hello welcome to today's edition of "worldwide exchange". i'm ross westgate. . >> i'm kelly evans. financials leaves stocks higher as eu leaders reach a deal. >> pledge to rescue destabilized debt markets. >> four uk lenders reach a settlement over hedging products. but the libor scandal looks to spread. coming up on the show, nobel prize winning economist joins us live on set. we'll get his view on europe's plan for recovery. that in just about an hour's time.

>> okay. welcome to the program. plenty to get through at the top. we did say two days ago we said there was no expectation this summit may be long because the only way was up. >> maybe we would exceed them. people are getting some clarity on this overnight and the wee hours of the morning. now we have a chance. >> the question this morning is it anything more than an utter relief there wasn't complete break down and discord. >> it does seem, though, italy scored two victories over germany last night. >> that was almost as extraordinary as what happened potentially at the eu summit.

>> eu leaders have made a break through on measures stabilize the bloc. cash from the regions permanent bailout fund will be used to help recapitalize countries. officials indicated any loans used to recapitalize spanish banks meanwhile will be given senior status. both the esm and esff can buy the debt. mario monti hailed it as an achievement. >> translator: countries that would like to take advantage of this stabilizing intervention should ask for it. if they stick to the existing requirements they won't have to be subject to a specific program. they will have to sign a memorandum of understanding and won't be monitored by a troika commission.

>> leaders also agreed on the creation of a single supervisory body. brussels said more concrete proposals will be unveiled shortly. >> we'll see what more comes out of that. undoubtedly the market reaction pretty clear this morning. you can see down here about 16 stocks in negative territory. heavyweighted to the upside. just to show you those main headline indices. we got the dax up 2.5, the cac up 2.5, the ibex up almost 3%.

french banks all up around 5.5% as well as deutsche up near 4%. what's that done to bond yields? at the end of the day it's about getting bond yields lower. in spain yesterday we went through 7%. we are back down this morning, 6.5%. many people will say that's still unsustainable. we'll have to see the proof of this summit to see whether we get those yields any lower in the coming weeks and back below 6%. italian yields are back below 6%, 5.9%. german bund yields up to 1.9%. the highest they've been in june. june 1st they hit a low. we'll be hearing from the financial policy committee around 10:30 london time. they may be reducing capital rules or advising the capital rules in the uk should be

reduced. euro had its biggest one day jump this morning. this morning we were 1.24, currently .1.257. aussie dollar speck up a cent. and sterling, we had a 1.55 handle. kelly. >> ross, thanks. silvia wadhwa has been following the summit all night for us as we've gotten more statements out of the wee hours of the morning. silva, for our viewers who are waking up and trying to make sense what's been agreed to, what's coming down the pike. >> reporter: let's start what hasn't been agreed to. a clear road map to fiscal

union. they've only agreed to another report to get a clear road map to fiscal union. sign terms of the long term aims that, particularly the germans or german bloc was pushing for we haven't gotten anything yet. there's no denying that. certainly germany lost at the table not only in football last night but in the round of discussions here. what has been achieved and that's a little bit more difficult, the markets were quite euphoric because they said what we wanted to have a short term fix it's been agreed. the seniority issue in terms of the debt with the esff and the esm. the bond buying by the esm in the primary and secondary market and some news on banking supervision. so all that was something that the market took home early in the morning and said hey this is more than we expected. there's a lot of ifs and buts in

there. there can be direct access to the esm without and being under any bailout regime. it's not quite so simple because angela merkel just arriving for the next round of talks here, quantified that and qualified that again. first of all what has to be in place before the esm can buy anything in any market or recapitalize anything we need a banking supervision body of viable banking supervision body in place. there has to be further decision by an eu council. before that's in place nothing will happen and the time frame is for the end of this year or possibly beginning of next year. the next thing then the esm could theoretically start buying. so countries have to qualify as

well-behaved countries and then this kind of access to temp sm can be granted. not quite so simple. >> the esm may have to inject funds in banks from january 1st. ties in with the timeline you're talking about. give me the sense of the politics here. has germany given in at all on anything? because the view is spain and italy won, italy won in football last night, they won in the summit, had germany taken a step towards a liability that they didn't want to have? >> reporter: no i don't think what they have. germany hasn't gotten anything to take home. they were prepared to give in, to they just wanted a bit of a tit for tat. they wanted something more tangible on fiscal union. what they agreed to at the moment these are the short term

fixes that the market needs to stabilize the euro. the germans didn't get anything in return. in terms of getting closer to something that might be called a shared liability or euro bond we haven't gotten closer to that, possibly moved away. before the germans get something on the sharing sovereignty, on the hard and fast budget controls they will never give way on anything like the euro bond and so it's almost a disappointing part of the deal that the germans didn't get what they wanted, that means they won't give in on the euro bonds. >> silvia, plenty more to come from you in the program. philip, let's kick off with you first of all. we have seen this morning as you might expect yields in italy and spain low. the question is, is what we know

at the moment and what we know about the fire power of the rescue funds is how much more -- how much lower can this move go? how sustainable is this yield move? >> it's hard to say. what you have now, really, expectations going into the summit were very low. and as you mentioned on your program the short term fixes surprised on the upside last night. now, a lot of the sustainability of this rally will depend on the implementation of these measures. on paper -- the idea that the esm could be used as a program and provide injections into the banks that's a significant step forward. however as usual in europe the devil is in the detail and on the implementation. so if you take the bank recap for instance that's not

available now, base don't forward basis it probably will happen but there will be question marks around that. if you look at the esff, the ability to buy bonds from italy or spain, there again there's a number of uncertainties as to the conditionality applied to that as well as to the market reaction and rating reactions to a country applying for outside help. >> how long do you think we'll get this market relief? what we've seen in recent weeks is it didn't last beyond the morning with greece, with the spanish banking system. do you think this one will go a little longer. >> this one will go a little longer. >> i think in this case we'll see a slightly longer reaction for a number of reasons. first of all the market really did go into this meeting with absolutely no expectation so i think with such a break through i think that will cheer the market for some time. from an asian perspective some

of these measures are important short term fixes even though clearly there was a slew of details which means we have avoided a scenario at least for the summer. in that sense you've seen the market rally in a favorable way and at the same time some positive data that could come up from china later in the year or expectation of more stimulus could help asian markets in the near future. >> what about silvia's point a moment ago that to save face germany, angela merkel may have to harden the position to euro bonds or some of these measures in order to save face. remember ahead of key political events there in germany in the next year to come as well. >> i don't know about that. i think it's possible. and i agree that while the summit had a surprise on the upside and short term fixes, when you look at the longer term and ability to evolve towards a greater fiscal and political

union and move towards the goal of greater debt mutualization, i think you haven't seen much put on the table at this juncture. doesn't mean it can't happen. but at this stage we don't have very much. i agree with that. >> what do we have to bring spanish yields, what's the level we have to bring spanish yields down what level is it where we say okay they can keep bore roger this rate hopefully without further, without broader bailout? >> if we were in charge of this eurozone mess, what we would argue is that the ecb should act as lender of last resort and look to anchor yields for spain and italy around 4% and that would be the real political break through. i'm not holding my breath. it's unlike try to happen. >> unless we get yields down 5% we're still in a danger zone. that's what you're saying? >> pretty much, yeah.

