brought to you live from n london, singapore, and around the world, this is "worldwide exchange." hello and welcome to the program. the headlines today from around the globe. a sea of red in stock markets following cautious outlooks from socgen's ceo. china's foreign direct investment falls for the third straight month in january reviving fears the powerhouse is sputtering. a decision on greece's second bailout should come by monday. according to the head of the euro group athens makes further assurances it will stick to its debt reduction plan. in the u.s. investors await

earnings information are from german mergers as well as jobless claims, ppi and home construction figures. and what a day -- 24 hours ago we had a sea of green. today it's a different color, kind of red across the screen. risk aversion after another delay in the debt greek bailout plan. so markets are moving, sentiment is lower. knnikkei 225 is off 0.2%. the down side was capped because investors and traders are optimistic because of the move by the b 0 oj earlier in the week to offer additional easing. 0.4%. china foreign direct investment falling for the third consecutive month and that seems to be weighing on sentiment as well but we had some profit taking going on in these two

particular markets. the hang seng holding on to the key level so a good sign. the taiwan weighted index is down 1.7%. australia really the big loser today, 1.7% but more on domestic corporate earnings, the miners were weaker as a result and the sensex off 0.4% so what a difference a day makes. yesterday it was all green and today it's all red. >> yeah, and a pretty flat close really yesterday for european stocks and here we are one hour into the session 9-1 decliners outpacing advancers. spanish debt auction coming up as well this morning. they're going to be looking particularly at the seven year issue to see how that goes. but if they raise the $4 billion they're targeting then spain would have raised 34% of its total issuance for the year and here we are only halfway through february. keep our eyes on that. the focus is on stocks and earnings. ftse 100 down three-quarters of a percent this morning it was just down seven points yesterday.

the dax was up 0. %. today down 1.3%. the ftse mib down 1 1/3%. of course we're still wondering what will happen with greece's talk as christine was highlighting that payments may come this dribs and drabs rather than a bunch of money and that seems to be where the finance ministers were concentrate their efforts and talks through the weekend and maybe back to a final decision on monday. now let's remind you on what's going on with earnings. kicking off in france, renault profit has fallen. the stock is up nearly 2 1/2%. edf stock is down 0.4%. annual growth view but not good

enough to raise the stock. and ppr today luxury goods have been outperforming recently. the profit did rise as expected. they see a strong 2012 performance but this is a sector that has been outperformed, the stock down 3.2%. we focus, of course, on banks. moody's coming out saying it may cut the rate of 17 global banks and 124 eu financial institutions and numbers out today from socgen. you see the stock down 3%. the profit did slump and toxic assets in particular are weighing. frederic oudea said investors should be rae assured about the bank's efforts to cut their exposure to peripheral debt. >> overall 75% reduction of exposure and we just have 307 million remaining. regarding the other countries we have short maturities. we were basically reimbursed.

we have new exposure to port dwal and limited exposure to spain. >> okay. and don't forget, of course, we'll be hearing more from frederic oudea during the show in an interview stephane conduct ed this morning. out of switzerland abb stock down 4%. they missed targets, a hit on its margins in the q-1 hit by price pressures and adverse business mix. givaudan off slightly under 1% this morning. its 2011 net profit fell 26%. it says price hikes are on track. zurich financial stock is off 1.7% it at the moment. the q4 profit has fallen on thai floods. speaking earlier on this channel the ceo had this to say about the company's prospects. >> the interest rates will remain low for quite some time and that obviously makes it somewhat challenging but we feel the way we are positioned and

the way we are capitalized in a good position to take these challenges. >> charlie morris is with us this morning. charlie, what do you make of what corporates have been saying, european corporates as we go through the season? have you detected a clear trend or not? >> european equities have a lot of headwind against them. when we look armed the world it's not the first destination i would put my money. one of the reasons is the currency. the other is the recovery is much lower than on the other side of the atlantic. i think that's also true in emerging markets in asia as well. people are excited with about the strength of recovery there. i don't see it as strong as we had in the last few years. america really is the story at this time. i think we should avoid the other as well. >> what about sort of the global luxury goods, consumer products groups which have that mix and exposure to where the growth is in the world and performed fairly well last year. >> they have very high and sustainable har gyns but the

valuations are high. the underlying story with the company, the operations and then the price. and the price for those companies isn't attractive. >> christine? >> this is christine. did i hear you say you are not bullish on emerging markets? i thought this is where all the growth is. >> i think long-term economic growth is an emerging market but is priced in to the extent of the excess returns. look at what's happened around the world, this is what the markets are telling us by the relative performance. and money is being flown out of the usa for ten years and had a started to turn. money has been going into emerging markets for ten years and that's now starting to turn. i think really the switch is emerging markets in asia to america particularly the tech sector. >> so when you hear companies like nestle trying to buy a stake in companies, can getting access to chain, for instance, would you approve of that or would you think -- would you err on the side of caution?

>> absolutely. and leslie is very much in the group of stocks that i have a high opinion of. i think they are enjoying the global growth in asia but not exposed to the stock markets so you don't have the overvaluation. these are robust global diversifiesinesses. i think this is exactly the way to play global growth as direct ing emerging markets. >> you are with us for the first hour today. good to have you on. talk more about nestle. shares have been treading more cautiously along with the rest of the market. they saw revenue rise more than expected in 2011. it is fairly cautious. that stock is outperforming up 1.74%. underlying sales thanks to volume growth and price adjustments. nestle expects revenue to go up to 6% in 2012. the year with where consumer goods giant will not be easier than previous years. the managing director and

european consumer staples at jeffires joins us now. thanks for joining us. the stock is an outperformer this morning. is that justified? >> oh, absolutely. these are very strong results, strong momentum in the fourth quarter, slightly in excess of 8% organic growth in the quarter, and that is against expectations slightly less than 6%. the whole focus of the market for the entire staples area is the stakes for growth. and nestle has been building this momentum in terms of growth over the past few years and this is a very, very strong final quarter. the stock will clearly be up significantly more today. were it not for a slightly wobbly market during the course of the session so far. >> we saw sales growth trimmed and margin targets. unilever was saying 2012 would be a difficult year. how does nestle compare against those particularly in the key

area charlie was talking about in terms of price and valuation? >> in terms of price and valuation actually the balance of price and volume was actually very balanced at nestle this year. clearly priced for all the key food groups has played a significant role in the second half of the year. bear in mind that many of the price increases that had to be managed. the second half of the year, so we were expecting stronger growth numbers because of the contribution of pricing in the second half of the year. however, bear in mind that as is the case for the ceo of unilever just a couple of weeks ago the outlook for 2012 remains pretty robust for these companies which are expecting, you know, 5%, 6% -- in the range of 5% to 7% organic growth. interestingly both indicated only modest margin increases this year, guidance 10 to 20

basis points essentially because the company is dedicated on reinvesting as much as possible, i.e., inquiring market share. i was in paris yesterday and the same thing with danone. 5% organic group but they are guiding for flat margins because they're reinvesting so much in terms of the core business and nestle today is saying the nestle model 5% to 6% organic growth in 2012 but they are saying increases in margins in constant currency this year and we're expecting another year delivering in excess of 30 basis points of margin. comparatively nestle is right up there in terms of the growth stakes for 2012, but it's going to be doing better on margin in our opinion than its two european peers. >> simon, this is christine. let's talk about inorganic growth.

