i'm christine kohn in asia. the nikkei falls to lowest close in six months. >> i'm steve sedgwick, in europe, a second term in office and gets her dream coalition

with the prohibition democrats. and the u.s., investors begin to look to third quarter erjs as the next big test to the recove recovery. hello, and welcome to cnbc's worldwide exchange. let's take a look at the markets with a look at the cnbc global 300 index, which is continuing, i'm afraid on the downward momentum of the previous week. down .641%, but september hasn't yet proved as bad as many who feared we would see some severe declines after the rallies over the previous months. in terms of the individual european bosses are alive and trading at the moment. the xetra dax, still down. more about that of course throughout the show, but live through berlin throughout the show. between .5% and 1.3%.

out regarding the strength of the yen, it pulled away from the recent highs. dollar/yen at 89.56. the euro dollar 1.46. and off its lows, but still trading 1.5865 would be live from their labor party conference to see what the labor party intends to do about the uk economy. let's get out to christine now. >> hey, steve, here in asia, we have a negative session after the unique data. we have japan, one of the biggest business today, the yen surging to an eight-month high, losing 2.5%, one of the biggest losers in the region, the kospi down 0.9%. we're seeing a selling spri which starts on thursday. the hank seng is down 2.1%. this is how the crude oil picture is looking.

falling below $66 a barrel, $65.54 to be exact, down 48 cents, and brent is also pulling back, as well, 47 cents lower, 64.64. lots of questions about the the demand picture. julia? over to you. how are you? >> thanks, christine. good, very well here. we're going to take a look at how u.s. futures are shaping up. last week, the s&p 500 did make fresh highs, but did end the week lower. now it looks like the dow is pointing to a lower open. dow futures down 14 points from fair value, nasdaq slightly lower, s&p also pointing to a slightly lower open. let's take a look at the boone yield, down to 3.23%. and we have a strong demand for treasuries last week, the yield on tenure note down to 3.31%. if we take a look at gold. we've been tracking where it's

moving around that key 1,000 mark, it's now down 1.65, that's .16% to 987.05. christine? >> thanks, julia. joining us now for market strategy, we have our panelists, the cio of bearings, and associate director in our hong kong studios. martin, let me start off with you first. how are you positioning yourself in this climate? >> well, we have become a bit more cautious recently just based on the valuations in china that haven't been as key at the start of this year. using different types of classes that are so colated. not just equities, but convertible bonds. it's quite interesting in an environment where deflation and extreme inflation are possible. and also, still like those assets very much as well as other commodities.

it's dropped so far this year whereas many equity markets as you know have soared in this sector. >> well, what about you? do you share the same thoughts with martin? are you more cautious in putting your money into gold and silver? >> we have a significant exposure to gold, gold miners, so we continue to have an exposure to that. i would agree with the other guest that with cultural products are extremely attractive. the market has been so weak here in the last six months that this now starts up as one of the best opportunities in terms of market valuation. overall, we are a bit cautious. we had a very -- very strong rally in the equity markets during the last six months. a lot has been fuelled by cost-cutting, restocking as inventories were low. we're now expecting final demand and that will really be a challenge for the future. because in the west, final demand is missing.

>> yeah, marino, that is the point i want you to carry on with if i may. you're talking about the increasing final demand. we know the u.s. consumer counts the 70% of the economy. and yet surely when we listen to the rhetoric coming out from the likes of the g-20, we have to reduce these imbalances, reduce this obsession with demand and consumption in the western market. that doesn't tally with what you need to see for the markets to rally. >> absolutely. just to put things in perspective, the u.s. accounts for about 28% of global consumption. china accounts for about 8%. it will take about ten years for china to grow to the same level as the u.s. and in about 2020 probably both countries are going to have a 20% share of global consumption. so it's not something which is going to happen tomorrow. and moreover, the goldmans cannot do anything to help that. so i'm afraid global imbalances

out on the agenda, but there is nothing we can actually do to accelerate the process. >> martin, marino has terrified me. said there's a ten year gap before we get the consumption coming out of asia to see these economies growing sustain bli. what about asia in the meantime? is it going to be the only part where we'll see a growing demand story. how are you adjusting your portfolio to account for that? >> well, firstly, just briefly, this is in regards to the g-20 and the possible withdrawal of stimulus there. the interesting thing, they haven't gotten much choice but to withdrawal the stimulus because the budget deficits and the depth of these country are completely out of control. in two days is the financial year of the united states and they will have tripled their budget deficits. china, on the other hand, they said they're ready to put

another stimulus package of low government debts, very undervalued currency. and that's probably one thing i wouldn't disagree with you. as to where we agree strongly on the growth side. but in china we think actually the size of the economy is vastly underestimated because if you're looking at nominal gdp statistics of china versus the adjusted one, it implies that the size of the chinese economy's actually 80% larger than most people say. and the chinese economy as a very strong place to be invested. and the numbers are very, very good. even ford and general motors are fighting for survival because of the problems in the united states expanded massively right now in china. we think it's a great play to invest in the chinese market and also as i mentioned convert with bond as a bit of a safer hedge. >> martin, what is your perspective on the u.s. economy? i know we're going to be wrapping up the third quarter on wednesday. what kind of earnings do you

think we're going to see? do you think we will be able to see top line growth? or do you think the improvement will continue to be just in controlling the cost and in the margins? >> well, i'm afraid the economy just keeps deteriorating. we have durable goods out of a negative reverting and a positive for the previous months. we have records of foreclosures, record of mortgage delinquenci s delinquencies. only the recent stimulus program and the bailouts by the banks which are running out of money again are keeping it together. it's not sustainable, the economy. on the other end, briefly to mention, if inflation is coming up again, you're also seeing the government manipulate the statisti statistics. inflation is going to rise again. not just commodities but to some extent equities, because they do represent tangible equities. you're not saying it means

equities are going to tank again. it may actually be long-term bonds, not necessarily equities. >> marino, what's your perspective? do you agree? >> yes, i agree, i think, there is a bubble in the government bond market sector. i think that there is very little danger of inflation in the very short-term. because the gap is still very big. so it will take probably one or two years before we see the resurgence of reflation. but the reality is that the credit rating of all of the countries in the west may well deteriorate in the next 18 months. also with downgrades from the aaa status that most of them have to lower rating levels. >> hey, martin, this is christine, how would you see the yen strengthen today, especially? a lot of people are saying they could hold a japanese economy hostage.

>> oh, japan is -- on the one hand, you have the industrial side of the economy that's relatively strong, relatively efficient and you compare with the u.s. and europe. but on the other end, the government is a big problem and then the strengthening of the yen or as the market tanks, people panic and carry trade position. it's very tricky, we are not actively betting on investing in the yen. we mentioned precious metals. as alan greenspan said earlier this month, the recent strength in the precious metals could indicate an early move from paper currencies. we think the largest currency move apart from the strength is going to be a move out of the currencies and into precious metals. gold being seen as a currency once again going forward. >> all right, gentlemen, thank you very much. martin and marino, cio at

barings. merkel has swept a victory in the general election. a parliamentary majority with the three democrats. a partner of choice. the result brings to an end merkel's unworldly grand coalition with rivals of social democrats. the result is expected to put europe's largest economy on a more pro-business course. >> translator: we have achieved something great. we have managed to achieve our election aim of a stable majority in germany for a new government consisting of cducsu and fdp and that is good. >> but the next german government does face major economic challenges. a surging budget receideficit t under control and rising unemployment. well, over in portugal, the governing socialist party has been reelected for a second term

but lost the overall majority in parliament. jose salk ra tease got 70% of the vote. big-ticket public works projects to stimulate growth and tackle the jobless rate, which is at a 22-year high. but the prime minister now faces a difficult task of pushing through reform without an absolute majority in parliament. >> translator: this was the victory of a political program of reforms of modernization and social justice. this was the victory of those who wanted to build a better future for portugal and the portuguese. this was the victory of the socialists of the country. the myer plans to raise $2 billion, owned by tpg will be offering just under 500 million shares, priced between $3.90.

