hello, welcome to today's edition of "worldwide exchange." i'm ross westgate. >> and i'm kelly evans. >> microsoft and google, better than expected numbers at the end of a positive week for stocks. avoiding a barclays style backlash. reuters reports the banks are looking to negotiate a group settlement with regulators. m&a activity, a battle looming and a report of a new stock exchange tie-up. plus, eurozone finance ministers are set to approve the terms of the bailout for spanish banks. the deal overshadowed as the country is rocked by violent protests.

you're watching "worldwide exchange," bringing you business news from around the globe. >> so we're just about there. we've nearly made it through the week. >> happy friday. >> happy friday. and sports looking very good. >> have you been following the golf? >> i've been following the golf, the cricket. >> how is tiger doing? >> 3 under. and it looks like we're about to get the first-ever british winner of the tour de france. >> this is exciting. even i'm following this one. >> wigo is the way they say it it in france. >> wigo. that's your french lesson. apple's debuting its latest ipad in china with less fanfare than previous launches. it's leaning on new technology to keep disorderly crowds at bay. we'll speak with a leading expert. and we're two years on since the signing of dodd/frank in

washington. an anniversary many on wall street might prefer to forget. we'll hear from one of the architects of the bill who say it may be the only way to prevent a crisis. we head to the coast of england within the hour. >> wish i were heading there. frito-lay is tapping the power of social media to spice up its traditional chips, offering $1 million for the tastiest new recipe. find out how to get in the game. that's at about 10:30 local time. and we'll talk diamonds. first-half sales lose their luster, but it's betting big on resources in africa. we'll take you to the depths of its most valuable mine in gaborone in botswana. i can't believe they let him out from the nyc. >> bob pisani, absolutely. it's great to see him in a hard hat. >> i haven't seen it yet. >> a little more difficult environment than the floor of the stock exchange. microsoft has posted its

first quarterly loss since 1986. the company warned it would take a charge in the fourth quarter to write down its struggling online ad business. revenues came up a little shy. microsoft is booking its fortunes in the coming months on its new windows 8 software that will launch in october. i have a feeling it be a lot longer than that before we see it. microsoft is up 2.2%. there you can see investors not too concerned about that writedown. google's profits beating forecasts on higher paid clicks for its onlied ads. revenues including motorola rose 35%. the company wouldn't say what its plans are for motorola after completing that acquisition last month. and as expected, ceo larry page was not on the conference call as he's still recovering from losing his voice. google shares up about 2.5% in trade this morning.

>> vodafone in particular trading lower after the company announced a steel fall in organic growth in the first quarter because of sluggish trading. service revenue in the first three months stood below 10 billion pounds which implies an annual growth of 0.6%. posted organic growth of 1.6% in the second quarter, down from 4.1% in q2. but the french advertising agency still upbeat about its prospects. angela merkel will -- one second. we're going to talk about her in one second. we have headlines just crossing here. the singapore exchange says it is not in talks with the london stock exchange on a potential merger. this, of course, following rumors that the two might be involved in a tie-up. we'll look for more detail on that comment and we'll bring it to you as soon as we get it. angela merkel last night secured a majority in favor of a

$100 billion aid package. the victory had been expected although 22 coalition lawmakers did vote against the bailout. and eurozone finance ministers are expected to give the green light to a bailout of spanish banks on a conference call today. the euro group will approve a detailed memorandum of understanding that will determine conditions attached to the disbursement of aid. the exact size of the package is unlikely to be finalized, though, until september. and this is social tensions keep growing in spain. mass demonstrations took place last night across major towns and cities in protest of the government's latest round of austerity measures. stephon joins us for more. stefan, in a way, not only the latest, but spain, there were two things that were supposed to happen. the bailout terms were supposed to be light. and it now looks with a memorandum of understanding that won't be the case. and also the eu is supposed to inject money directly into the spanish banks, and the spanish