i understand nestle is alsoizing pfizer's infant nutrition business in china. when it comes to infant nutrition, how profitable is the segment? >> the segment is a very profitable seg ment for the key players. nestle is number one. danone is number two. and profitability is typically 18% operating margins plus and that compares to group margins of danone and nestle around 15% on the fully adjusted basis. so these are significant contributors in terms of profitability. but they're concentrating significantly as global c categories. as you know danone made that kr critical acquisition of an enterprise value deal $13.4 billion. there is a lot of comment and has been in the financial press

of recent about johnson and other assets in china. so i think the stakes are high but these are very profitable areas when one has the critical mass as nestle and danone have and are continuing to build. >> yes, simon, the school of thought i do not agree with that actually these stocks are becoming too popular having performed very strongly last year. do you think they can continue and can increase with inflation? >> well, on the second question, their resilience in terms of material inflation i think the whole discussion about any of these companies, and you can go back to coca-cola over 100 years, is how you build brand equity. if you build equity you are reference pricing on the shelf is valued to the core consumer and, of course, when you talk about brands and staples it's in the eye of the beholder. when you get that equation right by investing behind your brands,

you can price the extraneous factors or external factors, currencies, commodity priced movements and you will not -- and you will not erode your brand equity by doing so. when you erode your brand equity is it if you are pricing up and pricing your brands up beyond the value point. and we have had a number of examples of companies the last two, three years, who have had to go into price resets, some major global companies. it has not been the case for nestle in particular which very, very rarely in its history i cannot remember when it's actually had to do a price reset. nestle over a 25-year time series has managed to price down to deviations from the mean on the likes of soft commodities. when it is four deviations away from the mean, they're still managing to price and retain the pricing over time and pull margin off it. there are few comparables anywhere in the world that have

that performance. coke might be one. >> good to talk to you. simon marshall. the head of the euro group says he expects a greek bailout within days. jean-claude juncker who heads up the group of finance ministers made the comment after last night's conference call. he said that significant progress can be made and ensured they are set to make all the necessary decisions now by monday. it always comes down to mondays. the troika has arrived in portugal to ensure the company is on track to meet the terms of its 78 billion euro bailout. silvia joins us for more. silvia, it's fair to say portugal has made progress in reigning in its big budget deficit but it still seems to remain an inevitability that it will need another rescue package. >> reporter: well, the big problem for portugal it's almost the poster child for a success story in terms of sticking to

the program. everybody is always agreeing the po portuguese are doing what they need. they are consolidating their budget. they are privatizing. they are restructuring the economy. they are liberalizing the labor market, everything that they are supposed to do, they're doing, and yet the confidence is not returning to the markets not because of portugal but because simply a lot of people in the markets are saying we have to 0 watch out what happens to greece and if it greece falls, portugal falls no matter how successful they are. so this is where it hinges on. this is where we might ultimateultimate ly falter. by the time they want to return september 2013 we're still pretty much where we are announcing the next eurozone finance minister's meeting and some progress being made but not really out of the woods. we caught up with the economics minister, not the finance mince it ter, yesterday and we asked him about these things, about sticking to the reform process

but where are the problems from possible fallout from greece and how can portugal get itself out of the crisis. this is what he said. >> we definitely have to make sure that the banks start lending money to it our companies. it's nobody's interest it if 0 our companies go bust because we don't have finances. we have to be it at the banking level, at all levels of government but also we immediate to monitor this situation very closely in order to bring money back to our countries. i have absolutely no doubt this is the short-term problem we need to address. they go hand-in-hand. we cannot allow our companies to go bust because of lack of financing. we cannot allow our european companies to go bust because of lack of xcompetitiveness. we can make all the structural reforms we want, but if our

companies die in the short run because they don't have access to credit we are not making any service to them, so we need to address the problem as soon as possible. >> reporter: in terms of the time factor, i am always asto d astounded that when we go to brussels that things are decided for the next year, for the next two years like portugal not entering the market until 2013, like greece not entering the markets until a couple of years or so. everybody knows that structural reforms take longer. don't you sometimes get the feeling that we're not generous enough allowing reforms to take place and that way putting ourselves and the countries in question under undue pressure? >> the balance between austerity and growth is a delicate balance. nobody has a magical bullet for this or a solution for this. what we need to do is obviously to learn what is going on as well and obviously to implement the structural reforms, to

improve xcompetitiveness of our companies, give ak is ses to credit to our can companies, and stay the course. in spite of all the volatility, we know that we need to stay the course and i think europe, portugal, they have to stay the course in order to get out of the situation. >> it's a fair argument to say that portugal is not another greece because you obviously haven't got the same problems. you haven't got the same institutions problems greece has, for example, a whole bunch of institutions that don't even exist in greece and yet the markets keep insisting that portugal is the next greece. can you convince them that it isn't? >> we have to and we will. >> reporter: so, indeed, portugal is doing what it can but it's suffering from very much the same problem some other countries are suffering, too. one of the key problems is the looming or threatening credit crunch he especially for small

mid-sized countries. the ecb flushing money into the pocket but it's not ending up in the real economy and that could be detrimental as we go down the road. >> we heard another finance minister today we need our banks to lend more to companies. it's double speak. banks are deleveraging like mad because they're being told to. >> they're being told to and that's what the cycle wants them to do. spent the last ten years leveraging. you can't lend more and delever at the same time. >> why are they saying it? >> it's the political thing to say. >> silvia, you can't -- every finance minister says it but do you think in reality they understand the double speak? >> reporter: i think they do understand the double speak. they do understand, let's say, the quandary the banks are in. they do understand that on the one hand they ask for higher capital ratios and higher

capital requirements. on the other hand we're telling them, yes, raise your capital that way but please don't run down your balance sheet. i think something has to give somewhere along the line. either the banks have to be recapitalized in a different way, the requirements have to be loosened, or money has to come to the industry directly. we can do this, the bank for -- the european bank for reconstruction but it's a clumsy way. you really want the banking sector to supply your economy and not the government. >> that's not going to happen. there is less money coming out of the bank sector and that's just a fact. silvia, good stuff. we'll talk to you later. i know you are going to talk to the former central bank governor as well for portugal, so we look forward to that. also, charlie says he still likes gold and gold shares, so how high can it go? i look at her, and i just want to give her everything.

yeah, you -- you know, everything can cost upwards of...[ whistles ] i did not want to think about that. relax, relax, relax. look at me, look at me. three words, dad -- e-trade financial consultants. so i can just go talk to 'em? just walk right in and talk to 'em. dude, those guys are pros. they'll hook you up with a solid plan. they'll -- wa-- wa-- wait a minute. bobby? bobby! what are you doing, man? i'm speed dating! [ male announcer ] get investing advice for your family at e-trade.

welcome back. let's get a view of gold. yesterday it was up because of expectations in what was happening in the greek debt plan. today it is moving lower as expectations wither away.

down $12. let's get an outlook from charlie morris. charlie, are we going to see gold break out of this range? it's within trading -- any chance of it moving out of this range? >> i think ultimately exciting in the short term and the reason is this. highly correlated in the stock market short term and in the very long term. and gold, the strongest invest omt on the planet, continues to be so. in the short it term, when the market goes down, the price of gold goes down. now in august last year we had a very, very strong move. standard deviation overbought in the long-term trend and the last two occasions that's happened. on that basis we have to wait a similar amount of time, until next year. i think in the short term we should expect gold to do whatever the stock market does. >> all right, charlie.

