welcome to "worldwide exchange." these are your headlines from around the world. spanish prime minister unveils pressure under spending cuts as the country admits the second deepest recession in history. >> australia cautions against becoming a one trick pony economy. futures trading industry reeling as pfg collapses amid accusations it forged records to hide millions admitting customers fraud for years.

barely start the show and breaking news rolling out from spain, so plenty of that coming up later on. >> perhaps the most interesting is how investors will react to this prospect subordinated debt will be written down. that sounds complex but it's an interesting element of this whole thing. we'll keep an eye on spanish, italian bond yields because we have mario monti talking about, we might need help, too. >> we'll keep checking on bonds as we go through the show because unsustainable levels. plenty coming up as we move throughout the next couple of hours. we're pleased you've come to yoin us to run through this journey we are about to embark upon. i'm getting a bit overexcited. still to come on today's show, as i try to calm down a little bit, we'll be speaking to senior strategist between the relationship between australia and china and what it means for the aussie/dollar, what he think

investors should expect in terms of further losses. we'll preview the interest rate decision due in brazil as policy makers are expected to slash rates there to a record low. indonesia is only one of the rapidly growing markets that one of our upcoming guests says will be the engines of global growth next year. find out which other countries she says fit the bill at 10:45 cet. 11:35, 5:30 a.m. eastern, we'll head out to dallas to find out one why money manager is telling investors to look at distressed assets in u.s. as opposed to europe snooze the spanish prime minister has unveiled further austerity measures after warning growth will be close to zero in 2013. rajoy says madrid's external net debt is reaching 100% of gdp and administration will have to raise taxes to cut costs.

we've traveled down to madrid, tracking what's going on now and just in the past few minutes we've had plenty of headlines crossing from that speech which we're watching live in madrid. what's the latest? >> reporter: plenty of announcements, indeed. more austerity for spanish government to reach target for 2012 and also fort next couple years. the government wants to save 65 billion euros over the next two years. this multiyear plan was requested by european union in exchange for the european banking bailouts. among measures that have been announced, first of all, the v. v.a.t. rates will increase to 21%. it was widely expected. the government has decided to raise taxes on tobacco, energy.

it's going to eliminate property tax breaks. it also is going to reduce some welfare spending, such as unemployment benefits. new claimants will have lower unemployment benefits. it's been announced a few minutes ago by spanish prime minister before the parliament. some category of people like civil servant, public workers, have been targeted by new measures. some bonuses will be removed, for instance, christmas bonuses like it was the case before. we were expecting some massive measures. it's been announced right now by the spanish prime minister who's speaking before the spanish congress, this is just hitting the wires and having a look if more announcements are coming. rajoy explained they need to

long-term measures in order to reduce structural deficit. plenty of announcement coming from madrid this morning. >> thank you for that. it amazes me anyone got a christmas bonus in spain. that tells a story, doesn't it? >> yes, it does. still a lot of labor laws that need to be reformed. spanish banks look to be facing tough conditions. press reports suggest savings banks will have to sell controlling stakes on the open markets. meanwhile, online edition of el mondo claims bank valncio as a bad bank. >> joining is patrick armstrong, managing patrick at armstrong partners. right off the bat, headlines out

of spain, how do they change the way the way investors will react? >> i think this may be a precursor in the way of some funding that spain has to act, cutting costs and that makes germany look like they're achieving their goal. >> if you think about what they're doing, they're basically committing themselves to further recession and the hope that perhaps maybe it will be bad enough or seem severe enough they'll get aid. >> and i think spain actually could manage without aid for its banks if it had unequivocal support if they needed support, and push spanish yields down, but you would have to provide that unequivocal support. you need the financial oversight where it's an eu member controlling all of that, fiscal integration to germany feels comfortable. that's where it's got to get to.

crisis is needed to make sure everyone is motivated to get to the end game. >> how low do they need to come for markets to be convinced we are beyond that tipping point and things are looking a bit better? >> anything -- i think spain -- you have to get spain down to 4% to be viable. you need germany at 2%. spain at 4%. that's a pretty big spread in a normal environment. if you get to something like that, that's where there's some perception that spain isn't about to collapse. anything above 6%, 7%, people are worried about the imminent collapse of the eurozone and spanish economy. >> when i was in spain recently covering this crisis for cnbc, things people were expressing to me in family lives is unemployment, youth unemployment over 50% at the moment and yesterday the oecd coming out and saying the focus on austerity was increasing inappropriate because it was hurting the long-term viability

of economies, i.e., become people bad at doing jobs. at what stage is spain, do you think, when you consider just how many young people have never had jobs in this country? >> i think the steps taken today or the statements today will lead to something where you do get to the end game. spain has to save face to countries lending to it. we don't believe the eurozone is going to fall apart. we do believe you'll get to that solution eventually but it will come in the form where ecb will start to get involved. once they see governments have a road map to the solution, ecb can get much more proactive, do the quantitative easing. you need the euro, and strong euro. >> it will take a crisis to get us there but at the same time it

would have been easier to harmonize what's happening across europe before things got so imbalanced within the euro bloc. patrick armstrong will stay with us for the rest of the hour. moving on, italian prime minister mario monti says it would be hazardous to say italy will never tap the european rescue fund. heed the country was not in need of a greek-style bailout. he said it may have to turn to the bond support mechanism to bring down the country's borrowing costs. pretty extraordinary there. no surprise in response italian ten-year yields are hovering near 6%. what's interesting is they're not faring worse this morning. we'll have to keep an eye on whether investors largely have priced this in. >> we'll definitely keep across that metricing at equity markets. it declines so across the region we're below by many half of 1%.

looking across the region in a bit more detail, this is what's happening with each individual. ftse 100 down by 0.5%. cac down almost 1%. and markets have ticked higher, adding two points now so bucking trend but pairly. some other individual movers. in terms of individual equity, big movers to the downside in the form of britvic, a uk drink company, they've had props with fruit juice, the caps on their fruit juice drinks and turning into a major recall. this is having a bigger impact than they expected on earnings saying this could cut 25 million pounds from profits, restocking their clients. turning into a headache.

