. welcome to "worldwide exchange" this morning. i'm kelly evans. >> these are your headlines from around the world. >> fears over a global slow down continue. china data points to eight straight months of contraction. >> the fed's new twist fail to cheer european stocks. >> and spain to auction off 2 billion euros of debt as investors await the first key audit. and of course also the commodity selloff continues. all prices hitting month lows.

welcome to the program the first batch of data out this morning from the eurozone showing a composite pmi reading of 46. a little bit higher than forecast versus 45.5 reading. the composite pmi takes manufacturing and service activity across the eurozone into account. while the reading is stronger than expected its still below the 50 level that indicates expansion. with us for more chris williamson chief economist at market. on the line from singapore is roman scott. chris, to you first. the eurozone data follows the china pmi reading that was much weaker than expected. what jumps out to you from these reports? >> what jumps out, everything

seems to be turning down. we have an upturn in france and that's the only sign of life. so, generally everything is looking weak and when you look at the forward looking indicators they are looking poor. so business expectations in the service sector about a year ahead in germany a record in the whole history of the survey. in the eurozone it fell to a great extent since the aftermath of lehman's collapse. things have taken a turn for the worse. >> in the u.s. we saw a softening that fell to a recessionary level but never slipped into a recession. is there in your view a similar possibility that sentiment has over corrected or we're talking about deeper recession? >> one thing is we're not back in 2008-2009 levels yet. we're approaching them but by no means that level of recession has been signaled. germany is moving into a mild

decline. so, it's still very modest but it's where is it going to go next. when you look at what causes it that downturn in business confidence. >> on that point let's bring roman in on that. roman joining us out of singapore. are you seeing bright spots anywhere, roman? i'm constantly struggle, trying to balance up the negativity that we're feeling in the markets and the negativity we're seeing in southeast economic data. are things getting worse across the board are or we seeing spots where you think it might be a turn around that's beginning to -- the start, the beginning? >> well, i'm actually in the positive camp given how gloomy everything is. let's be very clear. this is a european recession. caused by european issues and european mixture of bad politics and bad economics. so the question for us here in

asia and for the emerging developing markets is can asia still grow with the european engine off and is the u.s. recovery which is far more important to us in asia and the rest of the developed markets still on and i believe the answer to both of those are yes. it's not as good. the quality in growth rates will be low. i still think the u.s. is capable of doing a couple percent this year. asia is still growing. earnings of multinationals is still growing in aisha but slower than we expect. >> roman, i hear what you're saying and i'm glad you bring up those points and i look at the china factory data and it's super weak contracting for the eighth straight month for june. following to a seven month low. i was speaking to a couple of people over the past couple of weeks and a number of them are indicating we could be looking at an asset bubble being built up in china and that real growth in there reality should be around 5% versus wherever we are

now the 6%, 7%. if that were the case then we're not looking at growth in asia. >> well, firstly, asia is more than china. secondly look behind those pmi numbers that contracted for the eighth moynihan a row is the bad stuff is in the export markets. if you peel behind the numbers you look at domestic market growth, look at chinese consumption and we've all been banging on the table important the last few years saying we want to see more chinese domestic growth not just exports. then we're getting what europeans and the west want. decent growth in chinese domestic consumption, retail sales figures are holding up. the slow down has cured the biggest problem i had for the chinese market which is the inflation risk which is far more dangerous. this is a slow down in exports not a slow down in everything in china. >> chris, a lot of people focus on speak being of trying to get the read from all the noise out

there, focus on the disparity between your survey and the official quote-unquote china read we're expected to see. is there any reason to think your survey for whatever reason is more bearish, is overstating the weakness in china? >> no, i don't think so. i think this is a fair representation. we track gdp very closely and other indicators. we got a panel that's very representative in terms of small, medium and large companies. we weight everything according to how it should be weighted. we're very confident the method that we're using in china. >> there's different readings between yours and other official quote-unquote official survey. >> i got a feeling they look at larger companies to a greater extent than we do. it's bias towards larger firms in essence. that could be one of the reasons. there's a lot of talk about seasonal adjustments and we have very sophisticated me showeds to

turn out that noise. what you have in that ecb index is a very good under lying trend. it may not pick up all the ups and downs, but it's a very good indicator. >> chris thank you very much. roman you're with us for the rest of the hour, a very good thing so people can send through their emails if they want to get in touch with us. our show today we head out to madrid as first stage of independent audit into spanish banks is due. will spain have to request a bailout for its lenders. also we're live in saint petersburg for the international economic forum days after the country outlined plans to set aside cash to support the economy and its banks. >> we'll focus on myanmar and ask if the country is opening up to investors. plus u.s. home sales data is due for the month of may. we'll be live at the big apple for a preview at 5:30 eastern.

but if you're just joining us this is what we're looking at in europe on our pan-european markets. more red than green at the moment with markets coming off a little bit in early morning trade. of course some big stuff having happened within the past 24 hours and the biggest is the fed ramping up its economic stimulus, indicating its ready to do more, extending operation twist to the tune of $267 billion, cutting its forecast as well. we'll talk more about the implications of this fed move here within the next two hours. stock share lower by .6%. main european markets, ftse 100 lower by 6%. dax off a bit. cac off. ibex 35 off. as we continue to see a lot of focus on the spanish banks today, full coverage of that throughout the morning as well. essentially we got a debt auction taking place this morning, this afternoon the government releasing this

independent paper on the latest audit of the banks and this evening we could be hearing about a formal request for up to 100 billion euros of aid for a number of the spanish banks. full day of spain. health care, food and beverage, and household goods only three in the positive. with regards to the bonds here's what we're looking at. buying across the board. 10 year bund hitting a new high in this morning's trade yielding now 1.5%. inverse relationship so the yield is heading lower while the bond prices are hitting higher. the forex rates, a little bit of a weakness just creeping in there. lower by .4%.

still hanging on to that level. come what may. and we'll be looking at commodities also in quite a bit of detail coming up a bit later. for now i want to check in on asian markets. if you're just joining us, you want to know what's going on, tracey chang joins us out of singapore. hi, tracey. >> good morning. asian markets are mostly in negative territory today following the weak china pmi reading. the nikkei is the only regional market posting gains. but south korea's kospi ended lower snapping three session winning streak as tech stocks led a broader market decline. australia's commodity hit a fresh three day low, downward 1% low. india sensex trading lower. lastly let's look at the greater china markets.

the hang seng loss 1.1%. real estate dove as much as 20% after the company was targeted by a report from short seller seatron research. so the pmi contraction had a real impact over there. >> tracey, good seeing you. thank you very much. now i was just mentioning spain, just to kind of flush out what's taking place. again this the afternoon spanish government will be releasing the results of a bank sector audit carried out by two firms. speaking earlier the senior partner explained the process. >> we were asked by spanish government to review two scenarios, quite conservative and a little bit more conservative to understand how robust the spanish bank system

may be in reacting to some of the moments in the macro economy in the longer round. >> spain may also be formalizing its request for 100 billion euros in aid. spain will attempt to auction up to 2 billion euros with borrowing costs expected to hit a new euro era high. very full day for spain. where do you think most of the focus will be? >> reporter: a bit every where. the formal request for thespan ji spannic -- spanish banking bailout is expected. the spanish treasury will try to raise up to 2 billion euros from the bond market in two, three and five year debt. we're expecting the treasury to pay a record price for this auction. that was the case on tuesday for its t-bill auctions.