the listing will be the largest on the new york stock exchange in three years, and already very strong demand from retail brokers and investors. australia's farm chemicals company, new farm has accepted a $2.5 billion takeover bid from china. offering $13 aussie, that's a 70% premium. it's still subject to approval. nufarm's ceo explains why he doesn't see that as a regulatory hurdle. >> we're not a critical industry the way some of the issues have been in that sense. i don't think it's sensitive. i think we're more of a global player than a particular strength player. and i don't think the ownership question is likely to bring a sensitive position. >> nufarm reported a decline.

a bbb minus rating. shares of nufarm closed up more than .7%. china unicom says it will buy back a stake for $1.3 billion. stake is being sold at an $11 hong kong 10 cents per share. it says it hopes to use the proceeds to strengthen the financial base and explore new business opportunities. skt's exit comes after the carrier signed a $1 billion swap deal earlier this month. and checking shares in skt, the south korea rising 2.9%. unicom shares lost ground in hong kong today, down 4.9%, 5%, julia? >> thanks, christine. u.s. drug maker abbott laboratories plans to buy solvay

for $7 billion. the deal would boost abbott's prescription drug sales and the merger is expected to result in new treatment for hypertension and parkinson's disease. abbott will gain control of two major cholesterol citing drugs. the company announced it was putting itself up for sale. and kraft foods is expected to raise the offer for uk confection narrow group cadbury for nearly $17.5 billion. according to the observer newspaper, they will sweeten the offer after cadbury rejected a $16.7 billion. the report suggests it's also putting together a financial package that will enable a half cash offer. here's how cadbury shares are trading right now. they're down .18% to 799. u.s. investors could be in store for surprisingly positive third quarter earnings. many are looking to determine

whether the stock market rally has legs. earnings in both the first and second quarter did beat expectations, but expectations were low and they remain low with analysts forecasting a 25% decline in third quarter earnings compared to a year ago. on the up side, financials are forecast to come in with a 60% year-on-year profit gain. in beijing, taking a hard look at u.s. chicken imports as the trade spat intensifies. chinese ministry of commerce is investigating alleged dumping of chicken feet and wings and whether products are being sold at below market prices. the move follows the decision by the u.s. to raise tariffs on chinese-made tires for the next three years. and you can get more news, videos, and blogs on today's market-moving news at cnbc.com. steve? yeah, let's tell you what's coming up on the show. merkel becomes one of the the first western leaders to survive the recession achieving a second term in office. we'll be live from berlin.

and the yen pulls back from eight-month highs. japan's finance minister said recent moves were quote one-sided. but is the currency intervention off the agenda? and wall street suffers the big west one-week drop since we'll discuss whether this will prompt further losses.

all right. let's get to our global round-up of equity markets now. we're joined by adam, patricia, and becky. let's start off in london with becky. >> we are down by about 25 points or so. just about half of 1%. a little bit higher, but that didn't last long to be quite honest. let's look at some of the movers, the decliners as markets are moving lower today. looked like some analyst calls are having a negative impact on negative stocks. home retail is down by about 3. %. the analysts of credit suisse. they say that they have outlook for the pricing power for that company declining. also just disappeared. that has been lower this morning.

a uk engineering firm, and they've had their rating cut. actually invensus has had a decent run-up in the share price. at this stage, they're cutting the evaluation ground. basic resources stocks, et cetera, plus the banking stocks taking a bit of the tumble today. they're the ones that decline when we see caution about the recovery story. that appears to be behind the move behind lloyds, rbs, et cetera. we do see shares performing particularly well. the wolseley is up by 8%, heating and materials company, the biggest of its kind in the world. and the shares meeting after they came out with the full-year earnings. the profit has fallen hard over 50%, but the company says they see profits improving in 2010 in

the second half and they also see stability in the residential home part of the business. they are mitigating the difficult environment. how does it look in germany? well, the post-election bounce is over, becky. at the moment, we are trading lower 0.1%. we're trying to come back at least to the flat line. the mid cap also turned negative and up about 1% object an hour ago. same sort of thing for the tech heading lower. very much in the forefront of nuclear energy, nuclear power stations, something that the new government is, of course, adamant about. they want to continue doing and we do see a bit of a balance in these two stocks. on the other hand, quite a few stocks really reacting to analyst causes. for example, positive, supporting these two stocks. m.a.n., the truck maker down

2.8% as we speak. being downgraded by deutsche bank. two former holds and a buy, basf and daimler showing a bit of weakness. weakness in the solar sector. in the techs, we do have companies down about 5%, solar work down about 4%, and also nordex down about 0.4% and that is a direct reaction, of course, due that the new government will cut subsidies to the solar sector going forward. and that is something, especially the solar sector that is depended on in order to reach grid parody. they're getting government money. all in all, i have to say that balance was very short-lived and i think the entire tendency will be again redrawn on the asian markets as well as the u.s. markets and the u.s. opening. over to adam and the asian

market. >> thank you very much, patricia. well, it was a bleak day for the asian markets. all of them tracking the losses on wall street, but really setting the tone for the hefty declines for the japanese equity market. this was one of the biggest losers in the eight-day trading session here. it was held mercy to the movements in the markets and the japanese yen. following comments from the finance minister saying he was comfortable with the movements of the japanese yen. he doesn't believe, of course, there should be any intervention to help exporters. later in the day he changed his tone slightly saying they were continuing to monitor the markets. weapon did see the yen come off the intraday highs from 88 levels down to 89. nevertheless, the stocks and the likes of the autos got hammered hard today. remember many of these companies have pegged this year's budget in terms of the u.s. dollar rate at about 90 to 92. companies like toyota. so every one-yen movement, moves operating numbers by about 40 billion yen in the case of

toyota and 20 billion in the case of honda. moving on to the financials. we continue to see pain afflicted upon these stocks once again. numara announcing the capital raising, the shares were not traded on friday. today they were traded, it was down 5%. but the closing price from thursday, it was really soft. and the rest of asia, we saw quite a bit of weakness. we didn't see a recovery up in japan and base metal prices were lower. the commodity stocks did fall quite heavily. back to you in the u.s. a couple of pieces of news in the u.s. today. the dallas fed survey results for september which are set to be released at 10:30 a.m. eastern, a fragile recovery taking hold in the u.s. and looking at the week ahead, jobs are the main focus for investors. the private sector jobs numbers scheduled to be released

wednesday in the adp report. the government jobs report will be announced on friday. manufacturing numbers are also scheduled to be released in friday's ism report, and there are no major companies reporting earnings today in the u.s. christine? hey, julia. coming up on worldwide exchange, can south korea's top mobile firm survive without a significant presence in china? we'll discuss what's next for sk telecom. plus german voters vote merkel back for a second material. is a second right coalition good news for business? we'll discuss after this break.