25 million pounds because of the caps on this specific product aren't working. over 5% lower for burberry. they have had a good run up. quarter sales growth slowed lightly. some caution around for key markets, the chinese market in the run up tarlly to the gdp data on friday. barratt development, is a uk home builder. i highlight it because they were upbeat about the outlook for uk property they see a period of stabilization in the uk property markets. they could see a decent upside in earnings for the full year as a result of that. usually upbeat prospects as far as they're concerned for uk home builders. now, the euro had suffered because -- i guess it was

perceived as a lack of some big resolution from the eu finance ministers meeting we did begin to see elements of resolution around spain. now shifting higher but close to two-year lows. dollar/yen is at 79.30. aussie/dollar moving up 1.0232. and the euro against sterling at 0.7892. we're keeping a close eye on what's going on on in the bond markets, particularly the yeeies in spain. very low in germany. which we've become accustomed to. the spanish ten-year, we have been over 7% end of last week and this week, currently at 6.8% as we get those announcements coming out as we speak from

spain, mario rajoy announced another eight points on v.a.t. a raft of measures coming out italy, 5.9% so below 6% although the leader in italy said they won't rule out tapping bailout funds. here in the uk, 1.57% is the yield on the uk ten-year government debt. let's move to markets across asia. we do see a mixed day of traud. 0.5% higher for shanghai composite. declines the margin across india, declines to -- small declines for kospi and nikkei. let's get the latest from tracey chang. asian markets showed mixed

picture as chinese economy weighs on sentiment. they reverse earlier losses to end in positive territory. a warning from china southern airlines added to concerns about tailspining corporate earnings. shanghai composite as turnover remained thin ahead of the release this friday. nikkei slipped to a two-week low as strong yen hurt exporters. boj starting a meeting and they expect them to stand pat after that review last week. south korea's kospi stangd unremarkably lower last week. australian shares on flat. lastly, ibtd yeah sensex showing

weakness, ofl 0.6% as well. amazon may be getting into the smartphone market. they are working with asian suppliers to test a device which makes us ask, would you be interested? does the marketplace really need another smartphone? clearly hardware is the place to be, at least amazon and google are betting on that. if you want to join the conversation on "worldwide exchange," you know how, get in touch by e-mail worldwi worldwide @krns.com. they tell us why libor scandal isn't koopg us up at night. [ male announcer ] this is the at&t network. in here, every powerful collaboration is backed by an equally powerful and secure cloud.

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major major shareholders in barclays reportedly calling on the bank to hire external chairman to salvage its reputation. financial times reports three top investors say an internal candidate will be unacceptable. barclays deputy chairman tipped to take over.

shares in the entity in broker dropped to lowest level in more than two years after authorities imposed a fine on barclays for fixing the rate. icap customers include the 18 banks that set libor. patrick joining us. how does this impact your views of uk banks and banks involved in this as -- we've seen barclays at the center of this, selling off sharply. is there an opportunity there? >> well, it's not -- didn't get as far as buying it for us but we did get to the point where we still put options on it so that's reflecting a view if it goes down further we're happy to own it and getting paid a nice premium for those put options because volatility is re high. book value is not real, at a discount, trading on six times

earning. a stock depressed for good reason. our view is we don't think there's massive upside from here. if it sells off much further we're happy to own it and getting paid a nice premium for puts. >> it seems people were taken by surprise by how quickly barclays lost the ceo, coo, soon-to-be chairman. does that change your view on the company or the revelations about libor and themselves are changing the picture? >> it's a negative, the management change, actually. i would have preferred he stayed. it's one man doesn't control barclays. it's such a big -- it's a conglomerate of multinational and one man isn't going to change the direction. i think he managed it very well. the libor scandal is something barclays was a part of, so was every uk bank. that's not how the real material impact on our view. it's the big selloff that's

what's attracted us to it. >> long jpmorgan, i guess for similar reasons? >> it's almost identical reasons. jpmorgan were a little more bullish. we sold put options again but used that to finance call options. we've got a derivative strategy. when volatilities are high on these stocks you can put on much more elegance adjusted return trades by selling put options because buy call is very high on them and financing call options so it means if every day passes and nothing changes, you get paid. >> the poor retail guy saying long -- >> it means time. as time gets paid -- if nothing happens, you get paid. >> that's a nice option. >> we'll do a walk-through for those who want to understand these but it reflects fundamentally a change, so stay with us if you can. in the meantime, the libor

scandal causing regulators around the world to take a closer look at their own banking systems. australian treasurer was asked about his country's banks earlier on cnbc. >> i have not been afflicted with the lending problems that caused the libor problems. our banking system compared to the banking systems elsewhere is very healthy. i think it really at the end of the day comes down to good regulation. we've had pretty good regulation. >> swan was in hong kong to promote closer currency and financial times. canberra and china are working to make the aussie converted directly to the yen. >> i'm here to continue the dialogue. it's not just about convertibility. i mean, it's about how we deepen our financial links. it's how we deepen our economic

links and at the end of the day our cultural links. >> joining us, senior strategist, jonathan. how significant are these moves or talks at least? >> well, i think it's very important part of the internationalization of the rmb. i mean, we've obviously seen a few other centers open up outside of hong kong. from australia's perspective it makes sense to have convertibility between australian dollar and rmb. 30% of our exports last year went to china. just under 70% of our imports came from china. from that perspective it makes sense. from the chinese perspective it also makes sense. you know, they're looking to slowly move towards internationalization. this is another step along that process. i don't think australia will be the last center on this long journey they're embarking on. >> is this more of a symbolic change right now or a real

game-changer versus a nondeliverable you could have put on in the past? >> well, i think it's getting closer towards being a real game-changer. in recent times we've also seen china moving towards steps towards opening or converting -- being able to convert capital account as well. one region will be able to do that, or that's certainly slated to do that. we've seen more reforms on interest rate as well, seen some interest rate cuts is lowering bank margins, et cetera, and banks have more flexibility to offer deeper discounts towards customers in china as well. while we certainly seems as if the reform process is stepping up, is it -- is the yuan fully convertible in six months? no. but closer than we were a few years ago. >> jonathan, you're looking at the fmoc minutes as well today. what impact are you expecting on the markets and what you believe you'll get from those minutes?

>> well, i guess all of the market focus at the moment is on -- the u.s. a step closer closer to further stimulus from the perspective of quantitative easing. we had disappointing payroll number last friday. that might be captured in the minutes. certainly the market will be keenly focused on what degree or how close the u.s. fed is to fresh stimulus. some fmoc members have been hinting at that. we're perhaps not here right now, but certainly we think we're going down the path of quantitative easing in the next few months. tonight fmoc minutes will be watched closely from that perspective but next tuesday bernanke will be testifying, so the market is looking for a circuit breaker for the risk aversion we're in at the moment. >> if the fed either in the minutes or bernanke's testimony

next week succeeds, how do you expect that to affect the aussie/dollar? in other words, currencies. >> it should be viewed as a positive. i think that view is already priced into those currencies. i guess it depends on the degree of the stimulus in terms of how far we start to see risk currencies rally. we've already seen asian currencies, the aussie/dollar, bounce quite significantly. we would expect it to give us support. really i think the market's going to be looking for a turnaround in global data moment momentum. we had weaker data out of china. earlier this week poor u.s. jobs growth numbers. this policy stimulus has to be combined with the view that the global economy is finding a -- finding a trough point. if we're not there yet then i think risk currencies could weaken further in the third quarter even if the market

believes quantitative easing is coming. >> thanks for your thoughts there. . chairman of the italian banking association who is speaking this morning here in europe. at the annual assembly of the so-called adi, talking about the state of the italian banking industry and saying that europe must help italy so that europe must italy. this comes after we'd had comments coming out from the head -- mario monti, and then comments from the head of the italian bank association that he believes it's time for europe to offer side guarantees, as he put it, saying italy itself must push on with domestic reforms but europe must step in to assure the process with solid guarantees. also defending the behavior of italian banks in what is the

country's second recession in four years. so, they have been boosting credit flows to the real economy faster than the eurozone as a whole have been doing. >> he love he says, by the way, eurozone offered solidarity to germany back in 2003, saying time to step up and help us now. extraordinary. still to come on the program, brazil is expected to slash rates to a record low later. but can the central bank continue to prop up struggling real? more on that next.

