welcome to today's edition of "worldwide exchange." i'm ross westgate. >> and i'm kelly evans and these are your headlines this morning. >> things go from bad to worse for europe's manufacturing sector, contracting further in may. spanish pm ichli falling to a t year low. >> and prompting calls for more stimulus. >> and the u.s. presses the spanish government for immediate action on itd ba banks. >> and bp unveils it's looking to sell a stake adding it has received unsolicited offers.

>> this is jubilee weekend for the uk, but this is data jubilee for me. euro zone final may pmi reading, manufacturing sector activity index, is at 45.1. this is up slightly from the 45 flash initial estimate. of course it's still lower than what we saw in april. almost down a point from april to may to the lowest level since june 2009. the composition here aside from increases in ireland and i believe italy, pretty weak readings. and it's also what's going on with the employment with the new orders index and the new orders index for the eurozone for may

was down to 42.6 from 43.5 in april. that's a six month low. 1.2344 is the level. and what's even more amazing is the german yield curve. we had the ten year had a 1.99%. two year is negative. >> and gilts, 1.56. i didn't think we'd ever see gilts 1.56. what do you think of the priest action? >> at the end of the day this, is about capital preservation.ct action? >> at the end of the day this, is about capital preservation.p? >> at the end of the day this, is about capital preservation.pt action? >> at the end of the day this, is about capital preservation. action? >> at the end of the day this, is about capital preservation.p? >> at the end of the day this, is about capital preservation. treasury at the lowest level since 1945 and bunds you're basically giving your money to the german government for free. so it's not about value, it's

about capital preservation. and for those people that have deposits in europe concerned about the european breakup, it's all about moving their money outside of the periphery into some safe haven where at least they'll get their capital paid back. and in the case of bunds, even if at the end of the day yields go higher, i think they say will i get capital preservation or currency preservation to make up for the decline. so not about value. >> all right. more in a bit. but china's manufacturing activity eased in may from april's 13 month high. the deeper than expected slide in demand at home and abroad has led to more calls as to stimulate growth. in india, manufacturing sector managed to grow saidly in may. it's stayed above the expansion level for just over three years now. but domestic orders are slowing.

tracey chang is in singapore. >> according to the data output is becoming a big problem. in may came in at the lowest level since november last year. economists say with slowing global demand, factories see very little need to raise production as they try to get rid of existing inventories. this suggests further softness in the months to come. meantime hsbc's final pmi reading for may contracted for the seventh straight month. the private survey concentrates on china's smaller private sector firms. analysts say they are particularly anxious about the fall in china's employment sub index, dipping to an almost three year low.

this could cost major headaches for beijing as it gets ready for a leadership transition. investors are now hoping beijing are unleash fresh stimulus to counter revived fear of a hard landing. i'll leave it there. >> thanks so much. we've in order had too much of a problem in terms of the hsbc pmi number. this time 54.8 you was the month of may. and like you mentioned, it has stood above that 50 mark for a little over three years now. the pmi survey has shown that the new export orders have continued to grow at a very strong pace in the month of may. however, that is not the key problem. the key problem is what's really happening with the gdp and the number that came out yesterday was a shocker at 5.3%. pretty much a pulled down by the manufacturing sector itself and the slippage over there.

most of the street believe that given the kind of weakness that we've seen in growth, banks should cut rates in the june policy, however having inflation, one wonders whether that should happen. so far numbers indicate manufacturing is growing at a moderate base. >> people talk about a hard landing in china. 7% to 8% growth is not a hard anding. it's no landing at all. it's 7% to 8% growth. it's 12% less than a year ago, but, you know, that doesn't mean that the the bottom is falling out. >> let's get some thoughts on this from our guest. good morning.

do you agree that concern about a hand landing in china is overblown? >> yes, i don't think risk of a hard landing is very high. i do think the economy is slowing, but i do think the government whether step in and loosen policy to push gdp growth above 8% for the second half of the year. indeed the government has its policy in the past several weeks. but it will take some time. the science in the recovery will show up in june, but in a certain quarter particularly. >> what type of policy response are you expecting? >> i'd say mostly on the fiscal side, particularly on the subsidies for consumer goods, and the property housing

construction. mostly the sxen chur will be pretty much going to the places in 2008 and 2009, but the size of the stimulus will be much smaller than last time around. on the monday it taker side, i think there will be rrr, but plot likely to cut interest rate yet. >> if we did some sort of fiscal support, it sounds like won't be a 2008 measure. so while it may allay fears about china in particular, it won't help global growth. >> at the end of the day in 2009, there was a stimulus program, probably about half of that is what will be employed. so about 300 billion probably is what the chinese officials are thinking. but china hasn't actually put a fiscal stimulus program out in the open with clear policy action, clear dead lines so we can get our arms around the size and magnitude of the stimulus

program to prevent china from clearly slowing down. >> you point out there are a couple of things for investors to watch. new loans, project investments, central government expenditures and steal production. so what do those things tell us about how soon we might see further action? >> right now the indicators are still pretty weak. i'd say going forward probably in june maybe in the second half of june, we can see for instance new loans data and right now the government starting to do some policy, but to actually put into pla place, it will a some time and steal production could also pick up. but those are the confirmations. we need to watch for positive signs to reassure that 9 recovery is in sight.

but right now, a lot of uncertainty. >> the stimulus you're talking about you can isn't it putting investment into the wrong part of the economy? >> yeah, i have to say there's a tradeoff in the short term and long term policy objectives. in the short term, indeed, the government faces the challenge to boost economic growth and they have to do something that may not be the best thing to do from a long term perspective. infrastructure investment, probably a lot of it and the marginal effect is probably not very positive. but nonetheless in the short term, there is indeed the pressure to push up economic growth in the second half. so some investment may not be

going to places that are economicbly viable. >> emf is not planning to roy loans to help finance the bailout of bankia. last night talk was dismissed of an imminent intervention as, quote, baseless rumors. also that germany should be aware of the imbalances it created and assume its part in correcting them. commenting on spain's record outflow in march, he said the figures don't point to capital flight but, rather, to a difficulty accessing fund r funds. >> spanish government will publish data later today. release originally scheduled for yesterday follows a rating cut for spain's regions. fitch downgraded automatic autonomous regions including madrid. and warned of further cuts if spain does not cut spending. >> a tifrn any town in spain

claims to be the most indebted village. according to their mayor, the town owes 16 million euro, mostly due to the housing slump. the crisis has left the municipality with several projects they cannot afford. nancy, a reminder that it's not just the federal government in spain that has high debt loads here. can spain afford to bail out it banking sector and ultimately do you you expect the ifm despite all of the denials to come in here? >> let's start with can spain afford. the markets have voted no on that. analysts has done their calculations and what the size, probably close to 200 billion as a result of property loans. and the market has already done its calculation. yields have moved higher.