>> good to see you this morning. thanks for joining us. let's talk about what's happened in asia today in reaction. treasury has got all the market news for us in that side of the area. we thought we had tracey. we'll get to her in a few moments time. let's just recap meanwhile. let's show you where we are with bond yields. we got market data, the m3 market data and private loan sector as well. >> i want to remind people as we think about the health of the eurozone, m3 data money supplied in may. it was up 3% year on year versus forecast of 2.4%. we're still seeing new evidence of capital flight from spain as figures showed about $20 billion net left that country again back in april. loans to households in europe increased, broadly speaking in may but, again, ral credit

conditions still remain. >> spanish private-sector bank deposits down half a percent in the month of may. in greece they were down 5.5%. any crisis can be triggered by a flight to capital. >> it's easy to forget that underscoring a lot of this is still real imbalances in differences in terms of competitiveness across the eurozone. that hasn't been fixed. >> tracey is there for us in singapore. tracey, what's happening with your markets today? >> first of all, ross, happy friday. a rally here in asia following that brussels break through. they finished higher by 1.4%. the rebound may not last with the greek reading. and hong kong stocks up a whopping 2.2%.

same deal with the nikkei, jumped 1.5% to close above 9,000. the kospi powered nearly 2% higher and the south korean rallied to its strongest rally. the australian market was up 1.2% but the afx 200 lost 11% for the fiscal year. sensex showing a lot of momentum up nearly 2.3%. overall a pretty positive trading picture to start off the weekend. back to you. >> an important word coming here out of angela merkel, silvia said she would start head back on some things. angela merkel just said each esm bank recapitalization, each one will need unanimous approval. they will put the hurdle rate fairly high for the esm to come in. each one will need to have

separate approval. they will set the hurdle rates quite high. >> that's why we got these statements overnight about what leaders abreed to, today is just as important because you'll watch the politicking, you'll watch each of them win concessions from one another. these comments from merkel may be part of that. >> we'll take a short break. still to come what's been a pretty good session in asia today we'll talk about british banks as well. and get into that. and oil. how producer countries are dealing with falling prices. we'll bring you with an interview with iraq's oil minister. >> japan releases a bunch of economic data. >> plus, at 5:30 eastern we'll break down those disappointing numbers from research in motion. >> u.s. supreme court passes obama's health reforms. we look what that means for the

health care industry. >> also coming up on the program, we're joined by josef stiglitz. what does he make of what's going on? plus he has a book. >> he has some broader concerns too. [ male announcer ] this is the at&t network. in here, every powerful collaboration is backed by an equally powerful and secure cloud. that cloud is in the network, so it can deliver all the power of the network itself. bringing people together to develop the best ideas -- and providing the apps and computing power to make new ideas real. it's the cloud from at&t. with new ways to work together, business works better. ♪

welcome back to the program.

meanwhile japan's domestic economy is still struggling under the impact of the higher yen and slowing global demand. may's industrial output fell worse than expected while inflation dropped in may for the first time since january. a survey says japanese manufacturers expect sharp rebound in june. they are counting on solid demand from u.s. and emerging markets. let's get more thoughts here from our guest host. so, you know, with inflation in japan falling back certainly not what people were hoping for, what happens from here? >> well, i think first of all as you look at industrial production we agree we're looking for a much brighter outlook in the medium turn. we didn't have europe stuck in a

recession, u.s. will be dragged down by the talk of fiscal cliff, china is going through a slow down. the typical export markets for japan is going to be quite challenging and not least we still have a very strong yen which obviously bring down the export as well. in that sense we did have a recovery from a natural disaster last year so the capacity is gradually coming back. the reality is on the demand side things are still pretty tricky. >> they are. i wonder to what extent yen strength is going to continue here given some of this weakness. how do you expect the currency to react? >> well, we think the yen has been reacting not so much to domestic data but certainly much more towards the global risk apatite. certainly the good news this morning may be a little bit of negative on the yen, positive on $yen in the short term. more importantly the boj's action on asset purchase program is crucial because no matter how often the boj intervenes the

asset purchase program has been very effective in giving the yen some competitiveness. they which more will come. i think that's a supporting factor for dollar/yen later in the year. >> the best thing to happen for germany is for europe to resolve itself. doesn't seem as though we've moved that much closer although maybe some important steps here overnight. what about the real impact on japan from the region's weakness aside from what it's done to support the currency? >> well, i think the europe's weakness obviously has a number of fronts. first of all, demand for asian export has slowed down. as a result of that japan being a key provider of components as well as capital goods feeding in to that emerging market growth i think that's also lightning down to a great extent. you look at china import from around the region including japan for the first four to five months of this year it's underperformed significantly

compared with 2011. so, obviously, the slow down in europe has a direct impact on japan but at the same time the indirect effect via the emerging market is also putting some pressure on. i think the difference or maybe a bit of good news we've seen japanese banks lending a little bit more aggressively in the global environment when at a time of european banks are clearly going through a deleveraging process. >> good news for japanese banks. another second day of news for british banks they've been rocked by another scandal. they said they reached an agreement with over four lenders. barclays, rbs, hsbc and lloyds all found inappropriately sold interest blocks on loan. in a statement barclays said they cooperated fully throughout it's thematic review. lloyds said they assisted fully

and agreed to work with an independent third-party. it's added it didn't sell interest rates products widely and didn't expect significant costs. rbs is also reportedly facing a separate fine of 150 million pounds for engaging in similar actions. this is according to the "times" newspaper. tai, when you add in the libor sort of scandal that erupted yesterday that's now dragging in rbs as well as barclays and another misselling scheme as well as well as other things that happened out of london, this is the place where jpmorgan was, rbs trading scandal, how damaging is to it london's image for banking, for global banking as a place where businesses may want to come and be placed? >> well, i think that there's two ways to look at it. of course the news on its

surface seems a very negative image of the city as well as the banking industry. if i take a more slightly monthstive attitude cleanup is taking place, regulation success applied on the banking sector. hopefully the banking sector in london will emerge on the back of this much stronger and much more competitive. obviously right now we're going through the top phase of banks going through a lot of litigation, a lot of regulatory regulars. at the end hopefully they will emerge stronger and more competitive. >> i can kmaj singapore, hong kong, they are licking their lips at london's misfortunes? >> i think that's not the case because at the end of the day asia at times has advantage as welling a geographical

advantage. it's not necessarily good news for this part or my part of the world. so i don't think singapore and hong kong necessarily, you know, too happy about what's happening in london right now. >> all right, tai, more to come from you. >> after the break we'll check in on commodities. corn prices have risen sharply in recent weeks. can the rally continue and is there a threat to food prices. we'll discuss all of that coming up.