good point to note. you'll be staying, of course, with us. coming up on today's program, of course, we'll talk about currencies. is the yen weakness overdone. now is the time to take profits on the japanese currency crosses. how bad is the risk of contagion from greece and europe? we'll speak to the former governor of port dwes central bank live from from lisbon. plus, we'll speak to a strategist who says equity markets may hit all-time highs.

this is cnbc "worldwide exchange." a sea of red in european stock markets following cautious outlooks are from the likes of abb and socgen. the ceo remains prudent. china's foreign direct investment falls, reviving fears the world's economic powerhouse is sputtering. >> and a decision on greece's second bailout should come by next monday according to the head of euro group as athens makes further assurances that it will stick to its debt reduction plan. and in the u.s. investors await earnings information from

general motors as well as jobless claims, ppi, and home construction figures. well, asian markets are weak across the region today after another delay in the greek bailout plan and that also kept sentiment weak. you can see the nikkei 225 is up today but down side was kind of capped in this particular market because we had the boj move earlier in the week to offer addition additional stimulus. that supported the market somewhat. investors are optimistic. over in china the shanghai composite down. data showing that china foreign direct investment fell for the third consecutive month. the crisis happening in the region down 0.4%. hang seng up as well but the key 21,000 level. elsewhere we have the taiwan weighted index down 1.7%. the kospi up 1.4%. a lot of risk aversion at play

today. australian market yesterday was mixed. today it's more down side -- in fact, it's a worse performer today. we had corporate earnings and that weighed on sentiment. the sensex over in india up 0.4%. so it's a sea of red across the region today. ross? >> pretty much a similar story in europe, an hour and a half into the trading session. after, again, a flat close really yesterday. the ftse 100 down three-quarters. the xetra dax down. the ftse mib down. spain down 2.4%. a bond auction coming out of spain as well. we'll get results in the next ten minutes or so. we'll keep our eyes, looking to raise up around $4 billion. keep our eyes on a seven year. other bond yields.

treasury is .95%. down near three-week lows for the euro/dollar. euro/yen off 103.36. we'll keep our eyes on dollar yen coming off highs. and the fed still pretty divided on qe-3. few fed officials believe another round of bond buying would be needed to support the economy but others believe they would like to wait for more data to see if it deteriorates. the director of fx strategy at citigroup. there are plenty who believe qe3 is going to come in the united states because the recovery isn't strong enough particularly when you look at the employment data. do you see that happening and how will that impact the dollar? >> yeah, good morning. indeed we cannot exclude another bout of qe in coming months yet

we do agree with the fed or the majority of the fed policymakers that we could take deterioration in the data and suffer inflation data to receive that risk materializing. so from that point of view i suspect now it seems like the fed is on a data watch and data dependent and qe the next few months not really a done deal. >> yes, how does this wash through? what's the major influence in the current market? is it growth policies? qe traditionally, of course, has been a weakener but what are people focusing on? growth policies? how does it wash out in euro/doll euro/dollar? >> i guess it's all interlinked really in a sense that the latest rebound or the rebound and risk appetite we saw in euro dollar since the start of the year was an indication of a recovery in the belief that any recession in the eurozone is likely to be on the shallow one.

at the same time the world economy is continuing to show resilience that is outside of the eurozone. all of that support for risk sentiment as well. needless to say that the fact that the bernanke puts guarantee for the risk currencies is still very much out there especially following the affluency meeting in late january. some of that optimism or if you wish enthusiasm is being taken away most recently. needless to say further deterioration in the uncertainty about greece -- the fwrek second bailout is likely to have concerns the shallow recession in the eurozone may not be actually as benign so further deterioration may lie ahead. importantly while the central bank will do what it takes to forestall any further significant deterioration and sentiment. it's really about the time of the response and, indeed, how far risk assets will need to go

before we see that response. and the fed's minutes yesterday were kind of indicating that qe, as i said, is not a done deal yet so we may have to see further deterioration before we see them acting. in terms of euro/dollar, i guess the more direct implication is clearly the uncertainty about greece. all eyes on the meeting monday. really people looking for more clarity on whether there will be a second bailout and actually in what way the financial assistance will be extended, uncertainty about the guarantees demanded by the core, the guarantees in the form of an escrow contract where you put all the tax revenues and, indeed, these revenues are being used to satisfy any demands. all of that fairly uncertain. needless to say the psi deal certainly depending on the outlook for more financial assistance to greece. all of that weighing on the euro/dollar. >> the japanese, of course, watching the crisis over in the eurozone very chosely. we often talk about dollar/yen.

euro/yen is something we need to talk about. is it likely to offset any weakness coming from the eurozone? >> the rally in dollar/yen i suspect, yeah -- i would favor the rally now. uncertainty is not really helping dollar yen at the moment. i would like to highlight the rally was a reflection of the widening of the dollar/yen rate differential on the back of the surprise qe by the boj most recently but also, certainly, by the, i would say, the realization that, indeed, bernanke's stance most recently during the meeting may have been a bit overdone. that is the u.s. data despite the latest is pretty good. the resilience is very much out there. the widening rate differential between dollar and yen was reflecting the pickup into u.s. yields or the u.s. yields as a

whole. uncertainty about europe could weigh on the global economy and the u.s. economy as a whole could make more easing from the fed actually likelier. from that point of view the prospect for further upside in the two-year u.s. yields may be limited. the further widening, the two-year dollar/yen may be limited and, as i said, our fade rally in dollar/yen for now. by implication euro/yen under pressure as well. >> valentin, a lot of speculative money moved in, how do you see the outlook for that? do you think it's a risky position at the moment? >> the long usaussie dollar position is a reflection of the long asia short dollar position we had for so long and we remain generally constructive over medium to long term really 6 to 12 months. we see aussie support by continuation diversification

away not only from the dollar but potentially to a degree from the euro. as global reserve currency managers are looking for currencies with sound fiscal and economic fundamentals and is the currency of choice. if we see a global risk off event, they could indeed suffer. especially against the dollar. >> christine? >> ross, focusing, of course, on what's happening in china, shares reacting negatively. tracey chang has the details for us. what can you tell us? they drew more than $10 billion u.s. dollars down from 3% from a year ago marking china's third consecutive

monthly drop as global demand weakens. the eurozone's debt troubles trigger a cutback in european investments in the mainland more than 40%. while the fdi from u.s. and asia rows. the trade ministry warned. he said beijing will act to help struggling exporters overcome the gap in the overseas demand. meantime, the eu trade commissioner who was in hong kong today struck a far more can have dent note. bilateral trade will set, quote, near records this year. trade was also one of the main topics discussed between vice president xi jinping and u.s. president barack obama yesterday. before leaving for iowa, xi vowed deeper cooperation with washington on trade that said the u.s. must also do its part to strengthen the relationship. >> translator: it is very important for addressing

china/u.s. trade imbalance that the united states adjust its economic policies and structure including removing various restrictions on exports to china, in particular easing control on high-tech exports to china as soon as possible. this will help balance u.s./china trade, stimulate economic growth and job creation in the united states and improve the balance of u.s. international payments. >> xi was speaking to the business consul on the second day of his five-day u.s. tour. xi will next head to los angeles where dream works and two chinese media companies are reportedly expected to unveil a joint venture. back to you, christine. >> tracey, thank you very much. tracey chang. let's talk more about this, that fdi data highlighting the ongoing debate, is the world's second largest economy heading for a hard landing or not? well, we have two guests with very different opinions today joining us now. the director of lombard street research joins us from hong kong and justin harper head of ig markets in singapore. dinah and justin, thank you for

being with us. justin, the china fdi data showing they are not immune to external events. do you think they can avoid a hard landing? >> we talked about monetary policy that could be used. it has deep pockets. we've seen that with the eu. it has capped reserves there. it's dipped into the market in a domestic scene there by talking and saying we have cash at our disposal if you are suffering interest europe there. i think it's got tools at its disposal. it has high gdp growth slipping. it's been coming down but it's still at very healthy levels. i think it's in a good position 30 ride out this. >> you're comfortable with growth at 8 to 10? >> it's being maneuvered there, engineered to slow down from the double digit we've seen. that's a high by anybody's standards. >> what about you, growth is one thing but there's inflation, something china is still trying to grapple with.