spain complaint access the capital markets. it means repoing will be very difficult for liquidity. so difficult at the government sector, as well. >> spanish p abomi, 30th month contraction. the rates of decline are faster than anytime in the last three years. so the situation is getting worse. >> and we still haven't seen that flow throw to gross figures just yet. we'll be live in madrid and a guest who says spain is already receiving a large bailout in the form of ecb. and robert zoellick has urged european leaders to prepare measures for a possible greek exit. he warns governments must stand ready to recapitalize banks and guarantee funding for spain.

>> let's show you where we stand with equities. 7:2 decliners outpacing advancers after a pretty ugly may. ftse and dax down over 7%. yesterday fairly flat. slim gains for the ftse 100. right now just up ten points. xetra dax done another 7%. ibex at the moment down at thine year lows. one of the standout stocks today is bp, it's considering selling its tnk bp stake and about they did, that will wipe out its net debt. so up 3%. deutsche bank down 3.5%, it has won the right to take over check mark's 911 million loan portfolio. take a look at the bond yields. heading still at record lows. 1.179% for the ten year bund yield. so we're at a fresh record lows

on that. the two year, here it is. it is negative, minus 0.001%. ten year gilt yields, 1.556. that's a fresh record low. ten year treasuries, 1.5595. ten year gilts yielding less than treasuries. and ten year spanish debt 6.59. but we still have record spreads between spain and bunds. as far as euro-dollar is concerned, we got down 23. dollar-yen slightly stronger. aussie dollar, eight month lows against the u.s. today following the china ph ich hchlpmi's numb. sterling 1.53. commodity, how do they fair? spot gold down 1555. brent down to $100 barrel. that's a key level.

and nymex, 85. $74 after its worst month since 2008. tracey has more on the asian trading day. >> markets are mixed as investors digest the w dst china p mchlmpmi reading so far year. the shanghai composite crawled back to positive territory ending slightly up, you but the hang seng index failed to hold on to the gains. down about 0.4%. and over in japan, tokyo shares fell 1.2% today as the renewed strength in the yen hurt exporters. that index has now erased all the gains for this year. is this also the nikkei 2.25 worst weekly run in 20 years. moving on to south korea a, the kospi finished lower by about half a%. the bellwether samsung did end up 1.8% after losing 13% in may.

the australian market struck a one week low hurt by that weak china pmi data, but hopes that the reserve bank of australia will cut interest rates next week did offer some support to that market. and lastly, i sandian saiindia f again this morning. >> tracey, thank you. >> you can wakt us at worldwi worldwide@cnbc.c worldwide@cnbc.com, @cnbcwex, at keldly und l keld. so much to talk about including the ballot boxes this ireland have opened. will the government get the yes vote it expects? we'll be over in dublin next.

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ireland looking set to ratify the miss cal compact. polls indicate a majority yes vote is the likely outcome of the referendum. beccy meehan is in dublin with more. it sounds like despite the positive response here, that voter turnout hasn't been very

high. >> there sdw appear to have been a very low turnout. there's a huge number of up decided voters. so certainly not a done deal. but clearly this is a huge domestic response because it will have a beg impact on stability. certainly that's where the yes will come from. very much dominated by the idea that a yes vote accepting this fiscal compact will inject more stability into the irish economy. let's get a view from the ground, though, to find out about it that it's true. we're joined by ceo of cpl which is a staffing company here in ireland. thanks for speaking to us today. you're very much in the yes camp. why is a yes vote so important to irish businesses? >> as you said, it should bring stability, but most important should bring confidence to the economy and also confidence to

the employers which is really important in terms of job creation. >> you are very much at the front line in the staffing business. what's your impression based on how companies hiring or not hiring as to where we are in the economic cycle? >> i think we're certainly seeing some improvement and we have had some growth returned to the economy and certainly we're seeing some improvement in terms of jobs. it has been very encouraging to look at some of the announcements we've had particularly in terms of investment into the the economy in ireland and i would certainly hope that the yes vote would see that momentum continued. >> lots of companies that we've had the announcements from have been international companies, the likes of google, facebook, et cetera that have announced jobs over here. how important is the domestic confidence to that? because we still have a recession in ireland. >> although there are indications of economic growth and certainly we have seen some

increase in employment towards the end of last year, so that's been good. but absolutely we're a small open economy, so the global economy is very important, also, in terms of job creation. investment into ireland also brings with it a good impact for domestic company, as well. >> do you think ireland can continue to observe the kind of austerity forced upon it by theout bailout? >> we need to see growth and momentum. >> a lot of people have spoken about how important the foreign direct investment is to try to get some of that growth. how much can the government do to continue to attract investment from overseas, are they doing enough to attract that investment and keep your business. >> i think some of the key things are our investment if

education. it's very interesting to see imd has said first in ineurope in terms of access to education and highly skilled people. so i think that's important. i think the other thing is we have a good government structure and legal framework in terms of production of ip and so on. the other thing is that there's an ease of doing business this ireland which is very important. so it's it actually easy to set up a business. it's easy to hire people. and imd have said that actually we're also number one in europe in terms of adapt ability and flexibility of our workforce. so i think these are all key might be differences that the government needs to maintain and to keep the reputation of ireland strong. >> thank you very much for coming on. we'll get the results of the referendum later today. back to you.