welcome back to the program this morning. financials are leading european stocks higher as eu leaders reach a deal in easing the sovereign debt crisis. >> plans for a rescue funds to stabilize markets and capitalize the banking system. >> four uk lenders reach a settlement but the libor fixing scandal looks to spread as reports suggest rbs could face a fine. >> nobel prize winner josef stiglitz will join us. we'll get his view on europe's

plan for a recovery. stock market reactions today to temp u summit very positive. we're losing some of those early gains. the ftse 100 up. the xetra dax up. a lot of the french banks, italian banks up between 3% to 6% on the open this morning. the key thing of course kelly is was happening on bond yields. >> we've seen a lot of action in spain's ten year now down 6.57%, italy down to 5.91. credit default swap cost there's for those countries are coming in as well according to market. spain is down by 50 basis points but still those reading, ross, and bond yields broadly speaking unsustainable high some would describe. the bund benefiting a little

bit, that yield is back up as people are, in the wake of the news, 1.63%. >> we count at 1.25, 1.26 was the high position. 1.25. u.s. sterling above 80. aussie dollar doing fairly well. just to remind you, angela merkel now saying this new deal does uphold the conditionality principle but i guess we'll have to wait to find out what those conditions in practice will be. meanwhile let's go back to commodities. our next guest says there's a real prospect of a mega spike in food prices. joining us is the ceo of star supply commodity. tai is still with us. what's a mega -- how do you characterize a mega spike? >> a mega spike in agricultural

markets is something you end up seeing on the streets in food riots. we're only 10% off the 2008 highs on many agricultural products and the stage is set in the united states as sequence of events is unfolding which could lead to -- >> what sequence is that? >> 2008, agricultural price spike was started by extremely poor weather in russia and low stocks in wheat. now similarities are extremely low stocks in corn outside china and very, very dry weather the united states across the corn belt at exactly the wrong time for polination. >> how high are the prices going? >> 20% of the net corn crop after by products goes into

ethanol production. that's under law. so there's not a cap for corn prices. >> the question is what kind of price goals are we talking about for consumers and are we going to see -- people say the arab spring was due to high food prices. >> we'll find that quite likely in the next ten days. there's a usda report out tomorrow but it's dated june 1st. it will have little information content and really it will be the weather in the next ten days in the united states will set the stage for it. >> tai, what is this going to mean for asia? what does it mean for policymakers. sfood a much higher proportion of income. >> absolutely. i think if we do see a much higher food price where from we are now that will be very challenging for policymakers. you have a weaker global growth with problems in europe. but if you have a supply side

shock to the commodity system as we've seen in 2008 and 2011, the problem there is that policymakers will struggle to find a balance between how to deal with inflation first or tackle growth first? the experience will suggest they will be more pro growth in inflation and use fiscal measures as well as other protectionist measures to secure food prices or secure food and prices. so i think that's going to be very challenging. >> we've seen food prices high now for so long. as you say we're only off those 2008 highs a little bit. what long term changes is that having in terms of demand in supply for these crops? >> well, since 2005, acreage has been increasing by 3% per year which many in 2005 said was impossible. we're running out of land. turn out we're not. r and d increasing yields for

long term. so you're having more acreage, better yields and the fao are looking for a 70% increase in food output by 2050. it's possible. >> at least the supply is kepg up better than what was expected. >> but for someone who is hungry today that's not going to help them, the long term outlook is stable. it will be a very short term event. >> kevin, thank you for joining us this morning. we can only hope your most dire forecasts don't pan out. tai will stay with us. we have results of nomura internal investigation into insider trading. coo will see a pay cut and the ceo will see a wage cut. two directors will resign from

their posts. and the head of compliance will step down. a big internal shake up at nomura in the wake of its internal investigation to insider trading. >> our attention dominated this morning by the eu summit still ongoing. optimism helped support oil prices. will it be enough to stop crude prices from suffering their worst quarter since 2008? 2.25% on nymex crude, brent up a little bit less than that. we spoke with iraq's deputy prime minister and asked his take on future price action. >> 85 to 94 blend, i think that's about the bottom. when the oil a few months ago was up to $120, $125 that was about the limit. i think this is the range, 90 on

the lower side for blends or 80 for west texas. the higher should not go beyond what it was earlier this year at 120. so the middle is about $100 for brent. i think it will allow the world economy to grow and also will encourage other producers to produce at a reasonable profit. $100 a barrel is favorable not only for iraq, iraq can produce at a much lower cost but it's favorable for almost all users, particularly the marginal producers where the cost is much higher and also at that level we're seeing it earlier that would not affect the growth of the world's economy which is a very important factor for oil producers and consumers alike.

>> we're hearing reports that saudi arabia has reopened the iraqi pipeline in saudi arabia, to counter a blockade by iran. can you verify this is the case? >> can't confirm because that's a decision. but i would like to point out the pipeline was built solely for the purpose of exporting iraqi crude to the red sea. and we have asked saudi arabia to allow iraq to reopen and use that pipeline again as we are expanding our production in exports. we're divesting our roots. we have not had if response from them yet but that request was

made on more than one occasion. >> what's the worse case scenario if the strait of hormus is blocked kwhoot happen? >> that could be extremely serious for the world supply. it would not only affect the main oil producers ike saudi arabia, kuwait, iran itself it will affect the whole world. i cannot predict what the prices will be in that case but i'm sure we'll see prices ahead of unexpected. >> $150 a barrel if not more? >> i think be much higher than that. okay. now, there are celebrations and also likely protests in hong kong this weekend as the chinese

president flies in from beijing to commemorate the 15th anniversary of the former british colonies of hand over of chinese rule. >> reporter: hong kong celebrates the 15th anniversary of return to chinese rule. the chinese president has arrived in the territory especially for the occasion. he's on a three day visit during which bay ying is widely expected to give hong kong a bunch of market and economy supporting incentives. much of hong kong success is attributed to china since the hand over in 1997 gdp grew 55%, the number of jobs jumped by half a million. the employed population reached a record high. home prices have been rising, last year home prices rose 8% and are expected to jump another 10% this year. coinciding with the anniversary is a changing of the guard and