spain was asked to pay 5% for 12 and 18 month paper. pats the record since 1997. now of course the focus is on this stress test result for the banking sector. it's the preliminary report we're expecting the banks to be, to be organizing three coordination. the first one for the weakest regional saving banks because of the exposure to the real estate market. the second category would be for the mid-size banks which could face liquidity problem for a period of time. and then the large banks which are not expected to need any financial support. now the key question is how much the spanish banks will need from the european union. the estimate is between 60 and 70 billion euros. of course the most worrying comes from this report would be a conclusion that the banks

would need more than the 100 billion euro package already authorized by european leaders. there's no specific time for the announcement but it should come before the meeting which will start at 4:00 central european time. >> excellent. very full day. stefan, thank you very much for that. >> we move on. lch has raised marginal requirements on the italian debt. the clearinghouse has increased the initial margin on bonds with maturities between two and 15 years. the decision follow as similar move on spanish debt earlier this week. and over in greece, antonis samaras has been sworn in as the prime minister ending a protracted process that now puts conservatives at the helm of a three party coalition. speaking after the event, antonis samaras suggested the hard work has just begun. >> translator: we will do everything in our power to lift

our people out of the crisis as soon as possible. this is what i'll be asking for when i see the new cabinet tomorrow morning. hard work. so we can give concrete hope to our people. >> all right. our intremendopid julia chatters there now. does this new government stand a chance of keeping people together? >> reporter: i think there's at least a sense of relief that for now we can move on. we had this six week period of nothing going on, waiting for the next election. relief is the main thing. we're still waiting to find out how this government will look. what we know it's only going to contain the democracy party and then technocrats. i spoke to the head one of the

key think tank and he said the technocrat presence is very important and actually possibly leading to a success factor for the stability. what we know all three leaders are going to be attending the eu summit next week. the leaders say this is the first battle in addressing this bailout deal, the local media has been speculating what form the negotiations could take. it's expected to ask for a two year extension in getting that deficit level down to 3% and they speculate that that could cost between 16 and 20 billion euros. you can compare it to what the iff said last week of up to 20 to 30 billion euros. this will depend on many things. we know from the first quarter this year we're already significantly weaker than what was estimated in the second bailout deal, what needs happen is the troika needs to arrive. we need an assessment what the deviation is here versus what was expected in the second

bailout deal. once we have an understanding of the economic situation then greece and europe can come together and work it out. we just have to hope they can meet somewhere in the middle. back to you. >> thank you very much, julia. history in the making. get in touch with us either online on twitter or find us on e-mail as well, worldwide@cnbc.com. kelly? >> keep those emails coming. genius comes at a price at least for apple. the tech giant increasing the pay of staff at u.s. retail towards by as much as 25% according to the "wall street journal". so are those genius workers worth it? join the conversation here on "worldwide exchange". tweet us at cnbcx.

and a new twist from the fed as it tries to revive sluggish growth in the u.s.. we'll be discussing that and a whole lot more after the break. see you in a second. so, how do you feel about cash back? i would not say i'm into it, but let's see where this goes. [ buzzer ] do you like to travel? i'm all about "free travel," babe. that's what i do. [ buzzer ] balance transfers -- you up for that? well... too soon? [ female announcer ] fortunately, there's an easier way with creditcards.com. compare hundreds of cards from every major bank, and find the one that's right for you. creditcards.com. it's simple. search, compare, and apply.

welcome back to the program

this morning. ross traveling this morning. the federal reserve is extending its operation twist program through the end the year as it tries to boost sluggish u.s. growth. be officials are cutting their economic forecast and now expect gdp of 1.9 to 2.4%. half a percentage point lower than what they expected back in april. at his press conference following the announcement fed chairman ben bernanke said europe is affecting the u.s. economy and the job market has lost steam. he's prepared to take more action if necessary. >> we've taken a step today which is a substantive step which will provide additional accommodation for the economy. moreover we stated we're prepared to take further steps if necessary to promote sustainable growth and recovery in the labor market. so, we are prepared to do what's

necessary. >> bernanke listed several next steps the fed could take including further bond buying. he said he's watching an effort by the bank of england to channel credit to the private-sector if they are passed on to individuals and businesses. here's a quick look at u.s. yields. the ten year at 1.64%. that yield up a little bit. same goes for bonds across the curve there. let's get more with roman scott. you know, roman, you heard the fed chairman saying they are prepared to do what is necessary. that was the passage a lot of economists focused in on yesterday saying door is open, qe3 could still be come sewing why are we not still seeing more positive reaction? >> i think it's the risk off position of the markets. at the moment everybody is very nervous. it's not the fundamentals of the u.s. economy. things are growing slower than expected but i was told that was

an aggressive target to aim for a 2.5% to 3% balance recovery growth. i thought 2%, we're on target for 2%. consumers are back out shopping, not as good as it's meant to be at this stage in the recovery but it's there. auto sales are slowly getting there. and for me the most important thing is housing. i wanted to see that bottom out and start to see some green shoots of recovery to a proper recovery but at least not getting worse. all of those things you've seen in the first half the year. so, you know, are they going to aggressively move now? no. you will see some further qe moves and the markets will react more positively then. >> up think so, more qe moves as for a full blown qe3. we know the fed is leaving the door open for a full third round as opposed to just an extension of operation twist. i'm reading it differently.

i'm reading they didn't give a signal of this. >> i think as much as they could with the political circumstances in the u.s. we have to take that into consideration. the republicans would be banging for blood if they aggressively announce we're going to open the purse again and have another round of qe3. but they've showed very clearly signalling they are open again for further help. they will look and see how the data is going. europe is looking increasingly bad, and 2% growth in the u.s. when you got the other main economic engine in the world doing zero clearly that's not what was forecast at the start the year. so i do think that qe3 you'll see further quantitative easing and more palatable to do it then than now. >> roman, stay with us. keep your twitter comments

coming. in other news the ecb executive board member has said the central bank will discuss cutting interest rates at its next board meeting without he warned a rate cut should not be seen as a cure for europe's goes. speaking to the "financial times," he leveled criticism at european governments for not using esf funds to purchase government debt. now the law is taking a small bite out of apple. an australian court ordered them to fork out money for misleading consumers. apple's branding implies latest ipad tablet could connect with 4g in australia and it couldn't. they order to pay damages to samsung for breaching its patent. no amount has been set. >> take a look at what's happening. down 11% on a weaker than

expected second quarter outlook and as their profit margin slid. bed, bath & beyond may be familiar with seeing the big box home retailer across the country. the company's first quarter profits rose 15%. that was above forecast on higher same store sales. but costs are rising sharply as its spending on e commerce in an effort to fend off amazon.com. amazon launched a home furnishing website. shares of red hat were down 10% in after hours. ugly afternoon as the world's largest maker of line software. first quarter profits were up better than expected 15% on higher revenue growth but software billings which people watch as indicator of future business those came in shy of analyst as forecast. slow down in japan and europe will hurt results and cutting second quarter and full year revenue estimates. >> love bed, bath & beyond.