>> thanks. we'll be back to you in a little bit. and coming up next, spain's finance minister dismisses talk of a bailout as yields remain at uncomfortably high levels.

things go from bad on worse for europe's manufacturing sector. >> china slowdown deepens as factory activity drops off. >> spaen's finance minister denies talks of a bailout. >> and bp is considering selling its stake in tnk >> lowest since may 2009. that's a revised 50.# in april. new orders index, this isn't very good at all, 42 in may,e

lowest since march 2009. output fallen for the first i'm time in sick montx months. we saw it with the u.s. data yesterday. the mini recovery seems to be over there. and of course we see in the chinese pmi numbers, as well. ten year gilt yield, that's a fresh record low. 153. we were 155 before the data came out. that number confirms the weakness of the uk economy. >> at the end of the day, this is incredibly deflationary, the amount of austerity that we have and the uflt k economy is a

microcosm of the crisis. why we have this weakness as a result of the fiscal austerity that's taking place, we need to have greater -- >> to be fair, government spending in the last quarter was still going up. >> exports have fallen off a cliff. so austerity impacting what's going on in the uk, as well. to be fair, when you have this much tightening, you need on have looser central bank monetary policy. and i don't know what sequentially how it will happen, whether it's the mpc, the pboc, the ecb, the fed, this alphabet soup of central bank activity, there needs to be more provision of liquidity. >> with a are the odds we get a coordinated global central bank easing? >> frankly, if the spanish banking crisis continues as it is, we could see something the next couple weeks. markets are rioting until they see action. >> and speaking of the price action we were talking about, take a look across fixed income.

bond yields sinking to new lows. these are not typos. 1.17% on the ten year p. 6.6 we've seen a little bit more stress there in spain and italy at 6 abo.05%. ten year gilts, fresh record lows. and if you look at the 30 year, you'd see about a 1.7% number there. again about half the rate at which a lot of the struggling peripheral numbers can borrow money for 12 months. >> let's just show you where we stand with the rest of the indiceses. ftse 100 turned negative. xetra dax down 1.2%. ibex still up, but it is down at nine year lows. currencies just remind you sterling below 1.53 at the moment. down to 1.52 on the ham post that data, as well. we don't actually have sterling-dollar. euro-dollar 1.2340, just off the two year lows we hit recently.

aussie dollar at eight month lows. the imf is not planning to provide loans to help bailout bankia. at the same time, the government will publish data later today. of course the.mes out today, new business pmi, 38 about.3, manufacturing pmi and market have called the rates of decline as faster than at anytime in the last three years. that's the background as we're joined by john whitaker. thanks very much for joining us. can despite everything i just read, perhaps the most worrying thing is the reports that last month over 60 billion euros leaked out of spanish banks and that was before all this news that we've had in -- well, now last month of may. >> actually that's not news.

if you look at the figures for how much the spanish bank owes the european central bank, that was up at 300 billion and that reflects capital flight from spain over longish periods of five or sick months or something. so there's been a faltering confidence. >> how much worse is it getting, though? >> owe, sure. i think since the end of april, we can certainly help that's a lot worse. the problem is of course they won't make up their minds to sort this out and the institution that's really worried about what's going on is the european central bank because that 300 billion is owed to the european central bank. >> that and he remind people what we're talking about here. there are several ways in which a country like spain or greece or ireland is directly receiving funds from the troica or funds from, you know, agencies trying to help around the world. what we're talking about here is the way in which they're actually receiving funds through the banking system, the way that the ecb is set up, it's the target two system is the name

for it, but essentially if the european monetary union tomorrow were to stop funding spain, we're talking about huge liabilities. >> yes, we are. the germans, never lands, finland, they're all very much exposed to this central bank debt. no bup december bank said we have to make sure we have profit collateral. that's a tall order if you look at greece and what they're look to go back their borrowing from the ecb. >> if we had massive intervention from the ecb or the

bank of enyand, would that take the pressure off? >> the point is -- >> i know they can't do it. >> actually, they are. this is the point, they are doing it. that's why the european central bank is so keen that spain actually gets a bailout. get back to the case of ireland, it was the same there. european central bank wants spain to get a bailout because then the funds that support spain and the spanish banks would actually be channeled through an official bailout rather than the european sfrl huang. the european central bank is being very uncomfortable and will pass the buck. >> a game of chicken going on here. and who wins? >> let's look to the end game. i can't see greece in particular staying in the euro. nobody believes in the end that they can pay back the debt, nobody believes they can become

competitive. so the end position is that degrees "gross out and as soon as one country goes out, it becomes -- fixed exchange rate rather than this arrangement with the euro. >> and the history of those schemes has not worked out very well. >> and the cat is out of the bag already. already last year mrs. merkel was saying if you don't behave, you'll have to leave the euro. european central bank was saying something every week. now, as soon as somebody says some country will fall out of the euro, it becomes self-fulfilling. >> we're getting the results from the vote in ireland where they appeared to have approved the fiscal treaty, but this is a fiscal treaty that tightens mechanisms that already were existing and would have done nothing to prevent this crisis really. and would not do a heck of a lot more how other than providing austerity measure.

>> you're right. that's the thing. this vote in ireland is one of the biggest nonevents we've ever had. it doesn't matter if ireland ratifies it. it will go ahead anyway because they only need 12 countries to sign. secondly, all it does is to try to reinforce the rules that have been there already since the beginning of the euro. those rules have been ignored so routinely since the euro started. there's basically no sanctions that they can apply. so what's the difference? >> john, we could talk a lot. thank you. >> a real pleasure. thanks for stopping by. >> just to confirm, it was the minister saying appeared to have backed the eu treaty. official results come later. but he's taking his own view of

what his early counts. >> and the start of a new deutsche bank. starting today they will have two ceos. patricia is in frankfurt with more. how important is this move? >> we knew about this dual leadership at deutsche bank. interesting to see of course the first day on the job how do you have bank share price is reacting. down about 4.5%. but of course you cannot blame it if you look across the price, it is very much written that they will at that time lead. and should not be underestimated. important overnight we had the announcement that they are buying in to a loan portfolio,

spending 911 pill i don't know, that is a source talk about the number which has not been confirmed by deutsche bank yet, however, also when it comes to commercial properties. an interesting trend because we see more and more companies, more and more financials really getting rid of their loan portfolio. >> all right, patricia, appreciate that. >> pmi data, ten year gilt yields, fresh record low. 1.532%. rising concerns over china's growth continues on the agenda at the world forum. he was asked how worried he was about the prospect of a hand landing in china. >> i'm not very concerned about a hard landing. there's always a risk. but china has the resources setting on more than $3 trillion of reserves.

