welcome to worldwide exchange. quit iity markets have been falling and pushing commodities lower and the dollar a bit high per. >> a among worries that china's rate cut is a sign of more to come. >> and another top fed official is saying more stimulus needed to shield the u.s. economy from the downturn. >> and fitch downgrades spain's credit rating by three notches citing hire than expected capital needs for banks.

>> somewhat we're not down more today. it's a mooted tone. >> exactly my raekt. we saw the spanish downgrade. maybe no big surprise. and this is the lowest reallying that we have from the main rating agency out there. >> according to fitch, spain is now lower credit quality than ireland. >> let's eye talk about the industrial output data that's just hit the wires from hitly. you're looking the april industrial outfit down by 9.2% year on year. a pretty low level for italy there. the euro-dollar currently lower by 0.7%. but the data has been pretty

weak. >> it's not just the sentiment data where we've seen an erosion which we've seen sentiment shocks that didn't necessarily affect real data. it's the real numbers that are soft. we have soft data in terms of german exports and imports. germany done 5% year on year. much more than expected. interest i'm looking at the uk new car registrations in may up by almost 8%. >> meanwhile people still buying vehicles. >> so today's show, though, the nikkei has posted its worst weekly run in almost four decades. we speak to jeffrey's japan strategist who says they're retaining their short positions on securities. find out why in 15 minutes. >> we're also live in seoul where bank of korea has decided to keep rates steady.

hints at a potential policy shift. so what are analysts saying. >> and we hone in on poland, as well. i can't wait to watch all that football on tv. >> and just after that we'll speak to a u.s. fixed income strategist who says qe-3 is ready if about needed, but it's not need just now. >> we'll be speaking to the winner of the ernst & young leadership awards. can don don't miss that interview. fitch says the down grade reflects expectations that capital requirements for the company's banking sector are like i to be higher than forecast and that madrid will need eu assistance. they also indicated the possibility of further downgrades.

joining us is richard harris at port shelter investment. your immediate reaction to this downgrade by fitch. >> well, it's not terribly surprising. you might think hasn't happened before. it's just part of the run of bad news that we've been seeing. >> what are the practical eventually indications of it? >> it's quite interesting because we saw the spanish bond issuance get away well the other day. this is nothing about spain, this is all about germany backing up spain. so the situation actually is quite bad and i think itch is a more accurate representation. >> we've seen an awful lot of discounting. some of the charts seem to be

bottoming out. figures haven't really come out yet. >> so what will happen, we'll see further downgrades then from the other two rating agencies? >> i think that has to happen. and of course the big issue is what's going to happen when italy starts coming on the scene. spain has more foreign debt. italy has more domestic debt. >> okay. richard stays with us. >> he will. we'll be speaking to doug renwick. >> but the pboc, of course, cut were rowing rates by 25 basis points in a move meant to shore up the country's slackening economic growth. but investors there are questioning the timing. they took it as a sign of more things to come. tracey, we didn't see the follow

through in the markets, this initial rally petered off. >> china's first interest rate cut in four years failed to sustain any kind of market rally. i'll give you more in just a bit, but many investors were worried china's surprise move could signal a lot worse than expected. >> i have a feeling a the numbers will be bad, about i think they're sending a loud message that they're ready to coordinate. >> the former pboc adviser says he doesn't see that happening and he says china's move marks the beginning of beijing's shift to interest really rise. meanwhile china's top five banks have already raised deposit

rates to 3.5% among the bench mark level less than a day after china's action. remember, higher deposit rates is a big boon for ordinary chinese citizens. they will get a higher savings return. >> tracey chang there, thank you very much. let's get back to richard. i was doing the bank of england special yesterday with beccy and we were sitting tight waiting for the bank of england rate announcement. and then the chinese rate cut come and that really seemed to be the big piece of news that's had some implications in the markets this week. what does it mean, though? >> china is a reflection of what's happening the rest of the world. china isn't isolated. i'm actually surprised they haven't relaxed things before now because it's been quite tight. but the interesting thing about china is not necessarily what

they've done but how they've done it. more of a reforming move coming in will. >> the beginning of china's last rate cut cycle started in late 2008. that was not a time to get exposed to equities. is this a time are you saying to people now that china is coming into the market, other policymakers may follow suit, you have to get exposed to risk or is it still a time to stay on the sidelines? >> fundamentally the sidelines. i don't think this cut is pesly good news. it's a reflection of the bad news. but again, if you look at how the chinese market in shanghai has done over 2012, it's actually not done too badly. it's gone up in a series and then down sharply. so who knows. maybe we've got a bit of a turnaround, but i think we still have bad news in the economy to

come out. >> reuters reporting there will be an eu conference call this weekend. spain is expected to make an aid request for its banks this weekend. this call would take place on saturday to discuss the details of spain receiving that aid. >> that would be big if they do that. will is what we're waiting for. you either do or you don't. >> it's true, but spain has been trying it seems to almost strike this line of we want aid for our banks, but not necessarily for ourselves. and so this seems to be an indication of them going to the rest of the eurozone and saying we're ready for aid to our banks. maybe because we've been getting indications from that imf report as to what her saying for our audit details. >> i was just about to say, because the finance minister was saying we need to know first more exactly about the size. fitch estimating 60 to 100 billion billion for just the b.

this could be interesting tomorrow. south korea central bank didn't follow in the pboc's foot steps, deciding to stand pat instead. the details live from seoul. >> no surprise really the bok has kept rates at 3.25% for a year how. it was a unanimous decision by the committee. he made it clear that a rate cut isn't a choice for now. but local brokerages actually are betting on a rate cut as early as july. this as the bleak backdrops are dampening south korea's outlook.