i'm christine tan in asia. sk telecom sells back its stake after not having much success in the world's largest mobile market. >> i'm steve sedgwick. in europe, merkel wins a second term in office and gets her dream coalition with the pro-business free democrats. and i'm julia boorstin in the u.s., investors look to third quarter earnings as the next big test for the recovery. well, let's take a look at these markets. we took a little bit of a dropping last week, but a hasten to add, we're still up in

september despite the fact that the cnbc global 300 is down .5%. the cassandras out there said we were going to see declines in september and the rally of readdressing. actually we've seen in the last half an hour the xetra dax down from the .3%. the ftse has gained from the lows as well as the sac and smi in switzerland. let's take a look at the markets, the dollar yen is trading 89.59, bouncing off the multi-month lows and multi-month highs for the japanese currency. sterling bouncing back up, 1.589, touching 1.57 as the handle earlier in the session. out to christine. >> well, steve, here in asia, leaking at a negative session. lots of concerns about the pace of recovery after the weak u.s. housing data coming up from the u.s. in japan, for instance, the nikkei getting hammered 2.5%

because of the strong yen. steve was mentioning earlier, the kospi down 0.9%. we're seeing a selling spree ahead of the eight-day holiday weekend coming up on thursday. the housing getting hammereded as a result, down 2.1%. so overall, very bleak picture here in asia. julia? >> thanks so much, christine. well, we have a very heavy data calendar this week. markets look like they're going to open lower. futures, oh, there's been a reversal. markets pointing lower before, but looks like the dow is trading eight above fair value. nasdaq is down from fair value, futures are down from fair value, and s&p 500 is just slightly higher than fair value, but pretty much flat. so it'll be interesting to see how the market opens ahead all of this economic news we're going to get out. and last week the dow and s&p 500 did make fresh highs, but did end the week lower. let's look at how the ten-year note is trading, down to 3.32%.

steve? >> thanks, julia. let's talk about the global economy. trevor williams at the tsp corporate markets. trevor, with reference who what the policy makers are doing, i look at these markets and they look pretty correlated. ftse up, the dax up 15%, the s&p up yesterday and completely different policies. germans are looking to cut taxes, uk has to raise them. does it matter what the policy makers do for these markets? zbling it does, definitely. and there is a common thread there all of the policies, by the way, which is they're all still ultra-loose fiscal policies. some may be closer to reversing some of that than others, but none of them have started to do so in any significant way. and therefore the financial markets are really afloat in a sea of free credit from the authorities and we really don't know where yet they're going to settle until these transfusion

of public sector funds is withdrawn. >> but trevor, if credit and overabundance of credit got us into this problem, who's to say that this huge abundance of credit coming from the policy makers now is the right answer? it seems to me the same old same old? >> well, i think there's an element of that. after all, all of the economic bubbles that we've experienced over the last 16 years have been answered by ever looser policy. and i think this is the end game and there's nothing left to do other than to make sure they don't occur by tightening policies sufficiently. that's what's gone wrong in the last 15 years. each time policy's been loosened aggressively, it hasn't been tightened enough afterwards. >> it's julia boorstin in the u.s. i'm curious if you think recovery is on the way. some of the data last week put a damper on the rally. we have a lot of really important numbers coming out this week, particularly those jobs numbers. what do you expect to see? and how do you expect the market

to react? >> well, i think the jobs numbers will show an improvement, slowing trend of the job losses. the economy has begun to turn. and there'll be a quarter of positive growth in q-3 in almost every major economy. the policy has worked, it's turned things around, but we're not yet at the stage where the recovery is strong or sustainable necessarily without continued loose policy and remains relatively fragile. >> speaking of fragile, trevor, the boj recently upgraded, but today's yen search, that seems to be a key problem. to what extent is that going to hold the economy hostage? >> well, clearly. japan as you know strong currency, but ultra-low interest rates, signs of deflation. demand, relying on exports to expand, reigning in at some stage. i think japan's got more

volatility to come and has some real big economic challenges in the years ahead, which is clearly one of the reasons why, of course, the political scene has changed so much because of the challenges that there are. >> trevor, what happens when governments, including the united states start to withdraw some of their stimulus programs? and in the meantime, do you think inflation is the concern? >> i don't think inflation's a concern at all near term. so far below potential that other than the next 18 months, there's no hue of inflation. i think inflation is later on if policy's not withdrawn quickly enough and forcefully enough. so i think loose policy's here for a while and that will be the challenge for financial markets. well really don't know whether or not they can sustain these levels of recovery in a situation where public money is being withdrawn and therein lies a big test and volatility ahead i suspect. >> and trevor, on the other

hand, china's continued to pledge stimulus measures into the big mark, into the country. to what extent you think that is going to help drive the recovery and perhaps, you know, help the rest of the world out of a slump? >> well, i think that clearly china's economy on its own is too small to pull the world out of the slump. it's been a coordinated response across a range of countries succeeded in doing that. china's an important part of the world economy. and its imports are one of the key reasons why japan and possibly germany are showing signs of picking up as well as some of the neighbors. but it's been the effort of a range of countries that's led to the crisis, not one particular country. but its importance is that it's taking its role seriously and it's done its best to make sure that its role has been fully played out. and that's obviously a very good thing for the future of the world economic expansion going

forward. >> all right. trevor, we'll have to leave it. good talking to you. trevor williams, chief economist, big corporate markets. well, one story watching very carefully, south korea's sk telecom has sold back its stake in china unicom for $1.3 billion, and scoring lack of success in the chinese market, after unicom struck a $1 billion share swap deal. for more on the hits and misses in the teleco sector, mark good to have you with us. let's talk about sk telecom, they are getting more money. the fact that unicome has decided to say we're going to end this relationship. how big of a blow is it to sk telecom who has been trying to crack the chinese market? >> i think it is quite a significant blow. having them exit the china market just after announcing last month they were going to cease investment in their mobile operator in vietnam as well as cease investment in their

partnership mobile arrangement in the united states. so with vietnam, china, and the united states out of the picture, this really does raise questions about sk's long-term international strategy. >> why are they having problems expanding overseas? what's the problem here? >> well, i think the problem really linked back to the fact that south korea is country is bullish on a technology called cdma, a technology being phased out. only 15% of the global mobile subscriber base. i think that's part of the problem. if you look at the individual operations, there are regulatory issues and competitive issues in the market, as well. but i think this insis tans. >> i would say the cost of building infrastructure in these countries is absolutely enormous. i look at the case of india, as well. it's not a given just because we have low penetrations in these huge land mass countries that they are going to be very

profitable for all of those issues. it's not a given for the international players, is it? >> no, not at all. i would say that the situation has increased -- changed considerably over the last few years. you mentioned india. india could have as many as 14 mobile operators next year. other emerging markets like vietnam has seven, indonesia has 12. i think the competition now is so intense that it is really a big question mark if many of these companies that are pointing billions of dollars into mobile networks are actually going to see a return on the investment. >> mark, it's julia here in the u.s., with all of these foreign teleco companies battling with the regulations, trying to move into china, who do you think will be successful? and do you think we'll be able to see them overcome the regulatory hurdles? >> well, i think if you look at investment in china specifically, the question you really have to ask yourself is did chinese teleco's need investment? i think the answer is no, all

three operators are owned by the government. state-owned companies. i think the chinese carriers are going to be happy to have very single digit investment rates in exchange for kind of some of the international experience. you know, vote a phone is in china mobile. they've been there a long time, be it's only a 2.5% stake. i think what we are going to see in china is kind of the reverse. i think we are going to see the chinese operators get incredibly more aggressive going outside of china. china mobile has entered pakistan and looking around the middle east and other markets. but i do think the regulations will stay very firm and that foreign ownership in the chinese telecommunications sector will be limited to very low single digit numbers. >> in that case, could the split with unicom actually set a stage for eventual strategic tie-up with china telecom? >> well, i think a venture with china telecom would make sense because they are using that technology that south korea is very much invested in.