it has the instruments. it has much stronger control of the financial system, the banking system. it has the commitment, almost the necessity of maintaining economic stability. so in my mind, there are enough tools, resources, commitment, that china is likely to avoid a hard landing. >> are you worried about a prolonged recession in the eurozone and the impact that it could have on the broader global economy and the process? >> i am worried about high unemployment in europe and that that high unemployment would be persistent. it in many of the countries, the gdp has not yet recovered to what it was in 2008. in terms of people who can't get

jobs, it's still a recession even though the official name is not a recession. so in my mind, the relevant question is will there be robust enough growth to get the unemployment rate down to a reasonable number. i don't see that happening either in europe or in the united states. >> if greece does exit the common surns city era, will that be an ept comparable to the lehm lehman crisis? >> i don't think we fully know. back in 2008, we talked about the lack of transparency in the financial system and everybody said we have to make it more transparent. we didn't do it. we don't know the financial linkages.

but we have a little bit of an inkling when greece restructured its debt, wrote it down by 50%. this is a bigger event because will has to be a restructuring of a whole set of private contracts as well as the government debt. so it could have a more traumatic effect. >> should the ecb be doing more, playing a morrow active role in getting ahead of the current crisis and trying to stabilize the economies that are most the at risk? >> they've argued the responsibility lies with the government and not the ecb. a common framework like euro bonds, a common treasury, that the european government have the

first obligation. and i agree with them. but in in the absence of that, the ecb has the tools, has the ability to do a lot and to do a lot more than it's been doing. >> also speaking at the forum was a pro democracy leader. her message to investor, please bring money to her country, but only for the right reasons. >> we do not want more investment to mean more possibilities for corruption. we do not want to mean greater inequali inequality. we want investment to mean job. >> formula one the fifth to be ditched or delayed.

and he made this this comment effectively that why would anybody buy the stock if you think it's going to be 20% cheaper because of market conditions. fair enough. >> we've seen a little of that lately with facebook. it's clear that the ipo market which people were hoping would be in a much better position this year, not the case. hong kong down sharply in terms of activity. >> still to come, time for brits to get out as the queen prepares to celebrate her diamond jubilee.

before we get it to the queen's jubilee, first it's jobs jubilee in the u.s. that's right, it's jobs friday and this is particularly important. may being the month last year when we saw job growth in the u.s. decelebrate from a pace of about 1200,000 a month down to 54,000 triggering concern about the health of the economy. take a look at what people are expecting for the pig.

official expectation is that the economy adds 155,000 jobs. but after a string of weak figures including a private sector estimate out yesterday, a lot of economists have been walking back from that. unemployment rate may increase but still looks better compared with what's going on in europe. but take a look as to what we've seen in terms of the trend for u.s. and i roll growth. it's been incredibly choppy. what hasn't happened is what many economists hoped which is that we've reached a cusp where employment growth will be sustainable. take a look at what happened in 2011. as mentioned, we started to see a pick about up, we saw $1200,000 jobs added per month sh and then fell sharply. saw again a pick up over the winter, but the question is,

will we continue to see sustained or will we hit a summer swoon. >> jubilee data is a four day weekend of 306rpomp and pageant. celebrations will include floats sailing down the river. the largest flotilla on the river in modern times. 12 1/2 miles. also 2,000 members of the brin continue's armed forces will have a procession along the streets. >> they're taking on the challenge of reproducing it with -- >> sounds good to me. world's biggest private mint is also doing its bit. they've produced a coin which contains 60 diamonds and 60

ounces of fine silver. we have it onset with us, as well. joining us is managing director and her husband. first of all, thanks very much. you've got 60 of these coins, 60 ounces of silver. first of all, how much is it worth and how important is the jubilee for you doing this business? >> the coin is selling for 9500 pounds. only 60 in the world. the reason you buy it is because it contains 60 ounces of silver so the premium is a lot higher and it is a limited edition, it's a collector's item. so as silver and gold potentially can move either up or down, this coin potentially will go up in value whatever silver is doing.

60 diamonds in the crown weighing one carat in total. >> i'd like to put that on a chain and wear around my neck. that's a lot of bling. >> and you've done other came men are a difference things. it in the meaint business. is anybody mints drachma? >> i wouldn't want to stay a word. >> i think we've moved past the stage about idle speculation about this. we're talking about countries leaving the eurozone. i'm sure mints have never been more popular from investors trying to figure out what they're up to. >> so what's going to happen with silver?

>> we watch the underlying value much precious metals. the first point is what i think about silver and gold isn't really similar to what this is about. so we're quite diversified in this. but. >> that's the way marriage works. i think silver is getting quite close to a near term air of support in dollar terms anyway. around 25, 25 1/2 bucks. but it's much more clearer and well confined certainly is gold. gold has been flirting with a massively important level for he can smish thanes anyway which is basically 1530, 1535 dollars. everybody is looking at it, everybody knows it. but that's where thely liquidity is in terms of flaunting it.

it seems counter intuitive that if we did break 1530 around there, then technically we think it's a greater chance of a $300 down rate on gold on. very sharp extension of the recent correction. >> do you think that's more likely? >> it could be a dangerous call to pick that break because conversely, we do start to see the euro speeding up, we could get this big flight back in. getting out of gold could be a big mistake, but longer term even if we were for see that break, and it's a big if, i think 1200 bucks is still long term structure. >> i would agree with richard. i think gold is in a bull market. but more fundamentally, all roads in terms of the current

financial crisis lead to further central bank provision of liquidity. whether china or the united states or the united states or ecb. so we think there is going to be further monetary easing. that obviously leads to debasement. at the moment it's all about the safe haven. let me get out of greece and spain and get me get into bunds and treasuries. gold has not acted as it normally does in a financial crisis, but gold does well in two circumstances. negative high rates of interest, we're certainly giving away now to governments for free, or win you have signs of inflation. and i would argue both of those are the -- >> can i ask, are you getting a lid from investors looking at real investors, art work or wine or whatever is a hedge against some of the uncertainty we're talking about?