core re's top financial regulator recently ratcheted up the either rhetoric by saying the current situation in europe is worse than that of the great depression back in 1929. on the domestic front, high levels of household debt have cut into spending while inflation has stayed under control. that at least gives room for the bok to maneuver if it decides to alter course. back to you. >> thank you very much. >> i'm standing in front of our pan european market map. what we're looking at here on this friday, a little bit of selling taking place on our equity markets. we're down in the stoxx 600 by just over 1%. we initially saw a bit of a rally after that rate cut by china taking place noon i'm here in london yesterday. but we petered out towards the end of trading yesterday's session. we're looking at a negative start to the morning this

morning. it could also you one of these issues where you don't want to be long equity markets. we're hearing about the conference call that's taking place where potentially we could be hearing more about spain asking for a bailout. ftse 100 lower by 1%. the xetra dax off by 1.5%. and the ibex a little bit lower down by 1.5%, as well. let me break it down. show you the sector gainers and losers. we have one sector pointing its little pinker into positive territory. not by much. the food and bench sector flat to a little bit higher. lower low basic resources off by 3.25 percentage points. basic resources being hit quite hard. you're looking at quite a lot. you've got banks off by 2.5% and

autos off by more than 2%, too. spanish banks, where he ste saw downgrade by fitch. there could be more ratings cuts to come. and you're seeing spanish banks trading in negative territory. many off by as much as 3%. and finally, let's check in on the bond markets. selling in about italy and spain. so selling out of peripheries again, a arriving off trade that we're seeing this morning. bund being bought up alongside with gilt. and let's sneak in a currency market. just a quick look at what the currencies are doing. you have lower trade in the euro. dollar-yen off by a bit. done by 0.6%. we'll be talking about the japanese economy a little later on, as well. but speaking of asia, let's head back to tracey chang in singapore for an update on the markets will.

>> asian markets under pressure despite the rate cut. both shanghai composite and hang seng landed in negative territory. banking shares are a major drag on both in-disdisease. that market still managed to snap a losing streak. hopes for an early policy response by the u.s. federal reserve were dashed. but china's rate cut helped sectors like ste sectors like steel and chemicals see gains. investor anticipate dismal chinese data over the weekend and the australian market will be closed on monday for a national holiday. and lastly just a quick check on the sensex also trading to the down side off about 0.7%.

back on you. >> we can bear becan barely mak against that red backdrop. just hours after the downgrade, the country's twitter users began to voice their anger. the top trending phrase in spain last might, get this, was stop merkel. some example, stop merkel because her actions have already condemned greece and portugal. they'll take away the rest of the eu if they go on like this. and stop merkel, we have our dignity as a people, don't take that away from us. what do you think of the stop merkel trend? you can contact us via twitter @cnbcwex, al also @kelly_evans or at la would he @louisabojesen. >> japan's april current account data shows its economy still has big challenges. our next guest says japan has a better chance of a sustained recovery today than the 90s kate. [ male announcer ] this is genco services --

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tumbled 2 #% the year. data reflected imports. joining us now for more is japan strategist at jeffries. and richard harris is still with us. >> for the lasts 30 years even during the bubble, increasing

political pressure will perhaps drive a greater commitment to the existing 1%. >> i guess what i mean is that given the severity of with a someone described japan's current economic situation to be, the fact that it can't get real rates low enough to keep people from piling in to the yen, isn't time to do something even more extraordinary than all the various quantitative easing measures already under way? >> well, firstly, the reality is that the bank of japan is on the back foot when in comparison to even the prospect of a qe-3 from the fed. if you look at the bank of japan's balance sheet in comparison to the size of japan's economy, it's you willy bigger than the fed's is compared to the u.s. economy. but the fed on an absolute basis has acted a lot more aggressively. so that puts the bank of japan on the back foot. what it can improve is its

communication strategy. if you add the asset purchase program together, it's scheduled to break that rule by the end of this year. so it was dampened by unrealistic expectations on inflation which bank of japan has estimated at 1%. nobody expects inflation to be at 1% i imagine. >> i know you think the bank of japan will be easing again. >> as i pointed out several weeks ago, i think that bank of japan may well engage in an operation twist type operation especially since the year end of some of its operations have been

undersubscribed. i think that the three year could be extended to four year. that's one. also noting a more aggressive pace of purchase of risk assets of etfs and mostly etfs over the month of may, i think that there could be a boost to that risk asset purchase program alongside a more aggressive pace of purchase maintained over a longer term period. >> a question on the nikkei. i see that you're looking for the nikkei to come back to 10,400. what's the time frame for that and what do you think the cat it take list would be? >> 10,400 is where i see pew ral valuation trend valuation. i don't expect that to happen overnight. i think it would maybe be more real listic to look at that as a target within the year.

mostly after risk aversion subsides a bit more and markets return to to a slightly more cyclical upturn. i think that right now markets are inordinately depressed by the prospects of the european crisis and the greek election still upcoming. and i think some of that still stands to be priced out. so i don't expect that to happen before 17th of june. but sometime before the year is over, i think it would be realistic to look at that type of cyclical upturn again. >> this is richard in london. just very quickly, i'd like on dig finally into these growth figures out of japan. they say better than expected, everybody saying maybe the sue familiar any reconstruction. but actually 1% even 0.5% growth doesn't seem to be too bad. do you think japan may be a bit of an outlier in terms of global growth and might end up being a survivor out of this mess?

>> yes, i do. in my outlook for this year, last year i had foreseen a few quarters of above g-7 growth. and while it's material i'ding, the markets really don't seem preparing to give japan the credit that's due. if you look at the concentration of the consumption and the production, even the cap ex in manufacturing, in the auto industry, maybe feel the auto subsidies have been far too successful and the rest of the economy is not really keening up. i know we have another somewhere around 19 trillion yen that the government has to spend, but whether it will be spent effectively is still in question. >> naomi, plenty of thoughts there for us to think over this morning. next operation twist maybe for the bank of japan. thanks.

let's get a quick check of what's on the agenda in asia. they will release key economic indicators including cpi and industrial output at about 3:30 central european time. and again a lot of people sus pe pekting weakness could be why we saw its first rate cut. we'll get rate figure on sunday. ppi on monday. >> the chicago fed president charles evans says that the u.s. economy is growingrow but it cod benefit from more accommodation or stimulus. in an interview on cnbc's closing bell, evans said that he'd like the fed to provide improved guidance outlining conditions that would prompt the central bank to raise rates. >> i think with all the risks that we're facing, we would be in a better situation the stronger the economy is so that we can with is an whatever blows might be coming our way or hot and that's why i think more accommodation will be good. >> well, let's head to a break.