but again, i think it really boils down to the point that china telecom as a state-owned company, do they need this foreign capital or not? would they be open to a strategic investor for sharing content and strategies and distribution? i think, yes. i think that is a possibility. >> and telecom would be a better match. >> absolutely. absolutely. thank you very much for that. good talking to you. and that was marc einstein. angela merkel has secured victory. the conservatives clinched a parliamentary majority. the result brings to end merkel's coalition with rivals of social democrats. the result is expected to put europe's largest economy on a more pro-business footing. >> translator: we have achieved something great. we have managed to achieve our

election aim of a stable majority in germany for a new government consisting of cducsu and fdp and that is good. for the first time, sylvia, i am slightly confused. this was the worst result in 60 years for the cdu and everybody's celebrating this new coalition. am i the only one that's confused? >> reporter: no, i don't think you're the only one that's confused. we used to win elections here. this is what happened again. when both the losers from the new government. this time only the cdu is the loser, the fdp, the liberals helped merkel back on the throne. and to her wish coalition, to the coalition she wanted. is she going to be happy with this? very difficult to say. i think it's going to be trickier than she might have thought. but some of the projects like techs reforms are going to be

maybe higher on the agenda. we want talk about this further with the professor for politics at the u.n. on delegation to berlin as often during elections. professor, thank you for joining us. is it really in terms of angela merkel's results, the dream team she hoped for? >> i don't think it really will be a dream team because there are some differences in program between the two partners. the cduc has moved to the middle, left of the middle, actually, with some of its proponents, at least. who are very strong within the party. and the fdp on the other side, they want to return several social reforms, and i think this won't go with the cduc. you'll have very tough negotiations. >> reporter: especially if you look at the voter movements, 1.2

million voters from the social democrats moving over, moving over to the center as it were, it wants it very well to pedal back on some of the socialist reforms. in terms of big call for our tech cuts, is that likely going to happen within the financial restraints we have? >> i think there'll be symbolic cuts, actually. but there has that to be a replacement because the states deficit is so immense as in the united states. you have to fill the gaps. which means either new taxes or broadening the basis of taxes or inventing some new well tax like expenditures for the sit-ins. >> now, in terms of the real trend of these elections and this is also something we've seen in the last state elections, et cetera, is that the big people's parties keep losing more and more ground, and the parties on both sides on the

fringes are gaining more ground. it's a kind of italianization of german politics. how disconcerting does that have to be in the long run? >> it's a mirror of society in a way. because those regions which strengthens the parties, they have changed socially. there's no catholic small town and aquari-- and the same is tr the blue collar workers. on the other side, milieu for the sdp. so the big parties come smaller and the tendency to become even smaller than they are now, which means, well, six or seven-party system with parties, with middle strong parties and perhaps one or two small parties. >> is it going to make governing germany more difficult because we've got to get used to maybe

triparty coalitions in the long run rather than two-party coalitions? >> i think in 2013 we will talk about triparty coalitions, actually, because the sdp will open to the left. and so -- the spd of the greens and the leftist party, including some communists within the leftist party fighting against the fdp and the cducsu and says right of the cducsu for another party. >> it's going to remain interesting for the both of us. thanks a lot. professor, and that's it from us here. back to you. >> thank you very much for the clarity on this. remember, you can get more election coverage and find out how it's going to affect europe's largest economy on our website. just visit cnbc.com. christine? well, here in asia, australia's largest department

store chain myer plans to raise $2 billion in a share offering, owned by tpg will be offering just under 500 million shares. priced between $3.90 and $4.90 each. the listing will be the largest on the australian stock exchange in nearly three years. and there's already very strong demand from retail brokers and investors. well, the world's top producer russell is reportedly getting ready to file prospectives for a hong kong listings. the russian firm is eyeing a $3 billion initial public offering and could file an application before the end of the week. once it gets approval from the board. russell is aiming to list 10% of the shares in hong kong. the marketing of the ipo is slated for november with that listing set to take place in december. steve? thank you, the french government has nominated a new executive chairman of the state-controlled energy group

eds. the new chairman is the current chief executive, which already has ties with edf. the future is still uncertain, but many expect edf stake to increase. the soon to be former chairman of edf was expected to lose his post after angering the government this summer by calling for steep price hikes. in the united kingdom, shares in wolseley are trading higher after better than expected results for the fiscal year and gave a reasonably positive outlook. wolseley said the decline in sales was less bad in this half and sees this trend continuing as the market stabilizes. the company says it will start to scale down the cost-cutting program. julia? well, u.s. drug maker abbott laboratories plans to buy solvay

pharmaceuticals. it would boost abbott's prescription drug business in both the u.s. and emerging markets. and the merger's expected to result in new treatment for hypertension and parkinson's disease. abbott will gain complete control of two fighting drugs. a 41% gain since the company announced it was putting itself up for sale. kraft foods is expected to raise the offer for cadbury for tleerly $17.5 billion. according to the observer newspaper, the u.s. food giant will sweeten its offer after cadbury rejected a $16.7 billion stock and cash proposal. the report suggests it's also putting together a financial package that will enable half cash offer. here's how cadbury shares are trading right now. looks like they're up .18%. and coming up, third quarter earnings are forecast to beat expectations according to the latest poll by the "wall street

journal." we'll look ahead to the rally's next big test. plus the question to intervene or not to intervene. that is the question for the japanese. we'll focus on this after the break. t. oh please. you got the presentation? oh yeah right here. let me stow that for you, sir. thank you.

you know, just to be safe i used fedex office print online. oh you did? yeah -- they printed and bound 20 copies of the presentation, shipped it to portland, they're gonna be there waiting for us. that's a good idea. yeah. you have a nice flight. thank you. (announcer) print online...you upload your document -- we'll take care of the rest.

welcome back to the show. we'll focus in now on the currency markets. the dollar yen trading 89.47. the yen giving up recent gains. the euro has been up as high as a one-year high, 48.50 in recent sessions and sterling off the lows, 1.57 handle at its low over the last couple of sessions. let's speak to jane foley. we seem to come off the more extreme levels we've been experiencing in the last couple of sessions or so. if i may on the euro, we have a new reinvigorated government in germany, is that affecting the euro? >> well, as we've seen with the market, we've seen the psh still being very negative in so far as the story. for the most part of the week, bearing down on euro dollars.

from the point of view that the election coalition should be market-friendly. you might have expected to see a little bit of support for the euro, but i think the overwhelming sentiment is worried about global growth and that, of course, is pressuring euro/dollar still. >> what about the japanese yen. a little bit of confusion about the yen policy. yen intervention was unlikely. what can you tell us about the new government's approach to yen intervention? >> well, of course, we have had the new government. and the indications are generally they may not intervene. of course, it is going toward the end of the first half of the fiscal year. from that point of view, there is talk of a lot of reprepay, a well. and the indication so far is that they mat no have a policy. of course, we may all come in and be burnt by that. but generally speaking, the market is thinking they may not intervene enough.

at the end, as we move into october and the new fiscal half of the year-end. things might change. there are a lot of fundamentals out there that suggest that perhaps the yen should not be so weak. but for now, certainly the trend is favoring the yen. >> dollar/yen is now 89, how much stronger do you see it going? >> well, again, we've seen a lot of little bits of corrective activity. i think the trends that we saw last week. there's some momentum, et cetera, a little bit of corrective activity. but certainly i would expect as we go into the last few days of september to see that trend bearing down. and into year end, i think perhaps we could see a little bit more correction there. >> jane, it's julia here in the u.s. and watching the u.s. dollar fall to an eight-month low against the yen, what is your perspective for the dollar moving forward? and do you see it playing a different role in the global currency markets? >> well, it will play a different role. but again, this is an argument

which will go out five, ten, even 20 years. with regard to the reserve currency and come to the conclusion that right now there was a contender. what's the dollar role will alter. for now, you know, it is the main reserve currency. which with respect to the growth aspect, in the last week or so because the market is worried about the state of the global economy. and of course, if there is a bit more of a move away from risk at the dollar will gain. now, again, the end of this week, we've got the u.s. payroll state and that could set the tone for perhaps the next month. if that payrolls data disappoints the market and is weak and if the market again gets more concerns about global growth, the dollar can potentially gain some ground particularly against the euro. and we see some more u.s. corporate earnings. again, that's going to set the tone with respect to risk.

whether or not the market is going to be as risk versed or going to continue to be risk averse, we're going to see. the payrolls data and the corporate earnings are really going to set the tone for the next few weeks. >> all right, jane, thank you very much for your thoughts. coming up in the next hour, "worldwide exchange," all the top stories making headlines across the globe. plus, can third quarter earnings drive the market rally? we'll look at whether the expectations are simply too low.