installation of hong kong's government. leung comes the office as price continue to rise. gdp is the highest in the developed world. higher than that of the united states. leung has vowed to seek change while preserving stability. hong kong markets will be closed on monday to mark the 15th hand over anniversary. back to you. thanks for that. on the eve of the visit to hong kong china plans to build an experimental business. tracey chang has more for us. hey, tracey. >> that's right, kelly. the experimental business zone is a move aimed at internationalizing the r and d

and deepening ties with hong kong. china has been loose enning its tight grip on the yuan since 2005. this financial hub will be built over the next eight years and serve as a experimental dome. beijing has been outsboen its ambition to stab blache financial market on par with new york and london and this project should mark the government's biggest investment so far. the financial center allows eligible companies to enjoy a 15% corporate tax rate and they can issue bonds in hong kong. as an added incentive, hong kong investors can open private international schools and hospitals incorporate shanghai. back to you. >> fascinating. thank you. i want to get some thoughts from our guest host on this. is china going to be able to

successfully establish a new global financial center? >> well i think so. i think if you look at the progress they made in hong kong in the past two to three years no one would have expected the level of usage on trade, on other transactions as well as scale of the bond market, dibs on bond. the global circumstance with the weakness in europe w-the weakness in the u.s. certainly has called for a much more if a acy -- facilitative market. all these are very much paving the ways for the skper internationalization of the rupee. >> as much as individual nations

are reluctant to give up sovereignty and centralized power if europe wants to compete with china and india or brazil or u.s. on the world stage it probably will have to coalesce its power going forward. >> absolutely. i think if you look at a lot of the economies around the world, they do need to gather in groups to remaximizing their strengths. they are trying to gather critical mass. in europe we have a strong germany, but for europe to really compete with the likes of china, with the likes india over the next five to ten years that unity is very much necessary. >> tai, thanks. we'll have more with you in just a bit. china's movie lovers will get their own version of netflix. state-run china movie channel

will launch an online service in the fourth quarter. its studios found it largely impossible to do business in china because of government imposed limits but viacom is on board with the yet unnamed movie service and mgm could be next. >> big market if that takes off. congratulations, iphone. it's your birthday. apple is celebrating, give us the fifth, only fifth anniversary of the game changing iphone. if you can remember the first iphone retailed for $599. remember that. >> yeah. the days of 2007. >> first of its kind to lack a physical keyboard. it's sold 218 million iphones and raked in $150 billion. apple stock up 366%. >> wow. >> blackberries, sorry rimm,

maker of blackberry down 83%. >> i think i'm one of the last sort of surviving owners, i feel like an endangered species with my blackberry. >> i'm going write those down. those stats are worth recording. >> it amazes me it's only been five years. the tablet is only 2 1/2 years old. revolutionary changes in computing in such a short period of time. >> seems like they have been with us forever. >> what do you think about the iphone, blackberry, rimm's future. send us an earn mail at worldwide@cnbc.com or tweet us. reach us directly. here's what's on the agenda in asia. china releases official june manufacturing. that's when australia's mining tax becomes law.

on monday japan will post it's second quarter tankan survey. >> still to come, a little change in atmosphere here as we look at ways to diversify potentially investments. can you pour yourself a fine profit? we'll find out when we come back.

nice change of pace. 2012 has seen key benchmark index. the liv-ex came off record highs that were hit in 2011. what's the outlook now? joining us is peter, chairman. thanks for joining us. why are we seeing this big falloff in price from the highs of last year inis it still going down? >> well, it's an interesting question. we saw great highs, massive highs but looking over five years, the five years we have double digit growth. we believe we're on the bottom of that curve. we believe there will be a 20% increase this year. >> based on what in >> we believe the chinese and the indian market will be significant. we're looking at russia. so there's going to be a lot of

external -- >> wasn't that the reason behind for big jump in prices? >> absolutely. we had two bad years,s, exclusi, i was talking to our man this morning and he said that the 2012 growth is not that good. poor 2011, another poor 2012. we're exceedingly good 2009, 2010. >> that would drive those prices of those years up. >> and 2003 excellent value. >> supply is important but demand side what's happening fwloblly is much more important. wine prices are correlated to the performance of the stock market broadly speaking so you would kind of expect prices to go up and down with the outlook for global growth. >> that's not quite right. we've had growth consistently over the last 30 years so we've outperformed the stock market, outperformed gold, outperformed

silver as an asset class when you look at immediate term assets it's the place to be. >> if you bought into wine say post-financial crisis would you be ahead of the stock market? >> absolutely you would. we're looking at double digit growth every year on average over five years. >> do you have to differentiate. do you go into an index, get exposure or buy the bottles of wine. what do you recommend? >> a lot of tax issues. there's been an independent report on tax. the important thing is to make sure that the providence is maintained. we look after that wine as if it's gold, liquid gold. >> and also regulation. pretty unregulated market. how can investors actually make sure they are dealing with someone that won't rip them off. >> that's a great question. if you look at the market now 1% of the population, investment

population, i believe will get 10% regulation. we are the brokers now to put self-regulation together. i would like to come back on the shine september and launch it. >> i was going to say what's the -- the chinese big buys? they are buying the really brand labels. they say opportunity in the lesser houses that come from the same area in the same years. >> that's a great question. we were looking at growth brands, the chinese, as you know, are really brand conscious and more interesting in the brand when they offer the gifts than what it tastes like and that's leading the market now. >> i think that tells you a lot about the people who are drinking wine. >> peter, thanks very much indeed. chairman of vin-x.

tai, are you aware of this great asian-chinese demand for wine? >> absolutely. look at the auctions we've seen in hong kong and china or asia in general we've seen some very amazing prices being bid on rare cases of wine. not just wine but luxurious goods. there's a huge demand not just from the super rich in asia but the rising middle class for a taste of high life as well. >> tai, let's just talk about that, the rising of the middle class from an investment point of view. is that, whatever happens in china, is that a story which you believe investors can play into sort of the medium turn whether you're investing in jerome luxury carmakers or other european luxury goods? >> i think so. i think if you look at the rise of the middle class not just in

asia but across the world in history, typically they do go in slower trend but very steady trend. in that sense we can talk about the slow down in china's economy for the last six months but what reality is over the next five years we're pretty confident that the level of income as well as the size of the middle class in china will don't grow and likewise for the rest of the region n-da is clearly another huge opportunity from that perspective. indonesia is already a 25 million middle class economy that i think people are not very familiar with. so in that sense there's plenty of opportunities not just in china but across the region where luxurious goods are even more middle class consumer goods certainly will be looking for opportunities in this part of the world. >> okay. tai, thanks very much for that. we hope to see you. have a good weekend. enjoy a nice glass of fine red.