welcome back welcome back to the show. thanks for sticking us with on "worldwide exchange." the spanish prime minister, rajoy announcing a raft of tax hike as he aims to lower the country's deficit including a 3% rise in v.a.t. australia's treasurer heads to china to promote currency ties but cautions against becoming a one-trick pony economy. >> over one country or one commodity. more generally as a matter of macro economic policy and management and sustainability in the economy which is why the government has a far broader

agenda. futures reeling as brokage energy collapses amid accusations is forced records to hide millions in customer funds for years. european equity markets look like this. we are looking at a declining day for many of the european indexes. exception is spain where as we mentioned in the headlines, we've had a raft of measures coming out from that country as mario rajoy has been speaking in the past few minutes. up by 0.2% but declines for ftse 100, 0.3% and same for dax, and cac trading down by 0.8%. >> bond markets saw major action yesterday. quieter today despite more worrisome headlines. ten-year in spain is 6.8%. the ten-year in italy is at

5.9%. both of those below those key levels they were testing earlier. german bund, ten-year is at 3.2%. we'll keep an eye out for auctions on ten-year bunds in a little bits. and gilt 1.57%. >> euro/dollar has been languishing near couple year lows. coming off those levels, 1.2263, still depressed. closer to 1.2230 in the past hours. we did have some lingering concerns still the eu finance ministers meeting didn't get to the bottom of things. that's a topic that seems to come up regularly. euro/sterling, steady at 0.7894. the aussie is dollar moving up against the u.s. dollar, 1.0236

is where we stand. >> as we look, perhaps, at what's happening with oil prices. they say production has restarted at platforms in norway where they were previously concerned about a strike. the field center in oseberg is expected to start production before this weekend and east platforms will restart following the center platform, happening as soon as this weekend, and providing relief to oil prices we had seen in brent a little bit back up on those supply concerns. china's premier says beijing needs to open up purse strings to give the economy a lift and tracey with a bit more on this story. >> that's right. chinese premier says china should concentrate on promoting investments as a means to counter slowing growth. he says china needs to make spending on things like railway, public utilities, energy and

education priority number one. the comments were published in state-run newspapers says beijing may be pushing growth over long-term structural reforms. wen says they should concentrate on efficiency promoting regular people and they'll continue with tax reforms, value-added tax reforms, and lowering tax burdens on small size companies. the comments followed dismal data release and ahead of q2 figures. economists are expecting growth to slow to lowest level since 2009 april to june period. consensus is for growth to hit 7.6% from year ago figures. joining us -- still with us i should say is patrick armstrong, managing partner of armstrong investment management. patrick, let's talk a little bit about the chinese economy, the slowdown there.

how significant potentially it is for your world view. >> well, china's growth is slowing a little bit. targeting 7.5% for this year. i think it will come in around 8%. you're going to see a pick up in investment in the second half, i believe. i think they'll be announcing that fairly shortly. we also think there is a continuing rebalancing of the economy where you are going to see a trend of increased domestic consumption, which is much needed. you need a move from fixed capital toward domestic consumption. you have a high savings rate as long as the government does pro stimulus, pro economic policies, i think the consumer will continue to spend and increase spend. >> plays you like given that? >> luxury good, pick up companies like louis vuitton, swatch with weaker sympathy with burberry. >> doesn't that send a warning

sign? >> it's more product-specific, i think. i think we'll see strong results out of the other companies. we're getting no indication they're worried about what they're seeing in terms of sales. >> i think about even a tiffany a quarter or two ago -- >> similar to burberry. >> it's a product problem and not -- that's interesting. >> i think so. tiffany relies on a lot of people within europe more than louis vuitton does. they sell a lot of products to chinese in europe visiting the country. >> interesting. first, market watchers are hoping the latest f1c minutes. they continued the program until the end of the moment but some believe the central bank after last week's disappointing jobs data. policy makers in brazil widely expected to slash interest rates to a record low 8% when the central bank meets

later. the 50 basis point cut will be the eighth consecutive cut since last august. the brazilian real diminished quite a bit against the dollar in recent months as we can see from the six-month chart, leading the central bank to intervene in currency markets to provide support. joining us is director of global macro strategy at citi. what are you expecting today from the central bank there? >> we're also expecting 50 to 8% but we believe all eyes will be on the policy statement to see whether it leaves room for further rate cuts. we think it will. and very much in line with what the local futures market is pricing in at the moment which is 7.25 by the end of this year so continued easing from brazil until november/december this year. >> just explain to us how this is feeding through into the real economy. these cuts are coming thick and fast, aren't they?

for any viewers who watch rate cuts in the rest of the world and the commentary that comes out from various central banks is they have to wait to see how it feeds through and take a cautious, conservative view of what the impact is. doesn't seem to be the case with brazil. >> sure. i think there are two points here. the first is that monetary policy tends to feed through to brazilian re-electtivity with shorter lag than elsewhere because of the shorter maturity of domestic credit because of previous financial crises and so on. central bank says this time lag is six to nine months. i think the second point that is quite key is that i think brazil definitely needs a lower rate. both current growth and future growth expectations have been slashed really across the board. so, i think there are two parts here we need to think about. >> it's patrick here in london. wondering if you can comment on brazil central bank.

they've been intervening in markets recently to basically stop brazilian real weakening, with them cutting rates most likely. do they have a specific target for real? wouldn't they prefer a weaker currency given economic growth will fall below 2% this year? >> look, i think with all due respect, i think brazil central bank and policy towards the real has been quite conflicted. we've seen the central bank intervene in opposite directions around the same levels. i think a weak real poses a challenge, actually, for further interest rate cuts from brazil. quite simply, when you look at a chart of dollar/brazil facing expectations which is what matters for monetary policy, expectations are sensitive to what happens with dollarbrl. it needs to come down and the central bank has drawn a line in the sand to ten which markets

permitting they'll try to stick to -- and open up the markets. >> dollar/bril, i love the lingo in currency markets. what's your view on what we say by year end and we see how important this is for corporate earnings? >> i think in general we expect the dollar to be strong in the current environment. the u.s. looks a whole lot better than most of the world. equally, as i eluded to with brazilian real, some currencies have completely overshot any fundamental. when you look at dollar brazil in terms of trade or any other real indicator where this currency should be, it's completely blown out. in some we expect the dollar to be weaker versus brazilian real as dollar strengthens in the uncertainty global environment. >> that will are some u.s.

companies weeping. maya bhandari at citi. i'm in -- we can add this to the long things i'm mispronouncing but one is canberra, which as chris points out in an e-mail is pronounced canberra. so farnbro, canberra -- >> quite saying worcestershire. >> you know how it works. other topics. recent slowdown in emerging markets, especially those in africa and asia will bounce back according to ernst & young. joining us now is alexis, co-leader of the emerging markets at ernst & young.