>> well, actually the tradeoff between growth and inflation has worsened significantly in china. the global financial crisis changed the rules fundamentally. the massive export shock that it brought on to china and will continue to bring because the global imbalances will last for a long time. together with the already existing investment means that unless there is structural reform just throwing money at the economy will produce a lot more inflation than it does real growth. indeed, this is what we observed since the financial crisis. they engineered the most unprecedented monetary expansion ever and the economy started to overheat substantially so then they had to hammer domestic demands to the ground in order to curb the overheating. i mean the cyclical hard landing in china has already started.

the official real gdp growth numbers for q4 might show growth around trend but a range of other indicators suggest that actually growth is well below already in q4. well, looking ahead in 2012, first of all, we have the very aggressive monetary tightening that they engineered last year especially in the second half. broad money growth has come down substantially. it's now in line with real domestic demand growth well below trend. because the authorities use the wrong policy measures to tighten, i.e., minister of control, they have actually hammered households wealth and corporate profitability, and, on top of all of this, we now have a very substantial external w k weakening. so then the question is what can the chinese authorities do to stimulate growth? i'll stop here because i'm sure

you are dying to cut me off with a question. >> when you keep saying growth is well below trend, what in your opinion is the actual growth in china right now? >> well, for starters the real gdp growth numbers have always seemed extremely suspect because they don't seem to vary at all over time. which is highly unlikely for a large developing economy like china. and it becomes very difficult to actually produce real gdp growth forecast and i never even bother to do so. now to give a sense of the magnitude the growth could have been in quarterly annualized terms as low already as about 5% to 6% in q4 and i would expect it to be lower in q1 and stay within that region in q2. >> i'm just going to break in

now. we'll come back to this. i know charlie has a few points to raise as well with our guests. we have spanish auction results. they sold the amount of money up to the 4 billion that they were looking for. 2.2 billion, july 2015 bond. the yield set at 3.47%. it was trading around 3.25, a little bit higher yesterday. so that yield as we thought higher. the 2015 in january which is an old issue, 733 million. the yield on that 3.12%. kind of what we thought it was going to be. and this is the seven year, the key one, the october 2019. the yield set at 4.89 the 9%. looking for 4.64%. that's what it was in the gray market yesterday. and a little bid to cover on that. the bid to cover on the 2019

3.3. the last auction it was 2.1. and they have sold slightly more bonds than planned in total. 4.74 billion. that was not bad demand. the yield okay. so the point is now spain has raised in total around 34% of its gross issuance targeted for the year. here we are second week in february and they have 34% of it away. the yield on july is high. the seven year which was a test, they've come through that. we'll get some reaction on that a little bit later. let's return to this discussion, christine. a very interesting debate. diana doesn't believe in the official growth figures from china. ju justin, let me throw that to you. you obviously don't treat the official numbers as more suspect, but do you think there is enough in the government

policies to stimulate chinese growth at this point in time? >> yes, i do. i think there's a lot of momentum there still in china. there's a lot of investor confidence in china. you see what it does to the markets when it comes out with pos it tiff news there. the shanghai composite which is a good barometer, it is up 7.5% this year. there is still the underlying market sentiment in china and that's not based on wishy-washy da data. there is a strong feeling that china will ride out the troubles we're seeing in europe there and within its own domestic economy. >> charlie, jump on in. >> the point to both of you, the economy is one thing and clearly there's a lot of opinions out there, but i go back to 2007 and not only do we have a credit crisis but a number of asset bubbles particular ly in chines equities, the commodity market. we'll turn to that energy and so forth. these stock markets are down a very, very great deal. there's a journey for them to get back to where they were and i just made the case that

actually the stock markets are taking a significant break and there are other themes around the world that enjoy the global growth much more significantly than the stock markets will themselves. >> justin? >> yeah, i think there's definitely an argument what you are saying about other emerging markets performing well that we've seen india and the philippines. china still provides the momentum within asia so it can't be ruled out and put in isolation. it's still the driving force. the emerging economies all look to china for -- to sell their goods there and for consumption there. it's still a big driver and catalyst for the global economy and amongst the emerging economies as well. >> diana, do you have a view on that? >> yes, i do. although i'm rather bearish on the economic outlook.

if you then pause it that the authorities are going to try to do something to stimulate the economy this year. what they are going to do is, again, my expectation, throw money at the problem. but they can't get the banks to start lending indiscriminately. again, they are even more overinvested than before and they haven't even started addressing the huge successes in the banking sector over the last three years. if they boost liquidity, bank liquid itty within the system, it actually could show up in, again, inflation, much more so than real growth and that inflation could easily happen in a stock market bubble. so from a liquidity short-term perspective, i.e. on the three to nine month horizon, there is a positive case for chinese equities just because the authorities will be trying to stimulate the economy, because

there is no productive activity there to be produced or for this money to be channelled in and interest the authority's own perspective they see the stock market as where the excesses are not, so they could channel that liqu liquidity there. but then that is going to be a bubble that from a longer-term perspective investors have to be very wary of and make sure they get out of on time. >> diana, thank you very much for your thoughts today and for coming to this deboit. justin harper as well, thank you very much. justin is head of research ig markets singapore. very interesting discussion there. let's get over to what's happening in tokyo right now and makiko utsuda has the highlights for us live from tokyo. >> reporter: hi, christine. big development in the olympus saga today as prosecutors arrested former president and six others including former

executives and financial advisers involved in the fraudulent accounting. they are accused of hiding losses accumulated over the years amounting to over $1 billion. the losses had been shifted off the books to investment funds and holes were then covered up with funds obtained from inflating the value of newly acquired companies. prosecutors raided the homes of executives today and so far has admitted to having knowledge of the cover-up. his signature has been found on papers approving the inflated acquisitions. olympus released a statement today saying it takes the situation seriously and will fully cooperate with the authorities to uncover the facts. but investor reaction was calm as the move had been largely expected and shares dipped 2.4% on relatively light volume. and that's all from the nikkei business report. back to you, christine. >> makiko utsuda, thank you very much for that. ross, i don't know whether you still own an olympus camera.

i was thinking of one but maybe, you know -- >> no. >> i don't know. >> i don't know if i've ever owned an olympus camera. you know me, i'm a bit of a -- i'm not up with my tech gadgets. i'm a late comer. we'll take a short break. still to come while i ponder that, we'll talk oil on the other side of the break. keeping pressure on the price despite weakening economies. we've been talking bulls, bears, and dragons today already so how about we leave you for the moment with this, six little piggies adopted by a french bulldog at an animal shelter in germany.