>> that's right. coming up, markets are giving the thumbs up to day one at least of the eu summit, ross. we've seen though gains pulling back a little bit. the question is are there any breakthroughs to support the eurozone or is this just another sticky plaster. you can explain that to me and we'll head back out the brussels for more analysis after the break.

. welcome to "worldwide exchange". i'm kelly evans. >> i'm ross westgate. here's your headlines. >> financials leave european stocks higher as eu leaders reach a deal aimed at easing the sovereign debt crisis. >> uk lenders reach a settlement over misselling of hedge fund. scandal is to spread. >> japan's largest brokerage, two directors will leave and the ceo takes a pay hit. >> and coming on the show, nobel

prize winner josef stiglitz. we'll get his views on europe's plan for a recovery as well as a lot more. >> okay. so if you're just joining us very good morning. a lot has happened at the eu summit and basically it's a case of italy two, germany nil. >> they won on and off the field. >> they won in football and brussels on the summit. >> i was going say the same not true for spain which despite winning at summit saw rafael exit at wimbledon. >> let's remind you what's happened. eu leaders have made something of a break through on measures to save the bloc. 19th summit since the eurozone

crisis began. what's going to happen cash for region permanent bailout fund esm has approved it should be able to use to help recapitalize ailing banks directly without increasing budget deficits. officials indicated any loans used to recapitalize spanish banks will not be given senior debt status and both temp sm and esff will be able to buy the debt of distressed sovereign. italian premier mario monti hailed it. >> translator: countries that would like to take advantage sthafblizing intervention should ask for it. but if they stick to the existing requirements they won't have to be subject to a specific program. they will have to sign a memorandum of understanding and they won't be monitored by a troika commission. >> and leaders also agreed on the creation of a single supervisory bank.

brussels says more concrete proposals will be released. the esm may be able to inject funds into the banking system from january 1st but angela merkel this morning already saying if that have is going happen each injection into each bank would have to be universally approved on a case by case basis. >> as we don't get headlines from that meeting which will don't happen throughout the day the question is whether stocks can maintain their early gains. take a look. dow jones industrials average pointed up 125 points one of the biggest moves we've seen in quite a while. strong gains in the nasdaq and s&p 500 which is poised up 15 points. take a look at the ftse global cnbc 300. here we're up, 1%. we're a little bit off the highs, though and as we take a closer look at european markets some areas have seen a bit of a

pull back. strong gains across the board. ftse up 1.3% in the uk, xetra dax up 2.3%. camelback up 2.3%. and ibex pulling back from 4%, now down under 3. will the relief rally more than 24 hours. >> you made the point it was 3.8% up this morning and so was the italian market. we're pulling away from that. let's show you where we are with bond yields right now. as you might expect rises in yields for germany and uk. before that let's show you the bank reaction. bbva up 5.5%. and the french banks up higher. what about bond yields because at the end of the day if you don't get a sustainable move down in spanish and italian bond yields it will be all for

naught. spanish yields are down lower. that yield a little bit higher, 6.63%. ten year are below the 6% level. ten year substantially higher 1.74%. we'll hear from bank of england in half an hour. they may recommend relaxing capital rules for uk banks. euro/dollar 1.256. got up to 1.2628. dollar/yen steady. aussie dollar up. >> silvia wadhwa has been

following the summit all night. she joins us now from brussels with the latest. silvia, the question is whether angela merkel in order to save face maybe politically at home increase her opposition or hardens her stance with some of these measures as they get hammered out going forward. >> reporter: well, as it always with eu or eurozone designates never quite as simple as it looks at first glance. we have another round of talks here for the eu. we don't quite know what's on the agenda. could be some personality decisions who will head the euro growth. but there's also, of course, still some talk about the long term measures, angela merkel tnt get any results that she can take home. but as we look closer into a, the communique that came out and b, the statements, what mario monti said in the early hours that sound like a victory for the southern european bloc led by italy and france, spain in

that as well, say okay we got the shorter measures, we got the esm to come up with direct put buying, directly recapitalizing the banks, sound pretty much a battle lost for merkel. we heard this morning that it wasn't quite so simple, conditionality still applies as merkel walked into this morning's meeting basically saying okay we won't have a troika like the imf for bailout countries but what we still have is a country will have to be one of the well behaved countries, a commission will have to monitor how the country is doing, then the country can apply to the esm and then the esm can zion a case by case basis. we need the banking supervisor joy body in place and functioning. not quite the easy victory that mario monti was trying to sell us this morning. >> as we follow those developments of course who better to give their thoughts

than josef stiglitz, nobel prize winner. he's here on set. you've done a little bit of writing lately. i think we can show this tone, the price of inequality is the backdrop of your broader thoughts. i want to ask about the european debt crisis in particular here and your initial reactions to the latest news out of the summit. >> it's another positive step but what's characterized europe during the whole crisis is incremental steps, very small, positive market reaction for a day or two days. but until they realize they haven't solved the underlying problem. >> what needs to be done in your view? >> there needs a european wide banking framework. guaranteeing all the banks. as it is now, if you have your money in spanish or one of the other banks, you know that you

could be safer by putting it into a german bank. the government backs the banks. this helps a little bit by saying there's possibly some backing up from europe but only possibly. so there's a real problem of capital flight and this is such a slow mechanism it doesn't solve the problem. >> how much sympathy do you have with the germany position. before we lend our credit card to the rest of europe we need some control over other people's budget, we need some loss of sovereignty. >> the basic logic of that was what led europe into the current problem. they thought when the euro was set up that all you needed to do was to tie people's hands, make sure that they didn't have excessive deficit, and excessive debt. that framework didn't work. spain and ireland have a surplus and yet they are in crisis. so the basic diagnosis of the problem of germany is wrong and

with such a bad diagnosis the prescription is wrong. >> i accept that point. do you have sympathy, though w-the political positioning they are in? >> i understand their difficulty. this is something that should have been done ten years ago. >> they put the cart before the horjs enamelly. >> exactly. now europe is in crisis and are you going to say we're going to work for two or three years to get a regulatory framework or even a year when markets may not give you that time. >> you've heard the comments here. do you agree or do you think that there actually is a reason for markets to buy into the gnaws we've gotten out of the summit so far today? >> i largely agree what's been said so far on the program. it's a significant step in the right direction. certainly more than what many investors were expecting to go into the summit. however we still have big issues

of the size of the financial stability. when we talk about an earn sm banking license, when do spain and italy request financial assistance to drive down the bond yields. these issues will be discussed in the next few face and weeks. >> why then do you think we've seen such a positive reaction here? >> it's a question of positioning and very low expectation going into the meeting. the brokering by many heads of states and officials has been constructive to not expect very much. >> this is going to take a while. in fact you could say this has been taking since 1988 or whatever the committee was meeting and, you know, should market participants adjust to the idea that there's still quite a bit of network done. >> quite a bit of risk. let's talk about what happened last july. last july, greece was in crisis. europe got together.

