brought to you live from n london, singapore and around the world, this is "worldwide exchange." welcome to the program. the headlines today from around the globe, the day has come. eurozone ministers finally expected to give the green light to greece's second bailout package but work still needs to be done to make the numbers add up. china cuts and the pboc first rrr cut this year. japan posting its worst trade deficit on record as demand for japanese goods slumps and s&p warning of a ratings down grade if tokyo fails to control its growing public debt. and brent hits its highest level in eight months after

sales to france and the u can k. so it's monday, the first wo "worldwide exchange" of the week. it's also presidents' day in america. u.s. markets are closed which means we're going to bring you more coverage from here in europe and asia. we don't have a u.s. anchor today, an extra hour of the show. what we do have is becky with us for all three hours. >> a special treat for me. i get to spend an hour with you, ross. >> a special treat for us is what you mean. great to have you on the show. so becky is with us along with christine. it's also decision time for gree greece. i feel like i've said that before. finance ministers are in brussels today and they are expected to approve a second bailout. eurozone and ecb officials had a conference call last night to discuss the last details of the 130 billion euro rescue package as demonstrators took to the strooets of athens this protests

against the austerity measures. the new bailout money will be used to finance debt restructuring and stabilize the banking system. under the program financial firms exchange greek debt for longer dated securities and swap results in a 70% hair can ccut private sectors. silvia is back in her station in brussels. silvia, now, is this going to happen? is this going to happen and what are the outstanding details that we still need to agree? >> reporter: the million dollar euro drachma question. that is the hope today and the whisper is that we will see a signing of the 130 billion aid package, of the latest bailout. the whisper is still uncertain whether we see the extra psi deal going through today. there is an inkling in there that we hear almost there again, inching closer was the official phrase that we'll be using for weeks but that might be deferred

to some time between now and the summit which is next thursday/friday. so we're getting a bit closer to the deadlines, awfully closer, but that's what's being talked about at the moment. we know that there is a great sense of exasperation on both sides. of course we see the pictures out of athens, the growing unre unrest, the growing social strife there. by the same token there is a sense of exasperation from the eu officials, from eurozone finance ministers who say, okay, you don't want us to interfere in your affairs but, on the other hand, you are not delivering. you're not delivering on pr privatization, on actual pension reforms, health care reforms, labor reforms. you are not delivering on setting up some of the institutions and you are not delivering on privatization. so if you don't want our advice and on the other hand you don't deliver what you need to deliver, where are you going to

go? we had an interview with jean-claude juncker, the head of the euro group, where in a le leading question he was asked cynically wouldn't you all be happier if the greeks left the eurozone and, yes, i'm sure he was a bit annoyed and upset but it shows you the direction we're going at the moment. things are not improving. >> all right, stay with us, silvia. with us is the global strategist of ltg capital. peter dixon, senior economist at commerzbank. this new deal, peter, already the 120% target for getting debt down to gdp has slipped. we're looking at 120, 129% this deal goes ahead. i mean, this isn't sustainable anyway, is it? even if we agree this package isn't going to work. >> it certainly isn't. if you just roll the dime forward, it looks likely given the g it dp growth, interest

rates and l balances, the ratio will rise quite sickly over the course of the next five years. it implies a bigger haircut or perhaps a widening volume of creditors. either way i don't think this deal will cut it in terms of a debt target. >> so we're still effectively throwing money to buy time. meanwhile in november alone 126,000 greeks lost their job as a country, 11 million people. the greek economy seems to be getting worse. where does this path lead, even if we agree to the package now, where does the path lead? >> a very good question. i don't think anybody knows. ultimate ultimately it does suggest that greece will be forced into a bigger default. whether that default turns out to be again changing in terms of greece's relationship with the eurozone is the question. the optimal position from where i'm sitting we have a much bigger write-off of debt.

now that's going to cause all sorts of problems but obviously it could, indeed, end up with greece ejecting from the region which is a bigger problem for greece. that's the way it looks at this point. >> it's like putting a patient on a drip, isn't it? >> yes. unfortunately, it's a little bit like the ground hog day. we've been hearing this for quite a while. however, i think the interesting perspective is that if you look at markets, for example, if you lack at stock markets worldwide and take something longer term, the greek stock market though it's small and not significant globally is actually one of the very few that has turned around. so i, as with all this noise we've had the past few months about this final, final package,

if you look at average trend prices in greece, they have actually stabilized, which i think is a good signal. maybe a wrong signal but that's not something that we've seen before during any of the previous solutions which were supposed to be final. the market seems to be getting to terms with the situation and, of course, globally you have quite a significant brightening up as well, so it looks like whatever happens in greece is more or less discounted by market. i think that's more fascinating now than the headlines we are seeing every day and which are certainly not very encouraging. >> talking about greece now, once we get greece out of the way, who is going to be next? portugal? >> but, including also -- this is also a theme that is recurring but the portuguese bond market is actually sort of not panicking and not sending these signals. i think the most important thing here is that we now have, and

this is a change from the situation during most of last year, we have all the major central banks in the western world and now, since is last week, also in japan, let's say the g-7 sevcentral banks. they are now in an extremely expansive course. they are basically throwing around a wall of money under everything to make sure that whatever happens in greece, just in case it goes wrong and there's a breakup in the eurozone or whatever, they are basically -- the markets are supplied with sufficient liquidity so as we don't have another lehman kind of event. i don't think there's a global conspiracy to say het's do that because greece might do something wrong but, in effect, this is what is happening which is the main story in markets. that all the major central banks now are ahead of the curve with unexpected big decisions that they have been taking since roughly november/december last year, more or less in parallel

with the time of mr. mario draghi taking over the lead leadership of the ecb. >> the question, peter and silvia, is -- and this has been the debate going on in germany -- is whether we have caug cauterized the system from a bigger greek default, peter. >> i rather suspect that that's exactly what is happening. certainly the comments from mr. schaeuble over the course of the last few days suggest, and this may be brinksmanship, but suggests we're in a better position now to cope with problems than we might have been a few months ago and i've always suspected that it's in the eurozone's interest to continue to bail greece out until such time as the rest of the region is sufficiently strong to cope with any catastrophe which might arise. that's why i think this deal will go through but certainly it's not in the eurozone's interests or the greece's interest in order to get future

bailouts. >> all right, peter, thanks for that. senior economist at commerzbank. silvia, plenty more to come from you over the next three hours. thanks for now. ross, well, china stocks have had a volatile session. they surge following the announcement to cut reserve requirements for lenders beginning this friday but the gains were short-lived largely due to doubts about whether the pboc's decision to hand over $63 billion into the system had more to do with stabilizing credit than a bona fide easing. this is the central bank's first rrr cut this year, its second in under three months. mikio, what do you think? are they trying to stabilize credit conditions or is this a form of easing? what markets were expecting earlier but didn't come? >> i think they're a little bit still between a rock and a hard place. we talked about the easing by the other central banks globally but the chinese situation, of course, is a very different one. all the other nations are facinging basically a

deflationary future if they don't to anything or at least a significant risk. they have a debt bubble that has burst and china, while you may have a debt bubble but it hasn't burst. and they still have inflation that is, if anything, too high. so easing in that kind of environment is actually a risk. i know the markets -- >> you think it's a risk? >> i think definitely it's a risk. they should not even if we are a little bit lucky and the western world or including japan, you know, sort of stabilized these levels that would buy china bit more time to manage its economy or its soft landing without having to add more credit into a system that has already has plenty of credit and credit growth so it's actually not a very good news if they do ease right now. they would hopefully see they stay tight and recover without easing. >> that's a good point to make. we'll come back to you on that. mikio kumada, our guest host.