a final thought from our guest host. charlie, just a quick word about oil. brent still trading $118 a barrel. it's clear political tensions are outweighing any thoughts about growth. what are investors to do with oil prices and how big a wild card is it this year for everybody? is. >> i'm glad you asked me that question. the thing if you want to invest in oil is to look at european large caps because they're extremely cheap. to find a way to get a leverage

back to the upside is quite difficult. also, i would notice the next positions in the oil market are pretty high right now. i think the upside will be capped and, yes, we could get some news flow rises. >> so the final piece of advice is do you buy or not? >> we didn't. >> you decided it was the price. >> okay. let's just recap. we have to leave it there, sorry. we have to go. charlie, thank you very much. good to have you here. charlie morris for hsbc global asset management. still an hour of programming to go. today kayla joins us state side. good to see you and christine again. still to come on "worldwide exchange" today we speak to one strategist who says equity markets may hit all-time highs

later this year and, as always, keep your e-mails and tweets coming in and we'll put your questions to our great lineup of guests coming up in the next hour. 

welcome back to the show. u.s. investors await earnings from general motors as well as jobless claims, ppi, and home construction figures. >> in europe it's a sea of red for european stocks following cautious outlooks from nestle and socgen. the ceo is pretty prudent. china's foreign investment falls, reviving fears the world's economic powerhouse is sputtering. >> plus a decision on greece's second bailout should come now by the next monday. we've heard this before. according to the head of the euro group, athens makes further assurances that it will stick to its debt reduction plan.

you're watching "worldwide exchange" with christine tan in singapore. i'm kayla tausche. in the u.s. a few hours to go before trading. if we opened now we'd see the s&p 500 down about three points, the dow down and the nasdaq the tech heavy exchange just about 3 1/4 points today. very thin trading all week and especially after we got the notes from the fed meeting so we'll be looking to talk about that a little bit later today. ross? >> yeah, and european stocks are down this morning, weighted to the down side after a flat close. this is where we are. the xetra dax down. the cac down and the ftse mib down. plenty of earnings today which we'll get through. we've had some is auction results out this morning. spain doing quite well. we've had some french treasury

auction results. the average 8.9, bid to cover not bad. 1.3 billion in january of the 2015 treasury. average of 1% and the 2017 bid to cover 1.99. not a huge amount of money, i think, raised in that particular one. but they sold 5 billion of that. soap not bad. it comes on the back of spanish auctions this morning which now mean that they have sold 34% of their targeted borrow iing for e year and here we are only in the second month of february. yields slightly higher. the seven year is where the interest was. yield down 4.8% from the bid to cover healthy at 3.3, kayla. spain has done a lot of heavy lifting three weeks into the year. >> well, it's good to see some

of the yields coming down but definitely interesting to watch the headlines and see how each of these individual options go. the head of the euro group said he expects a greek bailout within days. jean-claude junk eacker made th comments after last night's conference call. he said that significant progress has been made and assured that finance ministers are set to make all the, quote, necessary decisions by monday. joining us now is our guest host are for the next hour, global head of g-10 fx strategy. nice to have you with us today. i know we were talking during the break about european capital flows. where some of this money is coming from as we see the auctions, some successful, some getting there. but where is the money coming from? >> yes, that's the question i'm being asked from investors at the moment. it's not really coming from foreign investors. i think it's clear the ltro has had some impact on banks to buy this paper and some other

domestic institutions to buy paper but we track very carefully and it's quite clear that foreign investors are not really coming back to eurozone bonds and that's part of the reason they are not trading better. >> investors were pinning their hopes on asia and hoping this money would come from china, from japan. japan is launching their own buyback program so it doesn't seem like they're focused on europe at all. what about asia? >> i think you're right that there's some hope this might be happening in the future but that we don't really have any concrete plans in that direction yet and in terms of the current flow situation it's not a flow that is impacting french bonds or italian bonds at this point in time. is china going to commit a significant amount of money to buying eurozone bonds at some point? i have some skepticism that figure could be big enough to really matter. >> what would china be looking for if they were to step in and buy some of those bonds?

what sort of figures would they need to see to be able to do this? >> i think it would probably be a part of a broader negotiation about their voting rights within the imf. there's been talk about including the chinese currency within the sdr basket so various ways to get more influence within the imf and also more weight in the global financial system and that will be a tough negotiation. in order to make a difference in relation to spain and italy, the numbers are so big it will need to be in the region, say $200 billion, $300 billion alone. i think that's too much to home for. >> it's interesting you mentioned china's participation in the eurozone. maybe they're after more european assets. what's your opinion on that? >> i think from the focus on the

resource sector, we have seen some smaller deals in that area from china over the last couple of months. so i think that strategy will continue but that in itself is not a major support for the various bond markets that are facing some pressure to the long end of the yield curve. >> how do you think the u.s. should be viewing this china participation into the yeurozon? should they be worried because china has a lot invested in u.s. treasuries, of course. is this part of the overall diverse if ication strategy? >> yes. it's a very good question. i think obviously there's going to be a huge shift from asian central banks out of u.s. treasuries and into eurozone bonds that could be an issue, but i think what we've seen over the last year and a half is the treasury market is holding up extremely well even if there's been periods where central banks

have not been particularly active in the treasury market. so there's a big face of domestic potential buyers that have plenty of ammunition including u.s. banks and other institutions that have been underweight treasuries over a multiyear period. >> do you think the fed is going to sort of launch qe3 again? it seems to be a debate about it going on. you look at the minutes, there's baying split. >> yeah, a bit of a debate, i think that's an understatement so obviously after the minutes we had yesterday this is the big talking point. we went to see a lot of clients during the road show last week in the u.s. and the consensus there is clearly that there will be qe3 during the second is quarter or the third quarter of this year and we tend to agree that, in fact, inflation trajectory it will be clear the dual mandate would allow it to

happen even during the second quarter. it's not clear from the minutes we had yesterday that they are just ready to do it but the inflation picture will be such a move as quite likely over a three to six month period. >> a couple weeks ago you were looking at the canadian dollar versus the yen. since then the trade has moved up quite nicely. what do you do with it now? i don't know, did you know the bank of japan was going to come out and launch more qe? did you just get lucky? >> this trade had two components to it so there was a general optimism about the performance of risk assets and then there was the yen funding and that had to do with the yen being at a strong level going into this year. in terms of the boj this week, we had some hope that there might be something coming out of it so we thought it was worth

that in the event but to be quite honest it was a bigger deal than we thought in terms of the asset as they announced and we have also seen the reaction in dollar/yen. i think up here where we've broken 78 in dollar/yen or almost testing 79 this morning we think the upside is probably limited in dollar/yen from here. our forecast for the second quarter is 80s. so we're getting quite close to that and we think it's probably time to book some profits on yen trades at this point. >> a lot of u.s. investors have taken the trade early on this year to short the euro. obviously the euro has performed relatively well. for the first couple months of the year goldman sachs came out and said now is the time it's going to come down. do you agree with that? is. >> if you look at the euro it's important what specific cross you are looking at. euro/dollar had a dip and then

we came back high. if you look at euro crosses, we've seen a very, very sharp down trend since the ltro was announced. if you look at it on a broad basis, the euro has been quite weak even the last couple of weeks. in terms of euro/dollar 1.25 is a reachable target for this year. we've been trading that since last week. we did get lucky getting short around 1.33 and we think 1.25 is realistic and that relates back to the capital flow analyses we've done. there's a pronounced structural weakness in eurozone capital flows both coming from the inflow and outflow side and that's one of the key factors we're looking at. >> we'll continue to talk with the head of g-10 fx strategy. he will be here for the rest of the hour and still to come a greek bail quout will be decided by monday ahead of the euro group. has greece really done enough to

impress its european lenders, and how bad is the risk of contagion to other countries? live in lisbon next.