they said you're not going to get out of this problem through austerity alone, you need a growth package. the country is facing austerity can't grow on their own there needs be a european wide frame work. it's been a year. not anything significant has been done. they are talking about 150 billion zmoo-- >> there's some deal about bailout or relief funds you have to abide by those original in the first place. >> no growth. no growth strategy. so there's a discussion, for instance of $150 billion package. most of that, in fact all but 10 billion is relabelling money that would have been spent anyway. so there's no real stimulus no, way to fill the gap caused by weakening of consumption,

weakening of lending, investment. prospects of europe remain very bleak. >> we were talking to pimco earlier unless you get spanish bonds down 5% we haven't done anything. we haven't and the away from the danger zone. what's the likelihood of that happening? >> first of all they asked for financial assistance and sign an mou. the stigma is not necessary i guess twifs biggest sticking point. but certainly from a debt stability standpoint you need lower yields in italy. but to the point that was made earlier you saw it through the numbers earlier this morning in terms of bank loans and credit to the economy, these are getting down again. so we have a significant great squeeze on and been extremely difficult to grow.

>> what action will we get from the ecb? it may be irrelevant if they cut rates. >> they will cut 25 and we think additional liquidity is due in third quarter with collateral loosening if necessary. >> thanks for that. nice to see you. joseph will stay with us. talking inequality and its impact on the global economy. >> see you in a few minutes. acceler-rental. at a hertz expressrent kiosk, you can rent a car without a reservation... and without a line. now that's a fast car. it's just another way you'll be traveling at the speed of hertz.

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quick check of your headlines this morning. financials lead european stocks higher as eu leaders reach a deal in solving the sovereign debt crisis. >> there's a settlement over the misselling of hedging products. and heads roll while the ceo takes a major pay cut following an insider trading scandal.

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on this very busy friday morning. as we digest the news from eu summit. let's check the markets. still in the green and significantly so across the u.s. although off the highs we've seen earlier. dow jones industrial average implied opening by 109. s&p 50015 points and nasdaq about 28. >> heavyweights on the upside we came off the highs. ibex was up 3.8% now 2.5%. elsewhere 2% on the cac and

ftse. the steam is running out of the bond market rally for peripherals. >> here's the one to watch. italy's ten year now above 6%. ten year in spain 6.65%. not sustainable levels. ten year bund 1.6 and 10 year gilt 1.72%. >> joseph stiglitz is here with us. you talked about the imbalances, i guess, in the eurozone. this book is sort of a deeper look of what's been generated in the last couple of decades. there's substantial difference between the lowest paid and those making riches. what are you surmising? >> actually the scandal that's broken out in the uk illustrates one of the main themes of this book. which is that a lot of inequality, especially the income at the top doesn't come from people really make being the size of the pie bigger or

making our economy work better, it comes from what we call rent seeking, trying to seize a bigger slice of that pie through things that actually make our economy weaker. the kind of scandal that characterized barclays and it involves many of the other banks. really a common practice. and just one example of the kind of practice that is very common actually weakens our economy. so what i try to do in talking the price ever inequality is to argue the way inequality is created today actually is undermining our economy and we're paying a very big price for this. >> there is bizarrely part of the problems we have today is because we try create equality in the american housing market in some sense. if there hadn't been a desire to extend home ownership to those who couldn't afford it -- >> nothing had to do. that was an accusation that was

looked at -- >> i said possible -- >> very small part. financial inquiry into the crisis looked at that accusation. almost unanimously one dissenter said no evidence of that. the basic thingpreying on the p americans. what the government said find a house appropriate to the individual. that doesn't mean lending them beyond their extra stoit pay. many loans went to people who owned their money. treat your house like a piggy bank, take the money out and of course the way they did it left them when the interest rates went up without a home. so that led to people losing their homes. 7 million americans lost their homes. >> i want to ask you about globalization as well because we seem to hear a lot of concern about protectionism.

you're actually a globalization skeptic. do you think that there have beenoutweighing the globalization. >> markets don't exist in a vacuum. globalization doesn't exist in a vacuum. it's how we shape markets. what are the rules of the game? and the way that they've been shaped, the way globalization has been shaped often doesn't work for most individuals. >> what's the most pressing reform needs to happen? >> i think right now the most pressing reform has to go the global financial markets. the global financial markets have been preying on their citizens. let me give you one number. before the crisis 40% of all profits went to the financial sector. now if a financial sector were making our economy grow in a robust way -- >> i've always agreed with the point the problem with the banks

they became the growth story instead of enabling the growth story. >> what they were doing is taking away the risk. >> how do you put the genie back in the bottle? when you talk about financial sector we get poor credit deals. >> you need to reshape the financial sector mean make it go back to provide money for lending. by telling them you can't engaging these kind of speculative activities, by telling them nontransparency gambles on the markets that's not your business. other people can go into that gambling business. >> it took the government and congress to approve it. >> that's right. but they invested. they spent more money on

lobbying campaign contributions -- their investments in politics were the only investments that yielded a return for -- they lost money on a lot of their real financial investments with their political investments really paid out not for the shareholders and bond holders but for the bank managers who had done very well in the last few years. >> just come back to europe here as we leave things as they currently stand, what's your biggest worry for the region for european or for the global financial system in five, ten years time? >> if we continue on the current course the financial system won't be serving the rest of our economy, the economy will be weak. inequality will being a greater, and the key point is that we're paying a very high price for this inequality, we could have lower inequality, more balanced financial system and higher economic growth. but if we allow things to go the way they are we'll have not only

a balanced economy and imbalanced politics with the financial sector really distorting both our economy and our democracy. >> more of the same. joseph stiglitz, thanks very much for joining us. >> a meaty book as well. >> yes. weighty. which is what you expect as well. thanks so much. >> good work out. >> still to come on "worldwide exchange" things are going from bad to worse at blackberry. slumping revenues. delay in next generation of hand sets. what's the outlook >> futures again, 110 points on the dow still. we'll be back. [ 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

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welcome to welcome to "worldwide exchange" this morning. if you're just tuning in i'm kelly evans. >> i'm ross westgate. >> eu leaders reach a deal on the financial crisis. >> four british lenders reach a settlement over misselling of hedge funding products. rbs is reported to be facing a fine. >> heads roll at japan's largest brokerage. two directors will leave and the ceo will take a pay cut. >> blackberry maker research in motion delays the launch of its

next hand set after posting a deeper than expect the loss in the first quarter. how long will the euphoria from the eu summit will last? so far the message seems to be pretty good here. dow jones industrials average pointed higher by 116 points now. nasdaq up about 32. s&p 500 about 15 points as well. but take a look what's happening to stocks across europe. ftse 100 paring their gains. 1.1%. dax under 2%. cac 2%. ibex, still up 2.4%. not near 3% levels.