even during times like these, there is a light beginning to shine again. it comes from a restaurant downtown. a shop on main street. a factory around the corner. entrepreneurs like these are the most powerful force in the economy.

the reinvention of business begins with them. and while we're sure we don't know all the answers, we do know one thing for certain: we want to help. come see what the beginning looks like at openforum.com

i'm christine tan in asia. shanghai stocks tumble in worries about more share supply. >> i'm steve sedgwick, angela merkel wins a second term in office and gets her dream coalition with the pro-business free democrats. and i'm julia boorstin, in the u.s., investors look to third quarter earnings as the next big test for the recovery. if you're just joining us in the united states, welcome to the start of your global day with worldwide exchange broadcast live from the u.s., asia, and europe. here in the u.s., we're looking

at how the market's going to be opening. there's been a reversal in the futures so far this morning. they started out pointing lower, but in the past hour, turned around. the dow futures are pointing up about by 21%, nasdaq over fair value, and s&p 500, futures up slightly. but an interesting reversal over the past hour. take a look at the boone yield, and where that's pointing. that's the up .012% to 3.25%. and ten-year treasuries, that number, the note is up .004 to 3.32%. steve, how's it looking over in europe? >> let's take a look at the cnbc global 300 index. down, it has rallied in the last 45 minutes or so. it's off the lows. but we have to look at this month as a whole. and considering there were so many people concerned about the

corrections, so far, still a couple of days to move us wrong, we're doing okay. the ftse up, down .2% down in the session so far. the xetra dax now up .6%, up for the month, best part of 3% now and the cac down .3%, month to date before this session was up 2.3%. let's take a look at the dollar rates, as well. all the more exacerbated moves of the last 48 hours or so. they've been trimmed a little bit. the dollar's gained a little bit against the yen off its lows. the euro has come up the 1.48 handle. christine? well, here in asia, negative session because a lot of question marks after the weaker than expected housing data we saw in the u.s. on friday. the strong yen hammering the japanese market. down 2.5%. the exporters getting hit, the kospi is down, the shanghai down

2.6%, the eight-day holiday weekend coming up on thursday. the housing getting dragged down 2.1%, and the aussie market down 0.8%. oil dropping below $66 a barrel, trading at $65.77. 25 cents lower a. lot of concerns about the demand outlook. demand also pulling down, as well. steve, back to you. let's get a view now from nick parsons. good to see you today, nick. >> morning, steve. >> looking at some of your notes, as well. and the markets had about -- looking at the month as a whole, it has done incredibly well considering where it's come from, as well. does anything look cheap anymore? >> it's very difficult to find places to hide in the current environment. we came up through spring and summer on the basis that things were never quite as bad as they were feared through the earnings

season in august, they actually were better than expected. but if you look at the source of that sort of growth, it was all cost cutting rather than top-line volume growth. and i think that's the problem where we're coming into the market now where we start in october to go into the q-3 reporting season. we're going to see valuations looking pretty stretched. and i think really it's going to be difficult to find any defensive areas to hide behind. and think there's a bit of inclination to head into cash where you can because it's looking a bit more stretched this time around than it is in the start of the last quarterly numbers. >> nick, it's julia here in the u.s. what is your outlook for the third quarter? as we start to see those reports, do you think we will see some top line growth? or do you think it's going to be a bit longer before it's anything other than cost-cutting and growing margins that way? >> well, i'm afraid to say we're in the anemic camp, only 2% for

the u.s. next year, it's very difficult to see where earnings expectations are going to be exceeded on the basis of revenue growth. yes, we might see it on the basis of cost cutting, but frankly, that's an easy short-term gain and today's cost cutting is really tomorrow's lack of final demand. very real concern is that we're not going to see enough top line growth. the consumers are content to be rebuilding their balance sheet, fancy way of saving more and spending less. and the fact they're spending less means the economy is not going to be rebalanced in a way that's going to bring top line growth through to the western industrialized countries. we're a bit more negative on the outlooks both for profit and activity. >> nick, obviously a big topic on the agenda this week are the jobless numbers. what do you expect to see in terms of those numbers? and what do you think the market reaction will be? >> well, it's key this report, isn't it? and i was surprised how

euphorically the market reacted. 16,000 people lost their jobs, that was 7,000 a day. the market's gearing itself up now for things to have gotten better in september. and we're hopeful only 6,000 people a day will have lost their jobs. that 6,000 people every day seven days a week who are not going to be contributing to final demand in the fourth quarter of this year. that's 6,000 people worried about their mortgage, 6,000 people who are going to be cutting back. and really, i think the market given where we start from in terms of valuations in respect to ratios, i think it's going to be difficult to get positive surprises from here. so i'm a little bit cautious about current levels. >> this is christine here. talk of what's happening between inflation and deflation, what are you betting on? >> well, we can clearly see, christine, investors are betting on both of them simultaneously. we've got ten-year bond yields down at 3.20.

i think what it's fair to say is there's never in my experience been quite so much uncertainty about the inflation. those fan charts that the government and bank of england loves to show. it gets wider and wider. i think what we can see here is investors are hedging their bets. they're not sure if it's going to be inflation or deflation. they may even believe it's not going to be either of them. but it certainly makes sense from a point of view to have both of those basis covered. and it's a very, very unusual situation, but equally refle reflective of the high degree of uncertainty. >> your problems and all heads of strategies' problem is you can't galvanize people to trade to say i think it's going to stay how it is. you have to have a view of up or down. i think a lot of people believe we're going absolutely nowhere for quite a long while. >> i think the best way to make 20% from current levels is make

3% or 4% six or seven times. it's very difficult to the one big move. i think that rotation does appeal to a lot of strategists. i think what we've also got to look at is the moves in and out of asset classes. we have can have a look at the attraction of bonds and security that the bond yields are holding has been overlooked in this equity rally. i think there's a good case for building up some of those longer term bond positions relative to the sort of ways we've seen through the second and third quarter. >> we'll discuss that soon, as well. there's plenty more bonds coming on to the market. >> plenty of them. >> parsons head of strategy. still to come as well as more from nick par sons, the pro-business right wing wins a mandate. we'll be live in berlin right half this break with coverage of the results. and we'll discuss what they mean for europe's largest economy. %%

ooh, peanuts. welcome back to "worldwide exchange." here's some of the big stories. abbott laboratories plans to buy solvay pharmaceuticals. it's expected to be announced later today and it would boost

abbott's prescription drug business in the u.s. and emerging markets. the merger's expected to result in new treatment for hypertension and parkinson's disease. and abbott will gain control of two major cholesterol-fighting drugs. solvay shareholders have enjoyed a gain. beijing is taking a hard look at u.s. chicken imports as the trade spat over tariffs on chinese goods intensifies. china's ministry of commerce is investigating dumping of chicken feet and wings. the move follows the decision by the u.s. to raise tariffs on chinese-made tires for the next three years. steve? >> thank you, julia. portugal's governing socialist party has been reelected for a second term but lost the overall majority in parliament. jose socrates got 70% of the vote. socrates has pledged big-ticket public works projects to

stimulate growth and tackle the jobless rate, which is currently at a 22-year high. the prime minister there faces the difficult task of pushing through reform without an absolute majority in parliament. >> translator: this was the victory of a political program of reforms of modernization, and of social justice. this was the victory of those who wanted to build a better future for portugal and for the portuguese. this was the victory of the socialists at the service of the country. elsewhere, iran is planning a third missile test set for today according to the country's revolutionary guard. the islamic republic will test fire the missile which officials claim has a range of around 2,000 kilometers, far enough to reach egypt and turkey. it follows a similar exercise yesterday and is expected to raise tensions across the region. also comes ahead of crucial talks in geneva this week between diplomats from the u.s., uk, france, germany, russia and

china. well, austria yal's largest department store chain myer plans to raise $2 billion. owned by tpg will be offering just under 500 million shares priced between $3.90 and $4. 90 each. the listing will be the largest on the australian stock exchange in three years and sources say there's already very strong demand from retail brokers and investors. china unicom will buy a steak for $1.3 billion. a 3.8% stake is being sold at $11 hong kong dollars a share. said it hopes to use the proceeds to strengthen the financial base. skt's exit from unicom comes at the second biggest wireless carrier signed a $1 billion share swap deal earlier this

month. shares in sk telecom raised, but down 5% at 10.70. elsewhere, reportedly getting ready to file a prospectus for a hong kong listing. according to the sunday times, the russian firm is eyeing a $3 billion initial public offering and could file an application before the end of the week. once it gets approval from the board. rusal is planning to list 10% in hong kong, the release is slated for november with a listing said to take place in december. >> and remember, you can follow all of our election coverage and how it will affect europe's largest economy on our website at cnbc.com. also, still to come, as the pro-business right takes a firm grasp of germany's government, we'll see how investors are playing the news. stay tuned for an update on the german market. my mother made the best toffee in the world. it's delicious.