welcome back to "worldwide exchange." i'm kayla tausche on the east

coast, just about four hours to go before the open of trade. right now futures are relatively flat. the s&p would open down about four points, the dow about 26 points into the red. the nasdaq down just about 2.75 of a point edging more into negative territory. ross, over to you. >> take a look at the wall right now. you can see we're certainly weighted down. decliners outpaced by advancers. nearly 9-1. we had a mixed session yesterday. the ftse 100 closing down seven points. today down 45 points after nearly .75. today town over 1.2%. the ftse mib down 1.63%. the focus has been, of course, on earnings. a rally up 2.68%. they came out with numbers relatively okay. socgen had a big drop in profits. frederic oudea, the sceo, tellig

us he will be pretty prudent in 2012. nestle -- actually, although they're talking about cautious 2012, certainly were better than some expected for the fourth quarter and the key point, the difference between them and danone and outperformed today up 1.5%. as far as the euro is concerned, we've moved further away from the 1.33 at the beginning of this month down to 1.3010 on euro/dollar. we went below that earlier. euro/yen, we keep our eyes on what's going on with the yen, of course, following the bank of japan action later. we have some auctions out this morning as well. this is where we currently stand. ten-year bond yields, back up to 2% last week. spanish auction today not bad. they've now raised 34% of their funds they were targeting at the beginning of the year and only through the second week in

february. yields on ten-year debt 5.54. i think it was noticeable this morning in the spanish auction was, of course, the 2019, the seven-year issue this morning. the yield on that came down to 4.83%. bid to cover 3.3, 2.1. the yield 5.35. so yield still coming down albeit the january 2015 the yield went up a little bit and we continue to keep our eyes on oil despite weaken iing economy keeping upward pressure, brent at the moment still above 118. it has come down but we were nearly at $119 a barrel. christine, what kind of day have you had in asia? >> asian markets are lower because of the delay. sentiment is also weak across the region as a result. nikkei 225 is down. the topics off. down side was capped because traders are still optimistics after the boj delivered that surprise additional easing

earlier on in the week so that capped sentiment. elsewhere over in china fdi falling for the third consecutive month as the crisis in the eurozone deepens so a sign they are not immune to the global volatility. this market is up 0.4%. hang seng, a bit of profit taking going on. still holding on to the crucial 21,000 level. the taiwan weighted index is down 1.7%. the kospi off 1.4%. the australian market the big loser today down 1.7%. lots of concerns about corporate earnings coming from can companies as well as the miners. they were weaker as well. the sensex up 0.3%. so it's a sea of red here in asia. that's it for me. i'll be back tomorrow with the news making highlights here. don't go away. plenty more to come. but we couldn't simply repeat history.

we had to create it. introducing the 2013 lexus gs, with leading-edge safety technology, like available blind spot monitor... [ tires screech ] ...night view... and heads-up display. [ engine revving ] the all-new 2013 lexus gs. there's no going back.

yeah, you -- you know, everything can cost upwards of...[ whistles ] i did not want to think about that. relax, relax, relax. look at me, look at me. three words, dad -- e-trade financial consultants. so i can just go talk to 'em? just walk right in and talk to 'em. dude, those guys are pros. they'll hook you up with a solid plan. they'll -- wa-- wa-- wait a minute. bobby? bobby! what are you doing, man? i'm speed dating! [ male announcer ] get investing advice for your family at e-trade.

welcome back to wo"worldwid exchange." it's kayla tausche on the east coast at cnbc head wears. ben bernanke will address community bankers today in virginia at an annual fdic conference. economic recovery, competition and regulation of banks are all topics on the table.

the federal reserve chairman is expected to speak at 9:00 a.m. local time. we will bring you live coverage of that event so tune in. u.s. home foreclosures are still on the rise. new filings up 3% in january over the previous month. one out of every 624 u.s. homes had a foreclosure filing on it last month but there is some good news. new foreclosures are down nearly 20% since january of last year and yesterday federal banking officials extended a deadline for homeowner foreclosure reviews. the head of the euro group has said he expects a greek bailout within days. this is the portugal has arrived in portugal to ensure the country is on track to meet its bailout. silvia is in lisbon. i suppose the big question everyone is wondering is if portugal is yet caught riterize any major greek default?

>> reporter: that's a worry for portugal, ireland to a lesser degree maybe spain and italy. portugal and everybody around the situation insists they are not another greece. they have an intact economy, a small economy, that needs to do some homework. they are doing homework. they are sticking with the program. of course we all know as much as portugal might be the poster child for the reform progress, if the rest of europe doesn't reform and help it along and if there is a great deal of fallout from greece, then the markets will punish or very likely punish portugal as well and the re-entering into the market would be a very tall order indeed. i want to talk with this about a man for a long time because he has central bank experience, sev central bank governor for quite a number of years here in portugal and now in the private banking sector. thanks for joining us here today. >> thank you. >> reporter: from your

experience, pre-euro, we know that there were flaws in this monetary union. especially countries like portugal are suffering from. how can it be fixed? >> it's a long way. it takes time. we can not fix it from one day to the other. we are taking the appropriate measures to try to solve our problems. i think we are doing well so far. but it's still a long way. we have a long way to run. we have to comply with the objectives of the monetary union, the international monetary fund. we have tough objectives to comply with in 2012 and 2013 as well in terms of the budget rebalancing and some structural measures that are being taken. privatization, the labor market, and more competition in markets,

energy markets and other markets and services. and so we have a lot of work to do. we are doing -- so far we are doing well. i think the troika is in town this week and next week. we will check how we are doing. i believe the third revision of the agreement with our creditors. i believe that we will be completely satisfactory so this will continue normally and it's a long way, as i said. we are still into 2012 and 2013. it requires great persistence. persistence is indeed the mind requirements for completing our work. >> reporter: the potential frustration is you might be doing everything right here in portugal and it looks the vibes we get from the imf and eu are

positive, and then we see what's happening in greece or not happening in greece, and the markets simply go along and say we don't believe this. portugal is going to be the next domino to fall, so to speak. can this contagion be avoided? >> of course we have to be aware of those external factors that are not controlled, that are not in our control. we have to do our work. there are other factors, external factors that are not within our control so we have to be aware of that. we have to be conscious of that risk. i can tell you that portugal's treasury brought very good reception. the treasury has been able to sell 3 billion euros in terms of the three months, six months and one year. i think the market is understanding our effort. of course the markets will not

open completely for some -- a long, long time of course. and we have to be sure of that. of course in 2012 and into 2013 we still have the financial support of within this agreement with the imf and the european union so we can count on that financial support. but i believe we'll never leave the markets completely. we are still in touch with the markets as yesterday i told you, so the portugal position that one year while greece is another case. greece is more complicated. >> reporter: very briefly if i may, from your experience as a central banker, the ecb has done a lot. they blasted themselves through the market with a three-year ltro and that's one of the reasons why the short term maturities are now doing well. should the ecb step up to the fray and do more because it's the only european institution that works right now? >> i don't think so. i think the ecb is doing its job and the ecb should not interfere

in buying that in the primary market. i do not agree with that. the ecb can make things easier as it is doing now by providing liquidity to banks. i think by the end of this month we'll have another liquidity oppression which i believe had will give the market about 1 trillion or so euros. so that makes things easier for our country like portugal, like italy, like spain, particularly italy and spain have taken advantage of that situation and then being able to issue medium and long-term debt in very good terms. so portugal not yet but i believe it will be a matter of time. i think if we do our work and if external environment remains more or less stable, i think portugal will be able to go back to the markets in one year or one and a half years or so.