>> and as we do that, we'll come right back with with two malaysia companies that have beaten the chelsea football team for a bid to redo the plant here in london. in a better situation the for a bid to redo the plant here in a better situation the for a bid to redo the plant here

welcome back. these are our headlines today. equity markets falling as investors getting out of risky assets. pushing commodities lower and the dollar higher. >> worries china it's rate cut is a sign of more economic grim data to come from that country. a slew of figures due tomorrow. >> and another top fed official says more stimulus needed to shield the u.s. economy from the effects of the global slowdown and europe's debt crisis. >> plus spain's borrowing costs right after fitch down grades its rating by three notches. >> well, let's just check in on sister link and see where sister link is trading against the

greenback. >> may plain why we're seeing -- that's a large drop. almost 0.8% on the day without yet getting any data out. means we could leave room for sure price to the up side. gathering pace for the month of may. expectations for the year ahead 3.7% year on year versus 3.5% year on year in february. this is the highest since nor. >> and the ppi figures appear to show a drop of 0.2% on the month. still up about 2.8% for the year. so softer than expected. year end rate has moved from

over 3 to 2.8%. in fact that annual rate is the lowest in almost three years. a dig downdraft in crude oil. core ppe was flat on the month. not too much of a change in the sterling-dollar which appears to largely have priced in a bit of weaker data. >> just looking closer at these inflation expectations. so they're up now for the year, 3.7% as mentioned. >> which is great because we get out the all data that softens yet expectations move up. >> this off the bank of england deciding to do nothing and this is key for wage inflation. 3.4%. also up from what we saw. it was below 3% back in fun.

this is a high that we're looking. so expectations definitely coming up. >> and let's take a look how it's effecting trading. we're still seeing red arrows. ftse 100 down 1.2%. cac 401.6%. ibex is down about 1.5%. fixed income also showing a bit of that flight to safety or flight to quality bid today. spain seeing 6.14. italy 5.75, still off their highs but moving higher. and gilts at 1.6% on the ten year. reuters citing sources that spain is expected to make a formal request for a financial package to recapitalize its banks. our guest says it will exacerbate medium term conditions. joining us is michael gallagher.

>> it's short term good news because sort of tempers some of the immediate concerns. and we've had also leaks of the imf report due out monday suggesting that the capital shortfall is 40 billion. so that will guide us -- >> the figures all on the low end of the range. some say bank needs as much as 200 billion euros. if this plan coming out with a $50 billion or euro figure is that going to be enough? >> if you go back to 2008, equity capital down in the banks. so better to do big. however, spain's reluctant to follow this route suggests we're likely to see something that's half hearted about so that that the lasting reaction i think

will be there's still problems. more importantly, spain taking this step will actually cause real concern amongst asset holders. there's still 3r0xly 1.1 trillion foreign holders of bank bonds, equities ap deposnd depo. and the risk is that those assets held by foreigner starts to shift abroad. >> looking at about 30% foreign holdings of spanish assets. >> approximately. >> richard, i'm curious to get your thoughts on this, as well. if we see the phone call taking place tomorrow, again, nothing confirmed, they might talk about something concrete, they might not. we don't know at will this stage. but what's your reading on it? >> i think michael is right, there needs to be a big bazooka and at the moment europeans are going step by step. i don't think the europeans have

any choice. if they're going to keep the markets at bay, germany has to put in some kind of support in to spain and spain has to be held. is probably stops at spain. >> so what does support mean, is that money directly into the -- >> ensuring spain stays in the euro, that its institution stays somewhat liquid even if it institutions end up being owned by some super national european institution. >> you mentioned looking at trading we're seeing a lot of red. it felt as though we would get a global policy response but we haven't. >> well, there's so much red it looks like a football match. it's extraordinary this morning. it does look like we're looking at some kind of capitulation. but these get very dangerous,

too. if we do get news, i'm convinced the markets will go up. if we see some sort of patch up, the markets will go up. so it's very dangerous ground for equity investors to take things day by day, but i suspect we may be starting to look at some kind of capitulation cap. >> we can see euro-dollar down to 1.20, 10% off european stock markets greek election is 50/50. if you see greece leaving the euro, it's catastrophic. >> but if we stay in, all is well. >> i have on agree with richard that i wouldn't be surprised if markets went up if degrees or wig to go. i love your thoughts on the spanish bond yield and what you think would happen if we do have a phone call tomorrow.

>> we might see temporary relief, but we expect 6.75 on ten year spanish yields. >> richard will stay with us. so keep your tweets and e-mails coming lieu. angela merkel has repeated her call for daeper european integration. speaking this berlin, she outlined her vision of a more unified bloc. >> translator: i think within the eurozone we need deep integration of the labor market. more mobility. and this may also include countries which is not part of the common currency. >> patricia joins us from frankfurt. i can't keep this straight anymore. one day we love merkel, the next we're against everything she says. you have this stop merkel twitter campaign apparently taking off in spain. just break it down for us.

>> one they think for sure, she is caught between a rock and a hard place. it's not easy for her. i think she's been fairing very well. it's interesting to see that her policies might not be. uhe lar, but still the most popular politician. she has contributed to things that she was very much dragging her feet about. the german budget deficit goes up from 26 billion to 35 billion, so she has started to put in money. but we see more pressure on her. interesting to see the latest comments coming from the ec bchb about the crisis. one thing he said i out was very interesting, nonstandard measures should be seen long

side government fiscal measures. interesting to see whether we see something coming out of this at the end of the month. >> patricia, thank you very much. how on to something that many of you probably are paying a the lot of attention to. euro 2012 football tournament kicking off in warsaw today. poland playing greece in the opening match. the competition will be held in poland and ukraine with 16 nations vying to steal spain's crown and become champions of europe. joining us how is senior forex and rate strategist from pnp. good to see you. why is it that you're saying that poland actually hasn't done enough to really try to capitalize from the infrastructure investments that they could have done ahead of

this event? >> five years ago when poland and ukraine won the contract to host the european championship, the kriks sector did experience quite a significant boon and it helped poland stave off recession during the 2008, 2009 crisis. however, because of several factors such as tight lending conditions, a paul in public sector spending, we're seeing that the construction sector is actually now starting to suffer. over the past few weeks and the last month in particular, we're seeing a numb bankruptcies in the construction sector starting to really take off. one of the major construction companies in poland which was responsible for some of the stadiums actually for the european championships has also recently filed for bankruptcy. and i think this is very much a cause of tighter lending conditions and also due to