government not be responsible. and equally i guess that doesn't look like it's going to happen either. >> yes, it's going to be a built heavier than what the spanish government was planning to do. interesting timing also, russ. yesterday while the german lawmakers were voting in favor of the spanish bailout package, the spanish workers were in the street to protest against the new austerity measures. it's not the first time they are protesting against the austerity package, but it was the first demonstration organized by the two main unions of the country, the two main trade unions. in total, more than 80 demonstrations took place across the country. and it looks like the government is taking the situation very seriously. the risk of social unrest because yesterday the cabinet approved a motion from the parliament categorizing urban violence as a specific crime which basically gives the police more power to arrest people even before they are committing any

offense. more power for the police to control or to try to limit social unrest in spain. >> just a quick question since you're there at the stock exchange this morning in madrid. just curious what kind of activity you've seen on the ground. the pictures for me have been pretty extraordinary and reports about police firing rubber bullets and all of that. what are you seeing on the ground? >> reporter: you mean in terms of security? >> yeah, just in terms of people in the streets and the level of protests across the country. >> reporter: well, it was surrounded by police yesterday evening when i left the stock exchange. there were a lot of barriers around the building. all the symbols of capitalism have been protected by the police yesterday. like the bank of spain also which was surrounded by policemen to avoid any major protests. a lot of people were in the street. but to be honest, it was rather quiet even if there were some riots here and there. global rr rly speaking, plenty

public workers, of course, policemen, firemen and a lot of people from hospital, teachers or so were in the streets. mostly it was quiet. of course, a lot of people to protest against the austerity measures. next, of course, as you mentioned, is the vote from the euro group on this memorandum of understanding. there will be more protests here in spain, but they will be more local organized via social media. >> stay safe over there. it's a good thing he has a strong chest. i think he can handle some rubber bullets. >> he's like batman. we're going to talk batman. >> we are. first joining us, regional economist at cib research. good to see you. thanks so much for joining us. here we are, equity investors seem to have gotten a little more relaxed on the eurozone debt crisis. here we are, spanish borrowing

costs, a record in the euro area for the five-year. the ten-year still around 7%. and most people expecting a full sovereign bailout by the end of the year. >> yeah, very much so. i think at this moment, us here in asia haven't had anything from the european side, because they have enough m&a activities down here, companies starting to report, it doesn't look half bad. so i think we temporarily, i think, decided to look on the bright side of life first. but i suspect come next week, we'll be focusing on europe again as a reminder that things are still wobbly out there in the real world. >> i'm curious what you make given that you're in singapore of this news or these rumors, i guess, that there might be a tie-up with the london stock exchange. >> yeah, i think -- well, we first heard it was -- oh, well, it wasn't a huge surprise because the singapore stock

exchange has been looking for a tie-up with the aussies fairly recently. that didn't work out. and we knew that the way forward is for an exchange like the singapore one. the bigger one will survive as technology and traditional businesses. so when the news emerged, we said okay, that doesn't look too surprising. so we'll see what actually turns out. even if it doesn't work out, i think singapore will continue to look around for partnership mergers with other companies basically because bigger is better. >> thanks for that. we'll be back with more in just a little bit. stick around. perhaps no merger between singapore. yesterday there was potentially going to be some kind of type in terms of allowing londoners to get access to singapore

investors. more on that later. now on to trade and what looks like seven weeks of gains on the whole for european stocks, but right now we're on the down side. you see nearly 6-4 being outpaced by decliners. yesterday the ftse 100 up. the highest level closed since may 3rd. today down 0.6%. the cac up 8% yesterday. the ibex up almost 15%. the bond market, as far as spanish bond yields are concerned, right on the 7% mark which we sort of went through post the spanish auction yesterday. treasuries still yielding just below 1.5%. and here we are with ten-year yields, slightly higher than yesterday, 1.21%. 1.20% yesterday. a fairly cautious end to trade this week.

euro/dollar, we're still in sort of the 122/74 level. dollar/yen, we're on six-week lows. aussie/dollar, 104.21. euro, euro down on year all-time lows near the aussie. we'll talk about that when we come back. a quick look at brent and nymex as we go into the weekend. brent currently trading around $107. and nymex, $92.07. that's the price action we have in europe. what about the asian trading day? tracy joins us for the first time today on "worldwide exchange" with all the updates. hi, tracy. >> good to see you, russ. happy friday. asian markets apparently took a u-turn from yesterday's strong performance, landing mostly in negative territory. the composite slipped about 0.7%.