you walk in and walk out with all kind of stuff you never knew you needed. >> cute little candles. they have everything there. still to come on the show, we'll go out to sait. petersburg. we have uk retail sales figures coming up. don't go away. welcome back to .

fears over a global slow down continue. manufacturing activity in the eurozone shrinks. >> the fed's new twist failing to cheer investors as european stocks open in the red ahead of a eurozone finance minister's meeting in luxemburg. >> the commodity selloff continue as oil prices hit multimonth loss. we speak to the executive director of the iea, the international atomic energy agency live in the next hour. >> just glancing at the uk retail sales. they are hitting our wires. uk sales plus 1.4% on the month.

plus 2.4% on the year. this is quite a bit better than expected as also seen there in the sterling spike higher. we've seen sterling trading lower ahead of these retail sales figures. 1.7% on the year. again we got 2.4%. lot stronger than anticipated. they say the may tore price inflation has slowed to .9% on the year and that's the lowest inflation reading we've had since october of 2009. >> volume is increase. not boosted by the price of things, people are buying more. in any case, i want to mention too with regards to the mortgage market some strength there in the uk as well. gross lending was 12.2 billion pounds. again for may. that was again compared with a reading of 9.3 million bonds. >> given mortgages in the uk are

pushing higher. the uk consumer hasn't got a break on the mortgage side of things. >> exactly. our guest roman scott makes of this batch of data. some strength in the uk economy or is there reason to look beyond this? >> well, i always take the long view. i was expecting a good number for uk retail sales. part of this is a base effect. it's coming off a very poor showing last year. you are starting to see recovery in all the fundamental indicators on the basic economy consumers getting out their wallets but that's because they haven't had their wallets out for three years. this is the summer season. you get an uplift of a lot of foreigners in uk, in thrown enjoying the low pound and remember because the uk has the benefit of being able to depreciate its currency which their brothers in the eurozone don't they are getting the benefit of that. if you look at the bigger ticket

items like cars which is the ultimate discretionary item they haven't done as well. there's light at the end of the tunnel. mortgages, good to see growth there because as you correct l said banks have been making hay by charging high rates to recharge their balance sheets rather than pass on the savings to consumers which is normal behavior for banks in crisis scenarios. >> i'm glancing with a little bit of a left eye on yesterday and on the bank of england's announcement that we saw four to five voting for more quantitative easing. mervin king being out voted. if you look at the retail sales data they did the right thing. if you look at other data, maybe they didn't. >> again, i'm putting this in the context, the base effects coming off a very low base. secondly, consumers who are opening wallets and spending again are those with jobs. when you compare it which the bank of england is looking at to

the employment figure there's absolutely no improvement there. so, those who are in jobs are starting to have a bit of cash in their pocket and spend it again. those without jobs still remain a major drag on the economy. the overall growth figure for the uk will remain poor and the export picture is also looking poor. >> roman, do you think that we're going to start to see wage inflation happening not just in the uk but globally? we keep coming back to whether consumers are spending, whether the economy is stronger and in order for that to be underpinned we have to see wage inflation and to my mind it's not creeping in to the extent that you can anticipate. >> no. the growth is clearly not strong enough yet to accommodate much wage inflation which, of course increases real disposable income. that's what you want. even in much stronger growth u.s. and as i keep saying for me it's the u.s. that's key here.

that's the gorilla in the mix. you're seeing much stronger growth in the u.s. consumers are starting to spend. very little wage inflation. only when you see that quite correctly that you'll get the major boost and that depends on employment. if you got a lot of people who don't have jobs, you don't have the demand for wage inflation, because there's always somebody ready to step in. the other thing, though, that is holding down inflation don't forget is oil and as commodities stay low that helps cap inflation. >> roman, thank you for now. we'll come back and talk more momentarily. in the meantime, awfully handy to see a european market board four. we're looking at a little bit of weakness across the board. ibex 35 off a little bit. basic resources still off by 2% as a sector. you a, to oil and gas are lower, direct reaction to weaker chinese data and no qe3 from the fed? >> take a look at what's

happening across bonds. i was keeping an eye on those yields in spain which are below that 7% threshold. 6.69. italy 5.74. bunds and gilt showing a little bit however of weakness as well, 1.59% and 1.75 on the gilt uk. >> gilt is a little bit unmoved in comparison to what could have happened. currency rates euro/dollar lower 1.2660. dollar higher than the yen and sterling off by a tad. over in japan consumers maybe getting thirsty again this summer and that has big brewers hopping. live from tokyo we have the story. >> reporter: hi. japan's major brewers are boosting production of regular beer this summer the first time in five years in the industry as a whole.

shipments have been falling for the past 15 years being pushed down by low malt or no malt which are sold cheeper. on the back of brisk sales in restaurants brewers are expecting a different summer. one company is ramping up its production by 15% from june through august boosting operating levels at its plants to more than 90%. saki brewers are expecting stronger sales. meantime output of kirin beer brewery shall exceed the year. all in all the hope is more beer going bottoms up will mean a better bottom line for brewers. that's all from the nikkei business report. back to you. myanmar is opening up to the world after being isolated for over half a century. foreigners will soon be able to

take full ownership of local firms under a new investment law expected to be approved in parliament soon. we have a closer look at the country's prospects in this report. >> reporter: the wounds of war that ravaged the country since independence are visible every where. a quarter of its population lives in poverty without access to education or health care. by 2015 when national elections are next scheduled the government has pledged to reduce poverty to 16%. officials say they know their own legitimacy is at stake if they fail to address such bread and butter issues. some businessmen and politicians are worried that the reforms we've seen in myanmar over the last year in particular may be reversed. is that concern warranted? >> it is impossible. it is impossible. because the global community,

also regional community welcome our reform. also our people, for our people we need reform. people desire is the reform. change. that's why those in the government elected by the people must do or they are going down. >> reporter: one of a dozen power outages occur every day blanken the all lies. many whisper frustration over if affiliation and a volatile currency. they feel the bubble in some parts of the city will only increase their hardship. travellers say hotel prices have tripled in the last year. local speculators boost about property that doubled in price in three days. some used cars mostly from japan cost six times more than they did a year ago.

it's precisely this boom, however, that's driving develop towers myanmar. here in london myanmar's pro democracy are on. campaign. aung san suu kyi received an honorary doctorate. she took the opportunity to thank the british people for their support but warned of expecting too much from myanmar too soon. >> myanmar is now at the beginning of a road. it is not the sort of road that you find in england. it's not smooth. it is not well maintained. in fact, it is not yet there. it is a road that we'll have to carve out for ourselves. >> quick programming note. catch our special coverage on myanmar this sunday at 1:00 p.m. central european time right here on cnbc. >> the st. petersburg international economic forum is

under way in russia. one minute he's here, the next minute jeff is live on the ground in st. petersburg. hi, jeff. >> reporter: hi. thank you very much indeed for that. we're here in st. petersburg waiting on vladimir putin who will come and effectively tell the international business community that russia is still open for business. of course, this is always a destination where you get the opportunity to talk to a lot of other influential people from the international community and i'm pleased to have with me lord peter mandelson the former european trade commissioner and chairman of global council. thank you very much for dropping by. i want to move off of russia and ask you about the uk because we have some slightly better than expected retail sales numbers, slightly better number on mortgage lending. does indicate, perhaps that some parts of the uk economy are

actually doing better than expected? >> well that's good news and i'm glad to hear it. however, a lot of people are holding back from investment. it's not because of a shortage of cash. many companies are sitting on quite considerable cash mountains. but there's huge uncertainty. and the principle source of uncertainty in britain is the eurozone. it's not only what's happening in britain. there is a lack of confidence about where the british economy is heading, everyone wants, you know, a lift. everyone is asking the government to do more to give the economy a lift. i think the government certainly should do all that it can possibly do in those circumstances. but, again, the main source of uncertainty remains the eurozone. and until that gloom is lifted, i don't think we're going to see a transformation of the picture in britain.