we'll have more discussion on china laettner the program. if you have any questions on this particular topic, the pboc eased over the weekend. that is cutting a bank's rrr rating by 50 basis points. do e-mail us questions worldwide@cnbc.com. becky? the equity markets in europe which is exactly what we are looking at on the wall behind me. plenty of green on the map. the vast majority are gaining and just to give you a snapshot of what this means as a whole, the stoxx 600 is up by over 0.7% today and i should point out, too, on friday a new closing low for the year for this index as well so pushing it further beyond those levels. clearly the china story is having an impact but also the situation here in europe and the hopes that we will have a resolution of the second bailout for greece today when the eurozone finance ministers get together. this is how that pans out around the region.

the ftse 100 is up by nearly 0.7% over 0.8% higher for the dax. the cac is up nearly 0.8% as well. they saw new closing highs for the year in friday's session as well so, again, pushing further beyond those levels and the ftse mib across in italy is up by over 1%. i do want to draw your attention to a couple of individual stocks that are topping out the biggest ga gainers by quite some margin. tnt express up almost 55% and there's a particular reason for this. ups offered nine euro share for the company. that was rejected by tnt express. the two companies are still in talks. so there appears to be speculation seeing as the stock has gone above that level that it was going to be another bid to come, maybe another bidder in the offing as well. postnl is up by 45%, the biggest shareholder of ntn express and that's why the stock of that company is gaining quite so much, too. what's going on in the currency

markets, this is how euro rates are looking. 1.3212, euro edging up right now. that is an off the highs in the session when we had 1.3238 session high so far at last time i check. optimism about the situation in greece and a possible resolution there. euro/yen looking steady around 1.0432. euro against sterling is at 0.8328. euro/aussie dollar 1.2264. lots of attention getting its focus because we have this developing situation in iran as well. this chart shows what's been going on the past 12 months and it's stark movement in the past four or five months or so. today brent is up 0.4%, over $120 a barrel, in fact. we're looking at fresh eight-month highs. the session high so far has been $121.51. so we are just off that but year to date, even before these gains

today we were up by over 11% so just recently we are seeing the price of brent moving markedly higher. u.n. inspectors are today in tehran speaking to them about the nuclear developments there yesterday as well. you may have noticed over the weekend iran has ordered a halt to oil exports to british and french companies so that situation can be continuing to develop, christine. >> okay 0, beccy. here in asia markets are mostly higher after the decision by the pboc by the weekend to ease bank reserve requirements. also hopes of a bailout for greece kind of helped sentiment. the nikkei 225 is up 1.1% above its one-year moving average. surprisingly they moved higher despite data which showed a bigger trade deficit for the month of january as exports slumped. it topix higher. gains were kind of capped despite the pboc's move to cut

banks reserve requirements ratio. people are now starting to worry about slowing domestic growth. so that's weighing on the shanghai market. over in hang seng in hong kong a little bit of profit taking going on down 0.3%. the banks and the property developers were higher, mostly higher as a result. taiwan weighted index up. the kospi pretty much flat. the us a traustralian market ge nice lift from the pboc decision. a lot of investors betting that china's demand for resources will continue to remain intact. new zealand 50 is up 0.8%. so overall a nice session with the exception of hong kong, ross. okay, thanks for that, christine. still to come in today's program, warning investors of a flat 2012, sent shares lower in denmark. we'll speak to the ceo at the 10:50 and another says apple is still a buy despite the runup in stock price. we'll find out why at 12:20. iran has cut off oil supplies from the france in uk. brent is up at an eight-month high. the latest from the middle east.

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checking this on the oil prices and see where we're going right now. clearly middle east intentions a big driver at the moment, the

supply side concerns sending oil markedly higher. we've had concerns about waning demand but not sending the oil prices lower. this middle eastern situation very much preying on people's minds. this chart shows the cost of brent over the past 12 months but since the beginning of the year it's notable we have seen gains even before today to the tune of 11%, over 11%, in fact, year to date. that is continued in today's session. brent is up by nearly 1%. $120.74 is where brent stands right now. that's off the special highs as well. we have seen prices over $121 just a few moments ago so that's the picture for brent overall. let's talk about the situation that's developing, though, in the middle east. the stait of who are muz is a flash point for concerns about how this is developing. iran has been pushing ahead with its nuclear development. we have comments coming through from iran this which they said

they are banning oil exports to british and french companies. that's in retaliation to eu plans on an embargo on oil exports to the eu from july the 1st. an impact on reality of british and french companies who already benefit little from iran but certainly is represents a development in the rhetoric that's coming out of this country. also, to point out, too, we do have u.n. inspectors in iran at the moment who are going to spend a couple days there looking into what they are doing at the moment. to bring this into context and give us more detail yousef joins us. what are the developments over 0 the weekend? >> reporter: well, becky, there is a lot happening and to real lly decipher all of this and make sense is quite daunting for some traders because the messages are mixed from all fronts. you mentioned, of course, the decision by iranian authorities

to stop oil sales to france and the uk. that in the scheme of exports is not really much because, remember, iran doesn't really have that much leverage because it needs that oil and in an environment of sanctions where a lot of clients including top importer china, over 500,000 barrels as of late last year, they are pushing for a discount on those oil sales so iran flexing some muscle but it can't go further. that's a different question. what the traders are worried about so definitely that these oil sales or the halt gets widened to other european countries and countries that are more dependent on iranian imports, spain, italy and greece. and they are particularly vulnerable to any such move. of course on the diplomatic front we have some developments, again, comments last week from several officials from the united states and from the european union as well that iran was signaling that they're interested in bringing talks back on track.

but, again, mixed messages that are really putting into doubt where this can go. the team from the u.n. nuclear inspection that is in iran today will be seeking answers about, quote/unquote the military dimensions that they have can concerns about in the report last november. again this visit will take two days. we'll be visiting different sites and talking to some of the scientists as well. but whether they will get the answers they're seeking about what tehran says is a peaceful nuclear program will have to just wait and see. israel is calling for more sanctions and some analysts are worried we could see a unilateral strike from israel because of the threat that iran poses, perhaps as soon as this summer, beccy. >> yousef, thanks for that, yousef gamal el-din. back to our guest host mikio kumada, so over the past, what, four months or so we've seen oil steadily grinding higher and that's continuing today.

there's clearly more risk to the upside for oil prices as yousef has been discussing, the situation in iran is flexing its muscles. is it the possibility that ever higher prices could choke off what signs of recovery we do have in the global economy now? >> with yes, of course there is. if the price increases continue and especially if they gain pace in an unexpected manner. however, the oil situation seems to be somewhat perplexing, at least to us because it if you, for example, look at the futures curve, there's a containment situation meaning that buying oil in the future is cheaper so the market doesn't seem to be very bullish on oil despite this situation in the middle east. that is a question mark right now which way oil is actually going. if we have, of course, the situation in europe continuing

to improve and the u.s. doing relatively well as it does in china, avoiding a hard landing and so forth, then, of course, longer term eventually oil will move higher but we certainly don't want to see any political noise or military noise in the strait of hormuz to make anything worse at this juncture. >> i'm sure people agree to you. we'll have more on this story coming up later in the show. at 12:15 cet we'll talk to the head of commodity strategy at bnp paribas. stay tuned, ross. >> the oil price keeps going up, could blow a lot of economic forecasts off track. until the first round of the french presidential elections nicolas sarkozy is stepping up his campaign to try to hold on to his jop. stephane is in paris with the latest. where does he stand in the polls, though, stephane?