>> reporter: certainly the ecb has done a lot for the short end and that's a start. thank you for joining us here. that's it for the time being. back to you. >> thank you so much for that interview, silvia. still to come here on "worldwide exchange," we'll talk to the u.s. fed and bernanke following the release of the minutes of the last meeting. we do that with a guest who says a third round of quantitative easing would have next to no impact.

welcome to the show. the headlines today in the u.s. investors await earnings information from general motors as well as jobless claims, ppi, and home construction figures. a sea of red for european stock markets following cautious outlooks from abb, nestle and socgen. the ceo says he's feeling pretty prudent. china's foreign direct investment falls for the third straight month in january, reviving fears of the world's economic powerhouse is sputtering. and solid demand for debt auctions from both france and spain. spain has raised almost 34% of its total planned issuance for the year. nice to have you here with us on "worldwide exchange." it's roughly 5:30 here in the u.s. where i sit. if the markets were to open now the s&p moving slightly further

downward than we saw earlier this morning. it would open down 4 1/2 points. the dow would open about 34 points into the red and the nasdaq would be down just about four points. our next guest, though, says we may see equity markets hit all-time highs this year, that would be great seeing where we are in the market today and throughout the week, but joining us now is paul shats, president of heritage capital and still with us is our guest host jens nordvig. i want to start with all-time highs for equities. people think as soon as we hit those key levels, 1350 for the s&p, 12,900 for the dow, that all we're going to see is selling. why do you think we're going to keep moving past that? >> and good morning to you. listen, we came into the year with such excessive bearishness especially on the euro and the eurozone that so much has been priced into the markets already. we had a flat year last year. usually after flat years markets tend to be more favorable.

we're in a presidential election year. from my seat the economy is at least stable. i don't think it's getting that much better but it's not getting worse. i thought after last year's decline we were certainly going to exceed the 2011 highs in the first quarter, which i still believe. i don't think there's enough cracks yet in the pavement for the economy to roll over. i think earnings are fine. i think things are generally okay. i'm not a valuation guy but valuations are okay. once you do exceed 2011 highs, we will have that pullback 1350 down to 1209. the second half of the year we have a chance. if everything -- it if the ducks line up properly, i think we have a shot at 14,500, 15,000, even higher on the dow. i don't think this is the launch of a second is secular bull market. we can go through the all-time highs before the election. >> what are the ducks that need to be lined up?

>> well, i think as long as there's not another shoe to drop in europe -- listen, europe's problems are not solved now. they won't be solved next year or in 2014. this is going to take time. i've said this for years. time is going to cure the wounds of the world. the banks are smoothing out the jagged edges. they can't fix the problem but, listen, greece, portugal, those are tiny little problems. they can't lose italy and we can't lose spain. i think they're doing everything they can to avoid that. so absence -- italy and spain really beginning to fall into the sea, into the ocean. we're doing what we're supposed to do to return stability, return confidence. corporations still have over $2 tr trillion in balance sheets and i don't even think they're going to spend that this year, next year.

given the geopolitical landsc e landscape, u.s. corporations are going to keep that money tightly in their pocket for the next secular bull market which launches later this decade. >> yeah, well, the ecb has protected the financials. in some way we've divorced the eurozone -- the global financial system from the debt crisis for the moment. and corporate balance sheets, that's an interesting point. i'm sure you're right about that which means they're not going to reinvest the money. a dividend payment is going to rise and also doesn't suggest they're actually going to create any more employment. >> well, the dividend -- one of my shockers of 2012 is dividend stocks are going to lag, and we've already seen some out of washington. it doesn't seem like dividend stocks will be all the rage certainly in 2013. i think they're going to be under attack. i think it's going to be harder for companies to want to pay out that money in dividends because

the tax rate is not going to be favorable. so, for me, i don't think that corporations if they're going to use their money they're going to buy back their stock or possibly some m&a. i think you'll have mna here and there but the best thing is keep that cash in their pocket, wait until those folks in washington -- i'll keep it at folks instead of the word i want to use -- get their act together post election. nothing is going to happen here in washington, we all know that. that would be crazy to believe that they're going to actually get together and do something right by the american people. >> paul, this is kayla. i wanted to get back to the market and talk especially about fund flows. you think people are going to be putting money to work in the equity markets but this week is the first week out of the last 20 that investors moved net capital into equities because what happens is they see one bad headline coming on stalled bailout talks for greece coming

out of a failed auction for a eurozone bond. they see the negative headlines and want to go to safe haven assets or gold. we've actually only just recently seen money come into equities. do you think there is headline risk for money to flow back out in the other direction? >> in 2012 there's always headline risk. the problem of today we saw these in the early '80s. let's call it as it is with south america was essentially defaulting. the problem now is the speed of information. the individual investor has not been part of this bull run from the march 2009. they haven't flooded the money -- the market with cash into equities and i think they're still so beaten up, so bruised, they have tremendous fear every time there's that possibility of rolling over again. they begin to pull money out. i don't see that changing. i think when this cyclical bull market ends, it's going to end with that whoosh of sideline cash from individual investors.

so far this has been about institutions for the most part and a lot of high-frequency trading. yes, i still think the investor, that wounded psychology continues. we will see money continue to come in. when you print dow 13,000, i think you'll have a wave of money come in the market. if -- if we do print a new high in the s&p or the dow you'll see folks all of a sudden saying, gee, we are at 6,500 in 2009. we're at 14,300 in 2012. boy, i'd better get into equities now. and it would be precisely the wrong time. >> paul, we have jens nordvig and i believe he has a question. >> i think the one question i have is that we're getting close to a level where a lot of risk assets have essentially recovered most of their losses from the second hatch of 2011 but global growth and certainly european growth is substantially weaker than it was before the

last leg of the crisis started. isn't that an impairment to having a rally at current levels? >> well, at some point we're going to pull back. we've gone up this entire year without even a 1% pullback. so clearly at some point in this quarter we're going to have a 1% pullback. that's kind of common sense. yeah, we're back to the old levels but so much of the geopolitical problems are at least somewhat stable or at least known quantities. i think it's the uncertainty or the problem we don't know that will trip the market up. we could pull back 4% to 8% is at anytime and it will be normal, healthy. we'll shake out some weak handed holders. some major cracks. we saw subprime coming in early

'07. the market didn't crack until '08. we don't have those tiny cracks appearing at this point. everything out there has been known for over a year. >> all right, thanks so much, paul schatz. we'll be back in a flash. and still to come, cbs is in talks with netflix to produce original programming for the online video service.

today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers.