>> interestingly from america, yes. as long as gold is moving, people seem to be buying it. something like this particular coin here because there is only 60, this is a wow factor. we have half sold. they are numbered, as well, which make them unique. an on the other side, they have a double equity. the queen's never had it on her coins before. so this is very unique. >> and i'm still learning about all of it. >> and that is the world's first diamond shaped coin and it has a diamond in it, as well. >> okay. >> it must be tough giving her gifts. >> exactly. richard will come back on his own as financial adviser. good to see you. you can come back on your own,

as well. we wish and you good weekend. >> and just want to bring you a couple headlines. an earthquake has been confirmed to have hit japan in the last couple of minutes. buildings in tokyo were shake. it was 5.2 magnitude. there has been no tsunami warning issued. no reports of immediate damage or injuries. but again, 5.2 magnitude quake shaking buildings in tokyo. >> and let's get a final thought with nancy. we've seen china pmi numbers. you have an underweight on base metals and minors. will you hold on to that? sgr ye >> yeah, the fundamental argument is that china is shifting there investment led growth to consumption whether he had growth and that means the came moddedities will be very different. i think what they're trying to do is consumption stimulus. there will probably be some investment in there, as well,

but the marginal return is going down. so they need to stimulate the consumption side of the economy. easy to build trillion dollar airports. more difficult to stimulate capital. but we think longer term the story is a growth consumption story and that's not metal intensive. >> great to have you on. come back soon. [ male announcer ] the inspiring story of how a shipping giant can befriend a forest may seem like the stuff of fairy tales. but if you take away the faces on the trees... take away the pixie dust. take away the singing animals, and the storybook narrator... [ man ] you're left with more electric trucks. more recycled shipping materials... and a growing number of lower emissions planes...

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welcome to "worldwide exchange." these are the headlines today from around the world. it china, slow down deepens there as factory activity drops off sharply in may prompts you wering calls for more stipulate husband. >> spain finance minister denies talks for a bailout. and expectations rained in after yesterday's disappointing adp data.

jobless rate the highest since 1995, so the employment picture getting worse. and euro-dollar just hit a session low on that number of 123.20. it's been a day of weaker expected data. but that's pushed beyond yields to record lows and it's not doing much for the futures right now ahead of the employment report. >> if you take a look here, it's back to red. dow jones pointed lower by almost triple digits. s&p 500 is pointed down about

14. this has a lot on do with the mood we saw across the globe in overnight trading. global 300 down about 0.4%. started out okay, but things have accelerated to the down side as we continue to get a string of negative data points including the jobs figures and manufacturing figures we spoke about off the top. the ftse 100 at this point in the uk down about 0.4%. xetra dax down almost 2%. 1.85%. that's more than what its 30 year borrowing costs are at the moment. and in spain, the ibex down only 0.3%. >> this is the chart that really matters here ahead of the take in the u.s. where bond yields are going. treasure record lows again this morning. let's start off if in germany. not quite negative the two year,

but ten year guilt owing yields, fresh record low. 1.5% for ten year gilts. pmi for manufacturing half an hour ago came in much weaker than expected. we had i think a 42 handle for that. and the weakest in terms of new orders since march 2009. in other words, much weaker than expected in terms of uk pmi this morning. fresh record shreds. we are on fresh two year lows euro-dollar. dollar-yen down 78.18. aussie not being helped by the china.me data. and sterling-dollar down 4.5

month lows. >> let's now take a check of what's on the u.s. data jubilee today. investors will be looking at the nonfarm payroll data for may. that number out at 8:30 a.m. eastern expected to show a gain of about 150,000 new jobs. although expectations have been reined in a little bit. the unemployment rate will also be released and is expected to hold about steady at 8.1%. personal income and consumer spending data will be released. and inflation gaming expected to show a gain of about 2% year on year. and it is the first day of june. construction spending for april will also figure into that. auto sales, we'll get those starting around 10:00 a.m.

so plenty there to keep people busy. >> let's just -- can we take a shot at those yields again? if you just joined us in the united states, you want to take at look at these so you imprint them on your mind. >> this is historic. really no other way to describe. given with a we've sehat we've this is pure lay sentiment shock and policymakers can turn sentiment around quickly, these figures point towards pretty serious recession. >> yeah. that's saying something. let's rehind you what those figures were. eurozone manufacturing worsening. down the lowest in three years. final manufacturing pmi 45.1. flash reading was 45.9 in april.

patrick o'keefe is joining us. thanks very much indeed for joining us. give me your reaction to the incredible yield levels. >> certain makes us feel better in the united states for what we thought was a fairly weak recovery. i say that jokingly. clearly the events that began back in 2007 have yet to be resolved. >> i won can ter what the answer here really is. we've seen from 2008 experience that at some point they will intervene. >> i think they will act because they need to act.