>> reporter: he's trying to close the gap but still nicholas sar kocozy is behind if the election would be tomorrow. i think france will have two run-off elections and the first one would lead the first with 29% of votes versus 27% for sarkozy and would win the election with 56% of the vote in the second round. 44% for sarkozy. so yesterday evening was the first big rally for sarkozy addressing 7,000 supporters in. sarkozy said that we avoided catastrophe. france has not been swept away by the price of confidence. with portugal, spain and greece. in the past with germany but obviously germany is doing better with the crisis so if you

want to play you have to compare france with greece and portugal as sar kokozy in the last couplf days tried to seduce the extreme right voters promising them a hard line on immigration and more recent deals tried to tease the catholic voters promising them a hard line on gay marriage. sarkozy knows if he wants to win the election he will have to seduce not only the core voters of the unp political group but look at the end of this political group. >> stephane, thanks for that. christine? thank you very much. coming up next on "worldwide exchange," numbers out of japan show record hitting deficit in exports to china in january, stung by the strong yen. will japan exports market recover?

this is "worldwide exchange." the headlines today from around the globe, the day, has it come? eurozone finance ministers are expected to give the green light to greece's second bailout package but work remains to be done to try to make the numbers add up.

the central bank cutting reserve requirements for lenders by 50 basis points and the pboc's first rrr cut this year. japan posting its worst trade deficit as japanese goods slump and s&p warning of a ratings down grade if tokyo fails to control its growing public debt. and brent hits its highest level in eight months after eirn holds talks. you are watching cnbc's "worldwide exchange." we like the dramatic, of course, with christine. becky is us. we have an extended program going for three hours, of course, because there is no u.s. market. we don't have a u.s. leg of the show, but plenty of things to react to, maybe an agreement on fwrooes, higher oil prices and,

of course, the chinese reserve requirement dropping over the weekend as well is. christine, what's the reaction to that today in asian trade? >> sorry about the delay there. i was trying to run from the table to the wall so it took a bit of time. you know how it is with heels. bear with me. this is how the market is looking today. up a couple of reasons, why, because the pboc easing. we also had hopes of perhaps a bailout in greece. this monday. well, we'll see. the markets are higher on the news. the in kay 225 is up. exporters were higher despite data which showed a bigger than expected trade deficit for the month of january as exports. the topix higher. over in shanghai there was a volatile session, gains were kind of kept because people are now starting to worry about domestic growth concerns because of the rrr cut. a lot of people are saying maybe the p about boc is trying to 0

put growth concerns ahead. that seems to be the picture in china. the hang seng drifting below negative territory, 0.3% on profit taking but because of the rrr cut, a lot of the banks and property developers were higher as a result. elsewhere, taiwan-weighted index up 0.8%. the kospi flat. the miners are getting a big lift. a lot of people are betting the pboc doing something it clearly says that china is doing something to make sure the economy still continues to grow and that demand for resources will continue to be intact. so, beccy, overall looking good for a monday. what does your heat map show today? >> a similar picture. lots and lots of green around. this is the picture as it's developing here. loads of green. a few stocks declining but few, indeed, modest declines where there are drops at all. overall the stoxx 600 is up by just over 0.8%, even on friday we had closing highs for 2012 so

the move to the pboc a bit more risk appetite front there. also optimism this deal will get done in groes and we will have a second greek bailout that appears to be pushing markets higher as well individual corporate pieces of news which are helping. this is how it's panning out around the region. the ftse is relative up by 0.75. the cac up by 0.9 and 1%. each of those two indexes closed at their 2012 highs as well so pushing to fresh highs today and the ftse mib up about by over 1% in italy. let's look at the bond markets and see what's happening here. in europe the bond markets are looking ahead to the potential for a bailout deal to finally be done in greece and in that light we're looking at the ten-year bund yields, 1.94. in italy and sane clearly we've seen yields a great deal higher in germany as you might expect but they have much more under control than a few weeks ago so well below those 7% kind of levels, that 5.5% for the ten

year italian debt and 5.2% rough ly for the ten-year spanish debt and here in the uk ten-year gilt at about 2.2%. that's what the yield is in the uk. so under the currency markets, reacting to the same kind of themes that euro/dollar is at 1.3216. the euro is moving 0 up against the dollar today and on that risk appetite that we've been mentioning. we are off the day highs. we did see 1.3238 earlier on. back from those levels but euro strength coming through. euro/yen steady around 105.1 and euro moving up against sterling as well 0.8333. sterling has done well in the context of the euro as we've had the worries. relative strength at least in sterling and euro against the aussie dollar at 1.2278, ross. >> this is worth pointing out they were doing well on the back of the cut and reserve out of

china. the dollar/yen up since is its october's peak. head of currency strategy at rbc joins us for more this morning. adam, let's kick off with the reserve requirement cut by china. certainly greece and commodity currencies, we presume there are more cuts to come. what happens to those rates? >> i think we'll continue to see outperformance of the general risk proxies not just on the china reserve requirements but also the further central bank liquidity, the risk of qe-3 from the ped, the low interest rate commitment, all of these things, i think, will continue to keep the market biased towards adding to risk going forward and that will be long aussie, long euro and the currency generally. >> is euro/dollar -- i mean, that always was with greater risk appetite people went long against the dollar. so far we've seen short

covering. trading at a very tight range. >> it still does change. as much to global risk appetite as it does to the peripheral risk itself and one reason why i think it is for euro/dollar to squeeze higher from here. whether or not we get the resolution the market is hoping for in greece. along those markets retain a bias toward general appetite for risk, that would see euro/dollar going higher. >> and how will the next round of the three-year ltro feed into that risk appetite? >> this is a question that divides investors and my view is that the principle transition mechanism is through risk appetite and if it boosts risk appetite is the euro would tend to go higher. cle clearly there's a school of thought that thinks the ltro is near enough to quantitative easing to be a negative but the experience we've had so far is that qe even in its purest form

feeds into market primarily through appetite for risk and as long as the euro remains a positive risk proxy qe if if it were anything close would see the currency trade higher. >> adam, this is christine, looking at the japanese yen. it seems the additional is keeping the japanese currency soft. for how long? >> i think the japanese authorities would probably like to see dollar yen settling into a 78 to 80 range or so until fiscal year end. i think there's every chance they get their way on that. however, longer term, i think despite the core trade debt we see out of japan what ultimately matters is the current position and remains in very solid surplus fundamental supply for a stro stronger yen. i would look for that to reassert it self. we settle into a range towards the top of the range for the

last few years. >> adam, good to talk to you. thank you for your insight. adam cole, a strategy rbc. the other story we're watching closely, china's central bank finally giving the markets what it had been waiting for. trace w tracey chang has all the details. the central bank finally decided to cut reserve requirement ratio by 50 basis points over the weekend, the reduction could boost chinese banks lending capacity up to $63 billion beginning this friday. this is the pboc's first rrr cut for the year and the second in under three months. the move boo investor confidence. the shanghai composite up more than 1% at one point led by banks and, of course, property plays but that on the modest gain of 0.3% of profit taking. market players also questioned the pboc's motivation after the central bank adviser reportedly said the move was meant to ensure stable credit conditions