falling public sector investment. >> in 2009, poland was referred to as a green island because it was one of the few countries that seemed to have positive gdp growth. people got quite positive on. is poland now maybe coming to the fore? >> i wouldn't say that they are as in as good of a situation. growth compared to other central european countries could be slightly better for poland, but still nonetheless as i mentioned, the construction sector is putting quite a significant dampener on growth. our growth estimates are slightly below consensus. we're looking for 2.6% year on year whereas consensus figure is around 3%. and still for the following year as well, we are looking for slightly weaker growth in the consensus, as well. and i think a large part of that is the construction industry as

well as high household indebtedness and also generally weak labor market in poland. >> how hard is this going to hit companies operating in the construction sector? would you anticipate it as bad as seeing quite a few more bankruptcies? >> in terms of what the sector could be r contributes to the economy, just over 8% of poland's gdp growth. in terms of the labor market, construction sector employment accounts for roughly 10% of total employment. however it's not just reproduction simply for the construction sector. about we do estimate that the creation could also impact other sectors by creating or destroying 200 to 300 jobs in other sectors. so it's not just confined to the construction sector. it could have an him pact for example on the financial sector

through nonperforming loans. and the labor market as a whole. >> green island no more perhaps. dena, thanks so much. certainly something to keep in mind as people cheer otherwise for the matches that are going to be happening in poland and ukraine all weekend. meantime, we're of course keeping an eye on what's happening across spain and the eurozone as they try to rectify their own situation. ecb making a lot of interesting comments. firstly, he says we have instruments to help spain. spain must decide if it wants to seek help. and as we learned this morning, it seems to be making that decision. interestingly, he also says germany is paying a high price to help, but it's also the biggest winner. >> and he says past experience shows that it's better to seek help sooner rather than later.

which is constantly this debate we're having between what the u.s. has done and what the europe has chosen to do. >> let's move on. they've beaten a rival bided by european soccer champions chelsea to redevelop one of london's most iconic landmarks. ceo and president joins from monaco. lovely to have you with us. just to claire prify why it is is an important project. this is europe's largest brick structure among other things and development also in the uk that's been very controversial with regards to what on actually do with. why have you chosen to get involved, why are you placing your bet on this? >> good morning.

it is an important center of redevelopment, job creation in that part of london. we feel that in that locality, a lot of interest not only from the domestic market, but also from the international market. as you know, malaysia, my home country, is former colony of britain and we have strong historical ties. a lot of investors into this part of the world. we want to take a big part of this this development. >> we're showing images. power station. mostly people in london just want to know because chelsea said they would make it into a football stadium. what are your plans for it? >> as it is now, we have the

approval whereby it will remain in-tag intact. we're committed to remain the structure as it is and maybe convert the area into a town center for that particular area. we're committed to job creation in the area and we think we can play a positive role in redevelopment of london. >> with regards to why you're getting involved now, i'm looking at the economic data and the weakness indicated still coming through. what's your time frame on this and how much do you anticipate that it could add to the economy? >> we're committed to the long term development of the we think

over the long term, measures taken by the governments in europe and uk i think the economy will turn around and we want to be there to take advantage whens's up. we're used to big projects in asia. we've did done it before. not in london of course. but we think that our positive contribution will be on it make it more wide, bring life back into the area, bring asians to come invest in london. why not. we can play an important role in the economy of uk. >> will is ri this is richard. i'm interested in the actual bidding process. football clubs aren't known for being too tight in their

spending. you can it tell us anything about that? >> i'm not pfamiliar with the chelsea football club. sorry. >> was it a tough job to win the project? >> well, it goes open and transparent. we followed exactly the procedure laid out for us. we made a competitive bid. we think we can be positive in the area. and i think we did a good job of giving everyone a chance. and i understand that chelsea wanted a football stadium. i understand another bid wanted to convert it into a car park, but we're committed on maintain the structure that it is. maintain iconic strugcture. what better than branding. we're committing to upgrade

about if the approvals comes through, extension it of the underlying extension. we think it's a good project. >> got it. thank pow joining us from monte carlo. we'll keep an eye on that project going forward. a couple of headlines to bring you just on the wires. imf saying china's gdp to grow around 8% this year. so perhaps on the higher end of what some would expect at this point. and that it's the chinese currency is moderately undervalued. perhaps more importantly, what's happening with you in spap. >> the spanish government is stating now no comment on possible bank aid. the requests that we were talking about earlier on come this weekend, they're reiterating no decision automobile after the bank audits. >> and imf bank audit monday, but a couple more weeks for the others to come through.

until the pafall before the big four complete those. >> and internal, too. so a whole host of audits that they were indicating that they wanted to get that you first before it they told us how much money the spanish banks would be receiving. >> and yet reuters report that there will be a call for spain -- >> one german source saying spain expected to make an aid request for its banks this weekend. again, according to reuters. unnamed sources. so we'll be watching will weekend. >> still to come, we'll be speaking to the u.s. winner of the ernst & young entrepreneur award.

earlier we asked whether you agree with the stop merkel stretrend that emernlged on twitter. and we got spain must not want germany's financial help anymore. perhaps it's a fine line to draw. if you want to join the conversation here, here are your thoughts. get in touch with us. you can contact us by e-mail or tweet us.