after beijing reiterated its resist anticipate. and market weakness spilled over to hong kong limited the gains for the hang seng index. strong performances from chinese telecom shares helped lift the benchmark higher. the mainland's second largest mobile provider jumped more than 7.5% on rosy earnings numbers. and the nikkei fell, underperforming its peers after positive corporate earnings numbers. financial stocks were among the worse hit. elsewhere, the kospi ended about flat. but tech stocks outperformed strong reports from their u.s. peers. australian markets slipped, but index still up more than 2.9% for the week. lastly to india's sensex, also showing weakness, down about 0.6%.

back to you. china is warning local mark markets. for those who have, they'll need to change their policies immediately. beijing says it wants local authorities to keep a closer watch on the property market to prevent land prices from rebounding. the order comes after home prices in 70 major chinese cities ended eight months of declines in june. and you can see there, property values across the board in china trading down, ross. meanwhile in japan, big manufacturers are tempering sales expectations from china. a reuters poll says 40% expect mainland sales to fall short of estimates. 38% also predict sales in europe to come uprt as well of estimates. but 84% optimistic that sales from the u.s. will improve. it's an interesting factor. they're looking for sales to decline, but sales in the u.s. to improve. that would suggest we haven't yet reached the bottom. we had guests yesterday who

suggested that in europe and china, maybe we have reached the bottom of the cycle. and that the u.s. is the one that will turn down. what's your view? >> mm-hmm. well, at this point if you start with the u.s., it's oons'y one. if we look at it, there are signs that things are stabilizing. we are seeing interested parties from asia starting to nose around in the u.s. so i think for all intents and purposes, looking at the numbers over there, it might not look great, but certainly things have bottomed out in the u.s. that's why the property cycle is constant. here in asia, china is interesting. they started their easing cycle at the beginning of the year. it has accelerated. the policy plan is mindful that they have to be watching the property market broadly, as is mentioned early on. data for the month of july suggests that things have improved as a result of the rate cuts. and watching, they do not want

prices to pick up pace too fast because we are now in attrition where there are many cities showing price increase as well as price decline as well, obviously, if we are in those cities where the prices are declining, you'd be looking to try to stimulate, you know, a property transaction and prices as well. but i think the government will be looking over their shoulder to ensure that a more balanced picture prevails and ensure that asset inflation remains contained as they continue to ease policy going forward. over in europe, i think given the recession is just taking hold, i think we still have some way to go as far as the european cycle is concerned. >> okay. stick around. by the way, loving the braces today. i've got to get myself a pair. thanks. let's move on. mercer mayor could get more than $70 million as yahoo!'s new ceo if she stays at the company for the next five years.

her pay package consists of a $1 million annual salary, $2 million annual bonuses and $42 million in stock options as well as $14 million in options to make up for what she would have been making with google. mark zuckerberg has dropped off the forbes list of the world's richest people. will zuckerberg make it back on the list? if so, how or when? what do you think? get in touch with us. send us an e-mail, worldwide@cnbc.com or tweet us @cnbcwex. ross? still to come, we'll hear from a guest who recommends going short sterling/dollar and long dollar/yen. we're going to talk currencies when we come back.

welcome back to the program. just a couple of headlines we want to bring you on the latest out of syria. a draft u.n. security council resolution on syria. that russia veto was, quote, absolutely unrealistic,

according to a for inministry spokesman. russia has rejected criticism over its veto on syria and says the west should pressure rebels to stop fighting. ross? meanwhile, the singapore exchange has denied it's in talks with the london exchange group for a potential merger. britain's "daily telegraph" reported two groups discussing a tie-up that might be worth 7.2 billion pounds. in an interview, the group is less focused on a collaboration. speaking exclusively to cnbc before news of a possible deal broke, they talked up that idea of cross-border corporation with an lse sgx deal last week. >> the announcement had been made with the singapore exchange last week is, in fact, one more innovation that the london stock exchange and the singapore exchanges are introducing. this will enable companies