and should not be misconstrued as an easing step. beijing's decision is seen as part of the government's efforts to gently tweak its pro growth policy amongst slowing growth. few believe the central bank will cut interest rates with the cpi still stubbornly high. >> back to mikio, kumada. you heard tracey saying it's just tweaking, easing in. do you buy that? >> yes, because, as i said, their problem is they have to do something is because there are a lot of concerns about is this soft landing going to be successful and might it get worse? but on the other hand they cannot relax too much because that will make things even worse eventually by undermining even long-term confidence in china because everyone knows that the level of debt in china is not very high but the growth of debt, i mean, they are easing or

tweaking at a moment where credit is still growing. credit is growing in china faster than gdp and faster than anywhere else in the world and even though it's growing, you have some problems in the economy with property prices so there is a clear case for potential misallocation of capital. >> do you think that's too much emphasis on easing? very little is being played on china rolling over local government debt. that's been down played a little bit. >> yes. >> is that a big concern of yours? how big a risk is that? >> that is a concern, of course, and especially it's a concern because we don't really have tangible information. it would be much better, you know, the european example is perhaps not the best example but at least we know some figures after two years so we wouldn't want to see the same kind of process in china where the bad news trickles out every now and then but rather come up and say, look, we have this amount of bad

debt. this is what we're going to do. this will be much more confidence building we've seen today. everybody, i think, or most people, i think, do agree china has the capability of maneuvering to this. but right now i'm not sure -- it's a bit of a sense of the situation. they need to be very careful in order not to shake the boat too much. economically they are being successful so far. >> our guest host, ross. >> good to have you on. the swiss central banks reportedly wanting to purchase south korean one denominated debt for the very first time. carolin schober has more on this. first rhie young lim. what are officials saying about this? >> reporter: according to an official here this seoul, ross, the two countries are discussing

the timing and amount of possible purchase which is expected to be made in the very near future. they say they are looking into investing in the pboc and bank of thailand. foreign investors have boosted by a net of $6.3 billion last year but remains relatively low at 6.9% as of the end of last year. >> rhie, thanks for that. carolin, what's the attractiveness for the s&p? why would they be interested? >> well, obviously, you know, that move makes very much sense because they wouldn't be the only bank to diversify away from the dollar to other currencies whose yields are more attractive but are still relatively safe. the korean yuan is certainly one of them. i want to mention there's another currency that for the same reason has been quite attractive of late. that's the aussie dollar. russia just recently said it may

be adding the aussie dollar to its portfolio reserves as of early february. i just want to give you some background. the snb holds roughly 55% in the euro, 25% in the u.s. dollar, and 3% in other currencies. now, ross, as for the size of the actual investment into korean treasuries, i don't think that would be very big. here is the main reason. the latest data shows that 83% of the forex reserves are invested in bonds with a aaa rating. now korean bonds only have a single-a rating by s&p is. that would be the main reason but still interesting nonetheless. >> carolin, thanks for that. mikio, very briefly, do you think we'll see more central banks diversifying into bonds in asia? >> yes, absolutely. that's the brief version of the answer. >> what's the implications for treasury holdings? u.s. dollar treasuries.

>> i think your colleague out of switzerland has already outlined it. the total amount will be very small compared to the size of the main reserves which are still, you know, globally u.s. dollar and the second being the euro. you need it as a diversifier and perhaps also as a bit of an improved currency management policy, a monetary policy management because, of course, all these nations are much more important than they were a decade or two ago. >> interesting. all right. mikio, we'll leave it now. our next story, japan posting its largest trade deficit on record. let's get out to makiko utsuda with the details. >> reporter: japan's trade deficit ballooned to $18.5 billion for the month of january. it was the fourth straight negative reading and the largest monthly shortfall on record.

the finance ministry said exports were down 9.3% for the month before and the drop mainly due to the strong yen as well as sluggish markets overseas. exports towards asia took a hit as demand waned. exports to china slid over 20% marking japan's largest trade deficit against the country. on the other hand imports grew nearly 10% on the back of rising oil prices and increased demand for natural gas. the finance ministry says exports tend to fall in january due to seasonal factors but economists say because of the massive trade deficit japan's current account may slip into the red this january. meanwhile, standard & poor's reaffirmed the sovereign debt rating. the agency says it continues to carry a negative outlook and could lower the rating further if the government debt continues to grow. and that's all from the nikkei business report. back to you, christine. >> makiko utsuda, thank you very much. our next guest believes a rally in the tokyo market has further

upside momentum. to nicholas smith of japan strategist of cla joining us live. nicholas, are the markets today seem to be shrugging off bad news about the bigger than expected trade deficit? of course that threat by s&p to downgrade japan as well. what does this mean in terms of risk appetite in the japanese market? >> we've had an absolutely fan tas it particular week. we've had a lot of advancers with the greek situation and then on valentine's day all heaven broke loose. the bank of japan announced new asset purchases. so i don't think that anyone was wildly surprised by the trade situation. i mean, of course we've had quakes, nukes, we've had floods, and then, of course, on top of that we've had the problem for january that the chain he's new year was in january instead of february. so a number of things were going

on there. then on the other side would be the import side, of course, with almost all of japan's nuclear power plants. it has a huge increase in imports of oil and natural gas. so i don't think people were wildly surprised on the adjusted rate. it wasn't that bad. >> to what extent can the japanese markets continue to ride on the additional easing offered by the boj last week? >> i don't think that's the reason the japanese markets are rising. i think markets across asia are rising on having factored in a doomsday ratio and the world isn't going to end so, yes, japan is up but korea is up a lot and china is up a lot and a lot of other markets -- sorry, hong kong is up -- and other markets are really moving. this isn't only on the back of

asset purchases from the bank of japan. that's certainly great news for real estate and stockbrokers. >> what do you make of the s&p threat to down grade japan if it doesn't get its public debt in order? >> i think that's a total and complete irrelevant. i think if i owe the moneylender some money, that's a problem. if i owe it to my wife, it's a lot less of a problem. japanese people owe each other a lot of money. that is the same point. they owe it to each other. so the fact that, what, 5%, 6% of japanese government bonds are owned by foreigners, the country doesn't need them and very quickly should return to firm currency accounts. this isn't an issue. s&p has a view but it's possible it's not a valid view. >> nicholas, you told us about trading on the back of all the liqu liquidity that is sloshing around there, the impact that will have on brokers, for instance, but why are you

interested in autos, machinery and chemicals? what's the investment story there? >> oh, i think what we've seen as we came into this year was a firm upturn in purchasing managers indices not just in the u.s. they were up in the u.s., up in china, up in india, up in japan, even up in europe. so across a very broad base they've been improving and those tend to lead global trade by three months with a 90% correlation. so i'm recommending that people generally get into the sectors that are well exposed to an upturn in global trade but something very unusual is hamming. almost invariably strong global trade has gone with strong yen in the past and what we have this time around is strong global trade with a weak yen and that doesn't look very good indeed. >> i'm sure a lot of people share your hopes, nicholas.

thank you very much for your thoughts today. good to talk to you. nicholas smith, director and strategist. still to come on the program, the world's fourth biggest brewer of carlsberg. we'll be joined by the ceo after the break.