lots of investors have been looking to new, higher growth markets to kind of shield themselves from what's going on in the rest of the world. the obvious question is, where is best shielded from the ways of the developed world? >> without being rosy, we have to say we're optimistic for zones we concern as rapid growth market. we consider emerging markets is probably too wide concept. more countries than the brix. we cover 25 markets. i would say all 25 are of importance because we expect growth, primarily to be fair n emerging asia, but also africa is getting interest, latina america and middle east may be

of interest. >> you mention those regions. we've heard about emerging markets, frontier markets. what in your view are the strongest individual places where we're seeing opportunity? >> china, india remain very strong markets because of the size and the scale of the middle class. i have to say for most companies around the world, the interesting part is the explosi explosion, expansion of middle class. because of the demography, china and india remain important. but indonesia is getting more traction. we expect for 2012 higher growth in indonesia than india. indonesia is 240 million in that country. in terms of domestic demand potentially there's a real market there. >> lots of guests on cnbc are cautious about india, and obviously the demographics are favorable and yet they have a lot of problems in terms of reform and reform agenda being strangled by a lack of movement in that country. when you consider 25 of these

high growth countries you mentioned, india should be best avoided surely? >> india is a continent so as usual we need regions, some cities. it's true in the short term we're more cautious, more prudent for indian growth. for example we're expecting 5.7% growth for india in 2012 in terms of gdp growth. lower than we expected before. the reason being, as you said, current reform which is hard and a lot of companies are facing difficulties in a country like india. >> what i wonder when we talk about indonesia, for example, we're talking about a muslim country. as more parts of the world are muslim or not traditionally the way that same demographics as western nations, how easy is it for companies to look for opportunity, expand, invest? >> regardless of religion, all countries we qualify as rapid growth markets, they are difficult markets, riskier than what we know in the western world, western europe or north america. the return can be there. as long as you have a population base eager to buy, eager to

partake goods from the rest of the world, they represent interesting markets. it's not a question of religion or continent. it's riskier business but also potentially a source of better return. >> thank you very much for joining us. interesting stuff. 25 of the rapid growth markets we should be looking at. let's move on and take a look at rest of asia. political shakeup in japan. we have the latest live from tokyo. >> reporter: defect tors from rules democratic party of japan are getting ready to launch a new party in a kickoff meeting starting in 15 minutes, they will leave no doubt they oppose notic noda's consumption tax increase. and call for ending japan's reliance on nuclear power and

giving greater sov rans to local governments. ozawa will lead the new party starting on of with 50 members. regardless of the rebellion, the tax bill hike is expected to be passed by parliament in august with support from major opposition parties. the move will make noda's government more vulnerable to an earlier election and make it difficult for one party to form a majority alone. back over to you. >> thank you very much for that. still to come on the program, we'll find out why markets are expecting robust earnings, results from india as top banks. not just the u.s. that has earning season. much more next.

let's give you a look at agenda in asia. central bank watch. india as tech giants emphasis in tcs results. we'll be joined on "worldwide exchange" for first on cnbc interviews. something to look forward to. earning season in india and top banks expected to post strong profits. we're joined with a preview live from mumbai.

>> thanks. indian banks are expected to show good numbers. the low base effect of last quarter will have very strong number. on an individual basis, particularly go like state bank of india, largest bank in q1 on the back of very high provisioning, with new management stepped in to clean up operations and asset quality so earning basis expecting a strong set of numbers. they started the clean-up process a long time back once again started focusing on increasing its balance sheet with respect to lending to retail. we're expecting very strong set of numbers. one we're watching will be hdfc limited, very stable and consistent in performance. every quarter if you watch performance net interest by 30%,

similar so to what they're expecting this urt quarter as well while net profit is expected to grow by 18%. the spreads are expected to be consistent, above the 2% mark while margins will come in at that 4.2%, 4.3% as it has for many past quarters. in general for the entire banking, particularly led by low base effect of last quarter numbers, are expected to look good and might see improvement in net interest margin. all that is likely to result in these banks reporting good set of numbers. the only point of worry perhaps could be in terms of the asset quality and and restructure books because fear restructuring of assets might show up in quarter by quarter basis as they have finished systemwide recognition. it may not appear as drastic increase or it might be flat. restructured assets is something

you need to watch for. good set of numbers from the banking space. >> reema, thank you for that. german tax authorities have raided the home of credit suisse clients, according to a german newspaper. they're chasing billions of euros from 7,000 german clients who bought insurance products issued by bermuda based credit suisse life but the swiss bank said they thought it was exempt from pros kugs because it struck a deal with german authorities last year that ended an investigation into the bank. hsbc reportedly apologized for lax anti-laundering controls at senate hearing next tuesday. according to internal memo reviewed by dow jones, the company will say sorry for not having stronger regulations and failing to deal with, quote, unacceptable behavior. they have doubled spending on compliance since 2010. unicredit is slimming down, they announced plans to have a

more regional based structure for small clients while large clients will be continued to be serviced by the cross-border corporate and investment banking decision. the ceo said they were complaining about the slow and complex structure. >> what is strength of credit has been geographical so this is helping in crisis italy is helping more than other countries. we keep moderate activities and looking forward. let's get final thoughts from our guest host patrick arm tro arm trong. you like high-yielding stocks. it caught my attention on the "squawk europe" program earlier. a guest discussed them as a bubble saying in '08 they collapsed more than the rest of the markets so be very weary now.

>> we're attracted to sectors with low cash flow and paying high dividend yield. big large cap pharmaceuticals giving big premium with respect to government bonds -- >> you like them for -- >> we like them for yield and stable cash flows. >> and less cyclical because being a pharmaceutical company -- >> definitely. you can outsource cash flow for these companies and even if you don't put any blockbusters in no one is expecting -- if you do get one, there's an upside but if you don't you get higher dividend than government bond. in america we like at&t and verizon, bc in canada, stable cash flows, high dividend. >> what about valuation? i'm sure you're not the only one who likes these companies. >> we're not the only one who likes them. they are a bit expensive in a normal environment because you're getting a pretty dull earnings growth from them. when when you look at bond yields at 1.5%, these are

attractive versus bonds. they're not high fliers but stable sources of income. that are giving real returns above inflation. the yields are higher than inflation where bonds are significantly less than inflation. >> i heard business stocks as well. give us those names. >> that's long-term growth industry and every time multi e multiples gets down we turn to pick them up. you've seen corn prices, soybean prices spiking. the long-term supply -- demand fund mea fundamentals are increasing. >> doesn't at the same time it become a tax on sort of growth in those countries when an increasing share of income has to go to the cost of some of these products? >> well, the companies we're buying are more on the cost that improve sufficiency of producing corn, so higher yield per acre, companies with better pesticides, things like that, that's not -- won't necessarily push up the cost of corn but

when corn prices are higher, farmers have more disposable money to spend on it because they get a higher bang for their buck for investment for it. it's not a direct translation and i see your point but these companies can improve yield per acre that makes agricultural commodities affordable. >> we appreciate those thoughts and all you shared with us. thanks for coming by. and still to come on the show, we'll speak to a distressed asset expert who says there's money to be made in the u.s. middle market.