so now we've turned her toffee into a business. my goal was to take an idea and make it happen. i'm janet long and i formed my toffee company through legalzoom. i never really thought i would make money doing what i love. robert shapiro: we created legalzoom to help people start their business and launch their dreams. go to legalzoom.com today and make your business dream a reality. at legalzoom.com we put the law on your side.

merkel secured a victory in germany's general election. merkel's conservatives clinched a mar majority with the free democrats who are her partner of choice. the result of merkel's unwieldly

rivals the social democrats. the result is expected to put europe's largest economy on a more pro-business course. >> translator: we have achieved something great. we have managed to achieve our election aim of a stable majority in germany for a new government consisting of cducsu and fdp and that is good. >> right. well, for more on this, we're joined by sylvia reporting from berlin. so it appears on the surface, the bouquets of flowers, the grand victory speeches, but enormous amount of work to be done. there are such cross winds in terms of what they can do and what their aspirations are still. >> reporter: yes, absolutely. first off, let's not forget one thing. a victory for angela merck la, but it wasn't a victory her party lost, as well. not dramatically, not as dramatically as the democrats, but they were one of the losers

as far as the actual voter turnout is concerned. the great winners, of course, the liberals, they want things like tax reforms, things like back pedalling on the social reforms that we've done. they want to abolish the minimum wages in the sectors of the economy. and that will become very difficult working with angela merkel and her christian democrats and especially also the christian social union, which is the bavarian. not nearly as conservative as you see parties of similar ilk in the uk. many are saying angela merkel is the head of a social democratic party only that it has the name of cdu rather than sbd. so whether we bet the sweeping changes, whether the coalition with the liberals is going to sit easier with her is a big question. >> sylvia, good morning, it's nick here. the cdu is really the sdp in

disguise, and that seems to be the way the markets have taken it this morning. the euro is barely changed, the bund future has very little impact. we hear about this pro-business party that appears to have been elected. you're suggesting that's very much not the case. should the investors be taking any particular strategy decisions as a result of this? or is it pretty much the same as we were? >> i think in many aspects it's pretty much the same as we were. we probably see some tax cuts but more tone tax cuts in something that is really going to change the scenario. the one sector where we might see some changes is in terms of the energy sector. nuclear energy, the sbd, very much tied to the exit from nuclear power, from nuclear energy because that was also a view with the voters. and with the liberals and the cdu, we might get an extension of the nuclear energy programs and not necessarily new plants, but an extension of what's going on. there might be a little bit of

it in it for the likes, with maybe a little bit of backlash for renewable energies. not much of it. i think these are minor changes, minute changes in terms of the big reforms that the country might need but are strictly speaking unwanted. we're not going to see much change. and another thing, this election we've got now and this election result might just well be the waiting loop for a real move to the left. because one of the big results has been that the left party, the party left to the social democrats is gaining strength and strength and somewhere down the line in 2013 we might be able to brace ourselves for a center left coalition between the greens, the sbd and the leftist party and that is a point where the changes might come. >> yeah, absolutely. the prospects of more polarized politics. thank you very much for joining us for that report. let's get to our round-up of

the global equity markets now. we're going to start off with rebecca. it's improved from the earlier lows. is it in positive? >> not quite. down by six points or so. we did start the day in positive territory. a fair bit lower, approaching unchanged level at the moment. let's take a check in some of the movers. on the downside, a couple of stocks hit by analyst ratings changes. home retail down over by 3%, almost 3.5% after credit suisse cut the rating. they're not keen on the business that home retail has. we are seeing the shares move lower. bank also suffering today, lloyds and rbs not doing too well. also suffering the likes of rio tinto, anglo-american, as well. tend to lose a little bit of steam about the recovery.

on the up side helping us to pull back to the change though, sales of wolseley have strengthened, higher by almost 10% now. and wolseley came out with the full-year earnings. they said profits they believe will improve in the second half of 2010, but stability may be in the new venture part of that business. seems to be helping prop the markets a little bit today. how's it going in germany? >> volatile. we are up 7% right at the beginning of the trading session, then, of course, went into negative territory. and also volumes are looking quite okay 37.3 million shares have traded so far and it is about the energy stocks that are helping the dax at the moment, up about 3.1%, on up 2.8% and reacting to one of brokers' calls upgrading that stock as well as giving it quite a nice progress.

getting an upgrade there up 2.3% as we seek. m.a.n., though, the truck maker, down 1.5%, and s.a.p. under pressure. interesting to see in terms of direct reaction from the german election is the energy sector doing rather well in terms of the main utilities. and e. on, those renewable energy stocks and renewable stocks, now down 3.7%, solar world down about 3%. over to adam now. >> thank you, patricia. well, we saw sizable declines in asia's top three markets by market capitalization being japan, and, the hang seng. in japan, it was really the yen strength that really was fanning the losses across the board particularly for the exporter stock. as we got comments the finance minister who doesn't seem to be against the strength in japanese

yen so long as it's appreciating in a stable manner. he did reiterate those comments later on in the trading day. that's when we saw the yen come off the highs. did little to stop the losses in the big exporter stocks. many of these companies, of course, forecasting 92 versus the u.s. dollar for this fiscal year in terms of the budget. really does knock off quite a bit of the operating profits now that we're trading at the 89 range. financials, other problem child in japan on the prospect we'll have to see many of these banks raising more capital, nomura with their $5.6 billion capital raising day, that was one of the worst performers in today's trading session down over 5%, you can see 5.8%. back to julia in the u.s. >> thanks so much, adam. well, today in the u.s., waiting for the dallas fed rates for september, set to be released at 10:30 a.m. eastern. last month's survey signalled a

fragile recovery in the u.s. looking ahead, jobs are the main focus. numbers scheduled to be released wednesday. well, the government's jobs report will be announced on friday. manufacturing numbers are scheduled to be released in friday's ism report and no major companies reporting today in the u.s. and that's your global stock watch. christine? well, coming up on "worldwide exchange," an article in today's "wall street journal" says get ready for corporate earnings. but does that really mean anything? or are expectations still so low that it'll be hard to miss? find out when we come back.

welcome back to worldwide exchange, 30 minutes past the hour. the top business stories around the world. in the u.s., investors begin to look to third quarter earnings for the next big test of the recovery. >> and angela merkel wins a second term in office and gets her dream coalition with the pro-business free democrats.

and here in asia, ipo fever is still spreading, a top department store myer plans to raise $2 billion in the country's biggest ipo since 2007. let's take a quick look at how u.s. futures are trading. there is quite a reversal in the past hour, they were pointing down, now looks like they're pointing up. the dow is up about 21 points from fair value. nasdaq is up about five points from fair value and the s&p 500 is up a little bit more than two from fair value. now looks like we're pointing to ahigher market open. looking at the ten-year bond yield, pull that up there, that is the ten-year note is down .002 to 3.32%. steve, what's it looking like in europe? >> well, it's not too bad, really. we were expecting throughout the month of september some form of cataclysmic decline.