listed on the london stock exchange particularly those who are members of our very prestigious ftse index series at no additional cost and at no additional regulatory procedures to be quoted in asia via the stock exchange in singapore. heineken has offered 4.1 billion u.s. dollars for asia-pacific breweries. this topping a previous offer by a thai bill heir. the dutch brewer is seeking to asquare stakes by singapore-listed group frazier and neve. heineken currently owns 42% of apb, that compares with f&n's 40%. sen is still with us. we were talking a little about this potential tie-up earlier. let's talk a little bit, too, about the m&a activity that we're seeing across asia right now. and with regards to this heineken beverage deal, in particular, what does it tell you about activity in the region? >> well, one thing here in asia,

obviously, as a result of the growth, strong balance sheet, many companyies -- and backdrop this region is still expanding. so basically, businesses are looking for opportunities to say how are we going to exploit this further. other growth industries and, well, obviously the beer business is big business here. income has been rising up generally -- well, actually they have good income, but nonetheless, in the consumption of beer, it has been rising. that's really the price. everyone is aiming at in terms of the interest from the dutch side or even from the japanese in terms of the thai in that there is that opportunity that potentially could make them a lot of money going forward if they can capitalize on it at this moment. so this is what we're seeing right now in terms of growth industries are seeing interest

because people and companies. >> absolutely. media conglomerate vivendi is considering selling its telecom unit. citing sources close to the matter, the sale could raise up to 8.5 billion euros for vivendi which is under increasing pressure. reuters also writing talks to sell activision have stalled over the asking price. as far as euro/dollar is concerned, we're away from the 121.62 level last week. but, of course, we have seen the euro down to all-time lows against some of the currencies, particularly the aussie dollar and the kiwi. paul joins us for now. paul, just on euro/dollar, first of all, we've got this range between the low 21s and 124 region. is that range going to stay with us for a while now? >> we think so. we think euro/dollar might have

a bit of fundamentals. our short-term models suggest something more around 124. we wonder whether there's just specific flows through the market may be diversification, fx reserves away from the euro that seems to be weakening the euro and against the dollar. but over the medium term, the lower yield in europe that we're seeing as the world adjusts to zero or even negative rates i think is going to be particularly heavyweight on the euro going forward. this range may be a little higher short term but ultimately lower. >> aussie, negative yields we've seen this week on two years in germany and in the netherlands as well. does that suggest capital out of the eurozone directly? >> well, the latest data that we got yesterday suggests that a lot of the money that's flowing out of the periphery bond markets in europe actually finds

its way into core and semicore. i think that's why you're seeing yields lower. the implication there is it's not actually flowing out of the euro. that's data for the first quarter. i think that more euros are flowing out now. i think corporates are repatriating money back -- >> sorry to interrupt. now that we have those negative yields, is it less likely you get those flows to core? >> well, i think it's all about the return of capital. rather than the return on capital when i think the world has to adjust to the fact that you don't get any yield for holding your money. it's about safety. and i think that that's going to be key. i think it's going to be a key away from the euro. so look at euro/sterling pushing lower. i think increased speculation about the uk base rate. very positive yields in australia, poland, for example. so this will be an enduring theme over the summer, how the world deals with negative interest rates.

>> paul, just curious whether we're seeing a longer-term shift happening here. there are reports that reserve managers are looking to commodity currencies and getting away from the euro altogether. in your experience, is that maybe one reason why we've seen these pairs with the strength with the australia and the new zealand dollar even against the euro? >> we've seen sort of flows away. we have a reserve management study that we published at the end of the year. a majority of reserve managers in that survey were looking at nontraditional currencies. and those seem to be some of the smaller european currencies. but importantly, as you mentioned, the aussie. other central banks have been quite vocal about their desire to move away from the traditional reserve currencies to smaller nontraditional. and i think that that must be ongoing and is set to be, again, a key theme that we'll have to watch through the year. >> paul, is it going to become a

carrying currency? >> you've got to look at them together. you've got near zero interest rates in the u.s., europe, uk and japan. and outside of the g4, you've so those three, four currencies will be used at various points as funders, and people will look for high yields and carry outside of the g4 over the months ahead. >> okay. let's move on. what's the view on the dollar, broadly speaking, as far as the dollar index is concerned for the rest of the year? it has sort of appreciated for the first part. what happens next? >> we think that the outlook becomes a s a little more challenging as we get into the second half of the year. we do have the discussion about qe3 in the united states. that's probably coming in september rather than august. then you move on to the election. and then you've got how the u.s.