>> always love to hear from you. ceo of glencore say companies need to bring up the cash. and he would have on to leave if voters to decided votes down his strategy. sovereign wealth fund has boosted its stake. over 10% in the mining group and that includes options. >> and the fed has voted to advance the skaultd basel iii capital rules for banks. reports saying than the 19 biggest u.s. banks could gas a 50 to $60 billion shortfall under the new rule which is require them to have a rnlg later buffer on hand around 7% of their assets. the rules which also must be approved by other u.s. regulators though expected to be

adopted by july. banks have until 2019 to implement the new levels. final thought from richard. the new rules being pushed through. is this going to make a difference with how the banking sector operates? >> it seems that quite a few of the banks are within the limits. so i think in the view of so much other things happening in the world, china slow down, the problems in europe, a lot of red on the screen this morning, i'm not really sure it's going to figure high on the radar screen. the dollar looks pretty strong at the moment and the euro doesn't. soenk you want to be there. maybe even renminbi is an interesting idea. >> but we've just been talking about weakness in china. >> but that currency is so

undervalued at the moment. it is still -- you have to think the growth we've seen in china for two decades compared to growth in the rest of the world, a lot of pressure that still has to be eased. >> how do i know when capitulation is happening? >> usually it's when nobody wants to buy at all. my general feeling actually is that all other things being equal, most of the news is already in the markets. and one you tend to find the bottom stage there, we may see another 5% or so, but actually as you said earlier, maybe not this weekend, but looking further out, i'd probably be a buyer of equities and i suspect as we go into third quarter, a firm buyer of equities. >> june 17th a game changer or not? >> i think probably not a game change because i think everybody has to follow the rules of the

market. it's the market that rules. >> richard harris also rules. thank you for joining us onset this morning. >> we have a full hour ahead of us. >> a lot more coming up. we'll speak to u.s. fixed income strategist saine zane brown. [ male announcer ] this is the at&t network. a living, breathing intelligence helping business, do more business. in here, opportunities are created and protected. gonna need more wool! demand is instantly recognized and securely acted on across the company. around the world. turning a new trend, into a global phenomenon.

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joiningou're just if you're just joining us, i'm kelly evans. >> i'm louisa bojesen. these are your headlines. >> equity markets are down as investors get out of risky assets. commodities are lower and the dollar moving up. >> worries that china's rate cut is a sign of more grim economic data to come with a slew of figures you today out over the weekend. >> and another top fed official says more stimulus is needed to shield the u.s. economy from the effects of the global slowdown and europe's debt crisis. >> and spain's borrowing costs rise after fitch downgrades the country's credit rating by three notches and reuters reports suggest the country may see gain for it banks, although we're also hearing will this is not

confirmed and they need to go a bit auto process first. >> just getting some comments from the bundesbank. the semiannual report. what we're seeing is a statement essentially indicating that the german economy is operating in a very difficult environment, stating that the greek political situation poses risks to the german economy, this of course isn't news. the spanish banking sector problems also a risk to the german outlook and they say german growth would benefit from the crisis resolved. all of course working very hard towards getting things resolved and the question is how much germany should be stepping in to aid the situation. that is what a big part of the debate is around. also saying germany is

benefitting from a favorable funding condition rate now and that eurozone demand for german goods has been lower and that's dampening growth outlook. they're saying that the 2012 german gdp growth draft has been upped to 1% from 0.6% in december. next year, though, 2013, they're cutting their gdp growth forecast to 1.6%. inflation forecast has been upped for 2012 and 2013, as well. this year we're looking for inflation at 2.1%. euro-dollar a little bit lower at the moment. and let's talk about greece. greek employment data also due out.

indicating seeing sling only. 6.57% year on year. so 6.5% year on year. revised gdp figure minus 6.5% on the year. may consumer prices plus 1.4% on the year out of greece. >> let's take a look at what that's doing to the u.s. futures. we're seeing them point down more. dow futures pointed down 81, but remember, you have to a fair value into account. and so we're actually implied to open in the green here right now. nasdaq would be lower by about 10. s&p 500, i we'll check these figures. bottom line is we may be marginally higher, but a next inned picture for the u.s. open. ftse cnbc global 300 now down

about 0.7%. the real weakness in the last 90 minutes or so. we started out okay, but increasingly the mood has shifted to risk off. xetra dax down 1.4%. cac 40 in paris 1.5%. and in spain, the ibex 35 the outperformer only down 0.8%. >> that is called guess the open. we may or may not be hearing more from spain with regards to how much money the spanish banks potentially might need. latest flash is that they need to undergo more audits before details on what the spanish banks will need. utilities trading a little higher. food and beverage up a bit. basic resources off. autos off and banks off. this is at least the basic resources move directly related

to the china story. the chinese growth picture is slowing down. that might be a bad thing for basic resources. we were talking about spap. let me show you the spanish banks. we've seen just one of them on this particular board creeping into positive territory. brond m bond markets buying into the core. spain and italy being sold. yields heading i higher in both those areas this morning. >> let's get a quick check of the agenda in the united states. mcdonald's reports may same store sales figures. that's about 8:00 a.m. at 8:30, we get the april trade deficit. that expected to have narrowed to just under $50 billion. at 10:00 a.m., april wholesale trade figures are out. so pretty quiet data day in the u.s. but waef had plenty here across europe and asia to keep us busy.

>> i think it's a day where you kind of just digest a little bit of what's been taking place. we had a really tumultuous week last week. a lot of red. will week it's been a little bit more measured. more what's actually happening. >> and i think the critical question will be did we put in the lows this week. is this the point at which people started to build positions for a risk on move supported ultimately by policy or is is this a week we look back and realize that there was a disappointing policy response and there was another downdraft. that i think is the back and forth that we're seeing play out in the market. >> and how much attention you pay on china, as well. whether you think that the multipronged recovery process is now gone back a step. >> ecb reminding people that the

esm is a facility that is not meant to directly lend to spanish banks. also speaking about how spain is in a different situation from greece. and that it's spanish banks which are the problem, not its economy. >> the esm can lend to spend via bonds basically. but they can lend via bonds, but they cannot lend directly in, you know, real cash to the banks. >> convoluted ways to basically do the same thing. charles evans says the u.s. economy is growing but it could benefit from more accommodation or stimulus. he said he would like the fed employ improved guidance. >> i think with all the risks that we're facing, we would be in a better situation the stronger the economy is so we can withstand whatever blows might be coming our way or not.