it hasn't happened yet, i say yet. the ftse is down .14% at the moment, giving up around 100 points from the highs as of late. still up month to date 3.5%. the german market still up month to date. before today's session 2.1%. so really bucking the trend on the back of the supposedly business friendly coalition, which will now be governing the country. in france, the cac down .18%. the cac is year-to-date, still up 16% month to date 3.3% higher. and over in switzerland down .8%. let's take a look at the foreign exchange markets very briefly for you. we saw some extreme moves, the yen around the 88 level versus $1. the euro dollar about 1.48, the sterling price around 1.57. at the moment, at least, just a

retrenchment back into previous levels. christine. >> hey, steve. well, a negative session here in asia, the weak u.s. housing data raising questions about the pace of the recovery. nikkei getting hammered today because of the strength in japanese currency, down 2.5%. one of the biggest losers, kospi down, shanghai biggest loser because of a selling spree happening ahead of the eight-day holiday coming up on thursday. the hang seng getting dragged down as a result 2.1% and the australian market down 0.8%. crude falling below $66 a barrel, $65.58, down 44 cents, and brent pulling back, as well. a lot of concern about the outlook, $64.70 a barrel. well, let's go to tokyo and check on the trading day with

makiko. the nikkei slid 2.5% briefly falling under the 10,000 point mark for the first time since july, triggered by the strengthening of the yen which drove the drive against the dollar. the highest in eight months. the yen also climbed to two-month high against the euro. driven by comments from japanese finance minister who said that the recent trend was not a normal suggesting that the government won't step into the market to cur curb the yun's rise for the time being. saying i have never said i will tolerate the yen's appreciation and that it is preferable for the currencies to be stable. electronic makers were among the hardest-hit with tdk falling over 6%. tokyo electron more than 5%. automakers lost ground with honda motors slipping 5% and toyota motor lost a near 4%. meanwhile, gainers were

mostly domestic demand related issues. retailers led the way with casual ware maker, sells imported furniture gained more than 3% reaching a year-to-date high for the second straight trading day. and that's all from nikkei business report. back to you. >> thank you very much for that. julia? joining us now for some market strategy is richard cookson at hsbc and still with us is nick parsons head of strategy in national australia bank. richard, where do you think we are in this recovery? are we going to continue the rally? or are we headed for another leg down? >> i think we're probably headed for another leg down at some stage. the only question is when. this is rather curious tension between the cyclical and structural. structurally when it comes to development markets, we're a sort of new low growth environment. you don't want to confuse the structure with the cyclical. and the cycle's still relatively

strong. commodity prices do seem to have peaked for the moment, anyway. and so that might just be telling you that this cycle is running out of a bit of steam. >> hey, richard, this is christine, here. it's quite interesting, i'm only bringing this up, your global ceo is moving to hong kong, does this reflect a shift in gravity in your investments to asia? >> well, it certainly reflects that huge shift that we have seen over the past few years. about whether the sources of global growth are going to be coming from. and, of course, from a structure -- from a long-term perspective, that's exactly what that shows. it doesn't really tell you anything about the current cycle, of course. >> yeah. let me pick up on that same point, nick. demand is the key. presumably emerging demand is the key. it could be ten years before the chinese demand gets anywhere near the u.s. demand levels, as

well. are we going to have a gap where the consumer is going to play ball? >> i think that's certainly going to be something that will weigh down global growth. let's not forget we're talking about the slow down in china and india and elsewhere through asia. china's projected after three consecutive years of double digit growth, a slow down this year. let's not forget that an economy that grows 6% a year is going to double in size in just 12 years. so there's still a phenomenal amount of growth that's going to come through that region. if we look at the oacd area this year we're projected to fall around 1.4%. if it wasn't for china and india, we'd be down 2.25 to 2.5. it's easy to down play and it's fashionable in a sense to say that there is a shortfall of demand at a global level and china is not yet in a position to make that up, but i think the keyword is yet. that economy will double in size.

>> richard, on that note. if i wanted to put my money where my mouth was and actually invest in companies with the right kind of exposure to these grand markets, where would i put my cash? >> well, yeah, that's a good question. but again, i'll make the same point, don't confuse the cyclical with the structural. i certainly would not be piling into emerging asia at the moment. and if i was going to be putting my money into markets in equities, it would be far more likely at the moment to be going into -- to the oil producing, to the commodity producing regions. but even there, from a tactical perspective, i'm a little cautious. i'm kind of sticking with my -- it seems to me that corporate credit is still from a risk adjusted reward perspective much, much, much the better play. it's still up ambiguously cheap. and if it's not, equity markets have fallen a lot further. >> and richard, which sectors are the cheapest?

where would you direct investors to look right now? >> financials are still very cheap across the board. and if you go down the pecking order the capital structure pecking order, the further down, the cheaper it is. certainly if i was going to be looking at the difference between banks common equity, i'm not sure why i would be buying that in preference to tier one. it does seem to me there's an awful lot of value there. >> do you like the corporate credit market? there's a lot of people rushing to market as i understand with ipos and rights issues, as well. >> well, i think the point, you've got to look at relative prices rather than just the absolutes. and while we share the view that equities are little expensive, let's not forget the pe ratio on the s&p 500 is now higher than it was in the three years preceding the crash. we went from 18 to 10, gone back from 10 back to 20. on the simple metric of value, which is just to take forward-looking pe, we're as expensive if not more so than we

were pre-crash. with that in mind, moving further down the capital structure, yes, i would see more attractive opportunities. but i would be just very cautious about assets as a whole starting from the top level. it's not until, you know, we've got to go back six months to find last time we saw a correction of more than 7%. that's very unusual in a rally of this size. >> hey, richard, this is christine. we've talked about equities, little bit about bond. what about currencies? the japanese yen, eight months high. are the currencies something you would play in your portfolio? >> yeah, listen. i think the yen has been rather overdone recently. look, it's still a very deflationary economy. it's very unlikely that the bank of japan is going to do anything in our lifetimes. this is going to be starting to shovel money overseas. and i really don't buy the argument that the new administration is going to be concentrating on building up the domestic economy to the detriment of exports. so, look, i expect the yen is

actually going to be -- going to be suffering over the next few months. yeah, sure i do like the commodities currencies and emerging currencies. but again, structural, cyclical. >> richard, thanks so much for joining us. again global head of asset allocations for hsbc. nick parsons, you're going to be sticking around for australia national bank. just ahead, kraft readies the hostile takeover. an american company looking to expand overseas. here's a look at how the u.s. tickers are shaping up. remember the anticipation of hearing the ice cream truck?

in poland, cargill borrowed the idea... for something quite different. small polish farms had difficulty getting... affordable feed for their smaller herds of animals. so cargill created a way to bring the feed... directly to them... on musical delivery trucks, selling a few bags per visit. ( dog barks, horse neighs ) keeping the small farmers competitive, and their animals happier. this is how cargill works with customers.

some people like to pretend... a flood could never happen to them... and that their homeowners insurance... protects them. it doesn't. stop pretending. it can happen to you. protect your home with flood insurance. call the number on your screen...