the world's fourth biggest brewery carlsberg as the danish brewery posted strong fourth quarter. they came in at 1.83 billion versus 1.82. joining us is the ceo of carlsberg. thank you for joining us. let's talk about russia. a third of your sales are in russia. it's been a weakening market. are things going to get any better there this year? >> if you look at our business in northwestern europe, very solid performance. asia very strong growth. you're right, russia has been challenging in 2011 and some of

the key factors here has been a price increase in the beer category but also very high inflation on food products and that has negatively impacted consumer behavior in our category and, therefore, we are looking at a decline in the category of around 3% in 2011. we do expect because of some of the fundamentals in the russian economy and also the much lower inflation expected for 2012 that the category at some point in time will return to growth during 2012. >> you are looking to take full control of your shrussian arm a i understand that your 2012 forecast doesn't account for that. if that happens, houcht of a difference will it make to that forecast? >> it won't as much make a difference for 2012 but it's the intent to buy minorities, a voluntary offer. that's what we put out there so we get full control and today we are around 85% of the total business. >> all right, so, look, this decline in western european

markets, how much worse is that going to get as we -- what do you factoring in in terms of the eurozone debt crisis for the impact on those markets? >> first of all, the markets in 2011 in northwestern europe, in our markets, were about flat. so not in decline in 2011 despite the cool summer so slightly better than we assumed going into the year. however, we still believe 2012 will be challenging in northwestern europe. we believe consumers will be cautious because of all the uncertainty and that's why in our approach to how we plan the business for northwestern europe is a lot about very strong privatization, strong focus, and then really get behind the highest return on investment and then we will work on contingency planning because it's hard to predict the outlook. >> mr. rasmussen, we're out of time but thank you very much indeed for the time you've given us, ceo of carlsberg.

christine? >> and, ross, we have to thank our guest host mikio, thank you for being our guest host. always a pleasure. nice beard, by the way. i wonder what ross would look like with a beard 2012. >> try it, ross. >> iran stopping supplies to bri britain and prance before the eu sanctions against them. we'll be talking more about the story when we come back. i'm freaking out man. why? i thought jill was your soul mate. no, no it's her dad. the general's your soul mate? dude what? no, no, no. he's, he's on my back about providing for his little girl. hey don't worry. e-trade's got a totally new investing dashboard. everything is on one page, your investments, quotes, research... it's like the buffet last night. whatever helps you understand man. i'm watching you. oh yeah? well i'm watching you, watching him. [ male announcer ] try the new 360 investing dashboard at e-trade.

welcome to the program. the headlines today from around the globe, are the day has come, we think. eurozone finance ministers are finally expected to give the green light to greece's second bailout package but work remains to be done to try to make the numbers add up. >> reserve requirements for lenders cut by 50 basis points and the first rrr cut this year. japan posting its worst trade deficit on record as china's demand for japanese goods slumps and s&p warning of a ratings down grade if tokyo fails to control its growing public debt. and brent oil hits its highest level in eight months after iran halts oil sales to both france and the uk.

we're into the second of three hours here on "worldwide exchange." no u.s. markets today because it's the presidents' day holiday which means we also have beccy and you keeping us going through the third hour today. it's also decision time for greece. finance ministers are gathering in brussels today and they are expected to approve a second bailout. eurozone and ecb officials held a conference call last night to discuss the last details of the $130 billion euro package. this as demonstrators once again took to the streets in athens in protest against the austerity measures. the new bailout money will be used to finance debt restructuring and stabilize the banking system. under the program financial firms will exchange their holdings of greek debt for longer dated securities. the swap will result in a 70% haircut for greece's private sector creditors.

so the good news is, silvia, that silvia is in brussels. the good news is, silvia, you actually have a meeting to report on so your trip isn't comple completely wasted. here is the one thing. we had this report last week, silvia, suggesting that under the main scenario on the sustainability support, it will only get down to 129% ratio. are they going to at all close it to the 120% that they wanted a couple of months ago? >> reporter: well, you know how far projections for the economy go these days. they last a couple of months and then falls apart a little bit further t. could also, of course, turn the other way. at the moment where we were a couple months ago, it looked as if the whole of the eurozone would head in a recession. now in terms of the data for the eurozone it doesn't look like we're falling off a cliff. it looks as if things are looking up a bit. we look at the u.s. things are looking up a bit.

it doesn't seem so imminent, of course, but for greece itself everything is still very grim indeed and if the greek economy keeps falling apart rather than picking up again, we do have a problem. we do have more of a problem and then maybe 129% are not sustainable. maybe we even head further south or go further through the roof in terms of the debt to gdp ratio but even when we're talking 120%, even if they get there it's not really a sustainable level. so what we get today is only one little step forward to give us more breathing space and this has been the theme song from the word go. not really about finding solutions but about gaining time. if we gain time to actually help solve the problems, then all the more power to it but at the moment it doesn't seem as if the other problems, the structural problems, the political problems, the actual economic problems in greece are going to be solved this way. >> among the total package which is the money, the private sector

haircut and the ecb, the central bank contributions, is there still a sticking point? is there still something that you think they've got to come to agreement on? >> reporter: no. i think the last bit did fall into place. you remember this time around last week we were talking about a petty one, some could say, of 325 million that had to be saved somewhere and an argument where it should be saved. that has been achieved. there seems to be agreement on the size of the haircut although inverted the size of the brackets may not be enough and we might have the more public sector haircuts attached to that. whatever the agreement that's on the table, it seems to be relatively clear. the other little sticking points are the ones that are behind the scenes. what's happening to privatization, what's happening to tax evasion? what's happening to decluttering

the economy. what's happening to getting the structural reforms of the whole institutional framework going? and i think there you find almost more exasperation than in the mere numbers of bailout packages. >> all right, silvia, stick around. joining us for more is the chief investment officer. chris, nice to see you. while we've gone through the greek saga, the dax this year, just this year, let alone since the lows of november, up 17%. >> yes, well, they took a little while to start to join in the race for the s&p. the s&p was actually rallying through the end of last year. the european indices were a little bit slower to get with it but it's -- they have certainly put on a spurt in the last six, seven weeks and i think it is justified, actually. it looks certainly as if there is a slightly better economic scenario playing out in europe than some had feared.

perhaps most importantly valuation is extreme ly supportive. these things got a tremendous kicking last summer. they're still well below the levels of last summer unlike the s&p so the valuation gap between europe and the u.s. is still substantial. all of these things have good justification for what's happened. is it overbought in the short term? quite probably. quite probably. but then again markets will squeeze the bears until it hurts and then squeeze them a bit more. >> the underlying assumption has always been when push comes to shove greece gets enough money to tied it over to avoid a disorderly default and that's what we thought, the assumption was right. so what is the next thing we focus on then? >> it's back to kicking the can down the road, isn't it? that cliche of last year has been dusted down and brought back. i don't know -- i find that rather disappointing, actually, to be honest. i'm not sure the reprieve will last terribly long because we have the elections coming up and what will happen then, pictures

from the streets of greece and i think that the medium term prospects of this really sticking are very slight. you've got to have some sort of consensus or something for austerity programs to stick and it just isn't there. so i think this is probably the beginning of the end in actual fact. it's the last kick of the can down the road. the germans hearts aren't in it anymore and i suspect we'll get the profit to fall so finally we can deal with the problem and move on. >> so the minutes, the confidence ebbs back out in the market, the rally comes to a halt and we go back even lower, do we? >> yes. my suspicion is that for a while we're into a roller coaster market. and i think everything has happened recently to suggest that's the case and we're getting to the top of whatever the track is. will we go back into a serious