>> at least you sound a little different to your former labor colleagues who continue to insist that this is a problem with the coalition and john osborn is pursuing the wrong track as uk chancellor. you at least are acknowledging the impact of europe on the uk. >> they acknowledge the role of the eurozone crisis. and its effect in britain. but they probably don't prioritize that because they are the opposition and they want, obviously, to play up where they think the government is getting it wrong. now, listen carefully to what i said. i too am seeking any government initiative or measure that will help, you know, pump the uk economy. we saw a significant initiative being taken last week by the treasury and the bank of england to deliver more liquidity into

the banking system which they hope will furnish additional credit to encourage people to invest. that's what they should be doing. all i'm adding is the rider, that it's not simply the availability of credit that is determining the rate of investment, it's the uncertainty created by the eurozone as well. >> just bear with us for a second, sir, if you might. we have the auction results from the latest spanish bone sale so we would like to hear about that. >> thank you, jeff. just glancing at them, we're looking at spain selling paper this morning. 700 million euros in 2014 bonds. 918 million euros in 2015 bonds and 602 million euros in 2017 bonds. cover ratio of 4%, higher than what we saw where it was 2.8%.

2015 bond bid to cover ratio 3.2%. also again higher and indeed the 2017 bond ratio 3.4% the last auction 3.1%. quite a bit higher. the maximum yield for the 2014 bond, 4.791. we were anticipating the yields to be quite a little bit higher and indeed that's what we're looking at again as posed to a maximum bond yield on 2014 bonds of 2.2. the 2015 maximum yield 5.5% versus 4.9% last time and the 2017 maximum yield 6.1% versus 4.9%. so yields definitely popping higher, getting harder and harder for them to get rid of the paper. let's head back to you, jeff, after this brief but important interruption. jeff? >> reporter: thank you for that.

let's go back to you for some reaction. let me just run through that again. the bits to cover ratio was better which indicates there is interest in owning the bonds but the yields seem to be off on the previous auction so again an indication that investors still want to be paid a little bit more for taking on the spanish risk at this stage. what do you think would significantly bring down yields? does merkel have to sign off on 600 billion euros worth of purchasing of spanish debt to make these yields come down. >> it has to be clear to the rest of eurozone led by germany but not germany alone will stand behind spain and its debt. i think that when that is demonstrated unquivocally, there's no question that the qualified will rise. but there's another event in spain today and that's the

release of an interest report on the state of spanish banks. i think that too will have quite an impact on market confidence. there's a further report, i know, coming at the end of the month so this is not "the last word" and it's not the last assessment of the state of spanish banks that we'll see built i think that could have quite an impact. >> but merkel holds the key here, doesn't she? ultimately she needs to sign off. you've been part of the european mechanism. you understand how slowly the wheels can turn. we've run out of road here, haven't we? >> i think there's no question that mrs. merkel in germany will stand behind any of the sovereigns in the eurozone who are experiencing difficulties and trouble. there's absolutely no question at all in my mind of germany walking away from these individual countries.

there's no question of germany sitting back and watching the eurozone break apart. that's not going to happen. but mrs. merkel has two concerns. she wants to be assured so that she can assure her political colleagues in germany and then the german public that what they are providing are not simply a panacea or aspirin. that along with the crisis response that quite rightly germany is part of, we are also seeing in those countries serious structural changes that will repair the long term lack of health and lack of competitiveness in those economies and you have to say it's a reasonable request by germany to see both these things happening. >> can there be an orderly greek exit? >> i wouldn't envision and i don't think anyone else is and certainly the german government isn't envisioning a greek exit

orderly or otherwise. we have seen now the election of a new greek government, a coalition. this is firmly committed to seeing through the adjustment program that's been agreed with their eurozone colleagues and the imf, all of us now have to stand behind greece in seeing that through and if that requires a little bit more latitude, more flexibility, to make sure that that program we mains on course i personally would not be against that. >> thank you so much for giving us your time. let's send it back to you kelly to the studios in london. >> still to come we'll take a quick look into china's asset management industry as a report says the mutual fund assets will triple over the next 3 1/2 years. we'll leaf you with a look at what's happening in markets as we head to break.  welcome back.

you are still watching "worldwide exchange" here on cnbc. fantastic morning it is. china is forging ahead with its plan to attract more foreign investment in the country's

capital markets. according to a new document china's security regulators proposed 50% ramp up of the total stake that foreign investors can hold. they also have plans to give approved institutional investors access to china's interbank market for the first time. china's mutual fund assets set to triple to over $1 trillion by 2015. the report by citi lists gains in equity markets growth in the pension system and net inflows from new investors as some of the reasons behind this particular increase. joining us now is david russell, head of securities and fund services for citi asia pacific. roman also is still with us as our guest host. david, this report super interesting to me. just the headline of it. mutual fund assets in china to triple over a trillion by 2015.

talk it through for us. >> china is a relatively small mutual fund market right now. 350 billion in some context sounds big but smaller than australia, for example. you don't need to see, almost a cold spring what you got in china. regulations have restricted some aspects of the industry and those regulations lighten up it can take off quickly. it's an unpenetrated market. look back in the last four or five years it's not gone anywhere, it's dropped in size. changes are coming that's the stock to see the market change. >> seems the slow down in growth is adding the impetus for china to open up to investors. china savers are becoming more willing to invest their funds. >> some things are almost unfortunate timing in the way the industry developed. let's bear in mind china only really has had a mutual fund industry in the last ten years or so. it's not an industry with a long

history. back in '07 the market opened up for so-called qe products. and timing couldn't probably have been worse. >> yeah. it's a tough one. tough one. isn't new money, though or is it money reallocated from a separate area? i note you say also that investors are going to be diversifying away from sovereign bonds and have started to do so already. >> if we're talking -- two aspects here in the industry. foreigners investing into china and highlighting some basic facts. the report says it quite well. but china, the domestic equity market accounts for 10% of global market cap. for foreigners as a percentage ever their portfolio it accounts for less than 1%, something like .1% of foreign investment goes into chinese domestic equities. >> incredibly low. i would have guessed it would be

much lower. >> that sort of magnitude is about 10% of the global market but as an investment portion of a foreigner's portfolio on average .1% from our data. >> who benefits the most? >> domestic aye set managers. you'll start to see over the next few years domestic chinese asset managers going offshore and you'll start to see names that you won't have seen before in the international asset management industry, chinese names. interesting time for china, both inflow and outflow. very interesting time. >> thank you very much, david russell joining us from citi asia pacific. roman, how does that resonate with you? >> it's a very maim timmature m. any deregulation is good. most chinese consumers don't have much to do with their money other than place them in banks

on low interest rates. sony opportunity like this should lead to fairly rapid growth and we hope some foreigners can take advantage of that. >> roman, thank you very much for being with us this morning as our guest host for the first hour. >> after the break we'll head out to madrid. borrowing costs there jump as a result of a key audit of the country's banking sector is expected. we'll leave you a look at how spanish yields did after people showed up at their auction.