cbs is in talks with netflix to produce original programming for the online video service. network head sees netflix as another potential distributor of cbs content. they aim to have five original series this year and earlier this month it debuted the first of those called "lillehammer." those in washington have reached a deal on payroll tax cuts. republicans and democrats announced the agreement which will renew for more than 100 million americans. the measure is the top priority for president obama but has been a sticking point for congressional republicans. the house and senate are due to vote on the measure later this week. the fed still remains divided on qe3. according to the january minutes officials believe another round of bond buying is going to be

needed soon to support the economy. but others said they would like to wait for more data to see if the outlook will deteriorate. mark rogers is an economist and joins us now. mark, look, where do you stand on this? it's not clear if we get more qe3 how it would help employment which seems to be one of the reasons for perhaps implementing it. >> yes, i think that's the key issue of the potential impact from qe3 and what we have to remember is we're still sitting on top of massive qe2. so essentially the fed is going to be debating internally whether or not the benefits from qe3 outweigh the costs. the costs will be potential inflation. what will the benefits be? they would be adding to their balance sheet and potentially

expanding excess reserves. but currently excess reserves have tracked qe2 and the real issue is that the excess reserves have not been put into loans by banks. so would be essentially almost to impact from qe3 and we're still sitting on top of qe2. >> yeah, this inflation issue that everybody keeps say iing is inflationary but there hasn't been any generated yet from the first or second round so i don't know why it would be any different with a third bout. >> well, no, but the issue is at some point the fed is going to have to unwind the balance sheet and the larger the balance sheet the higher the risk of future inflation. the key point i think that came out of the latest meeting is whether or not the recent actions will actually make a

difference, and i think the communications actually will make a difference. >> mark, this is kayla tausche here at hq. with investors incentivized to move into riskier assets based on the yield where the it ten year is and other securities even lower than where it was in the first and second rounds of quantitative easing, what would the point be? why would they see the point to introduce a new program? >> well, i don't see the point. i think the fed, though, is paying attention to the economy. the fed realizes that fiscal policy is actually turning contractionary. the fed is in the game and pulling out all the stops. will any other moves make a difference? and i think additional quantitative easing will not make a difference because it's really the banks that need to be lending. i do believe the new communications policy will make

some difference in some sectors. for example, the new language says that the fed funds rate is likely to be exceptionally low through late 2014. it if you look at that from auto lenders' perspective, the fed is saying they're going to have dirt cheap funds for at least half of the life of the it typical car loan. so a key beneficiary is likely to be the auto industry. i think housing will benefit a little but the biggest beneficiary will be the auto industry plus banks are able to help consumers delever the consumers that have incurred debt over the past years. >> mark, obviously the fed speak is a step of much discussion and much deliberation but the language that there could be cause for additional asset purchases, what does that cost? what will we see in the market

that will cause the fed to step in and say, you know what, we are going to launch qe3? >> well, the fed is wanting to keep its options open and i think basically there's a lot of debate within the fed. there's a lot of diversity in terms of whether the fed should do qe3 or not. but basically it's going to be cost benefit analysis and at the end of the day i don't think they're going to do it, number one. the economy in the u.s. has improved. if you look at just the latest data, retail sales, once you toss out the quirky auto sales component, look very good. industrial production in terms of manufacturing looks robust. the fed is keeping its options open but it's looking more and more like in the u.s. that it's not going to be needed. >> and, mark, we'll have to leave it there, senior u.s.

economist. up next, we'll look at the trading day ahead on wall street as general motors is due to release fourth quarter earnings.

the head of the euro group says he expects a greek bailout to be agreed with in days. now looking at a euro group meeting next monday. i feel like we've been here before, though. silvia has been in portugal talking to the finance minister there trying to gauge whether portugal can protect itself from ongoing wrangles within greece. the other aspect of this, it's become deeply political, even more political than it was with the greek president having a go at the german finance minister

and saying, well, who is schaeuble to tell greece what to do and mario monti had to speak yesterday at the parliament and basically tell everybody to calm down a little bit. and i wonder if this is is now the most dangerous phase of this process, the eurozone politics seem to be fracturing even more. >> reporter: yes. you teal like you've been there before. think about me. basically live in brussels these days and we have another ahead of us on monday. you are quite right. mario monti also put his finger on the wound as it were and i know it. i've been in a number of talk shows on german television where we had the same kinds of problems and issues. it's the divisionalism as it were. the germans say why should we pay for the greek pensions and the greeks are saying why are the germans dictating what we do? a very difficult path to go down on to point fingers at one or the other because that doesn't

solve any of the problems and it clutters up the reform process in many of these places and if you look at greece, if the greeks and, indeed, greek politicians worry more about what the germans are saying than pushing their reforms ahead, that's not very helpful. if the germans are more worried about saying whatever you do, it's not enough. it's not very helpful. so i think mario monti is right, we have to get back to the point where everybody is saying, hang on. we're all europeans. we're in this boat together although some have to pay in money and some have to pay in it terms of pay cuts. but it's very difficult to pull this back because pushing europe as an excuse is always very comfortable for national politicians. sadly so. >> thank you so much, silvia. today in the u.s. we are waiting for earnings from general motors. first full year as a public company. it will release its earnings for last year, the automaker expected to post its lowest

quarterly profits in more than a year. investors awaiting key unemployment figures. last month's initial jobless claims data will be released at 8:30 and fed chairman ben bernanke speaking at a banking conference in virginia today is expected to address tough issues facing community bankers. with us today we have paul schatz, president of heritage capital and here at headquarters with me have jens nordvig, global head of g-10 fx strategy at nomura. i want to talk about what we are expected to hear from ben bernanke today. how, paul, you expect the stock market to react and how you ex pkt capital flows, bond markets and everything else that you cover to react. we'll start with spaul. >> regarding bernanke, i don't think he's going to say anything different, anything off the script. i think he's going to continue down this path that the fed is ready, willing and able to stand by if they see any kind of hiccup. the problem we all know we have a divided fed. they're not on the same page.

30% want to sit and wait. you have a couple guys who want to take action right away and probably the middle of the road is the right way to go where to stand there with the fire hose in hand -- >> it looks like we may have lost paul, of course, having a divided fed, some would say is a very, very good blessing. many times, jens, i don't know what you think you're expecting to hear from bernanke today or if it's going to be business as usual. >> i think the one thing to watch for from bernanke today and fed communications in general is whether they comment on inflation coming down. if inflation is coming down, that will really set in motion a process that could lead to qe3. if we also have the other part of the dual mandate coming down below that would put us on track for qe3. >> and what do you think he'll say about that? the fed has been quick to deny

at all. you can't really deny it at this point. >> no, so i think today's speech won't get a heck of a lot newer in relative to the communications. but that is the key thing to watch for the next couple of months, if we're going to gear up in the second or third quarter. >> so second quarter or the third quarter, paul expects the dow to hit 13,000 and then a whole lot of buying. we'll have to keep notes and hold them to being accountable on some of these predictions but thank you so much for being with us. global head at nomura. thank you for being with us today on "worldwide exchange." that's it for today's show. i'm kayla tausche in the u.s. >> i'm ross westgate in europe. "squawk box" and the countdown to the markets state side. whatever happens, we hope you have a profitable day.

good morning. another day, another round of questions about greece. still no deal to secure the bailout. there's an agreement in washington. lawmakers announce a bipartisan deal on the payroll tax cut. i feel like i've reported this six times already. plus an economic trifecta. reports on jobs, inflation and housing at 8:30 eastern. today is thursday, february 16th, 2012. "squawk box" begins right now. ♪ come and knock on our door we've been waiting for you ♪ ♪ we've been waiting for you ♪ where the kisses are hers and hers and his ♪ ♪ three's company, too good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. we're all together,