen, how are the asian markets looking? >> investors are getting a chance to react to the gdp data coming in today and yesterday. nikkei 225 up 0.8%. ten-month high. the kospi up 1.7%. take a look at the china market, down almost 3%. hong kong managing to reverse early losses to climb higher after the markets closed. the territory announced that gdp for the second quarter grew 3.3%, coming in better than expected, signaling that the economy is now officially out of the recession. the second country to do so after singapore and the bombay sensitive 30 index down 0.4%. in terms of nymex light sweet crude, this is how the oil picture is looking. hopes of a recovery looking to lift nymex light sweet crude up 32 cents, $70.84. brent is tacking on gains, trading around the ranges of

$74.33. up 39 cents, mike. >> thanks, christine. joining us now for market strategy is john hanes, the strategist with rensberg shepherd. and still with us is efan devitt. john, i'd like to start with you. we had a strategist on earlier in the show who said the s&p 500 is the battleship of stock sxhkts that we know where that fleet is headed. is he right or do you think we're headed into an iceberg? >> well, i think that it's a difficult -- in order to expect a great deal more upside surprise out of the s&p 500, i think you have to make a couple of assumptions and one of the assumptions would be that the downward revisions to future growth rate expect ages and earnings potential, the people had been beginning to factor into their estimates are going to be reversed and it was all about dream. we can go back to what we

thought the dwond world growth looked like before march. or you can go back to the wall of liquidity on the sidelines will be forced off the sidelines into risk assets, almost irregardless of valuation. i think that we are now headed towards a period of consolidation. i think we've defined the low end of the range and i don't think we're going to touch anywhere too close for that 667 or whatever it was on the s&p. i think that's over. but we started the year saying to clients that we thought equities would probably close the year within 10% of where they started. that still seems to be a very sensible way to frame the outlook for this year. moving on to next year, i think there's some potential for disappointment as we head into 2010 as earningses expectations for growth already factor in somewhere in the region of 30% in the u.s. and similar amounts in europe. if that starts to look like it

is difficult to achieve, then i think maybe people start to look for cheap insurance again rather than if you like cheep leverage, which is what equities have been since the middle of the year. >> epin, equities are within 10% of where they started the year and room for disappointment in 120. would you agree with that? >> i am. although i think one has to look at the individual stocks today because certain companies on fundamentals do justify the current upswing they've seen. they've been disciplined about cutting costs and very much put their houses in order much more quickly than in previous recessions. probably will be slower about building cost base again and that sets them up for a nice earnings stream going forward. the technology sector will do fairly well we think currently. that seems to be one place where consumers are not afraid to put their hand in their pockets. so on a sector base, calling individual sectors and

individual stocks are the way to go. i'm concerned about making a blanket statement on the whole. on fundamentals, some companies aren't going to make it. >> john, what do you need to see for you to be more bullish about the equity markets? >> i think we're in a trading range for a while in terms of overall equities. i certainly agree with what's just been said. i think there are a lot of cheap equities. if you're prepared to take an investment time horizon rather than a trading time horizon. i think that can just as easily come back to bite us. but i think there are some great global brand name companies out there with decent yields, that have m&a opportunities, that can take advantage of others' weaknesses. you don't expect to harbor those returns for 18 years. it's very much an investment

market, nod a trader's market in my view. >> john, thank you very much for your views. john hanes, strategist rensberg shepherd. >> all right. >> let's head over to japan in tokyo. kitadai-san. >> thanks, christine. tokyo stocks continue to rise on aggressive buying by foreign investors amyself rising optimist about the economy. we saw the highest close since october 3rd last year. machinery, mining and trading issues led the gain. upped the economic figures in europe and walmart's earnlings boosted sentiment. high expectations for japan's gdp data to be released on mondon curved buying. net buying of japanese stocks by overseas investors since april has amounted to $2 trillion, up 26% from a year earlier.

shares of top exporters such as toyota motor and sony have made huge gains partly on anticipating of improved earnings. the fact that japanese stocks are lagging their asian counterpart is another factor. the shanghai composite index has jumped 67% for the year. some analysts believe investors are diverting money to tokyo from chinese markets which have been volatile recently. and more signs of the japanese economy's steady recovery. sales of new cars here in fiscal 2009 may increase for the first time in four years on the back of breakfast hybrid sales. the eight manufacturers of passenger vehicles which account for some 90% of all new auto sales now anticipate their combined sales for 2008. that's the wrap from tokyo. back to you, christine. >> kitadai-san, thank you very

much for that. mike. still to come, the private equity industry may be fom going through tough time, but it's still rewarding. who is on top? stick around so happened out. before that, here sa look at how the u.s. futures are shaping up, though, according to a slightly higher open. these days, when you have to spend, shopping online can help save. doing it with bank of america can help save a lot more. up to 20% cash back from over 300 online retailers with our add it up program. just sign up and use your bank of america debit or credit card when you shop online. it's one of the many ways we make saving money in tough times a whole lot easier.

welcome back to cnbc's "worldwide exchange." here are some of the top stories we're watching from around the world. top u.s. media companies have teamed up to challenge nielson in the tv ratings game. the financial times says the group includes nbc universal, which is part of the company that cnbc is part of, viacom, warner, as well as two of the nation's biggest advertisers proctor & gamble and at&t. they plan to award contracts to media viewers by early september. that's the traditional start of the fall viewing soap in the u.s. 2008 was a very good ceo for blackstone's ceo, steven schwarzman. he earned $702 million last year. the vast bulk of that came from the vesting of equity grantsdz he received when

public in 200 it also paid off to be in the seven of the top ten highest paid ceos run an oil or natural gas company. becky. >> euro zone prices fell more than expected in july on the back of falling energy and food costs 37 consumer prices fallen by 0.7%. the continent's largest economy, spain, france, germany and italy all saw negative inflation. christine. >> hong kong has pulled itself out of the recession. fresh data shows the economy expanded 3.3% when compared to the previous quarter. on year, q2 gdp fell 3%, but better than what economists were forecast b. and more good news, the government revised up its outlook for 20 9.