welcome to "worldwide exchange" this morning. i'm kelly evans. >> these are your headlines from around the world. >> fears over a global slow down continue. manufacturing activity in the eurozone shrinks by the most in three years. china data points to eight straight months of contraction. >> healthy demand for the spanish debt at the last auction, investors are demanding more for their money. >> the fed's new twist fail to cheer european stocks. european trade is in the red. >> commodity selloff continues, all prices hitting multimonth loss. we'll speak to the executive director of the international atomic energy agency, that takes place live within this hour.

all right. if you're just joining us let's take a look at how u.s. futures are trading. hello to our u.s. viewers. dow at this point pointed lower by about 25 points. we're back in the red after a couple of mornings in the green. nasdaq is pointed lower by seven points. same thing for the s&p 500, what's interesting we usually see markets trade better after a meeting especially after ben bern earn left the door open. ftse global 300 down. european pmi data showing contraction weighing on sentiment. ftse down. dax down and camelback out of paris half a percent. ibex 35, now down .85%.

>> coming back a little bit. the data definitely having an impact in today's trading session. what we haven't seen that much of an impact is sterling. take you over here for a little ride. we got sterling/dollar flattish even though we saw quite a bit better than expected uk sales data. just want to point out the euro/dollar trade better. regardless of what's taking place in the markets whether or not the fund extends twist or whether we see the bank of england trying to move forward with more stimulus although it did manage to do so we still aren't seeing a whole lot of movement in the currency rates at the moment. the bond markets, interesting once again a lot is taking place with spain. latest updates on the last

round. audits. they could also officially be asking for 100 billion euros peoplely more some say in terms of aid for their banks and of course we have the bond auction. the bond auction indicated that once again yields rose as was anticipated but there was a very healthy bid to cover ratio and managed to get rid the top end of estimates in terms of the amount of paper they wanted to sell. yields 6.6%. commodities super interesting we got oil trading lower by around a percentage point or so. weaker chinese data having an impact. and copper also lower by approximately 1.3% too. now if you are just joining us, let's just recap what's been taking place in our asian markets. all very interconnected. tracey chang joins us live out of singapore. hi again, tracey. >> good morning to you again.

well not a great day here in asia. both asian markets landed in negative territory today following that weak china pmi reading. the uk only regional market posting gains. but south korea's kospi ended .8% lower snapping its three day winning session as tech stocks led the broader market decline. afx 200 hit a three day low. india sensex reversed earlier losses gaining half of a percent. greater china markets, the hang seng index lost about 1.3%, shares of chinese property develop ever grand real estate dropped 11% after the company was targeted by a report from a short seller. the report's allegations are untrue says ever grand.

and now the earliest gauge of china's factory activity show that eight straight months in decline in june falling to 48.1 comparing with a fire reading of 48.4 in may with the biggest drop in new export orders since march of 2009. so as these slow downs continue can we expect more calls for further easing? back to you. >> thank you very much. >> i'll pick it up from here. the federal reserve extending its operation twist program through the end the year as it boosts sluggish u.s. growth. officials cut their economic forecast by half of a percent jack point expecting gdp of 1.9% to 2.5%. ben bern said europe is affecting the u.s. economy and the job market has lost steam. he made it clear he's prepared to take more action if necessary. >> we've taken a step today which is a substantive step which will provide additional

accommodation for the economy and moreover we've stated that we're prepared to take further steps if necessary to promote sustainable growth in the labor market. so we are prepared to do what's necessary. >> joining us now, senior u.s. economist from our studios in new york. ellen, how do you read this? >> well, i think this is a fed who doesn't want to appear as though they were doing nothing and so they really took the easing path of least resistance. that was in the announcement that they would go ahead and extend the maturity extension program, that operation twist through the end the year, and bernanke and his presser stressed that's the end of that program. they've taken it as far as they can. that means further additional monday taxpayer policy easing will come primarily from

quantitative easing. the markets didn't get that yesterday but it probably is coming. they stressed that if down side risk increased or the u.s. outlook weakens they will take further action. the language in the statement was pretty strong that this fed has not done and prepared to take further action and come in the form of more quantitative easing. >> ellen, do you think it's warranted, though? do you think they really need to at this stage or is it healthy also for the markets to flush it out themselves and for us to figure out what's going on in europe before the fed jumps in again? >> i think that your last point there is the most important, waiting to see what happens in europe. if there is significant tightening of financial conditions that spills over here to the u.s. and stemming from europe, not only would the fed respond with further quantitative easing because at that point you're pulling out all the stops, but they are

stepping in with -- we would step in with possible liquidity programs, reconstituting those from the financial crisis of 2008, those are the term auction facility windows. we still have those available to us. we can drop the discount rate especially for u.s. banks we've done that for european banks in case they need dollar funding. so there are many measures they can do to step in. bernanke stressed he's confident that the european leaders will do what's necessary to stabilize the financial system there, and that's what they are waiting to see. they don't want to front run, the ecb force them to do something by stepping out with a big quantitative easing program right now. we're just not there radiate. we think we will get there. we think financial conditions will tighten further. but the fed wasn't there yet as of yesterday's meeting sneem len, we'll leave it there for a moment. a preview of the housing data.

first let's take a look at today's other top stories. msci said it placed greece on its review list for reclassification as an emerging market. >> sounds fair. >> reasonable. at this point. >> given everything that's going on. >> still a tough one. south korea and taiwan one of those countries that may it please get an upgrade. >> clearinghouse is raising the margin call on italian debt increasing the cost of using italian fwonds raise funds. this is a similar move they made on spanish bond and irish sovereign bonds back in 2010. you could argue now that lenders there are much more awash with funding. >> spanish yields have come down. i don't think this answers or does anything to answer

questions about those countries needing funds like ireland. >> precisely. >> a spokesman confirming german chancellor angela merkel will attend the quarter final football match between germany and greece on friday night and it promises to be epic. just ripe with possibility for metaphorical play and she said she would meet the greek leader, new leader, antonis samaras the following week match. >> hit it out with the scarf and the singing the songs. >> probably too much for her profile. >> also geniuses come at a price for am. the tech giant is raising hourly pay for employees at its u.s. retail stores by 25%. i'm all for this. full discretion. all for this. this is why i switched to mac. a kid 12 years old goes like that and everything works.