we already have the massive reserve on the federal balance sheet, but most of that money is sitting as excess reserves in the banks. there's just not a lot of demand out there for lending because they look at aggregate demand, they look at the shakiness of the recovery around the world, and they really question whether further investment, further expenditures make sense. >> the forecast for today's u.s. payrolls report is for something in the range of about 155,000 jobs. i would actually say that's probably closer to 120,000 jobs or so for may. now, that follows 115,000 in april. what do you think this report will have to show today to keep people positive at least relatively speaking about the u.s. economy? >> i think the forecasters expected that we would have an

average month of 150,000 net new jobs, private sector jobs here in the united states. what we have seen in the day at that time the past couple of days is that we're a little on the low side, but let's remember that yesterday's adp number which came in a little late is really not that different. i think the real challenge today is even if we get a small up side surprise. i think at this point, everybody has lowered their expectations to where a very low number is not going to surprise anybody. but if we were to get say 150,000, 175,000, that may actually be positive news for markets. >> although people might wonder if makes it harder for the fed to come in and all that matters is whetherle policymakers are providing who are liquidity. just to speak broadly about the health of employment in the u.s., you've mentioned and drawn

attention to the fact that the share of people working has fallen significantly not just during the recess, but remains lower. is there a structural problem here that's developing? >> i think there is a significant structural problem. and when we look back to actually the beginning of the millennium, all the way back to january 2000, what we've seen this most labor market measures is that we've been on a secular downward trend, in terms of people that actually hold job mrks terms of real wages. we have seen an erosion of the american workplace in terms of its ability to generate jobs an sustain incomes. particularly now that the economy is in a massive deleveraging, those trends appear to be pick up momentum. >> is there any benefit to be

gained from -- i'm trying to find some positives here. and there is an indication as labor rates go fun china and elsewhere, we might get high tech on shoring coming back to the states. >> we definitely see that. one of the stars in terms of the employment recovery has been the united states manufacturing sector. it's added over 500,000 jobs. that's a sector of our economy that in post world war ii period was in secular decline but has had a fairly robust jobs recovery. there is also increased competitiveness of american goods and services. so will is underlying good news. but the long term problems associated with the borrowing binge of the prior decade, some

of the accumulated problems that we have not allowed to work through the market place continue to weigh heavily on current performance. >> all right. patrick, plenty more to come from you. thanks for joining us. george osbourne will sue the eu over their plans to ban short selling. incredible. amazing on both sides. one that the eu would try to to ban short selling and secondly that gornl osbourne would turn around and try to sue them. >> we believe in the free working capital markets over here. irish manufacturing third straight month of expansion in may. which is in contrast to everybody else. and meanwhile i'm not shush the data was strong enough to ally concerns about ireland, but it was a great spot. france to cancel a c.a.t. rise and has announced it will

increase tax on companies biggest countries and the wealthy. >> and planned flotation has hit a wall. and you have to wonder what that will mean for wall street company, financial firms. didn't bode well for market sentiment p. >> and bp has announced it may sell its stake in tnk after receiving unsolicited interest. today's news marks a departure there bp's previous position on it tnkbp which bob dudley said was a core asset. >> in terms of bp, it continues to perform well. the "wall street journal" described it as a squabbling rock rolling down the road that keeps delivering hits.

fundamentally it's a really good investment. >> so what counselido you think the move? at worldwide@cnbc.com, @cnbcwex or@kelly_evans, or ats ross westgate oig. jamie dime mondon has been to testify. who are details on that

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let's take a quick check of headlines. eurozone in dire straights as manufacturing activity falls to three rear lowyear lows. >> and china deepens its factory fall i don't have. >> and yesterday's disapphoning private sector data. >> the reaction to the fresh lows on yields.

can i tell you ten year gilt as at 1.51. down to 300 year lows for gilt yields. and ten year treasuries at the moment, 1.5358. we were down literally minutes ago at 1.52%. >> if you take the treasury note for example, don't hold me to this, but in-early last year, we were at something like a 3.6%, 3.7% range and it was then people were saying yields are so low, how can they go any lower. we were worried about the debt ceiling. and it's continued to decline. and a lot of people, if you're wondering why we're so focussed on this, a lot of people will look at the ten year yields as something of a proxy for growth ro prospects. >> we know it's a fear proxy. >> that, too.

but does suggest that there may be much more raekness in terms of growth rates globally than people have really put into their forecasts. jamie dimon will have to answer to the trading loss later this month. he's scheduled to testify before the senate banking committee on june 13th. and then again on the 19th for a house an he will. take a look there in frankfurt trading down about 0.8%. that's outperforming because i think frankfurt is down about 2%. >> walmart shareholders can voice concern over the company's recent bribely scandal in mexico. shareholders meeting taking place in fayetteville, arkansas. and it would include a 30 minute question and answer session with company executives. >> walmart shares have been hurt by competition from dollar stores and from costco.

>>. >> a california judge dealt a blow saying it doesn't violate copyright laws so google will not have to pay oracle. >> if you sue, you sue big, right? still plenty more to come on the show. >> we'll speak to a u.s. hedge fund expert who says managers are seeing all sorts of opportunities in these markets. >> and as we do that, just remind you we're getting to session lows here for european stock.

dow pointed down triple digits. s&p would be down 16, nasdaq 25. if you want to know why, just take a look at some of the figures we're seeing across fixed income across the bond space where investors are flocking to the safety of anything outside the peripheral numbers of the eurozone. ten year in germany now at 1.15%

or so. gilt record low. hedge funds this year started out okay, but our next guest says testify's given back some of that performance of late. still, though, they're apparently seeing all sorts of opportunities. chris jones is with us. all i want to know is who is long and who is short the u.s. ten year. >> i think it's more complex than that because a lot of the people out there looking at the u.s. bond market have more complex traits on. there is no obvious direction or plays there. i think everybody is looking atop down volatility. and nobody knows what politicians will say next and how that will affect markets and

nobody knows what will happen in the short term to the situation. >> so what strategies are people looking in to and seeing opportunity? >> if you look at anybody with a fundamental bottom up strategy, clearly the markets have reverted again. it's risk on risk off and will they'll find it difficult to make money. so cash on the table rather than invested, wait for this period to subside. >> the problem with being long vol, it hasn't been that reactive and it's expensive. >> what's been the worst strategy this year? >> i think looking from now onwards it will be long short which had such a great start after such a tough year last year, but we saw a brief

respite. the market has been driven by fundamentals. but it's back to last year again. >> it's a new normal world. the vol is impress. it's difficult out there at the moment. >> i hear there are hedge funds doing weekly net asset value reporunn because of volatility, don't want -- i'm wondering what impact that's having on investors keeping withdrawing that money. >> investors need to be real aware of the volatility before

they invest. there's no free lunch in hedge funds. and volatility will come even if it habit come yet. so go in with your eyes wide open rather than just to say what has happened will happen going forward. >> and still a place not generating a lot. >> fund to funds is tough. if you look at the layer of fees hedge funds are charging, and the fund to fund fees, that's pretty much back to libor. >> chris jones, head of alternatives, thank you so much. >> we'll take a short break. still to come, the latest unemployment picture in europe and the u.s. ahead of that important jobs report. plus we'll be in madrid and dubl dublin.