for your free brochure. welcome back to cnbc's "worldwide exchange." here's some of the top stories from around the world. abbott laboratories plans to buy solvay's pharmaceuticals for roughly $7 billion. the deal would boost abbott's prescription drug business in both the u.s. and emerging markets. the merger is expected to result in new treatment for hypertension and parkinson's disease. plus abbott will gain complete control of two major cholesterol-fighting drugs. solvay shareholders have enjoyed a 41% gain since the company announced it was putting itself

up for sale. angela merkel has swiped a victory in germany's general election. conservatives clinched a majority with the free democrats. merkel's partner of choice. the result brings an end to the unworldly grand coalition with rivals the social democrats. the result is expected to put europe's largest economy on a more pro-business footing. >> translator: we have achieved something great. we have managed to achieve our election aim of a stable majority in germany for a new government consisting of cducsu and fdp and that is good. >> well, australia's largest department store chain myer plans to raise $2 billion in a share offering, owned by u.s. private equity firm tpg will be offering just under 500 million shares. the listing will be the largest on the australian stock exchange

in nearly three years. and sources say there's already very strong demand from retail brokers and investors. let's get some final thoughts now from nick parsons, head of strategy at national australia bank, as well. well, you've given the market some conundrums, as well. we've got the deflation/inflation debate going on, as well, where does this leave us really? in terms of the fact we're going to be in a similar fiscal position, similar unemployment position for many years to come even if we have a mooted recovery. >> it leaves us in an era of low slow growth. the best we can hope for is a return to growth, half the levels we saw precrash. i think for most of the developed world, that means growth in the order of 1.5% rather than the 3.5% to 4%. so even though we've returned to normal, it's not going to be the normal that brings cheer either

to investors or consumers. and i think we're going to have to get ready for a new reality at much lower levels of activities than we've seen previously. >> you mentioned earlier about the prospects and the benefits of parking some money in the bond market, as well. i mentioned my concerns of the fact it's going to be enormous issues. >> i think that's a valid concern. the argument that is probably japan. japan has got the greatest debt to gdp than any of the countries, it's got a high level of domestic savings. when we look at individuals and households who are going to be rebalancing, effectively saving more and spending less, i think we can use some of those savings to help finance the fiscal deficit. so that's where i think the positive news is going to come from. household saving is good for bonds. >> nick, we've been talking a lot about the jobless numbers. but you've also referenced the consumer a number of times.

what's your sense of the american consumer of the global consumer? it seems like the consumer is really what could drive that top line growth that we're looking out for. >> well, as far as we can see, christine, consumer is the only thing that's going to drive that top line growth, very unlikely to be another round of government spending, it's unlikely to be autonomy investment. more broadly is responsible for between 65 and 72% of gdp. retail sales in turn are responsible for around half of consumption. so without that boost from consumers seeking to spend more than they have been willing to over the last 18 months, then i fear we're simply condemned mathematically to an era of fairly low growth. yes, things are going to feel less bad than they did, but i think less bad is very different in absolute terms to good.

and therefore, i think this process of balance sheet rebuilding is going to be a drag on activity for some years to come. this is not something that's going to be over in a couple of quarters, this could take five to seven years. >> i'll pack my bags now. thank you very much. we're going to say good-bye. nick parsons, national australia bank. up next, an article in the "wall street journal" says get ready for positive surprises from third quarter corporation earnings. what to expect after the break. welcome to progressive. how may i help you? i'm looking for a deal on car insurance. i think i might have a coupon in here. there's an easier way. we've got the "name your price" option. you do? follow me. you tell us how much you want to pay, and we'll build you a policy that fits your budget.

and i still get great coverage? uh-huh. go ahead. you're the boss. i'm the boss of savings. more like the c.e.o. oh, oh. no glass ceiling. the freedom to name your price. now, that's progressive. call or click today.

it's nine minutes to the top of the hour. "worldwide exchange," joe kernan can tell us what to expect. good morning. >> good morning, steve. once again, we are on the cross roads of washington and wall street today. our guest host, senator judd gregg, ranking member of the budget committee, newly appointed member of the banking committee. everything from the nation's

rising debt to a push for a health care deal now. he's a republican, and, you know, i just -- we had howard dean for two hours, didn't we call on friday? we had the governor on -- former head of the democratic -- right, former head of the dnc. he was just on. so, please, when senator greg's on today and says something that might be counter to what you're thinking, just know that we're fair. searching for investing opportunities. well, we have a strategy session with a fund manager that controls $200 billion in assets for some of the nation's largest pension funds. ceo of principal global investors will tell us where he's looking right now. then we're going to find out which high-tech stocks are ready to rally and pull that sector higher. all of this comes as the countdown begins to friday's jobs report. everything leads to that whenever we're in jobs week. does that mean october is today? >> thursday. thursday? >> is that thursday? >> yeah, the first.

>> anyway, "squawk box" will begin right at the top of the hour, which will be in about 7 1/2 minutes. >> i wonder if people are saying to you the same things they said to me. everybody was terrified about september, and yet the dow's up 1.8% year-to-date, the s&p's up, now they're rolling over the same fears into october. have they got it wrong, do you think? >> so far. so far they do. you know, every weekend when i read all of the papers, it's waiting for -- now we're really waiting for the crash. now, you know, earnings coming now we're going to say now the correction's going to come in earnest. so the more you look for it, the more you wait for it, the harder it is to come. october, though, it strikes fears in the heart of anyone of a retail broker. and i remember some octobers that weren't too pleasant. we'll see, never know. >> you and i probably around in october of 1987, we do remember some of the big ones.

>> from under my desk, i do. from under my desk as a stockbrok stockbroker. back to you. joining us now for a look ahead at u.s. trading days, angus campbell. we're tight on time here, but give me your thoughts. a lot of data, particularly that jobs number. what do you expect to see? and how do you expect the market to react? >> yeah. it's going to be a quiet day today, but as you say, we're building up to a big week for economic data overseas. tomorrow, we've got the likes of consumer confidence, which is expected to jump up a little bit. we've got the final reading of gdp on wednesday. ism manufacturing thursday, and then the big one payroll on friday. we're expecting probably a decline of around 200,000. and, you know, there's been some big movements following on from payrolls over the last few months. so definitely, i think, there'll be a big build-up to that on friday. last week we saw really a bit of

a reality check for indices. they've been rising quite substantially. and the question really now is whether this little pullback that we've had is going to present a buying opportunity. we've certainly seen that from our clients buying into this recent weakness. then maybe a couple of technical indicators that would suggest that there is possibly going to be a bounce in towards the end of september and q-3. we're sitting right on the 20-day moving average. so that could present a buying opportunity. >> and so, angus, as the third quarter wraps up, a lot of discussion about whether any earnings growth will be just because of cost-cutting or whether or not we'll see some top line growth. do you see an opportunity for top line growth in the third quarter earnings? >> well, in second quarter earnings, we saw very, very few companies actually show bottom line revenue increases. and it was all down to cost cutting. it'll certainly be another very focal point for q-3. we'll have to wait and see.

there are a few -- >> angus, unfortunately, we're going to have to leave it there. thanks so much for joining us. thanks for all of us from "worldwide exchange," that's it for today's show, i'm julia boorstin. if you're still one of the guys who's going over and over... going urgently... waking up to go... it's time to do what lots of guys everywhere

have already done-- go see your doctor, because those could be urinary symptoms due to bph, an enlarged prostate. and for many men, prescription flomax reduces their urinary symptoms due to bph in one week. one week. only your doctor can tell if you have bph, not a more serious condition like prostate cancer. avoid driving or hazardous tasks for 12 hours after your first dose or increase in dose, as a sudden drop in blood pressure may occur, rarely resulting in fainting. if considering cataract surgery, tell your eye surgeon you've taken flomax. common side effects are runny nose, dizziness and decrease in semen. millions of men have been prescribed flomax. maybe it's time to see your doctor and ask if flomax is right for you. and call 877-4-flomax to see if you qualify for up to $40 off new or refill prescriptions. for many men, flomax can make a difference in one week.

she is the greatest thing ever. woman: one little smile, one little laugh. - honey bunny. - ( coos ) we would do anything for her. my name is kim bryant and my husband and i made a will on legalzoom. man: it was really easy to do. - ( blows raspberries ) - ( laughing ) robert shapiro: we created legalzoom to help you take care of the ones you love. go to legalzoom.com today and complete your will in minutes. at legalzoom.com we put the law on your side.