deals with its own fiscal problems. now, that might be a more challenging environment for the dollar in the second half of the year. it's going to be harder for the dollar to get significant upside. and again, we think that the focus should be away from euro/dollar and sterling/dollar and dollar/yen and to the dollar emerging markets, the dollar uuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuu t 1200 people are being taken to three local hospitals in the region. there are pictures already, of course, on twitter and the

internet showing some of the crowds outside the theater. one person is in police custody. and there was no confirmation just yet as to whether others were involved. again, this was -- this comes, if you look at some of the local reporting ahead of the premiere, you can tell that people were already talking about the crowds that were expected. so again, we're hearing reports that between 20 and 30 people injured, 10 potentially 12 according to some reports killed in shooting in denver following the premiere of "the dark knight" movie there. >> pretty awful story. unclear on the details whether we have a gunman or explosives used. we'll bring you details as they come in. let's remind you where we are as far as the bond markets are. we look at foreign exchange rates. bond yields in spain currently over 7% still at the moment. and there we go. currently around the 7% mark as well. just getting public sector

finance details as well out of the uk. let's bring you this. public sector net borrowing, up 14.4 billion versus $13.9 billion a year ago. a little bit more than expected. again, it's expected to be up 13.3. public sector net cash requirement, $3 billion versus $10.7 billion a year ago. but once again, borrowing numbers for the uk, a little bit worse than we might have thought. we know tax rates worse as well. and we've got the growth rate out next week for the uk, and it could be three consecutive quarters of negative growth. >> that's absolutely the one to watch. we'll see whether that situation can improve at all. still to come on the show, rain in the midwest has done little to dampen fears of a sharp rise in world food prices. we'll speak with a guest who tells us what the u.s. drought means for prices after the break. don't go anywhere.

and these are the headlines from around the globe. microsoft and google boosting confidence in the tech sector at the second week of gains for stocks. reuters reports that banks named in the libor probe are

looking for a group settlement. no deal. the singapore exchange denies it's in talks with the london stock exchange on a potential merger. and eurozone finance ministers are set to approve the terms of the bailout for spanish banks, but it's overshadowed as the country is rocked by violent protests. other stories also focusing on today, we've got reports of a shooting and people dead in denver, colorado, at a "batman" film premiere. more details as we get them. also rebel forces in syria advancing into the heart of damascus. report suggests government forces have left some neighborhoods in the capital. russia and china yesterday vetoed a u.n. security council resolution that threatened sanctions if they failed to halt violence against the uprising. the russian government said the resolution had been rejected because they called it absolutely unrealistic. meanwhile, rain showers have failed to ease concerns about

what's described as america's worst drought in a half century. more than half of the corn crop was in drought last week. weather forecasters said the blazing conditions could last until november. as a result, prices of corn and soybeans have set highs in recent weeks. joining us, commodity analyst at barclays. thanks for joining us. we've seen -- we're aware, of course, of the price rises. i suppose now we have to start looking at the implications of this on the demand side and also particularly i suppose in emerging markets. >> absolutely. i think the focus of the market so far has very rightly so been very much on the supply side of the equation. and you know, keeping in mind that we've seen almost unprecedented cuts in terms of expectations of u.s. yields for corn. a potential for further downgrades. all that has made for a very strong supply-driven story so

far. you're very right in saying that the implications now move on to the demand side. what are likely to be the impact in terms of, you know, 8$8, $8.0 corn prices, $18 soybean prices. what are the implications in terms of innation? the sensitivity very much is focused on emerging markets. that's where the concerns really lie. this time around, if you look at the key large emerging markets, india and china, for example, then the implications here are quite different because china, for example, is not really -- you've seen easing food inflation concerns over the course of the last few months. you've started to see stock bills compared to the food price spikes in 2007, 2008. so china looks relatively comfortable. india, on the other side, is an area where we do think food price inflation could have an impact which means domestic supplies could shrink further, in addition to high international prices. >> i just want to bring song in on that. are you as comfortable as she is