welcome back welcome back to "worldwide exchange" this morning. i'm kelly evans. >> these are your headlines from around the world. spanish prime minister rajoy unveils spending cuts with the country amid second deepest recession in history. australia treasurer heads to china to promote currency ties but cautions against becoming a one trick pony economy. >> australia shouldn't dependent on one country or one currency. as a matter of macro economic and sustainability economy which is why the government has a far broader agenda. brokerage firm bsj amid

accusations is hid client funds for years. welcome to the program this morning with a hello to u.s. viewers who may just be waking up and tuning in. we have green behind me this morning as we take a look at how the u.s. market is set up for the open. pointed higher by 35 point for the dow, the nasdaq by 6 or 7 points and the s&p 500 by 3 or 4. not a lot of action. it's one ofse a problem with frt shoots, and they had design. problems with the caps prompting a recall. this recall has cost them a great deal more than they anticipated. they now see 25 million pounds coming off the earnings in this period because of this issue with the design flaw in these caps in the six-week period it

will take to restock customers. that's having a big impact on stock. burberry suffering. we saw revenue growth of 11% but a slowdown in the pace of growth and concern lingering about the highest growth markets as well, particularly concern about china where they do rely on for a great deal of their trade. down by 5.5%. barratt gomendevelopment, and t stock rose at start of trade and now dropped by 1%. a uk home builder and they were unusually optimistic about the outlook for uk housing market in general saying they see a period of stability in uk housing market. we are in a double-dip recession in uk but they see a period of stability which could help growth in future periods. euro/dollar reacting to -- the eurozone debt crisis. we had seen around 1.2 230 around two-year lows because of a lack of big conclusions from the eu finance ministers meeting

at the beginning of this week. we have had more comments coming out from rajoy, leader of spain, just on air talking about changes to tax regime, cutting back on public spending, et cetera, and that's given a little more optimism to the market around the euro. we're looking at gains of 0.3%, so 1.2283. depressed but off the lows we've been looking at toward the end of yesterday's session. dollar/yen, 79.26, and dollar aussie against u.s. dollar up, and sterling/euro, 0.7897, sterling continuing round of strengthening against euro. record levels on that front, too. let's talk about bond markets, so much attention on europe. very low yields for euro bund. in spain, where we're looking at yields over 7%, coming a little lower, still not a pretty

picture for the spanish yields but 6.77%, which does represent a continual decline in those yields just in the past day or so. partly because of what mario rajoy has been saying in his speech. tax cuts and changes to the spending patterns for that country. in italy, below 6%, 5.91%, so italian yield moving in the same direction. and we have had comments coming out that italy may need to tap bailout funds from europe as well. and the ten-year gilt in uk, 1.57%. let's get a view of what's going on across asia. this is how the equity picture is shaping up. a bit of a mixed picture. declines in india. declines for south korean market, japan as well. we do have gains for shanghai composite of just around 0.5%. let's check in with tracey chanchang for the latest.

>> mixed day in the market as concerns about chinese economy continue to weigh on sentiment. greater china markets dpped to turn around in positive trade. main land banks are lower from v.a.t. loans. and the shanghai composite climbed about 0.5% but turnover was very thin. nikkei slipped to two-week low as strong yen hurt exporters. the boj begins a two-day policy meeting today. some analysts expect the central bank to stand pat after releasing unexpectedly positive economic last week. kospi finished slightly lower as foreigners continue to unload local stocks for a third straight session. australian shares are flat after newest consumer confidence report showed more optimism about the country's economy. let's check on india sensex showing weakness, down 0.5%.

let's give a quick look at what's on the agenda in the united states. usda gives latest world crop production and demand report at 8 a.m. eastern. may trade deficit figures are out with gap expected to narrow from april. 10 a.m. we'll get may wholesale trade numbers. 2 p.m. the minutes from last month's fed meeting are released. this one sure to be closely watched and often a big market mover. chevron reports interim second quarter results after close and we'll also get q2 results from marriott. peragreen has filed to liquidate a day after regulators discovered an estimated $220 million shortfall in customer accounts. the ceo remains in a coma after attempting suicide on monday. the cftc accused them of hiding missing money for more than two years. sticking with financials, jpmorgan reports second quarter

results on friday. wall street journal claims the bank is expected to announce cost of trading losses from chief investment office will total $5 billion for the quarter. futures losses are seen at less than $1 billion. jpmorgan also reportedly plans to claw back millions of dollars in compensation from executives at the heart of the trading losses, including the former cio. joining us now is joining us, joe, thanks for getting up with us but i know you've been up for hours. as you look across markets and watch your website, what's on top of people's minds? what do you think will drive the market today? >> i'm definitely curious to see how market will react to spanish news about new tax hikes and spending cut plans. in theory it's one of these thing, spain is taking these measures, austerity, in theory it's what the market likes to see but in practice it seems

like every time a country has done anything like this, they're actually digging the hole deeper as market ultimately assesses all that's going to happen is the economy is going to weaken and tax revenue will shrivle up further. it will be interesting to see how quickly the market determines, if it does determine, this action is just the exact same thing. >> joe, it's interesting to see that we had comments coming out from the leader of italy saying we might need to tap bailout funds in europe as well. most europeans -- european leaders have been at pains to say they don't need to tap any bailout funds and everything is okay. but the leader in italy comes out and says, maybe we will. markets barely seem to notice. what do you think is going on? >> yeah, it's a strange thing. as you say, it's the kind of thing where no leader wants to say anything about how they need a bailout until the very end for

fear of losing market access or whatnot. the comments from italy are pretty strange. the lack of market reaction is interesting. it seems to be one -- it's hard to tell what the market reacts to. we have this seemingly headline-driven market where whatever comment from a random european leader, finance minister, whatnot, sometimes they move the market significantly. sometime what they say doesn't move the market at all. it's certainly interesting. more and more people are believing that both spain -- certainly spain already, but italy as well is going to need outside assistance in some form or another. >> joe, do you think this whole situation over at pfg is getting the attention, the broader attention, it merits? >> probably actually deserves more attention. i don't know that it has huge implications for everyone but sort of retail futures industry seems to be reeling at this point. after mf global and now this, it

seems like there's going to be a pretty big crisis of confidence in the whole industry. and it's probably going to end up going all the way up to the regulatory level. there's probably a good chance it's going to result in some sort of, you know, wholesale changes to the regulation of the industry. this idea of segregation of customer funds, i don't think anyone will believe it much longer. you know, especially now that we have these reports about how this issue may have been going on for two years, it wasn't just like some recent run or a trading loss. that looks pretty bad. >> joe, thanks for that. stick around. we'll come back to you shortly. just a few stories to touch on. spain's prime minister has unveiled further austerity plans after warning growth will be close to zero in 2013. rajoy says madrid will have public spector reforms, sell state assets and raise v.a.t. to 21% from 18%. the premier told spanish

lawmakers the measures were painful but necessary. >> translator: i know that the measures we need to take may be painful for every one of us, for every consumer, pensioner and housewife. it is difficult when incomes decrease and taxes go up but this has to be done because thanks to these individual sacrifices, we will be able to pull through this together. >> amazon may be getting into the smartphone market. "the wall street journal" reporting the company is working with asian suppliers to test a device. but would you be interested? does the marketplace really need another smartphone? we pose this question earlier. response so far seems to be, no. but if you want one, let us know. you know how to get in touch with us on "worldwide exchange." e-mail worldwide @cnbc.com or tweet us @cnbcwex or individually. ♪