bear market? hopefully not. there are not enough good things so hopefully that scenario -- and that's perhaps the most important thing for long-term investors that they can start to remove that likelihood of going back into a horrible bear mark but i would caution people probably not to rush in. you will probably get a better chance to buy into the market at some point in the coming months. >> chris, we have word they are working together to support europe when it comes to funding. is this pour supportive? what role do you see them playing in the recovery process? >> they've already done a pitt. bid. they did reforms last year. so far all i'm hearing is talk and good words. we're not seeing the good deeds quite yet. look at these guys are

reasonably smart investors and i don't think they're going to throw good money after bad. i think the germans have found themselves painted into that corner as we saw last week. the chinese and the japanese are not paint ed into the same corner, so they need to see credible progress and when they see credible programs, it won't be a good investment opportunity. the problem at the moment particularly with the greek situation is clearly not critical and that's why the imf, the striking thing is the imf are not participating anything like the degree they did last summer and that's because they know these plans lack credibility. so with a bit of luck in the coming months i think the greek thing needs to be sorted out properly once and for all but i'm sure we will get support from the japanese and the chinese and the imf and everyone who recognizes the opportunity that exists. >> and just a little bit of news out from the greek finance ministry, there seems to be agreement at the working group on lowering the interest rates

on the eu and imf loans paid out to greece, the bilateral zones, $110 billion which they gave in may 2010. so they are talking about lowering interest rates and those original loans but still under discussion the deeper haircut for greece's private bondholders still being discussed and also there's still a question mark, apparently, on whether the profits from the ecb should be transferred back to greece. still to come, we'll take a look at the impact of china's move to ease monetary policy on the equity market as beijing still going to manage a soft landing. it looks like it. we'll talk about it when we come back.

we're getting gnashes out from greece. we heard from the finance minister who suggested that questions remain on whether profits from ecb should be transferred to greece. and the dow jones is quoting an official saying essentially that there appears to be a deal to cut the rate. the europe central banks will help in the debt write-downs. so conflicting reports coming out as these discussions continue. and those last-minute talks on the technical issues and greece

will continue to make the necessary sacrifices. we're still not quite sure about whether the central banks will partake or won't partake. let's bring you up to speed with where we are with the global markets with beccy. i'll tell you where we are, ross, that's up. that's the case across europe anyway. lots of green on the map. optimism that we'll get approval finally for a second greek bailout today and also the china rrr news as well having more risk appetite, too. at the end of last week we closed out the stoxx 600 with the tresh high of 2012 pushing back higher beyond those levels today up by 0.7% so off the highs of the session but still managing to lose to the upside. these are the markets around europe and they are all positive. the ftse 100 is the relative laggard but still up by two thirds of a percent.

gains for the dax. they could be closing at fresh 2012 highs when they finally end the session and the ftse mib moving up on italy by 1%. now we do have the macro stories that are driving the markets higher in general but we have a couple of corporate news stories which are helping, too, in particular let me point out what's going on with the stock of tnt the biggest gainer ong the stoxx 600 today. it is a standout day when you consider it's up by 55%. now it had words ups offered 9 euro a share. that has been rejected but the companies are still in talks and they have pushed above the 9 euro level suggesting there could be a higher bid to come. s it is up 47% for postnl. those two stocks are the biggest gainers on the european markets so far today. let's mention what's going on in the currency markets, too. we do have a bit of return to risk appetite with the news out

of china on the rrr ratio but also the greek story is playing into the euro in a big way. the euro is up today by 0.2% against the dollar, 1.3208. that is off the session of the high. we did have a session is high of 1.3208. euro/yen steady at 105.09. the why are owe edging higher. also the euro against sterling, the sterling had the relative outperformer compared to the euro as the euro crisis has developed but today the euro gained the ground and the euro against the aussie dollar 1.2268. let's see where we are in terms of the german yields right now. the ten-year yield at 1.94. the italian and spanish yields have come down from the levels we saw just a few weeks ago. those are very much unsustainable.

elevated but 5.5 really for the italian yields. and 5.2% on the spanish yields and in the uk the ten year is at 2.2%. so that's the big picture when we loo what's going on in terms of the greek story and what's going on in china. we do also have to bring to attention, though, what's going on in terms of the geopolitical situation across the middle east because oil has been in focus today particularly related to the situation in iran. now this chart shows what's been going on the past six months. year to date brent was up by over 11%. we heard they are banning oil exports to british and frieench can companies for eu sanctions in place on the 1st of july.

greece, for instance, and that will have a bigger impact on greece than on the uk and on france but it just shows the rhetoric is continuing to tick up. u.n. inspectors are spending this next couple of days in iran checking on their nuclear program which has a bit of consternation across the west. brent is trading up by another 1% today. $12 $120.47. christine? >> here in asia the cut you mentioned by the pboc over the weekend and hopes of a second bailout for greece and that seems to be fueling the risk appetite here in asia. take a look at the bourses. the exporters were higher. we showed a record trade deficit for the month of january because exports slumped.

elsewhere the hang seng lower on profit taking, 0.3%. we had the banks and property players up because of the pboc cut over the weekend, very volatile trade reversing gains. the shanghai composite up. people are starting to worry about slowing domestic growth so that seems to be weighing on the shanghai market. taiwan weighted index up modestly. elsewhere pretty modest gains across the region as well. with the u.s. close on presidents' day that's your global market rally. china news today, stocks there have had a volatile session. they surge at the start of the trading day following beijing's announcement to cut reserve requirements for 0 lenders beginning this friday. but the gains were short-lived. largely due to doubts about whether the pboc's decision to pump over $63 billion into the

system had more to do with stabilizing credit than a bona fide easing. this is the central bank's first rrr cut this year. its second in under three months. let's talk more about it. chris wiley, we had a guest earlier on, our guest host, in fact, who said with inplagues so high it was n inflation so high it was not a wise decision. what are your thoughts is this. >> it's interesting that just very recently we've had some indications that inflation isn't being quite as quiescent. i don't think the chinese have a lot of choice at the moment. there is a slowdown under way, plenty of evidence of that, showing up in all sorts of different indicators. so they're doing what they can. how much latitude do they have, how far can they go in this direction? i think quite a lot of hope has been pinned in the last few months and the fact that the cycle has turned. the rate cycle has turned, that

the monetary policy cycle has turned and one has to say it's not just about rates, it's also the other measures such as the reserve ratios. and the underlying assuming that is fine, now it's turned, we can go into a nice easing cycle the last couple of years just like the historical parallels. the chinese have complete freedom of reign and perhaps this is the point here. i'm not sure that is actually the case. i think they can probably find that they can start to do something. then they'll start to hit some potentially constraints because inflation isn't coming down quite as much as one might like to justify further easing so i think there is a valid point there and i think it's another one of those things on the back of one's mind when you're thinking of getting really carried away with the bullish story at the moment. there's quite a lot of straws in

the wind, things still have to be tackled. questions that have to be answered and this is one of the big ones. >> one of the big ones to us, chris, what beijing hopefully wants to generate out of this is that much of the lending will go to smaller, medium sized enterprises to grow their businesses or to genuine growth stories instead of being channelled into inflation, into the property sector. how does the central bank avoid that from happening? how do they guard against this scenario? >> that is the elephant in the room, isn't it? they said if they have a crisis in china would anyone know. that means it's so heavily managed one doesn't know where one stands. what we do know is there's been a lot of quota led lending in

recent years which has gone into very unproductive areas and almost certainly not being serviced properly. as long as that's the case, it's very difficult to think about directing lending resources more effectively. the real point is the system just does nautical britted for that at the moment. people do not lend on krcredit china. because they're lending, the quickest way to do it is to lend it to the big state backed enterprises which are being managed by your political colleagues so that's the way it's tend ed to work. i have to say i'm not very bullish about the ability of the chinese to change the way in which they lend. they're certainly not going to do it overnight. it's something that will take years. >> all right. plenty more to come from you. we'll bring you the latest on greece. it looks like lower interest rates for greece are in the pipeline but they're still talking at the moment on how to