what's happening across bond markets. let me give you a scene. italy yield is back over 6%. 6.04%. this perhaps the best gauge of all of the action to indicate whether or not we've seen real sort of achievable lasting reform or whether the initial knock on positive reaction on stocks may fade. >> more comps coming out from the new financial policy committee at the bank of england. head by mervin king. new committee responsible for the microregulation of banks. said uk banks should now draw on emergency cash bubbles to boost lending because we now have this emergency liquidity scheme that the bank announce ad couple of weeks ago they can draw on that without necessarily damaging their position. they say they are in a pretty strong position. uk bank exposure is 42 billion. uk bank exposure 169 billion.

the impact of the greek euro exit would be manageable but they are repaegt, the bank of england repeating to restrain the cash dividends and pay to boost their capital and then also be able to draw down those cash buffers as well. what they are effectively saying you don't need as much capital as you're holding in your buffers, we have schemes under way to help you, you need to put that money back in the marketplace. interesting thought there. we got regulators saying you don't need to hold as much money. that's the backdrop from the bank of england amid what's a british banking crisis at the moment. what about investors? we had a number of comments already on cnbc. this is what the experts have been telling us. >> the stocks in a basket have been generating very good returns for us in the beginning the year. so investing in a particular stock we have a diversified

basket of global stocks that can benefit from various parts of the world. >> on the left-hand side of our system, on the buy side, we're seeing the chemical stocks stronger. there's real value opportunities here. >> no matter how often or how much the boj intervenes the asset program has been very effective in giving the yen some competitiveness. we think more will come. that will be a supporting factor for the dollar/yen in the coming year. and another wrench in the works for rimm. the blackberry maker reported worse than expected earns. revenue plunged 43%. the company says it now plans to

slash 5,000 jobs and pushed back the release of its blackberry ten hand-held sets until next year. after hours trading almost 14% for rimm. keep an eye what happens. joining us now from new york is manage director and senior tech analyst at jeffries for more on this story. peter, what if anything can rimm do to stop -- what's effectively become a death spiral. >> very difficult for them to turn this around. the only thing we think they can do is license or form an alliance or partnership. it looks grim. those results were much worse than we expected. >> at what point can people look that for any sort of value or maybe short term play here? do you just advise them to steer clear entirely? >> absolutely steer clear. a lot of these potential loins or options, they are very

difficult to try to put probabilities around it. in fact it's almost impossible. it's not worth it. we rather people stay on the sidelines, lots of better names particularly apple and we would really advise information stay away. >> what's the end game for rimm, pet center >> it's grim. you know, that push out is the workts part of everything we could have imagined. what it does is effectively tells developers we can't execute. tells consumers to look elsewhere. we expect another big cost cut and they might disappear. we expect at some point somebody buys the pieces for salvage value. >> real stickiness for rimm on the enterprise side, a lot of corporate clients prefer it because of the architecture as i've called my own backberry i like typing on the keys. fewer and fewer of those of us

left and it it sounds like companies strategically have to start thinking beyond rimm. >> potentially, yes. we would argue it doesn't necessarily have to think beyond rimm because we expect someone would bit, one. pieces, i imagine microsoft, ibm, cisco all those folks would buy this at salvage value. if you think about it they will burn a fair amount of cash between now and the middle of next year. we think the stock will trade between $5 and $7. maybe then we'll see some sort of bottom. >> what's amazing, five years of the iphone since they launched the iphone, during that time the stock up 360%. rimm stock has declined 83%. it shows you in a short period many time in this sector hour things can change. so no one is invulnerable, i guess. >> no, especially if you have any hubris or arrogance and you

continue tuned shift. the big thing for rimm they had an antiquated browsing system. they were on java. everyone else was on unix. >> thank you. i mentioned some of these comments come being out. on the one hand they are saying be uk bank should join emergency cash to boost lending. then he's saying banks should raise capital. explain that to me kelly, you're smarter than i. they need to draw emergency crash. we got credit. tight credit conditions. could you raise -- i want to draw your cash bufrs and raise capital. >> raise capital. but not seeking permanently high levels of capital. we want to you have a capital buffer for this crisis. if you're banking and confused

by this we don't blame you. there's a lot of nuance we would like to have it three or four different ways. >> they are saying they have 500 billion in buffers. they have significant protection against funding strains. they tripled holdings of highly liquid assets. now 500 billion. which is signifying you have more than enough capital. can you raise more? it's confusing. >> it is. we'll follow that as we continue to speak to them. still to come a win for president obama as his health care bill survives. but what impact will it have on the race for the white house? we'll discuss that after the break. ♪ [ engine turns over ] [ male announcer ] we created the luxury crossover and kept turning the page, this is the next chapter for the rx and lexus. this is the pursuit of perfection.

good morning. welcome to the program. you're watching "worldwide exchange". these are your headlines. . financials lead european stocks higher as eu leaders reach a deal in easing the sovereign debt crisis. >> british lenders are reaching a settlement over another scandal this time interest rate hedging products while rbs now engulfed in the libor scandal. >> research in motion delays the launch of its next phone after a deeper than expected loss in the first quarter.

president obama's health care reform act has been upheld by the u.s. supreme court. five of the nine justice ruled in favor of the bill and backed the core requirement that all americans buy insurance or pay a fine. the president described the ruling as a victory for people across the country but republicans are vowing to push for a repeal of the act. joining us now nor is the senior vp and national practice leader of the health and legal benefits gro group. first to you j.d., what are the practical implications of this ruling? >> well, i think for employers this is a status quo decision. there's going to be a need for guidance from the government on a lot of those issues very quickly. but i think longer term aside from the compliance strategy there's the whole question of

the health care strategy. compliance helps the trains run on time but health care strategy knows where they are going. employers have to know where they are going in trying reduce hearth costs because there are very few employers who are looking to the government bail them out of the rising health care costs that they are dealing with and they've take that on themselves and they are going to be doing that. >> boris, what do you make of the ruling? >> the ruling is actually, could be a net positive for republicans in november because it takes the decision out of the hands of the supreme court which is just nine people and puts it in the hands of the voters. only 34% of american voters approve of obamacare as of now. even less approve of the individual mandate which was by the way struck down by the supreme court. barack obama was out there celebrating but in effect his signature piece of legislation was struck down as it was and ruled constitutional only as a tax. good luck running on that. hey i pass ad bigger tax for everybody. isn't that great?