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areyou you are watching "worldwide exchange." if you're just tuning in, these are your headlines. spain's prime minister unveils plans to cut public spending and raises taxes. australia's treasurer tells cnbc his country should be less dependent on china. pfg best collapses amid

accusations is forged records to hide millions of dollars in missing customer funds. and fitch affirmed aaa credit rating for united states but keeping negative outlook. they say the u.s. economy is being undermined by the government's inability to address the deficit. fitch says it's unlikely to decide whether to revise its u.s. outlook until late next year. still with us is joe weisenthal from business insider. when i read fitch is worried the deficit is undermining growth going forward, i wonder if they're not slightly missing the point. >> yeah, i do think that. there is this -- when people talk about the deficit, i think people frequently put the cart before the horse. the most useful way to think about the deficit as a symptom of the lack of growth. in fact, the deficit can be a tool in fighting slow growth if

we expand the deficit. one of the big mistakes people continually make since the crisis is this obsession with curing the deficit as a number that cures growth. i think for most people they don't -- you know, you talk to a lot of people. i'm not talking about economists right now. but especially if you look at politics and so forth. no one really knows what the deficit or the debt is. they just know it's a big number and they know things are bad. when they say they want to fix the debt, fix the deficit, to them that means fixing the economy. when it actually comes to economists and people who have the ability to affect things, it's always disappointing to see this deficit obsession rather than a focus on what growth measures will actually result in the symptom of a lower deficit. >> at the same time we have the oecb coming out and very strongly calling for more stimulus. ilo report this morning saying the same thing. the message is getting more consistent but it's moving away to some degree from what fitch is saying.

just quick on the politics of this, because the fiscal cliff is a concern. i know a lot of our viewers around the world may want to know how likely it is that congress is able to come to some sort of agreement to temporarily extend or push off some of the measures that might otherwise hit growth. >> you know, i think it's funny. i just saw a survey this week of -- i think put out by citigroup and they asked their clients what they think is going to happen. investors are still overwhelm g overwhelmingly saying that come the beginning of 2013, there will be some kind of deal in place to push off both the spending cuts and the -- sorry, yeah, the tax hike and the spending cuts. to use the cliche, kick the can. but in terms of how it's going to happen, if you ask people, i've never heard like a really good explanation of what the deal is going to be made. things are going to get acrimonious with the election, especially obama throwing out his tax cut callor incomes

under 250k, at least not raising tax and republicans standing firm in opposition of that. so, the fighting is going to begin soon. it's going to become pretty obvious the two sides aren't very close at all. again, i guess i have to put myself in this view of all the other people who think that somehow it's going to be solved, but don't ask me how it's going to be solved. >> well, we won't, joe, but we'll come back to you in a little bit. stay with us. still to come on the program -- >> still to come on the show, how much did the fed know about rate. we'll talk to libor experts to see how this could impact regulation in the states. 

welcome back to the program. u.s. lawmakers have launched a probe into the fixing of libor. emerged the federal reserve bank of new york became aware of the problems by end of 2007. republicans on the senate banking committee say they want to know more about the involvement of timothy geithner, at the time ahead of new york fed. joining us is andrew murphy, and joe weisenthal with us as well. you indicated regulators could and should have done more about libor fixing. what specifically do you --

where do you think they dropped the ball? >> well, there's a myth of objectivity that helped a lot of people to pass over the libor situation until relatively recently. it's very easy to think of libor as something like temperature or a fact of nature that doesn't involve huge amounts of human discretion. actually, i think a lot of market participants and regulators took that for granted for a long time. the new york fed and others did look into libor over the last few years in several ways, but at least from what we can tell from the outside, they didn't get involved as far as they could have. i have eluded to some possibilities they could have used some of the data they have as regulators to backstop it is fixing. they could have and probably will in the future become involved in finding a way to make the system more credible, whether that means strengthening libor going forward or helping the market to transition to an alternative. >> so, what is the way of fixing

this in your view? how do we prevent this kind of issue from cropping up again? >> well, everyone is talking right now about civil and criminal punishment. certainly those who are responsible need to be held responsible. so, some part of the solution has to be sending a strong message for the future. but solutions don't always just involve punishment. they also involve planning and preparing for the future. and there are a huge number of tools in our tool kit. we need to be considering all of them and realizing that tools each have pluses and minuses. some people want to talk about transitioning to a libor or libor alternative that has no subjective elements. that is based on actual transactions in each cases. that could help in some ways, but it brings cost because as we all know, sometimes the market seizes up. there isn't a lot of liquidity. there isn't a seven-month swedish krona market on an

unsecured market that day. if you're basing your libor on actual transactions then you can't get a rate that day. we have a huge number of options we need to be considering. it's actually a very complicated set of questions. in my research i remind people one part of an ideal solution is aligning incentives to manage discretion. so i talk about ways in which those who set libor and set indices like libor need to be given the right incentives to do so. i talk about intellectual property right changes so they can make money on these things when they're running them well. that's one of many solutions we need to be exploring. >> this is joe in new york. one of the things with libor and this whole scandal is i feel people don't really understand how, if at all, it affects them or whether it does at all. and i think that's going to be one thing that prevents this from really becoming a big theme that gets into the public's imagination. how would you characterize it? how would you present it in a

way that would make people care about it? >> joe, in america i think people care about this less than in the uk and that's surprising because if anything it matters more to american consumers. libor is perhaps the world's most important number. it is a number that goes into credit card agreements, student loans and the majority of subprime mortgages. so, it's a floating rate of interest that affects what people pay. if you're an american consumer this means that what you're paying is being potentially affected by some kind of tampering. and it is in trillions and trillions of dollars worth of transactions. nearly every corporation you can think of has an interest rate swap to help it manage changing interest rates. and those swaps have libor in it. so, this number, when it goes up, makes a lot of people pay more. when it goes down, a lot of people pay less. it's the background assumption

of the financial system and affects both high-level financiers and consumers who involve themselves in any kind of borrowing or lending. >> yeah, hugely important there as andrew just mentioned. no easy solutions emerging. however, andrew with us from jail and joe, appreciate all your thoughts. coming up, we'll focus on spain, distressed assets and plenty more after the break. first, take a look at what's happening across the bond space. watch spain, watch italy and of course watch u.s. futures. still have green arrows as we await the open on wall street. >

welcome back. these are your headlines. >> spanish prime minister unveils a fresh cut of spending cuts in the public sectors and raises sales tax to rein in the country's deficit. trading industry reeling as brokerage firm pfg best collapses after forging records to hide millions in missing customer funds for years. burberry, the stock trading sharply lower. sales rise in the first quarter but the luxury fashion house hints at a slowdown in asia.