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headlines from around the world, things go from bad on worse. jobless numbers their highest in 17 years while manufacturing activity falls to a three year low. >> china slowdown deepens prompting urging calls for more stimulus. >> spain's finance minister denies talks of a bailout from the imf as the u.s. presses the

spanish government for immediate action. >> and it that wasn't enough, u.s. markets set to open lower. expectations for today's jobs report reined in after the can disappointing adp data. >> u.s. futures pointed down, dow by triple digits. nasdaq would be opening lower by about 20. s&p 500 also to the down side by about 14. this keys off a lot of the weakness we're seeing across asia and europe. take a look at the ftse 100. after disappointing manufacturing activity figures, down 0 p.4%. cac 40 down about 1%. the ibex frankly looks good for the day, only down about 0.05%. >> but it is at nine year lows.

okay. look at he's yields right now. we have ten year bund yields at 1.15%. been down to 1.14 handle record lows. fresh record lows. ten year note 1.5. >> and the uk will be celebrating the queen's jubilee, but for investors on friday, for today it's all about the u.s. jobs jubilee. the key note of course will be u.s. jobs report due at 8:30 a.m. still looking officially to add about 550,000 jobs for the most about, but expectations have been paired back. the question is whether it will be up or down from april. the key reason why may is important is not just because of

what we're seeing in those figure but also because we have to remember what happened back in 2011. first four months of the year, we were add building 200,000 jobs a month. in may, we hit a wall. so the key question for 2012 is whether may will bring us another disappointment from that better jobs pace. patrick o'keefe is still with us. for viewers just joining us this morning, what cow expect okou d what will it take to keep people positive about job prospectses in the u.s.? >> i think the con send says forecast of 150,000, had we scheefed that, even that won't keep pick happy.

we need to average about 1200,000 net new jobs per month just to keep up with the growth in our work age population and to make at least a more begin al in-road into the large number of unemploy unemployed. so when we look at what we're up against in this morning's report, i think expectations have already been lowered given some of the earlier data in the week. there is now the expectation that we're not even going to meet those lowered expectations. it's reminiscent of the movie we've seen before. i think we have to focus on the fact that jobs growth even if it meets expectations is still well below what we need. >> and patrick, we've had this this deceleration in private jobs growth. what is the outlook for that? >> i think the outlook is that

private jobs growth, which has averaged about 165,000 jobs since the jobs recovery began, that's about where we'll stay. may slow down given what's going on in europe and china. the export component of the american economy has really fueled a manufacturing rebound here. slowdowns in asia and europe. a lot of these exports were lost. >> that is i'm sure on top of a lot of people's minds. how much resilient can the u.s. be? >> it's difficult when you look domestically at where we would get internal acceleration. the public sector is consolidating, which is to say that it's no longer acting as a stimulant, but now a drag on gdp. households are basically drawing

down on their savings in order to maintain their consumption. one of the data points that i pay close attention to is the proportion of after tax incomes that are derived from page and salary earnings. and it's currently at near historic lows and has been for the last two year. all right. we'll leave it there. patrick o'keefe, thank you so much this morning. as mentioned, china's manufacturing activity eased in may from april's 13 month high. deeper than expected slide has led to more calls for beijing to stimulate growth. pmi survey also lower than april's. tracey chang has more details on this. >> the official data covers mostly china's biggest state run firms. according to the data output, it's becoming a big problem.

in may the sub index came in at the lowest levels since november of last year. economists say with slowing global demand, factories see little need to fire up production as will they try to get rid of even stories. mean time hsbc final pmi reading for may contracted for the seventh straight month. analysts say they are anxious about the sub employment enkeks. this could cause major headaches for beijing as gets ready for a leadership transition. back to you you. >> doesn't matter which of those gauges you follow, they both point to slowing in china. we asked if beijing should consider other forms of investing. >> obviously the chinese have

other prerogatives in terms of trying to keep their currency from appreciating. but ultimately, yes r, you woul have to think that they're looking for other alternatives, what might those be, typically they might be real assets, commodity, an outright purchase of oil. anything that basically has a better potential return than a 1.75% return on a u.s. treasury. >> we had a jubilee coin in here this morning, talk about a real asset. it was beautiful. but the demand is really from the collectible items that people say at least this i feel like i'm preserving my wealth. it may be a better return. >> we had quite a lot of pmis out of the you're ozone.

number of unemployment hit will the highest level in 17 years. final manufacturing pmi, 45.1. number of people looking for work across the region hit 17.4 million, the highest since january 1995. also we had a pretty awful uk manufacturing pmi number, as well. that just to remind everybody hit 49.5. expectation on that 45.9 -- expectation 49. new orders below -- >> denmark fell from 63 to 54. that was a big step back. but just another area that shows you when you start to get concerned about the spreading throughout the eurozone, export demand will hit every one of these countries. china included. the u.s. data will be out at 10:00 arm. so even though we're focusing on the jobs report, we'll get that

shortly thereafter. all right. coming up next, spain's finance hin sister dismisses talk of a bailout as the ten year yield remains uncomfortably high.