if we get food rise prices, they won't impact china quite as adversely? >> i think at this juncture, we are also mindful that we do have, you know, the weather at this juncture is affecting the supply side. as pointed out, it doesn't look to be as severe. and more importantly coming from the lower base, i think the pressure will be more manageable. and asia is about rice, it's about chicken, it's about pork. so supplies of those, i think, still fairly comfortable at this juncture. so i guess the backdrop of perhaps more modest amount of growth in china and the rest of asia because of slower growth momentum, i think this time around, the inflation pressure will be a lot more manageable than, say, compared to, say, 2008. >> it's clear that any time you see a spike like this, there's concern of a correction. but are conditions in the u.s.,

you think, likely to be supportive of keeping prices at these high levels for some time? >> absolutely, i do think so because unfortunately what we've seen is a lot of the damage has already taken place. if you look at the corn poll nation period, the key period when yields are set, that's when we've already seen the impact of the drought taking place. a lot of that has already benefactored into a marked downgrade. the issue a bit more critical of soybe soybeans. then potentially you could see some of those yield losses being mitigated. as things stand now, i think certainly an environment of heightened grain prices is here to stay. clearly we can't continue this sort of momentum. you can't be rising by 40%, 50%. i don't think we've topped out in terms of how high we can go simply because there hasn't been any letup in terms of the supply side. it's gone from bad to worse. >> finally, does agriculture continue to outperform, though,

other commodities? >> absolutely, yeah. if you look at the performance of the rest of the commodities subsectors this year so far, then grains price, especially agriculture, has been a clear outperformer. you've seen a recent pickup in crude oil prices, but they're remaining well below the levels of 2008. if you look at mprecious metals agriculture has been the outperformer surprisingly. if you look back to price performance five to six weeks ago before we saw the drought biting in, then agriculture prices were looking fairly range bound to modestly lower. >> thanks for that. have a good weekend. >> thank you. >> commodity analyst at barclays. angela merkel, second quarter production up to 12.9 million tons. the company credits improvements and rampups at their mines. >> the outlook isn't so bright for the precious stone business.

debeers earnings have during the first six months of the year as the world's largest diamond producer suffered from waning luxury demand. but debeers is taking a long-term bet on luxury, digging deep into botswana to keep the diamonds flowing. cnbc's bob pisani went and has the story. >> reporter: two hours outside of botswana's capital of gaborone, the debeers company is digging, trucking and crushing its way to profit thanks largely to this mine, the most valuable diamond mine in the world. the mine itself is a 50/50 joint venture between the diamond giant and the government of botswana. it's a partnership that's paying off. in 2011, the mine produced nearly 11 million carats of diamonds, about 10% of world supply. >> it produces the highest

quality stones. 80% of stones out of this mine are gem quality. >> reporter: it's hard to get your head around how large this mine is. it's one of the biggest holes in the world. this shovel behind me is six stories high. the mine itself is two miles wide and more than a quarter mile deep. and it's getting deeper every day. moving all this rock around is no easy task. some of the largest earth-moving equipment in the world is here. just look at this thing. it can carry 300 tons of rock at any one time. and just the tires are 15 feet high. the land here is so valuable that officials won't even let me bend over and pick up a rock without asking for their permission. even so, they've got to crush about a ton of rock to get just under two carats of rough diamonds. but those rough diamonds have thousands of miles to go and hours of cutting, grinding and polishing before they end up in jewelry stores around the world.