broader markets don't seem too disturbed by burberry's cautionary comments. we've seen green behind me. the dow jones pointed higher by 25 points. nasdaq by a couple of points. same going with the s&p, higher by two or three as well. not huge moves. certainly we're waiting to see further action in europe as we await to hand off to the u.s. open. we can take a look at what's happening across markets. ftse 100 down 0.3%. cac down by 0.5 and ibex 35 in the green, up 0.5%. we've seen them rein in a little bit, so more muted tone than just 30 or 60 minutes ago. >> indeed. let's get to the big question then, how do you make money in these markets?

here's what some of the experts ve been telling us so far this morning. >> long-term holder of assets or short-term holder of equity. reasonable amount of weighting to india because fund mentally at the end of the day, i would rather invest in economies that are demand and consumption led in the longer term or even in the medium term. >> to me it makes sense to look at some of the assets in sort of so-called peripheral european area. we've been involved recently quite a bit in spanish regions, some of which offer very attractive yields, some covered bonds in these markets are very attractive as well. >> we like luxury goods companies. i think great day to pick up

companies like louis vuitton, swatch, trading down with sympathy for burberry. >> the funny thing is we're talk about double-dip recessions all day, austerity in spain, tax changes and the last trade of the day, luxury goods. >> and you look at the market and it's kind of shrugging it off. maybe we've priced that in with some of the nasty action we saw the last couple of weeks or maybe people are waiting for the fed minutes to tell them central banks will ride to the rescue. >> i'm sure the fed will be a big part of this. we must keep track of what's going on in the europe because the eurozone cries and response has been a big part of what's driving the markets. spain's prime minister has unveiled further austerity plans revealing growth will be close to zero in 2013. they says they'll have public sector reform and raise v.a.t. to 21% from 18%. let's get out to stephen, out in madrid and looking over these

figures and announcements from ra r rajoy. >> i spoke to a couple of people and all have been impressed by the size of this new austerity package. it's not going to be easy, short or comfortable but the only way that can lead to economic recovery, what mariano rajoy said to congress when he announced this new raft of austerity measures. it's a mix of spending cuts and tax increases that should reduce the budget deficit by 65 billion euros over the next 2 1/2 years. among the most significant announcement is v.a.t. rates will increase from 18% to 21% for the regular rate. and from 8% to 10% for the lower v.a.t. rate. the government also is going to increase taxes on energy and tobacco and is going to counsel

tax breaks on property. that's for tax announcement. also announcing this morning significant cuts in public spending. in social spending. new claimants, for example, will have lower public benefits. public workers will face a salary cut of 7% on average. and the government has decided to cut by 21% of subsidies for trade unions and for political parties. going to also reduce the number of public companies and foundations at the national level. he claims that these additional measures are absolutely necessary to reach the new deficit targets. >> translator: i know that the measures we need to take may be painful for every one of us, for every consumer, pensioner and housewife. it is difficult when incomes decrease and taxes go up. but this has to be done, because thanks to these individual sacrifices, we will be able to pull through this together.

>> mariano rajoy believes the measures will allow spain to meet its new deficit target. earlier this week european leaders agreed to give spain more time to reach its deficit target, 6.5% of gdp for public deficit in 2012, 4.5% of gdp for the next year, and 2.8% for 2014. these are the new targets in terms of deficit for the spanish government. back to you. >> thank you very much. so, does europe offer any good opportunities for investors looking to snap up distressed assets? let's put that question to our next question joining us from dallas, chief investment officer at highland capital. thanks for your time this morning. are you looking across the pond now and seeing opportunity? >> well, investors have allocated about $150 billion to this trade, which some are calling the distressed trade of

a lifetime. and i just don't see it. in fact, we voted with our feet. we sold our $3 billion european clo business to a private equity concern. and it's just not going to be the opportunity that people are thinking, primarily because we think it's just way too early and you just don't have the foresellers you do in a classic distressed market. i've been doing this for 30 years. best distressed market is where you have a foreseller of good and assets, not a strong seller of poor aas sets. we think this is a 2008 moment where you have things like bank trade deficit $60, turn it around in a year and you made 40%. this is a situation where you have a very, very long, long workout period here. maybe ten years. and so the risk you put on right now is going to be suspect. >> it's interesting in that may have people in europe, who are trying to lure investors into

the region a little concerned. hang on one second. >> we want to interject with just another piece of news out of europe, which will probably help you come back and have the discussion a little more. we have results of the ten-year german debt auction, which shows the ten-year bund yield, lowest on record at german auction. we have extraordinary low yields and that is continuing. 4.51 billion euro sold at this auction. ed bid to cover 1.5% versus 1.4% at the previous auction. the yield -- sorry, 1.31%, the average yield at the auction of ten-year german debt. 1.31%. last time around we were looking at 1.52%. so, this ten-year bund yield, the lowest on record at german auction. just telling part of the story about concern around the peripheral european debt and

where the perceived safe havens are. >> and that 4.51 billion raised short of the 5 billion potential target size of the auction there. back out to mark in dallas. mark, again, you know, you're talking about steering clear of europe entirely. i imagine between some of the action we're seeing in germany and headlines out of spain regarding the haircuts investors might have to take on holdings of dent there, it's only going to add to what you've already told us. >> okay. if you spent any time in europe, the thing you'll figure out is that there's no way you're going to have all of this austerity, tax raising and then all of this intervention to save their banks to have u.s. investors walk away with goodies. i think eventually there will be some sort of opportunity here but it's really not going to be now. you don't have a foreseller, the sem, rtlo, gives the banks a lot of time to work out with their problems.

the reality is they can't afford to sell right now. they only have about 5% of capital on average. that makes them 20 times levered, sometimes as much as 30 times levered. there's no way they can afford to sell assets at prices we want to buy them. i sit on our trading desk, we trade over $10 billion of securities a year. i'm seeing absolutely nothing of value coming out of europe. the things we are seeing are very high quality portfolios, trading at 95, 96, 97 cents on the dollar. there's really not a distressed trade. for some people that have very cheap funding it it might be interesting but for the traditional sort of distressed investor looking to make 15, 20, 30% returns, it's want there right now. >> is that the case across all of europe, both within the eurozone and outside of it, or can you distinguish between opportunities around the region? >> i think you can but it's still way too early. really all the things that the

politicians are doing in a very difficult situation are causing some very, very difficult growth opportunities. so, if you're going to be hurting your economy this much for this long, it's the exit you really have to worry about. if you -- if you can put on risk, so you have a good manager that has a good sourcing, it's really the exit that's questionable. when you look at what's happening with this libor probe on top of the other stuff, the capital markets are challenging. >> real quick because we are running out of time. but where do you see opportunity, then? what are your top ideas right now in a nutshell? >> well, we always like u.s. distressed middle market private equity opportunities. we've got 30 or 40 of those we're looking at today. we bought a hospital concern in 2009. we've increased the ebd in that company about 83%. we're buying secondary clo tranches. some of the european banks can