that's compared with the previous estimate of 5.5% contraction. rebec rebecca. >> and "worldwide exchange" will continue in a moment been we'll get a look at the u.s. trading day ahead. , you'll love it. your old mop will just have to get over it... [ engine rattles ] [ man ] love stinks! ♪ love stinks! ♪ yeah! yeah! [ female announcer ] new swiffer wet jet is redesigned. it cleans deep in corners. its solution penetrates layers of dirt and its absorbent pad locks it away to clean better than a mop. the newly redesigned swiffer wet jet. ♪ love stinks!

let's get a look ahead to the u.s. trading day with michael gurka. good morning to you and thanks for being here. >> thank you. >> so this morning, we are going to get a bunch more economic data. it's going to be cpi, consumer sentiment, also some important gauges as far as manufacturing activity is concerned. but on the flip side, we have earnings out of ja c penny and abercrombie and fitch in the retail sector. what are you going to be looking at most importantly today?

i've heard some say that it's going to be this manufacturing activity number that we see. >> well, i think the manufacture ing information is going to be key only because it can surprise to the up side. if we see something disappointing, manufacturing doesn't have the onus right now to be something that's going to disappoint. personally, i'm looking at that michigan number. i think confidence is what is about to drive main street from wall street and the fact that our last survey was 66 and we're looking for 69. if there's a 70 handle on this number, that's one of the reason why you start to see this market getting legs. i've got one of my big technical levels in the dow right now and i think right above 93, 91 on a settlement basis is huge. and for the same reasons that you're seeing 5460 in the dax. again, i think it's one of these snashos where if you start

seeing confidence look very bolstered into these areas, that could continue well into the third quarter as we start the fourth. as you just mentioned on the earnings front, i think the retail area is another depressed area that's starting to show some legs here. i would not be surprised if we see something bullish in that sector, also. >> michael, i know it's summertime. so you expect trading volume to be relatively low. but some are raising red flags will how low volume is and this is emblem attic of a lack of conviction. what do you think about that? >> well, it was clearly expected in this recovery scenario and for the same reasons that if you want to throw a letter out there, that it's not going to be a v at this area, i think that there's so many extraneous levels right now, especially in the dollar and, of course, in energy with crude in particular. i think that there needs to be more confirmation fundamentally in the markets through some of these numbers like today when you start seeing that volume return and, of course, august is

a historical level that you see on the charts on volume, that is, where we start to see some depressed areas. but again, i think along with the number one scenario being employment, i think what you need to see is confidence bolster this year. one of my favorites is taiwan. sorry about this rec election of this data that we just saw, but there are definitely scenarios in technology and overseas markets and emerging areas like taiwan that show legs and spill over into the u.s. markets and where investors start to spread their money. so volume can be low in the u.s., but it doesn't mean investors and trader res stepping off the gas pedal here. i think they're allocating into other areas because they start seeing significant returns and they start seeing markets overseas doing well and they want to participate there. i know investors and some of the

professional and institutional people do not miss that. i think that's why when you start seeing these enormous recovery concerns, they're spilling into other markets. and i don't want people to get completely foiled by the fact that there is a lack of evidence in environments that show this is dissipating. >> michael, speaking of oversea eggs markets, when you see a sell-off in china like that, are you worried? >> not really. i think there is a lot to be learned from what we saw in the last three quarters at this historical level. and i think one of the things that we learned is you take profits. the let et ride men tamt of investors of one, two, three, four year out scenarios is going to get tighter. i think what you're happy to see is people that are very familiar and happy with what they've seen is they're taking people off the board and looking for reallocations. much for the reasons that i

think there's going to be more interest in areas of the world like south africa and canada where it's more conservative in nature because we didn't see the crisis areas in those sector webs i think that's one of the reasons why you're starting to see these type of levels. and no, actually, i think the volatility will show you that these are somes in a seasonally adjusted nature where you start seeing these corrections. and we have been very, very short to jump back into accelerated levels. so i'm not surprised by any measure. >> michael, thank you so much for coming to see us today, mikat gushg ka. u.s. "squawk box" follows "worldwide exchange" for viewers in europe, asia and the united states. joe kernen is here to tell us what we can expect from the show. joe, what have you got? >> rebecca, you've had your day if the sun with the open championship. a great one with watson. we're going to talk golf today because of the pga, but let's wait until i get through the rest of the lineup before we talk about our guest host is ivanka trump.

we'll see here in the squawk board room. we're going to talk gaming, real estate and the health of the consumer and more. she's bringing along richard lefrek. plus icon mow home ed el-erian. as i said, the pga championship is in full swing. the world seems right now like things are moving along as they usually do with tiger firmly in the lead with a 67. no one really came close. that was not him. that was mohammed eled el-erian. i don't know if he plays golf. one of your guys, padre, irish, anyway, but looking good at minus four. those two guys paired again after that showdown that didn't end so well for the irishman, but a great tournament shaping up. >> joe, thanks so much for that. that's good-bye from all of us as "worldwide exchange." have a great weekend.

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