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there are reports this morning that the syriza party promises loan write-offs in greece for all the unemployed. so dan tweeted can he solve the u.s. housing problem, too? join us in the conversation. e-mail our tweet us. all i want to talk about are bond yields. >> if you follow our tweets, you'll get a recap of the lows that we've hit this morning. but despite all the negative news, there is something that is outperforming. bp sharply up. 2.8% at the moment. top gainer on the ftse 100. why? because they said they may consider selling their stake in tnkbp, the troubled joint

venture in russia. will they think they have a couple bids out there. and if that happens, analysts say this would be great because it will wipe out the net debt for the company. so there we go. one stock shrugging the trend. >> and these are your headlines. eurozone in dire straits. pmi falls to three year lows. china's slowdown deepens. and expectations scaled back after yesterday's disappointing private sector data in the u.s. and bailout of bank yoig is

not planned, dismissed as baseless rumors. the spanish government will publish data on the region's budgets following a cabinet meeting. the release originally scheduled for yesterday follows a rating cut for spanish regions. silvia is in madrid. it's pretty clear the spanish government will do anything to try and avoid a portuguese like bailout. how far can -- how long, you how far can they take this stance? >> and why should they. p we ask ourselves every time again, we see this train heading for a real accident and nobody stop it is. we've had -- in greece, will in ireland, in portugal. and every time we have the same sort of drama as it were saying, no, we're not in talks, no need for a bailout, we can do this

ourselves. and in the end, got more and more expensive. yield spreads got worse and worse. spain is a much bunker chunk. the problems coming from different sides. but at the moment, however, what the government is facing is two things. first capital flight. we can't deny it anymore. 66 billion euros left the country in march. the government trying to play that one down. and the other one is we need bankia to be rescued and we haven't got a real plan for that yet. and of course we also have the economy it if recession and not getting out of there. and all the regions having problems in refinancing themselves. cabinet meeting today. there's hope that some clarity

will come. but i wouldn't pin my hopes too high on that one. >> if anything, we've learned that. a tiny town in spain by the way claims to be the country's most indebted village. according to the mayor, the town owes 16 million euros mostly due to the housing slufrl. it's left with several projects it can no longer afford to complete. ireland meanwhile looks set to ratified the eu fiscal compact. beccy meehan is in dublin with more. if they say yes, what happens next? >> if they say yes r, not much happens. if they say no, we could see a lot of action in the market sense as well as on the ground here in dublin. this referendum is all about putting through ratifying the fiscal compact. ireland of course has been

bailed out once already. and if they say yes, they can still access the esm. if they say no, they can't. and many people we've been speaking to here this morning have said it's quite possible ireland will need more bailout money. the country has put in place all the austerity, it's met all the targets that have been put to it. and yet still more us a terry needs to be carried out. it takes a yes to access the esm money. so a lot riding on this. we should get early indications very soon of the outcome. >> again appears to be a vote for yes and to a fiscal compact that would tighten the existing controls which would mean more austerity. >> a low turnout, as well.

still ahead, walmart shareholders will be expecting answers on the mexico bribery scandal from company executives. we'll be live in fayetteville. etteville. they have names like idle time books and smash records and on small business saturday they remind a nation of the benefits of shopping small. on just one day, 100 million of us joined a movement... and main street found its might again. and main street found its fight again. and we, the locals, found delight again. that's the power of all of us. that's the power of all of us. that's the membership effect of american express.

the implication is we can't deal with a greek exit. >> they're saying it isn't about ingesting a small peripheral member of the eurozone, it will is about contagion.

but we'll keep an eye on his comments. and walmart shareholders can voice their concern over the bribery scandal. a shareholder meeting is taking place in fayetteville and will include a 30 minute q&a. courtney reagan is live in fayetteville and joins us. what kind of drama do you expect? >> good morning. right now we have about two hours or so to go until the shareholders begin filing in, but we're expecting to see about 14,000 fill the arena. there's expected to be musical performances, justin timberlake will be the emcee. but there will be shareholder business taking place. and among the six proposals that will be voted on or the announcements will be made about the results of the votes is the re-election of the board members.

rox proxy advisers inching to vote against some of the board members including current and former ceos as well as board chairman. also a founding family member. however, because the walton family does own the near majority of shares, it will be unlikely that any of those board members will lose their seats. but it does remain to be seen it management could make some changes on its own later on as a result of potential pressure from shareholders. back to you. >> court any, thanks. >> european stocks are down.

and bond yields just come off their record lows that we hit a short while ago. and ten year t notes down to 1.52. we've had record low yields despite the fact we should have had position squaring ahead of the jobs report. >> let's give a quick look at jobs report. investors looking for the nonfarm payroll. expected to show a gain of about 150,000 new jobs. unemployment rate expected to hold steady at 8.1%. of course we know europe's now up at 11. also personal income and intendiintend i spending for april, savings rate in there, as well. pc price index will also be out expected to show a gain of about 2% year on year. we've got construction spending

and we've got ism manufacturing for may for the oous. global figures are quite weak. the question is whether the u.s. will continue the trend. auto sales reporting throughout the day. >> is that enough data today? >> the data jubilee. >>le digits for the dow. >> chris, you've seen where we stand on futures. what's the position ahead of the employment report? >> opening in the s&p futures looks to be below that 1300 level. key support level that held this week at a throw monee month low no support until about the 1285 handle in order for to us have any sort of bounce back.

look to the jobs numbers. if we come in between 150,000 to 170,000, we could see an uptick, but things are looking very dire on both sides of the pond and we're looking for those yields in the ten year treasury to creep below that 1.5 level. >> what is the mood in chicago? when i look at these bond yields, i can't even believe the numbers on the screen. what's the feeling there? >> a lot of individuals thought we would have a lot of hedge positions. and the overnight trading, people are just running to that risk averse trade. a lot of individuals are covering their shorts, but they're not taking on any new position. they're not aggressively going after anything right now. and it's a sit and wait period.

and this number is really, really big for all the traders here on the floor. >> what else do you expect to be a move sner tmover? ism seems low, but that could be the one that catches attention. >> ism is huge, but really what else could move. we had a 17% pull back in crude and that's based off the strong dollar. individuals think that money is across board. we're seeing downward pressure across the board looking for a global slowdown to really allow individuals to get back on track. >> got it. chris, thanks for being with us. a lot that's happening. >> and that's it from us. "squawk box" kicks off next with the countdown to that employment report.

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may employment report just hours away. market expectations and political implications. this is a special presentation of "squawk box" live from the nation's capital. >> good morning an welcome to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. alan greenspan will join us for an hour long conversation at 7:00 eastern. we'll talk about europe, the u.s. economy, fiscal and monetary policy, and much more. but first becky has this morning's top headlines. >> of course we'll begin with jobs today. the may employment report set to