sell these now because they've been distressed for a while. you're selling investment grade risk in high teens. that's a great example of a high asset from a highly des stressed seller. all the opportunities we're really seeing here are here in the states where we've got a pretty good established rebound in the economy. certainly we've got some challenges ahead of us, but nothing like you see in europe. >> mark okada chief investment officer at highland capital. thank you for joining us. we'll take a look at today's other top stories. burberry announced a slowdown in quarterly sales growth citing concerns about the asian market. >> u.s. ceos echoed these concerns. the deficit way from the eurozone to weakness out of china. >> we'll get or on that later in the week. the gdp figures we'll be watched. david cameron and francois hollande agree to disagree on europe as french president makes

his first official visit to uk. pomp and ceremony around that. they do have significantly differences. >> very little tangible result out of that meeting. mario monti saying italy may be interested in bond market support. the country doesn't need a greek sale bailout but we can add this to the long list of politicians claiming they're not like a greek bailout. >> some have been at pains to say they did. the ilo warns 4.5 million eurozone jobs at risk unless governments invest in boosting employment. echoing what we've heard from the oecd yesterday. >> stimulus taking place of austerity from a lot of agencies. maybe took a little too long on that front but in any case, more after the break. before we go, time for a brain freeze. 7-eleven is giving away free

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to welcome back welcome back to the program this morning. if you're just tuning in, these are your headlines. spain's prime minister unveils plans to cut public spending and raise taxes. pfg best collapses amid claims it forged documents. and regulated unit of pfg best filed to liquidate, a day after regulators discovered an estimated $220 million shortfall in customer accounts. founder russell wassendorf sr.

remains in a coma after committing suicide on monday. amazon may be getting into the smartphone market. "the wall street journal" claims the company is working with asian suppliers to test a device. mass production could begin later this year or early next. reports say the smartphone on would have a four to five inch screen. amazon entered the tablet market last year with the launch of the kindle fire, about $300 cheaper than the ipad. amr, bankrupt parent of american airlines seems more open to a merger. the ceo says it makes sense to view a potential deal. five partners are being considered. blackstone is reportedly considering whether to shed its entire portfolio of u.s. office buildings, which analysts say could be worth $22 billion. blackstone's empire consists of

more than 100 buildings and 50 million square feet of space, primarily in new york, boston, l.a. and northern california. reports say the private equity firm may sell the portfolio off in regional parcels or could list asset as a real estate investment trust. let's take a quick look at at the stock. year to date chart, down to 0.09% today. we're tweeted, recent struggles of r.i.m. shed light on phones being oversaturated. the amazon phone would only make sense with android os. this is the question we've raised on this program, do we really need another smartphone and if amazon comes out with one, would you buy it? if you want to respond to that or anything else you've seen on the program, except my pronunciation, those tweets are banned, you can tweet u us @cnbcwex. >> i think you should pronounce everything in the american way since you're american and i'll

pronounce it in the british way and even it out. still to come on the show, fed minutes from last month's minute due later but will markets get any more clues on qe3? more coming up next. ♪ ♪ ♪ ♪ [ male announcer ] what's the point of an epa estimated 42 miles per gallon if the miles aren't interesting? the lexus ct hybrid. this is the pursuit of perfection.

welcome back to the show. in is a quick snapshot of what's going on in the equity markets across europe. we are seeing cac diversion. the ftse and cac and in paris, ftse down by 0.3 to 0.4%. cac lower by 0.5%. dax moving up by just nine points or so while the ibex held onto gains of 0.5%.

and rajoy talking about trying to get their house in order back home with changes to tax regime and public spending. a bit of optimism. >> we'll see if u.s. futures can hold onto the optimism. they've been in the green most of the morning. here's a look at what's on the agenda today in the u.s. usda gives world crop production and demand report. may trade deficit figures will be due out. that gap is expected to mayor narrow from may. and minutes from last month's fed meeting will be released. highly anticipated. chevron will continue earning season. it will report interim second quarter results after the close and also we'll look for second quarter earnings from marriott. dow jones industrial average, there's a close-up shot for you, is pointed -- let's see, higher still by about 25 points. that nasdaq we were just zooming in on is up by four or five and

s&p also. >> very artistic. a different view of the markets, literally. >> switching things up. joining us is crying, chief economic strategist at vining spark ibg. craig, is it the fed minutes that are going to be the most important thing driving markets today? >> absolutely it is. everybody's looking to the fed right now to see if they're starting to lean towards another round of quantitative easing. after la month's jobs report, ism figures last month and a broad downturn in economic data, everybody is looking to the fed for direction. so, we'll see. we'll look through the minutes and see if there's any hints they're leaning towards that or that there's a majority of the fmoc members leaning towards that. it will be hard to tell because the language they use is -- is vague. but we'll look for any kind of hint of that and that will drive the market today. >> i wonder, too, craig, to what extent action we're seeing

across asia and europe is going to impact trades. because we haven't seen much market move at all even though we've gotten extraordinary headlines, everything from mario monti talking about a bailout to spain moving forward with more austerity. >> sure. well, you know, it's -- there's a lot of -- there are really a lot of bad news built into the market. you know, the headlines out of italy that monti might be a one-term -- might just have one term and more bailout talks, i think a lot of this is already built in. with ten-year trading at 1.50, you argue can it go lower from there. i think it will be harder to do so. it doesn't surprise me we're not seeing a big market response to those things right now. >> i know you're particularly interested in municipal bonds. run us through why you are particularly interested in this asset class. >> well, it's one of the few places left where you can find some type of yield. if you look at just 15-year municipal bonds you can find yields between 4.50% and 5%.

it's very difficult. all of their asset classes, it's hard to find value. the other thing is with the impending tax debate, you know, we very easily could see tax rates go up and that will add value to municipal bonds. so, for our investors, we talk about staying in somewhat of a bar bell strategy with short-term cash flowing assets giving them cash if the market chaks they can reinvest and alternatively longer municipal bonds because that's where there's some amount of income you can get. >> craig, chief economic strategist at vining sparks. he and others like municipal debts even as municipalities, california being a notable one here, file for bankruptcy. >> yeah, indeed. that's it for the show. we're out of time. >> beccy is with us before ross comes back on monday, much to my relief on both fronts. now off to u.s. "squawk" thanks for tuning in. >> thanks for watching.

good morning. jpmorgan preparing to announce millions of dollars in clawbacks from some execs tied to the now infamous london trading losses. think libor didn't matter? cities across the country are blaming bankers who set the rate for local financial troubles. corn crisis. government set to release a key crop report this morning. it's wednesday, in case you didn't know, july 11, 2012 apparently. "squawk box" begins right now. ♪

good morning and welcome to "squawk box" here on cnbc. i'an