so more accommodation would be good. >> the fed is also prepared to act on the debt crisis. people often and you can about the evans rule where he'd like the fed to communicate something like it would be apeasing mode. until unemployment fell to 7%. >> europe is in recession. china is slowing. brazil is slowing. u.s. is slowing. so we're in a synchronized slowdown. whan investors have to ask is will this tip us into financial instability, as well. and that's particularly important for europe. but i think that we have to

navigate a slowing and we also have to and a half gate the policy response. . zane brown joining us now. how are you digesting all the headlines we've gotten from the fed or not gotten week? is it enough to signal stimulus is coming or was it all a big disappoint? >> certainly it was a big disappointment to a lot of parties who were hoping for more incentive from the federal reserve. but what's really realistic and expected exactly how the fed addressed this. they can't do a whole lot more. and they do have the ability to perhaps refocus operation twist all over again. but we were already below 1.5%.

why would the fed want to try to ease additionally when the fear throughout the united states, throughout the world, is already pushing rates probably as low as they can be. >> so on balance, are you saying that the fed is doing what should be doing how by not keting that it will be stepping in tomorrow? >> i think that it would be inappropriate for the ped to do something now because in the last several weeks, we've already seen fear throughout the world already pull rates down and that would be the consequence of additional easing. plus the fed has announced that it has other concerns. the fiscal cliff is a concern. that could put a bump in the road for the economy later on and the end of operation twist might end up pushing rates on longer term securities higher. the ped ought to keep whatever qe-3 ammunition it has left to address those concerns. it would be fool hard it i to

just go ahead and spend that ammunition now when they have problems on the horizon and it would be better used in the face of those kinds of bumps in the road. >> stay with us. i want to update viewers that the fed has voted to vens the so-called basel rules for banks. the 19 biggest u.s. banks could face a $50 billion to $60 billion shortfall. the rule which is also have to be approved by other u.s. regulators are expected to be adopted by january. banks would have until 2019 to implement the new capital levels. zane, what would these new capital levels do you think mean for u.s. banks? how much more connect and environment will it be? >> certainly there is now the need for additional capitalization and in addition

to the $60 billion headline figure you've cited, there's also an additional potential surcharge that the fed is thinking of putting on the largest banks. so doesn't come at a great time in terms of the stock market, but they can come up where that capital because the regulations aren't required this year or next year, they have some timeo show. fitch has slashed its credit rating for spain by three notches. it says it reflects expectations are likely to be higher than forecast and that madrid will

need eu assistance. for more, stay tuned because at around 11:20 c chlt techlt, we'll be speaking to doug has renwick at fitch ratings. >> and just hour after the downgrade, the twitter users began to voice hair anxio their. the top trending phrase was stop merkel. so that merkel because her actions have already condemned greece in portugal. and we have our dignity as a people, don't take that away from us. what do you think of the stop merkel trend 1234 tweet us @cnbcwex or at kel @kelly_ r or @louisabojesen. >> tough to get things right in this this environment. china takes the markets by surprise with this cut in rates. is this a sign of more disappointing data? ahead we'll discuss that. [ male announcer ] this... is the at&t network.

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equity markets fall as investors get out of risky assets. >> the fed's charles evans says that more stimulus is needed to shield the u.s. economy from the

effects of the crisis. >> and spain may seek more aid for its banks as soon as this weekend. >> all right. well, the imf deputy managing director david lipton says the slowdown is moderate and the response appropriate. he sees china growing around 8% this year. and of courses a you know, the pboc cut borrowing rates by 25 basis points in a you move meant to shore up the country's growth, but investors took it as sign of worse things to come. tracey chang has been looking closer at this. a real surprise that they chose to do will this yesterday. >> china's first interest rate cut in four years failed to sustain any kind of market

rally. main investors were worried that china's surprise move could figure that tomorrow's may economic data which includes inflation and industrial output will be a lot worse than expected. others worried any fresh stimulus could actually exacerbate china's real estate bushel. but the former prime minister says he didn't see that happening and china's move marks the beginning of beijing's shift to interest rate localization. meanwhile the top banks have rated deposit rates to 3.5% less than a day after china's action. and that's a good boom because they will get a much higher savings return. back to you. >> thank you very much. zane brown is still with us. zane, what does it indicate to you, are you reading this as a good sign that potentially we're

all a bit weaker than we thought? >> i think it's aed bad sign in terms of the economic growth that we may be able to expect from china. it reinforces some of the manufacturing numbers that we've gotten out of china recently and the import/export numbers i think were very revealing for china. it is an export driven economy and expectations for the first quarter of imports and exports, they thought exports would grow at about 8.5%. instead they were about half that. 4.7%. that is understandable because europe is not doing so well, but that really suggests that the export function is slowing down and, two, when we look at imports where we're all promised that consumers in china would finally consume a lot more and a lot of it would be internal driven growth instead of being almost 11% as expectations were,

up 0.3%, a bismal failure. i think we can expect lower numbers coming out of china going forward. >> and still coming up, we'll speak to linkedin co-founder to find out how the company is dealing with the recently discovered data breach. >

welcome back. reuters is citing german and eu sources as saying that spain is expected to make a request it weekend for a financial package to recapitalize its banks. according to the agency sources, euro group finance ministers are expected to hold a conference call to discuss aid for spain on saturday. the spanish government, though, has declined to comment on the report and has reiterate that had no decision will be taken until after an audit of the banking industry is completed. so with that in mind, fitch has slashed its credit rating for spain by three notches from an a to it a bbb. the agency said that the downgrade reflects expectations that capital requirements for the country's banking sector are likely to actually be higher than forecast. and that madrid will need eu assistance. fitch also placed spain on

negative watch indicating the possibility of further downgrades. douglas renwick is from fitch and he joins us. so you're downgrading spain. and you put them on negative outlook. could be more downgrades to come. how serious is it that spab asks for money sooner versus later? we had indications from nowotny that it's better to ask for help early versus later. >> as to the exact timing, as long as sman as market access at the moment, there's not a problem in the financing side. but if they need to put in 60 billion in the to thibanking syn order to shore it up, could be 100 billion if you apply the irish style default rate -- >> how do you know it's 60 billion when the audits haven't finished or taken place yet?