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we seem to be inching closer to a deal. eurozone ministers are close to an agreement on a number of measures including loan and interest rates on the original bilateral loans from the eu and

the imf paid out in may of 2010. we are still getting problems on 0 how to pass the ecb bond profits and discuss iing deeper private sector write-downs as well. gary jenkins, the ceo of swordfish research. good to see you. thanks for joining us. this idea of passing on the ecb bond profits, we heard bill gross, our guest today, the ecb will take part but not face collective action clauses and that causes a real problem down the road for holders of greek debt and maybe other eurozone greek debt as well. does it? >> it will. at the moment it this thing will get through and we're going to avoid the worst case short-term scenario which is disorderly. so at the moment it's a huge relief. however, when we get further down the line and we see the detail, then people might start thinking, well, if the ecb can come at anytime and suborder nate everyone else, then what extra premium should we demand

for that risk? so there's going to be unintended consequences of the ecb's actions. >> whether that plays out on italian debt. >> exactly and they will be looking at what happens with greece and saying, well, we don't know exactly how much italian debt. we don't know exactly how much further down the line so we don't disclose it. they disclose an overall figure but wove to assume that if anything goes wrong there we will be suborder nate. >> the ecb is talking about giving up their profits. you say they're not profits. >> well, they're not profits as we would call them profits. if you buy an asset of the price, let's say, 25, and that's what you can sell at, i hesitate to call that a profit. i wouldn't be able to cash it in and use the profit for anything.

nor would you. however, the eb is wonderful european institution who can claim that by switching the bonds and passing them on elsewhere to another institution that someone can pretend that the profit that would come in place in ten years' time. >> to the efsf is about three or four steps. >> explain just how those unintended consequences would play out. if market players are trying to figure in what risk, what does that mean further down the line? >> what it means is first of all we have a situation where if the situation turns and gets more negative, we have the scenario where, say, the economic data is coming in, it's disappointing, people are concerned about what's happening with debt sustainability if italy, in spain, then bondholders will look at that and say, okay, if that situation deteriorates i nknow that losses were taken by the bondholder. i know the ecb could come in

with a huge amount of money, say, in those kind of bonds and you have to take all that into account. you are deciding what is the right risk premium to invest in those kinds of assets. i don't think it's a concern. they just want the deal to get done but it will be a concern if we see economic deterioration the second is half of the year. >> stick around. plenty more to come including the yields in spreads on italian debt whether that's sustainable. christine, what else is coming up? right, up next on "worldwide exchange," you'll be joined by the chief strategist of sarasin. stay tuned. are you still sleeping? just wanted to check and make sure that we were on schedule.

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well, a deal is finally on the table. reports suggest eurozone officials have reached an agreement on most terms of a new bailout for greece. the questions still remain over private sector and ecb involvement in the plan. china's central bank cuts by 50 basis points and the pboc's first rrr cut this year. japan posting its worst trade

deficit on record as china's demand for japanese goods slump and s&p warns of a ratings downgrade if tokyo fails to control its growing public debt. and brent oil hits its highest level in months after they halt oil sales to france and the uk. that oil price of course in response to the cut in rrr as well for china over the weekend and in a general sort of risk on sentiment as evidenced by european stock. no help from european -- the u.s. markets which would be closed for presidents' day. xetra dax is now up over 17% for the year. another 1.2%. the cac, the ftse mib, the ibex up nearly a percent, too. as far as peripheral debt is concern concerned, well, yields are fairly steady this morning. the ten-year italian debt below 5.5%, 5.48%.

we'll continue that discussion. remember spreads over bunds at one stage in november 500 basis points and italian debt yielding between 7% to 8%. gary jenkins is still with us. gary, have we -- seeing this big move down in italian yields, are we now at sustainable levels or not? is this level now one we're going to stay at? >> very unlikely. i would imagine it will continue to be volatile. you've had a situation where you've had a lot of help from the ecb directly. you've had help from the ecb through confidence while the ltro and you've had a lot of help from the rest of europe by all the talk of moving some sort of fiscal compact. so all that's been pretty positive. but the thing we still await is how does italy actually grow or not grow over the next year or two. this is a long game, not something that ends today.

they show their debt back on a sustainable path. >> have we separated to some degree the banking system from eurozone debt, and have we separated to some degree italy from whatever happens eventually with greece? >> i don't think we've separated the banks because as the sovereigns go the banks will go. so i think those two -- >> as part of the ltro? >> it helps the banks -- it allows the banks liquidity, more confidence with the banks but i don't think you can separate the sovereigns. they all go bust the banks won't be sitting there all fine. you can't get rid of those two. italy to some degree has decoupled from greece. portugal is probably more in the spotlight but notwithstanding that italy needs to raise so much money and there's such fragility i think we'll be talking about it all the time. >> not this week but next week. okay. thanks so much for joining us.

ceo of swordfish. our next guest says he sees risk appetite return and equities in emerging markets are undervalued. joining us is the chief strategist. the dow up near 13,000. the dax, as i said up over 17% now for the year. i suppose the question is at this moment whether you think we're getting a bit trechd in this rally. >> i think that's probably the case in the very short term. some market participants have been waiting for a number of weeks now. we think the market can actually grind higher and that's mainly for three reasons, one is the data is improving at the margin. particularly for europe and emerging markets and valuations are still very attractive and we have seen some rewriting year to date, of course, but it's not over yet. we're only halfway into this

rally. >> phillip, i'm delighted to hear what you are saying, actually, we've been banging that the last few months. we think the valuation gap is unwarranted between the u.s. and european equities in particular. i'll be quite interested in hearing what you recommend your clients do and how you are positioning your clients in u.s. equities versus european equities. are you actually overweight in european equities now as a result of your views there? >> yes, we think europe has more potential than the u.s. overweight in europe in january versus the u.s. where we have the slight overweight. i think in terms of the region are still the emerging markets. the upside is the biggest. clearly in europe we have the same or more ex traem valuation but i think we need to split the market there a bit more between the financial sector which is a

very cheap region and which is not so cheap anymore but also we think there's still more upside potential and two versus the euro stocks. >> phillip, what would prompt you to change your view and if we do get a deterioration of the situation in europe as we are discussing the yields in spain and italy, for instance, look much more sustainable, get worse all over again and confidence ebbs away how about change your view? >> for us the most important indicators are the macro indicators, the cyclical picture. we have seen consecutive gains and expectations index in the european pmi, even in the southern part like italy and spain, we see some stabilization. so if we see a deterioration there, if for any reason sentiment would turn down on the business side, that would be a

reason for caution, of course, also in the financial secotor o the spread side if we see spreads for italy for example, that would be reason for caution. other than that if these indicators it continue to improve we will stick with the rally and we think it can go on. of course we have the occasional setback. we think that would be a buying opportunity as in the case of greece, if we have continued volatility our next couple of weeks we think that would be a buying opportunity that actually many investors are waiting for. >> phillip, hi, this is christine. are you buying through chinese equities because of what the pboc did over the weekend? when we talk about emerging markets, we cannot objeviously ignore china. >> well, china is our favorite equity market for the year in terms of emerging markets but not since yesterday, since quite some time. we thought that even in the

fourth quarter when we started to see the first hint of monetary easing in china and that was very positive for us and the move yesterday just on the weekends is just another sign that actually monetary easing is taking place. i think we actually in a goldilocks scenario for equities we see that monetary easing is taking place. inflation is moderating and the growth picture is improving and that is very bullish for cyclical markets like china but also like russia. we think that the potential because that's where the in flows will be and we think investors are and will move money intories can can i assets. sort of the biggest market will benefit the most from that move. >> phillip, thank you for being with us, chief strategist sarasin. stay tuned for more strategy. one guest gives us his top three

for 2012 coming up. and right after the break, iran cuts off oil supplies to france and the uk. we'll get the latest live from the middle east.