i love you. >> now let's take a quick look on what's the agenda today in the united states. weekly jobless claims are out at 8:30 eastern. pmi report on manufacturing activity this is a new one will be released just before 9:00 a.m. and 10 april leading indicators. june philly fed sales. >> coming up best by's annual meeting takes place today. what will investors have to say after the shock departure of the firm's ceo? more in just a bit. rogram.

these are your headlines this morning. pmi data shrinks across europe and china fueling fears of a global slow down. >> spain enjoying healthy demand at its last auction but investors demand more for its money as yields jump. >> european traced in the red and u.s. futures are pointing to a lower open. now we're talking about investment opportunities. we're talking about what's taking place in the eurozone and how it's impacting the globe. let's head back out to jeff who

joins us live out of st. petersburg. jeff? >> reporter: hi. thanks very much indeed for that. steven jennings is with me. he has an investment bank that's doing business here in russia and the region and of course in africa as well. very good to see you. thanks very much for doumgs. let me start off with a very broad question. what is the best investment opportunity in the russian economy today? >> the consumer story in russia is very, very strong. we have 4.9% gdp growth, significantly overshot in q1. we got the outlook for fairly robust growth. that's an environment declining from commodity prices. so the consumer story is driving growth. we have a lot of fast growing, whole spectrum of very interesting consumer plays from technology all the way through to banking. it's in that space where we'll see the out size returns.

>> will the money be made by people like yourselves who are involved in putting the deals together, or can the home investor who just wants to buy some stocks on the russian market make money here as well? we see very low multiple on the russian market but then we've seen a low multiple for some time and trades at a significant discount to the other bric economies. who will make it here, you guys or can the retail investor make some as well? >> with russia it's important to be objective and strip away with what i call the western recognize. over the last ten years this is the strongest performing big market by a significant margin. but ironically after those superior returns it's still the cheapest market in the world. cheaper than pakistan on a p.e. basis even though we have this tremendous growth. for financial investors who are prepared to take objective,

there's tremendous opportunity here. >> seems that russia has been a victim in many ways in what's taking place in core europe and the sovereign debt crisis there. do you think that's the catalyst for a rerating for russia as a whole that if we get something that's a resolution this year we're able then to see capital flow back into russia rather than the flight we've witnessed? >> very much so. this is the world's high big market if we're looking at mid-size and larger markets. q1, one of the stronger markets in the world. nothing has changed here. the external environment has changed. one of the worst performing markets in recent months. so we see sentiment is very correlated with where we are in the business cycle. as russia rallies, as assets revalue the glass becomes half full for outsiders. it's not so much what russia needs to do we need to get

through this risk off phase in global markets. >> you invest in africa also. throw out some opportunities that you see in the african continent because again as we've seen this big risk off story play through it's frontier markets in africa that have suffered. >> the under lying economic story in africa is arguably stronger than anywhere else in the world. if you strip out china it's the fastest growing region in the world. that growth is broadly based across a dozen countries. they are in the early stage, asia type convergence so that growth will continue for the next several decades. transitioning in terms of democracy and governance. not very leveraged at all. not only do they have high growth they are the least exposed region to this global contagion that everybody is so concerned about. i think as time goes by and it will become regarded.

people laugh today but regarded as high return low risk. >> thanks very much for coming to see us and sharing your views with us. steven jennings. we'll talk to the iaea in just a moment how well supplied the energy market is. let me send it back to you for the time being. >> jeff, thank you very much. very interesting stuff. >> i want to bring this to your attention. italy's prime minister is out talking about how the tax system is undermining italy's competitiveness and how potentially it needs reform. he says international accords are needed to fight tax evasion. it needs a more accessible tax system and tax evasion is a huge wound to italy's credibility. >> not just greece. spain has seen its borrowing costs rise at auction of medium term debt. the spanish government is prepared to release the results of a banking spector audit. the spanish banks very much in

focus. we've seen the ten year coming off, those quite substantially in terms of the yield. we were at 7.1% a couple of days ago. stefan joins us out of madrid. to recap us, what exactly is taking place today out of spain? >> reporter: we just had the bond auction which went quite well. the demand was very strong. it's expensive, very expensive for the spanish government. the yields are much higher than the last auction, the highest one in 15 years for the two year bond spain was asked to pay 4.7%, up from 2.06% the last time. for the three year bond, have to pay 5.54% up from 4.8% the last time and for the five year note it was asked to pay a bit more than 6% and that's to compared to less than 5% the last time.

so the borrowing costs are extremely high, clearly unsustainable in the long term and raises the question about the opportunity for the esff to buy spanish but italian debt from the secondary markets to ease the tensions on the bond market but all in all it was quite a good bond auction because the spanish treasury raised 2.2 euros which was more than its original target. what we have this afternoon on the radar spanish government will unveil the detail of the stress test in the banking sector and say how much will be needed. and later tonight it will request formally the eu report for its banking sector. >> stefan, thanks. as we head to break we want to bring this to your attention. oil prices are the big story. brent and nymex trading near 18 month lows. 80.72 for nymex, 91 level for brent crude. you got to wonder at what point

opec comes back into the mix. we'll hear from the director of the iaea in just a bit. say with us. [ male announcer ] trophies and awards lift you up. but they can also hold you back. unless you ask, "what's next?" introducing the all-new rx f sport. this is the pursuit of perfection.

you're watching "worldwide exchange". let's take a quick look at how markets are trading. red arrows across the board in the u.s., this comes after

stocks closed lower yesterday following the meeting for the first time this year, typically that meeting is more supportive. ben bernanke indicated he's willing to act. oil is trading lower. commodities getting hit. brent at 18 month lows. 91.76 is that level. let's get more from ellen, senior u.s. economist who is still with us this morning. ellen, this drop in commodity prices in oil in particular, some of course will say this helps support the u.s. consumer but it seems every time oil prices selloff it's because the global economy is doing so poorly. >> exactly. ate double edged sword. so we get that selloff when people are concerned about global growth, and we do have a global slow down in growth, and what that means for u.s. manufacturers in particular is fewer foreign demand for u.s.

manufactured goods which puts downward pressure on the need for energy to produce those goods. that's happening around the world. as you mentioned it is a boon for u.s. households. or let's say it takes some of the pain away from u.s. households that's suffering from a poor labor market, very slow to no wage growth. having those price pressures come off for u.s. households is very supportive right now. >> ellen, very briefly and quite a general question, do you see the u.s. economy gaining any foot hold for the remainder of this year? >> i think that it's going to be extremely difficult. the chairman yesterday in his presser mentioned a slew of headwinds that the u.s. is face. u.s. housing market. the job market. europe's financial crisis. global growth slow down. there are so many factors that we're facing here. i don't want to leavous the u.s. fiscal policy which will come to a head later this year.

so businesses are rattled. i don't see much certainty returning to how businesses feel about the outlook and that will keep hiring sideline the u.s. and that's the crux of our recovery. >> ellen, thank you very much. we will be rejoined by you on the other side of the break. but coming up here on worldwide@cnbc.com, we'worl"wore exchange," our next guest has a bold prediction for the presidential election. he says no matter who takes over the white house it's a win-win situation for real estate investors. we'll get his take in a second. optionsxpress, where you can trade your favorite products,

all in one account. keep watch on the markets. or use our exclusive tools to help find ideas. it's powerful, easy-to-use technology for trading stocks, options, and futures. keep trading whether you're at home, in the office, or on the go. optionsxpress, the broker smart traders deserve. open an account today at optionsxpress.com.