>> we rate a lot of the spanish banks, so we've been looking through the balance sheets. >> so what happens if the country comes forward with a plan that is something in the 50 billion euros? >> it would be a start, but we would say the system would probably immediate more money than that. and the idea behind supporting recapitalizing the sl ystem up front is to try to shore up the banks. the banks are stable and supported by the government. >> what is it about spain that justifies a bbb righting? >> the government has to put the money in itself most likely to support those bank. the recession will drag out a lot more than assumed. in our opinion, we'll miss the

deficit target and you'll get quite high debt to gdp. >> how would you prefer to see the spanish banks recapitalized? still seems to be -- i don't know. directly, via the frob, by the esm so esm? >> if the esm for example was reformed, we got closer towards a banking union and actually the costs are spread across europe, that clearly would be beneficial for spain. detrimental for other countries with better banking systems. >> so you'll have no choice but to down grard germany? >> i wouldn't put it that way. we have france aaa negative. the more you share the burden, the more you'll impact the stronger ratings.

>> zane has a comment on this. >> 60 to 100 billion is a huge number and we had a sigh of relief yesterday when spain raised just over 2 billion. and if spain has to raise that money nesh to money for their regional and central banks, it's really going to push help probably in to junk status very quickly. is there and alter in a stiff for spanish banks to be recapitalized without spain getting involved? >> under the current system, no. if you want to get a loan from the esfs, the esm has to come through the national government. so it's a loan to spab in to ge to the banks. you're right that it will be a struggle to raise that kind of

money. that's why there's a good possibility that they could be getting a loan from the esfs to support the banks. that's incorporated into our rating already. so we expect support for the banks. >> and i know it isn't the policy of a rating firm to sigh what it thinks should be done, but you have in the past indicated that they have to fix their deficits. are you regretting some of the us a take yo austerity measures have weakened their position? >> in the near term if you are cutting your deficit you will get bad gdp figures in spain this year, nergs year. but when you ump pyou implement structural reforms and not continuing to go up, that maintains confidence in the economy. you start to put growth in a more sustainable footing in the longer term. so it's a matter patience.

>> douglas renwick, thank you for joining us on set. and zane, thank you so much for your time this morning. tell everyone in new york i say hello. coming up, we'll be looking ahead to the u.s. trading session with a view from the cme. and we'll speak to the co-founder of linkedin and we'll keep you updated on all the breaking news out of spain, too. [ mechanical humming ]

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welcome to "worldwide exchange." >> these are your headlines from around the world this morning. >> stocks are down as investors get out of risky assets this morning. also seeing commodities trade lower and the dollar higher. >> spain has been weighing on sentiment, fitch down gragd the country's credit rating by three notches and reuters suggesting the country may seek aid for either banks this weekend. >> and investors also concerned that china's rate cut is a sichb more grim data to come and a you sluf figures d slew of figures due to be

released tomorrow. >> we've gone from a muted tone to negative to a bit more muted. dow pointed down 50 points, but fair value kicking that into positive territory. s&p 500 still trying to figure out what's wrong with our quote, but the bottom line is we're micked. this following fitch's down gra grading of spain last night. ftse 300 down.

we were at the session lows about half an hour ago. things have since bounced back just a little bit. boot city 100 down about 75 --.75%. the xetra dax down almost 1% and the cac 40 more than 1% at this point. spain now in the green. a lot of this has been keying off the weakness we've seen in spain, but it seems that still this country the outperformer of the bunch. >> you're not investing in the markets for fun, are you? maybe you don't mind in you lose money. but most people want to know how do you make money in these markets. this is what some of the experpts have been telling us. >> i'm not expecting many to want to talk about european equities as an opportunity. they're at 20 year lows when you strip out the pnkss. >> hsbc and standard charter

very investable, strong balance sheets. well positioned globally. and have limited done side. lloyds, barclays, rbs, heavily exposed to the and you are row zone. >> it's time to still day on the sidelines. i don't think it's necessarily good news. it's a reflex of the bad news. >> roters reported there would be a conference call where they would officially ask for aid, but fitch says we still want results of the audits before we give any aid. it may be the start of the process rather than the end of

one. and this morning they have just downgraded some spanish utilities as a result. chicago fed president charles evans says the u.s. economy is growing, but could benefit from more stimulus. he says he would like the fed to provide improved guidance outlining conditions that would prompt the central bank in the future to lower rates. >> i think we could with staefr whatever blows might be coming our way or not and that's why i think more accommodation would be good. sgle says the fed is prepared to act to reduce the impact of the debt crisis. he's not a voter on the fmoc this year. ben bernanke offered pfew

behinds, about the chances for qe-3 are still rising. >> europe is in recession. china is slowing. the u.s. is slowing about so that we're in a synchronized slowdown. what investors have to ask is wheth will tip us into financial instability, as well. i think it that we have on navigate a slowing and the policy response. >> the former president of tokyo electric power company set to face questioning for the first time since last year's nuclear disaster. a parliament appointed panel will grel him on the events that led to the world's worst nuclear distancer since chernoble. >> important to say he's denying that he'd ever considered pulling out all of the plants. he's denying that he abandoned the plant. they're's looking into what he

was happening. >> angela merkel has repeated her call for deeper european integration. speaking in berlin, the german chancellor outlined her vision of a more unified bloc. >> and keep in mind the former italian prime minister saying if a german euro would be worth 2.20 to the dollar versus 1 at the present time 20 for the italian. there are benefits to being in it. lloyd blankfein tells cnbc he doesn't think a greek commit would be a lehman type event. he also said goldman is rooting for europe to work. >> would it be hard if they're rooting for you'europe not to w. nobody is interested in europe falling apart. >> of course. what else is he going to say. >> facebook may be struggling

with monetizing its mobile site, but twitter says it's pot havm g the same problem. it ceo said it's starting to see more money from the ads on phones than from the desktop computers. >> the next company whose prospects become heavily scrutinizeded. >> everything will end up mobile. >> for better or for worse. more on social media in just a little bit. it's good week bad week for linked in oig. would he discuss the outlook with the man behind the firm after the break. [ male announcer ] this is corporate caterers, miami, florida. in here, great food demands a great presentation.