oil prices moving higher again today, certainly the theme since the beginning of the year up by 0.8% in brent so far. over $120 by 57 cents or so and that's coming off the highs of the session as well. we have seen the tensions in the middle east taking center stage and having a significant impact. particularly in the past couple of days two pieces of news. one is yesterday iran came out and said they were to british and french companies in retaliation really for the eu sanctions against iranian oil imports which are due to come the 1st of july. this will have little impact some of the european countries more dependent on iranian oil exports. they are gathering steam. also, we have u.n. investors who have arrived in tehran today to talk on that disputed nuclear program as well. let's get a read on what the situation means with yousef gamal el-din.

yousef? >> reporter: it's great you bring up the map to show the strait of hormuz. they issued a report and warped as well of low level provocation so it's not just a question of closing or opening the strait because what iran can do is increase inspections and small down tanker traffic and that would reflect on a lot of the risk across the board. back to to the u.n. nuclear inspecti inspection, the team there in iran, in tehran, talking to scientists and wanted to access more sites. they are looking for answers to the questions they have. they made it clear they had serious concerns about the military dimensions of iran's nuclear program, whether they're going it get any answers is a different question. there were some positive signals from iranian authorities last week in a letter from tehran they made it clear they would like to start negotiations again with some of the major western powers but then on the other hand you mentioned the cut in oil sales to the uk and to france. the scheme of things it's not too serious.

in terms of volume. but the fear here is that this widens across to other kcountris that are more vulnerable to a cut in oil sales such is as greece, italy, and, of course, spain as well. but, remember, iran doesn't have all the leverage in the world. they have clients that are pushing for that discount in the sanctions environment so a lot to look out for, beccy. >> yousef, thanks for that. >> chris, what's your view on oil prices, particularly from the investment point of view? >> we've been keeping a close eye on oil. for a few months it's been bubbling under and now it seems to be really beginning to get moving. obviously these geopolitical tensions have been the catalyst in the short term but i think there's another story which links back to inflation in the emerging markets, people getting more bullish about growth generally and in emerging markets in particular. the marginal price of oil set in

the eastern hemisphere not the west because that's where growth is. so as people turn more bullish on the economy you would expect relatively tight situation and i think that's at play here. that's squeezing the oil price higher and that's what was happening anyway. a gentle squeeze on oil prices as people became more relaxed about global growth and now more impetus on the geopolitical story. but it's beginning to look as if oil actually might have a little bit of momentum on it from here but don't get too carried away because it's another thing further down the road to temper your enthusiasm perhaps because, of course, it does ultimately start to put a brake on because it's a tax on consumption basically. in the short term, i think it is something which should be represented in portfolios but it's not easy to invest in because most of the products are based on the futures market. >> we'll take some calls and

focus in on the uk housing market. a pickup in confidence has seen asking prices in february rise at the sharpest pace in almost ten years but it's come off a pretty low base. we'll get more when we come back.

the average asking price rosemont to month in february according to right move, the highest monthly increase for near nearly ten years. joining me is the commercial director at rightis momove. how does it fit into the broader context? >> there's obviously a story behind those headline figures. we have an active micro market amongst the cash rich, those with deposits and then those markets demand is exceeding supply and that's helping drive some of these figures but let's

not forget this time of year you do have a state agent vying for frern fresh stock as well. it is fair to say that they're are more widespread signs of a greater confidence amongst some of the house buying public as well. >> why greater confidence? >> well, i think some of them if you look back have had low volumes the last four to five years. there is pent-up demand there and those that can actually get mortgages are actually seeing historically low rates. very much not a mass market here. it doesn't represent the volume market but there's an elite sector that has the cash or the access to funding to actually purchase. >> you talk about people that can get mortgages. what's your experiences, how difficult to get a mortgage now? is it easing up at all for buyers? >> you still have to be squeaky clean on the credit score but in terms of mortgage products for those with a 10% deposit there's a third more than there were a year ago. 25% increase in the number of

buy to let loans available as well. that doesn't mean you are necessarily going to get those loans but there is more competition in the mortgage market which is good news. >> miles, we're broadcasting from london here. anyone living in london knows there's been a tremendous squeeze up in london prices in recent months. what's the broader national picture? that number is the national number, but is it quite a patchwork of strength and weakness on the national level? >> certainly it's led by london and the southeast. london only 1% off the all-time record high, shortage of listings down this time last year. so it does depend in various parts of the country. there are a lot of micro markets and it depends on the housing type. can your target audience or buyer get a mortgage for that type. there are cash rich areas in a lot of cities across the uk. while there is a southern bias

to activity, there are pockets of activity throughout the country. >> do you have a sense as to whether this is being driven by under occupiers or the return to buy to let investor? >> certainly the bottom end prices have to be right. they are now seeing returns of between 6% and 10% and objeviouy that's a sign of recovery at the bottom end. they are looking for deals and bargains. it's not the first time buyer coming back in but the only occupier level certainly the top end, middle to top end starting to be driven by people that have that access to cash have been living in a resistant property for several years during this downturn and perhaps deciding we're outgrowing the property or actually if we can get a mortgage then rates are at a reasonable level. >> miles, this is christine. speaking of cash rich and people with plenty of cash, the chinese have plenty of funding. are they going to the uk in droves to snap up property? >> the state agents do report a lot of activity from the chinese

buyers so obviously one of the things that people are locking for is a safe haven and one of our surveys we carried out half of the people said the property asset class was the lower risk in their view, so that was one of the things people are looking at and, again, they're choosing the more southern based london market. >> okay, miles, good to see you. thank you for joining us, miles shipside joining us from rightmove. chris, good to have you on today as well. >> thank you very much. >> you're confident short term? >> yeah, reasonably confident. cautiously optimistic. i would caution in the very short term. it looks a little bit topee and it's very rare that you don't get an opportunity to buy the market at a lower level that the starting level. very rare indeed. >> fair enough. chris, thanks very much for

joining us. and, ross, it's time for me to say good-bye. i'm christine tan in sing is pour. it is a monday so hopefully you'll have good news on your end today. >> you never know what will come out later today, christine. it's also presidents' day. the u.s. markets are closed. we're going to bring you an extra hour of "worldwide exchange." becky, what's coming up? >> we'll get oil at bnp paribas. plus, the next ltro help the eurozone out of the crisis? we'll discuss liquidity and european banks from 12:35 cet.