. welcome back to . welcome back to "worldwide exchange". if you're just tuning in i'm kelly evans. >> these are your headlines from around the world. >> fears over a global slow down continue. manufacturing activity in the eurozone shrinks by the most in three years while china's data points to eight straight months of contraction. >> healthy demand for spanish bonds. >> the fed's new twist fails to cheer investors as europeans trade in the red and u.s. futures point to a lower open. well we got red behind me

here. the u.s. opened maybe lower at this point keying off some losses. dow pairing some of its losses at this point opening lower by ten points. nasdaq and s&p opening fractionally lower. the ftse cnbc global 300 down .2%. we had a mix batch of data. some stronger than expected european pmi figures. china's data disappointed. uk retail sales figures held up reasonably well. that has helped give some support to stocks. the ftse 100 down .4%. camelback out of paris down .2 and ibex in spain is fighting back into the green after opening lower by 1%. a rather successful in terms of

the people showing up for the auction for spanish debt. turning sentiment around. keep an eye on that ten year because it's calling back from that 7% level. >> not rocket science. sometimes the basic questions are the best ones. how do you make markets in these markets. here's what the experts have been telling us this morning. >> one of the best trades is simply setting volatilities rather than have a directional view. many have been removed. >> the other end of the spectrum european union is falling apart and dipping into the safe hey convenience. if you don't know what currency you'll get back paid in if the bunds mature. >> parking in corporate bonds is where you'll get the best bang

for your buck. you'll get paid, repaid. in some cases the underlying government bonds. okay. we'll get the latest snapshot on the u.s. housing market today as may existing home sales are due out at 10:00 a.m. eastern. they are expected to drop by 1.1% to annual selling rate of 4.5 million homes. joining us more is managing partner at citicorp. you like real estate but what's interesting you don't want to get out there and buy a single family house. you're talk about multifamily properties in cities like new york. >> yeah, that's exactly what i'm talking about. the housing sector seems to be growing. it makes people feel comfortable they are getting equity back to what they lost in the past several years. but investors aren't going to buy a single family home. investors are buying yield driven asset, and a lot of

people are moving back into the cities, so feel very comfortable that multifamily house is a place where a lot of investors want to put their money. >> what we talk about here in the uk about how are you average family really hasn't gotten a break at least not on mortgages because mortgage rates have continued to head north. is at any time same situation in the u.s.? are you still seeing kind of a mortgage tightening for a lot of families? >> you know, rates are actually at an all time low for families. however, a lot of the people out there do not steam have the equity that banks are looking for in order to purchase their homes, thus looking to rent, thus the opportunity for investors and multifamily housing. >> the excitement for example buying into new york has been well documented. at what point are people paying too much for these markets and are there other places to look for opportunity.

>> any metropolitan urban area is a great opportunity to look for multifamily assets. however, new york has a lot of growing areas growing potential areas, areas in which people are moving into and the rents are expanding and, therefore, new york is a very nice safe haven. new york is the only place in the u.p.s. that has a serious rent civilization code which keeps rents or part of the market under governmental controls. >> ellen you're a senior economist. are you seeing a stabilization of the u.s. housing markets? >> we are. we're seeing the housing market off the lows and even in a more pronounced way since the beginning the year. but i would have to draw a distinction between single family homes and multifamily. home builders have flocked to the multifamily segment because that's where your return on

investment is. not only -- think about it. all the homeowners that lost their homes to foreclosure they have to rent for quite some time pap new demographic of young people coming in who saw the housing market was not a very viable investment and they are more likely to be renters. that market will be tight for quite some time which keeps rental prices up. >> may be more attractive for investors. that means it will be more expensive for renters and for people who are still shut out of the single family market? >> you're right. you know, to put it in terms of inflation, headline inflation has been coming off shortly because of the top in oil and gas prices. core prices have been high and a lot of that is that rental component. ate big chunk of everybody's monthly payment who rents and seems to be going higher. that's something as home builders more of these

multifamily properties they will come online and take some of those rental pressures off. we're not quite there yet. we have more properties coming online. maybe we start to see that. >> what is the impact of it being an election year. what's the bacteria going to be on the housing market? >> i think it's a win-win situation for the housing market in general. real estate in general is a great hedge against inflation which no one sees coming today or tomorrow but in the future if mr. romney should win, actually both presidents looking to spur the economy which should spur on real estate growth in general, so the fact that it's an election year, the only thing that i would tell investors is to look to sell today is because mr. romney would probably keep the same tax codes but mr. romney is looking to change

them. >> thank you both for your time this morning. >> we were just talking about oil and where better to go than to the st. petersburg international economic forum which is under way in russia. jeff cutmore is live on the ground there. jeff, many can't mention russia without mentioning oil. >> reporter: absolutely. there is a very clear connect between the prospects for this economy and, of course, the oil price. many here looking at the decline we've seen in the price of oil and asking what that will mean for russia's growth prospects over the next six to 12 months. let's see if we can get you a better guess on the direction of the energy price. we have the executive director of the iaea. thank you for coming to see us. what will the oil crisis be over the next six to 12 months. >> i would like have a crystal ball to look into it and i could

answer your question precisely. what we've seen been happening in the past three month, the oil price came down from 125 to 96, 97. and this is, course, very interesting and i think it's fine. and what's fine as well is that toil market is much better supplied than it was before. but that's not complacent. there's still the economic recovery going slowly and you can see these high oil prices are -- we look at it from a historical point of view, they are historically high and for a long time. emerging countries as well asthma tur economies face the same kind of problems. >> can suppliers and users feel comfortable with this rate of exchange. is this an orderly decline we're seeing? >> i think the decline in prices it's always about market

fundamentals. what we've seen in the past few months is that the opec supply was much more than it was before, 1.5 million barrels a day and this seems that the market was better supplied than it was. there's a new kind of balance coming in to the market between price and liquidity. but the question, of course, is this balance for a long time or a short time. >> the issue, i suppose for opec is how much in control of the price are they at the moment given there's quite a strong opec contribution to the market right now. do you feel that they are able to swing price significantly with statements? >> well, what's important is the influence of the impact of non-opec supplies. russia is a very important non-opec supplier of oil. i think this has to be bear in

mind. what i can see now is that many people also in opec what i can guess from reactions i get they have the impression that this is a better situation than it was before. but, of course, how the situation will be determined is very difficult to judge. >> a lot of american consumers are starting to get excited about the prospect of soft $3 a gallon petrol. should they perhaps cool their enthusiasm? do you think they might see a topping off around the 80 to 90 dollar a barrel mark here as we get a match of supply and demand? >> you know, the point is whenever there are low prices for the barrel it takes some time before you can see this translated into the price you pay at the pump. always takes some time. people like to pay less, that's

true. but on the other hand there's always to be borne in mind the price you pay at the pump is related to the price of a barrel. i wouldn't be complacent. i would never be complacent because you can't forecast the price. >> let me ask you about the natural gas market before we wrap up here because we've seen, obviously, this huge nonconventional supply of gas discovery in north america, and that has brought down the btu price in north america. >> yes. >> do you think we're now at such a low price that that's going to deter further discovery of gas, it's going to perhaps slow down the price of that gas find its way into the end user market. >> two interesting things. one other countries who also have these reserves of shale gas are looking into opportunities to explore them themselves.