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just hours after fitch down graded spain's sovereign credit rating, twitter users began to voice their anger. the top trending phrase became stop merkel. we asked what you thought of the trend. tyson tweets are isn't much dignity in being assumed by others. spain must not want germany's financial help anymore.

if you want to in-i don't the conversation here, you can get in touch with us. e-mail us or tweet us. >> i do find it funny. stop merkel from what? from trying to help out frrks trying to help save you're rod some takes super powerful economy. yield 5.7% right now. we're also seeing selling in the spanish ten year, too. a little bit of buying in the ten year gilt. there might not be that much of a reason pot bank of england to be stepping in, increasing it stimulus program. the market is doing it on its

own. ten year bund yielding 1.3% so coming back a stad in this morning's trade. >> these are your headlines. quit i markets fall. and charles he evans says more stimulus needed and reuters suggests spain may seek aid for its banks as soon as this weekend. earlier will week, a russian hacker posted passwords of millions of linkedin's users. joining us from the ernst & young world entrepreneurship award is reed hoffman, co-founder and executive chairman at linkedin corp.

he's been named entrepreneur of the year. reed, congratulations. it would seem this honor overshadowed by some of the difficulties at your company. were you not proactive enough to take steps to protect use he were's data? >> yes, the company is takes this fully seriously. as far as we can tell, there has been any damage to any customer accounts. we recommend everyone that they update their password, but we've also identified which accounts have been compromised and we've taken steps to make sure all users are secure. >> at the same time there were reports from a research group suggesting that your mobile application allowed access as to people's calendar information. so is is this a broader problem than just passwords being hacked? >> no, the calendar information

is part of a feature on the mobile applications which allow to you identify for example put linkedin profiles and other fofr of the people you're meeting with. so the information needs to shipped to us to say here is the profile, here is the information. we don't store any of that information, we don't use any of it in any way other than to exceptionally help the feature that you've opted into. >> do you think people understand what it is they're opting into? >> the feature exceptional esse allows you to say when i have a meeting with reed hoffman, here's reed owe profile. you have to do a match up to say you're meeting with reed hoffman. so it shouldn't be a surprise. >> moving on it to the entrepreneur award, which congratulations on that, what

does the award mean to you briefly and how are you going use to move in to will this next chapter of your business, whatever that may be? >> well, i'm very honest are orred by the award and i think it's just business as use. how do they invest themselves for great economic opportunity and the award is wonderful. it's just the beginning to -- just a milestone along the career. >> reed, stay with us. we'll continue this conversation just after the break. and find out how one of reed's biggest rivals is breaking in the cash for mobile users. 

a shot at high schooler ee history is on the line. it's a shot at high schooler ee history is on the line. it's been 34 years since a horse has won the triple crown. tomorrow i'll have another will try to end that long drought. coverage starts saturday at 4:30 p.m. eastern on mnbc. >> gorgeous animals. >> you're going to the races. >> i will see horses, but they'll be playing polo here. >> he have yet to try my first polo match. i'm still a chicken. i'm afraid of hurts the horses. will any way, let's give you a look at what's on today's agenda in the united states. mcdonald's reports may same store sales numbers right around 8:00 a.m. at 8:30, we'll get the april trade deficit. the gap expected to have narrowed to almost $49.5 billion. at 10:00 a.m. april wholesale

raid figures are out. >> facebook may be struggling with moptizing its mobile site, but rival social network twitter says it's not having the same problem. the ceo says the company has started seeing more money from the promoted tweets it sells on phones from the same product sells on desktop computers. reed hoffman is still with us from linkedin. what about you guys, is mobile more or less profitable for you? >> because the vast majority of money comes from corporations, it doesn't make a difference. they're the same for us. >> so the more years start using linkedin products on mobile it'. what generates the most revenue? >> the majority comes from individuals and corporations subscribing, buying certain features and search and

communications in order to enable their business. and that same premium features can be used from the desktop or from mobile. >> when setting up a social networking site and then somehow dough ensure your longevity, how do you ensure that people are still usinginkedin in five or ten years? >> you have to be a key part of people's lives. whether so whether it's social entertainment or how they invest in their career, if you're a part something that continues, then you'll continue to be part

of their life. so basically your career runs from 18 or 21 to 65. and so we think that as long as we do our job right, we're relevant to people eye li's liv. >> where is it that you're really investing at the moment with regards to growth markets? where do you put in your efforts? >> linkedin naturally grows at over two users a second. so the product spreads by people inviting people. so that just naturally happens. so next week i'd be personally focused on japan. >> what do you think facebook could learn from linkedin with the way that it went public?

>>. >> i think we learn from each other. linkedin is first site that built the people you may know function. there are things that facebook innovates on that linked in oig learned from. so part of technology innovation is you pay attention to what people are doing and then you build your own version of yourself. >> you're kind of more known for being the professional side of people's networking relationships. and facebook is more the personal side. you can put the two together and have a match made in heaven? >> you willy, people like to keep the two services separate. facebook has a lot of pictures and social gains and linked in is about how you invest in yourself and how you make certain kind of moves in your career and day job. so what i was talking about is

noting them together. i was talking about learning from technology innovation and new features. >> you are an executive. you run a big company. how do you see the technology market panning out for the remainder of this year? we're seeing some interesting companies develop. in the drop box area, there's on whole number who are continuing to build. and ultimately over the long term, i think that's what you look at when you look at markets. whether north there's any particular week or month, i think that every should take a three to five year long term view. >> and lastly, having just won this entrepreneur of the year award, what investigation do you have for the next generation of entrepreneurs? >> i think entrepreneurs should always be bold.

target something very large. how you can change the lives of millions of people and build something new and distinct for that. and that's what entrepreneurs do. >> reed hoffman, joining us from monte carlo. thanks so much. >> exciting for the next jen reaction of entrepreneurs. reuters is citing german and eu sources assaying that spain is expected to make a request this weekend pack annual to recapitalize its banks. but finance ministers expected to hold a conference call on saturday. no decision will be taken up after an audit of the banking industry is completed. this is key. so we'll have an eye on spain no doubt. spain the only market to trade a little higher. r. optionsxpress, where you can trade your favorite products,

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today's today's top story, spain will request eu bank aid tomorrow. the global market still buzzing about ben bernanke's testimony to congress yesterday. he promised that the central bank was ready to do something if financial troubles mount, but he offered few hints about when it would happen or whether it was imminent. friday, june 8th, 2012, "squawk box" begins right now. >> good morning, everybody. happy friday. i'm becky quick along with joe kernen and andrew ross sorkin d