doesn't play in american politics. >> boris, what's the likelihood, on the one hand now as we've heard the economy will have to start preparing for this to be law. but we have an election coming up. what's the chance if we get a republican sweep i want gets overturned. >> what you need republican mitt romney become president, for republicans to keep house to and then to actually overturn, to filibuster-proof majority in the senate meaning 60. tough to do. if republicans get over 51 in the senate simple majority they could close off funding for bill effectively overturning it and choking ift. is there likelihood? yes. the presidential election is looking very tight and mitt romney will come out ahead and in the senate it's a close game. >> j.d., that just confuses the picture slightly again. if you're an employer an employee in this climate what do you do for the next few months? you just have to pretend it's going to happen and start

implementing it. >> i don't think you even have to pretend it will happen. employers have been implementing pieces of this legislation for the last couple of years and will continue implementation in the short term. longer term you have to look at cost reduction strategies. there's a lot of ideas in the affordable care act but supposed to be implemented over five, six, seven and ten years. employers don't have ten years to get their health care costs under control. they have the next year, sometimes the next quarter. they have to deal with these rising health care costs now and not looking to washington, d.c. to help them do that. they are taking matters into their own hands and looking at cost reduction strategies such as, for example, not exiting from health care but looking to do a more deep dive into investing in their employees productivity. programs to manage chronic conditions. employers need a healthy and productive workforce in order to

succeed and i think that's the direction a lot of employers will be going over the next couple of years no matter who wins in november. >> what does that mean for the health care industry. who benefits or stands to lose from these changes? >> well, i think in terms of wins and winners and losers, i think that will have to -- we're going have to look at that over a period of time. certainly from the standpoint of, you know, the whole question of cost versus question which is part of the policy under the affordable care act, one interesting thing that came out of yesterday's decision was medicaid expansion. most of the uninsured that are supposed to get insurance not most of them half of them are supposed to come in through an expansion of medicaid and basically under the decision yesterday medicaid expansion was made optional. states don't have time pleament these medicaid expansions if they don't want to. we'll have to look at how that plays out over time in terms of

this whole question of coverage versus cost which employers are concerned about. >> boris? >> exactly what j.d. is saying. it should be health care providers, should be employers, should be individuals and states taking care of this issue. this is not a fed issue right now. obamacare is an example of what american voters are rebelling against. that's what started the two party movement. that's what brought in 2010 republicans to control house to. that's what will bring republicans to the white house in 2012. obama will lose the war because of this supreme court ruling. also look at the ruling itself, chief justice john roberts most likely twent way he did because he wants to keep the respect for the supreme court way up there. he's a scholar of the supreme court, a student of history. if he voted along party lines, people that were nominated by republican president that would

have put down the supreme court in some people's views. most likely the reason to be struck down the mandate but struck down in the taxation clause to keep up the appearance. >> thanks very much. just back to the markets. european banks have been the best performing sector. not quite at session highs but up between 3% and 5:00% across the board. more comments out this morning. the reason the banks are rallying because there's this plan for temp sm to direct capital into bank systems that are failing. angela merkel has come out and tried to clarify and said each and every injection is going to have to be unanimously approved and there's a spokesman out of the german parliament saying the german parliament must approve

that direct aid from the esm. we're getting a sense. also that would probably be up and running the target date was january 1st next year. >> coming up. merkel and monti will be meeting in italy next monday. market appear to be liking the eu summit results so far but will the rally hold as we get into trading day on wall street. more on that and more from brussels next. what makes the sleep number store different? you walk into a conventional mattress store, it's really not about you. they say, "well, if you wanted a firm bed you can lie on one of those. we provide the exact individualization that your body needs. wow, that feels really good!

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okay. so rallying on the fact that esm will put money into the banks and buy debt in sovereign nations and there will be no down playing seniority when they put money into spanish banks.

silvia is in brussels. how do we get from what's been announced toni of this stuff being implemented? >> reporter: well it's really funny. sort of a little bit like saying you know what both germany and italy won the semi-finals. how can that work? this morning we thought that certainly italy won the semi-finals or whatever you might call it here in this euro 2012, and as we head into london hang on a minute maybe it's not quite like that. what have we got? the esm, banks can be recapitalized directly by temp sm once we get the banking supervisory body on board and working. we need some kind of compliance to go down to each country that apply from temp sm and than case by case decision and we have the german parliament digging in and saying we have a parliamentary decision. on the seniority issue it's very clear, yes, there will be no

seniority for esm or esff not so simple only funds transferred from the esff to the esm won't have seniority status everything that comes direct from the esm will remain. so there's more and more question marks as we head into the lunch time. we might end up germany and italy being winners of the semi-finals maybe both losers. >> maybe they are. silvia thanks very much for that. let's get some thoughts from michael who joins us now. michael this relief rally dourks buy into it? will we see it lasting more than 24 hours? >> that's a very good question for the same reasons i'm not surprised of the magnitude of every asset class here in futures land across the board, metals, energy, everything up dramatically at least up over 1%. i won't be tapered in by this

buying scenario as we see it but it will be a success by the end of the day if half these gains are pared because it's a heck of a move. one thing you need to note, month end and end of the second quarter. a lot on the board here and a lot of positions are being saved by this move. if there's follow through watch the metals and watch treasuries. >> the question s-michael, the extent of the short fallout because we've seen italian yields perk up back through 6%. how long do you think this will last? >> about as long as an aspirin would, ross. i don't think it will be that long. that really near term focus traders, anything on the short term will invite this. if you're flat you'll invite this rally with two hands and look at another position to get shorter on the longer term because of the framework fundamentally of what just went through and now the markets

digestion of that. what happened here people have asked me about the treasury markets, the equities, but i think bond yields here in the u.s. still on the longer term basis especially in the ten year. people will continue to focus at 1.5% and then through that i think what will happen you'll see the tail on how treasuries retook this midday and what will happen, instead of the usual asset allocation you'll see more buying in treasury, expecting more politicians to get involved and start to decipher this. as we start to antiequate this out into the different countries you'll see how they do not mesh and that becomes the framework of where the dollar trades. that rally will continue on the u.s. side. >> michael, thank you. >> we'll keep an eye four on all of the developments throughout the day. we'll be back with you on monday. >> "squawk box" continues the story. >> have a great weekend.

>> when it starts.

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good friday morning the global markets surging on a very big european break through. the eu leaders agreeing to use permanent bailout fund to recapitalize struggling banks. stocks are rallying. italian/spanish government bond yields are falling sharply. will it work? the supreme court decision, businesses, individuals, investors still trying to understand what the high court said about the health care overhaul and what it means. we'll break it down. of course we have a flury of corporate news on friday including a $20 billion beer deal and more trouble at blackberry maker research in motion. it's a biggy, it's friday, june 29, 2012. the last day of the quarter.