we have a new american price and two other price in the world and much higher than the price in north america. what will happen to the price is whether it will be gas to gas prices. it depends on the situation in north america if they will turn into an exporting country. so there are a number of uncertainties, but i think it would be quite interesting to see in what manner it will be possible and what degree it will be possible to get away from the gas to oil. >> thank you so much for giving us your time. it's been a pleasure speaking to you. the executive director of the iaea. let me send it back to you. >> jeff, looks busy where you are. thank you very much. >> antonis samaras has been sworn in as the prime minister of greece, ending a protracted process that now puts conservatives at the helm of a

three party coalition. cabinet has not been selected. julia chatterley joins us from athens with more. when can we expect a cab meant what difference will it make >> we are expecting a cabinet announcement any time today. we've been expecting it since lunch time. next few hours we're expecting a composition of new democracy and technocr technocrats. no participation from pasok. but they are working on an agenda to address how they will address this bailout deal. all three leaders will attend the eu summit meeting next week. remember at the same time as negotiations are going oranges we know greece is running out of cash. they were supposed to come up with 11.5 euros. the troika needs to come back

and understand what's going on and greece and europe can negotiate. guys, back to you. >> you're watching "worldwide exchange". before we head to the break. pmi data slinks fueling fears of a global slow down. >> the fed's new twist failing to cheer investors as european trades in the red and equities, u.s. futures pointing to a lower open as well. >

you are indeed welcomed back. spain has seen its borrowing costs rise. spanish government preparing to release the results of a bank sector audit that happens later on today. stefan rejoins us from madrid. it will get interesting and especially if we see the audit indicating that they might need more money than what the market is already pricing in. >> that's the question. according to some press reports, they will put the banks in three coordination. first one for local savings banks which are heavily exposed to the real estate market. second category for the mid-size banks which could have some liquidity problem for a period of time and the third category for two largest banks which are

not expected to need some cash injection. that's for the classification. of course the key figure will be how much money will be needed by the spanish banking sector. the estimate is between 60 and 70 billion your jobs perhaps even more according to j.p. morgan around 75 billion. the worst, most worrying coming from the conclusion that the spanish banks would need more than the package more than 1 billion euros. this is what the european leaders have agreed to lend to spain. so we'll have the answer late in the afternoon. there's no exact time but should be more or less at the same time as the meeting in luxemburg. over to you. >> stefan, good to see you. from stefan to all things soft. >> bed, bath & beyond. shares of bed, bath & beyond were down 11% after hours on

wednesday this after a weaker than expected seven quarter outlook. first quarter profits did top forecasts but retailerses costs are rising sharply as it spend on its ecommerce competition. best buy holds its shareholders meeting in minnesota today. courtney regan previews the meeting. >> reporter: later this morning best buy holds it's annual shareholder conference and while the executives will be gathered one minnesota, shareholders will be in front of their computers. this is what is considered a virtual shareholder by the company. shareholders can ask their questions over the internet to the executives. i'm told by the company that interim ceo will be making a presentation. there will be voting or announcement. votes that have been cast on the five proposals.

none of these proposals are expected to be overturned. it's also expected to be a relative unevent tful meeting. shareholder questions will last 20 minutes sore. remember chairman richard schultz actually stepped down much earlier than anticipated. it's said he's exploring options for his percentage of the company. he does hold about 20%. there's been some speculation there's interest in a private equity buy out however it's only speculation. we don't expect the executives will be answering any questions related to that. back to you. optionsxpress, where you can trade your favorite products,

all in one account. keep watch on the markets. or use our exclusive tools to help find ideas. it's powerful, easy-to-use technology for trading stocks, options, and futures.

keep trading whether you're at home, in the office, or on the go. optionsxpress, the broker smart traders deserve. open an account today at optionsxpress.com. sven's home security gets the most rewards of any small business credit card! how does this thing work? oh, i like it! [ garth ] sven's small business earns 2% cash back on every purchase, every day! woo-hoo!!! so that's ten security gators, right? put them on my spark card! why settle for less? testing hot tar... great businesses deserve the most rewards! [ male announcer ] the spark business card from capital one. choose unlimited rewards with 2% cash back or double miles on every purchase, every day! what's in your wallet? here's your invoice. the india rupee fell lower. the yen against the dollar too.

joining us is the helped of g 10 strategy. why is the dollar rising this morning and how much further will it go? >> we did see some corroboration in the dollar trend. i suspect some of it has to do with the fact that some investors were hoping for more aggressive qe from the fed. operation twist was not enough. some short covering there. tinting move is the in the dollar yen supported by the widening in the dollar yen spread as well. overall, however, we remain skeptical we'll see sustained rally above the 80 figure as we expect japanese corporates to come in, japanese exporters from the sellers at the 80 level. >> 126 something on euro dollar. how long can we hold on to this level? >> i suspect the risks have down shifted to the down side. folks will be focus on the euro

side. i suspect that we know the drill, there will be some expectations. which may not be really met in a sense that markets will be disappointing again which could be euro negative. in terms of, i guess headlines today, q would be amount of bailout for spanish banks. close to 100 billion is realistic. key, however, will remain whether or not the bailout will be provide by the esf or esm facility because if it's the source of the money concerns about subordination of the existing holders of spanish debt actually could, indeed, weigh on euro, euro/dollar lower. >> thank you. we appreciate your time. just want to mention the ten year spanish bond is now below 6.5%, this following a somewhat

better than expected auction result. >> i saw a tweeter write, crisis is over. thank you very much. >> if only it were that simple. >> someone is making money and someone is losing their shirt. >> who is buying. ecb buying? >> spanish banks. not the best sign in the world. >> france bore roger at much lower rates than it did the last time. markets surge for direction. pmi is a disappointment. it's very rare stocks trade lower in the u.s. after an fmoc meeting, particularly one where they leave the door open nor stimulus. that's it for today's show. >> we'll see you same time same place tomorrow. can't way. good-bye. thanks for watching. ♪

[ engine turns over ] [ male announcer ] we created the luxury crossover and kept turning the page, writing the next chapter for the rx and lexus. see your lexus dealer. all in one account. it's powerful, easy to use technology for trading stocks, options, and futures. optionsxpress, the broker smart traders deserve. open an account today at optionsxpress.com.

good good morning. today's top story, spain paying euroera highs to auction dies and within hours the government is expected to finalies a multibillion euro rescue-package. back in the u.s. the fed delivers mostly what markets were expecting so why are investors disappointed. it's thursday, june 21, 2012. "squawk box" begins right now. ♪ >> good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. yields actually rising in the latest spanish bond