debeers is moving its sales operation from london to botswana into next year, a move that will centralize its operations and get diamonds out of the ground and into the hands of consumers even quicker. back to you. >> the scale of that is extraordinary. >> it is. and the security, as he mentioned there, you can't do anything without their approval. >> one ton to get two carats of uncut diamonds. one ton of rocks. >> wow! >> amazing. okay. well-behaved apple fans in china high fived sales assistants and got their hands on the latest ipad without too much hassle. there were no sleep-deprived crowds, rowdy scalpers or egg-pelting incidents which had accompanied the china launch back in january. this low-key debut was largely thanks to a new online reservations system that allowed apple to control the flow of people to its stores. the sale comes weeks after apple

paid $60 million to settle a trademark lawsuit over the ipad name. joining us now for more is shaun rein. shaun, i guess the question, is the lack of problems a problem for apple? >> i think you have apple starting to understand that there's massive demand for their products. the ceo already says that he's mind boggled and shocked at demand, but he shouldn't be. people in china absolutely love the products. sales have gone up 600% in the last two years. so the first side is that apple is managing the profit a little bit better. the second is that because the ipad is not contingent on buying through a carrier like a telecom, a lot of byers have bought the ipad already when they traveled to hong kong or other markets and brought it back to china. you'll see strong demand, but it's not going to be quite as

frenzied when the latest iphone comes out. >> we were talking in the office this morning, when can we expect the iphone 5? >> i'm not really sure. that's a closely held secret. probably in the next three to four months. i think the key for apple is when are they going to bring it into the china market? historically, they've been too slow bringing in new products. i would argue they're underperforming in the china market. they only have five stores in mainland china while they have over 300 globally. what apple really needs to do is move faster in opening up retail outlets, and they can't wait too many months to bring in the iphone because they're actually losing market share in the smartphone market to android platforms at the high end with samsung. and then at the low end which has got a huge investment from private equity firms. >> it's interesting. i just wonder why, shaun, this company has plenty of cash. why haven't they been more aggressive? >> i think there's two reasons.

the first, the supply chain management. it's very difficult because their products are so popular to be able to handle building enough products to be able to supply the entire world. i think clearly under steve jobs, apple was very ameri centric. he would launch england and the united states first. i think that would be a mistake if the current apple leadership would continue to do that. we actually think that apple could be the largest market in china for them, if they are to localize a bit better. they've got to get their act together. otherwise they're going to face some pressures like we saw with palm and then blackberry. it's not given that apple remains dominant for the next five years. >> oh. >> shaun, just picking up on that as well, how would the status of their tablets, their ipad, compare to competitors in that space as well, and what samsung are doing? >> well, i think samsung is doing very strong because they've got sales distribution throughout the entire country.

they're it's really very difficult to buy an apple product. i know myself i have a samsung not because i want it, but i wasn't able to buy an apple in a one to two-month period because you had to register online and it just took too long. samsung is competing at the very high end. you can't say that apple's products are better than competitors like two, three years ago. but the key for apple is there is a market for them. i interviewed a 26-year-old girl recently. she makes 250 u.s. dollars a month as a street vendor. and she bought a $1,000 ipad. i asked her, how did you afford this? and her answer was that she skipped lunch for six months so she could buy that ipad. you can see there, even the low-income people in china really want apple products. so i hope they can bring it in faster. >> okay, shaun, thanks for that. shaun rein, managing director at china markets research group. speaking of groups, a large

number of groups may be seeking safety in numbers. according to reuters, it says banks are looking to reach a collective settlement to avoid the negative publicity surrounding barclays admission of manipulating of interest rate. but a deal could be hard to reach considering the different regulators and varying charges tent associated with each individual bank. and ross, there had been reports after what happened with barclays that the next group of banks would -- given that we don't want to lose our top fleet of management when we deal with this given the precedent that's setting, maybe they'll try to come to some sort of group agreement. i've not sure what interest regulators would have in doing that. >> that's the question. and i suppose there's a cost in time. if the banks are willing to say that we'll come to the table and get this thing done quicker, that may be -- i mean, that's, i guess, always the attraction, isn't it? >> yeah, i would imagine. once they settle the regulatory

side, there still could be civil litigation. so this story -- >> certainly want to share that out. >> if only they could come to a group settlement on that as well. the latest on this story developing out of the u.s. this morning. according to reuters, a mass gunman has shot dead ten people and wounded 30 to 40 others at a showing of the new "batman" movie. this movie just premiered. this is "the dark knight rises." this is according to a local radio station which says a figure in a gas mask had opened fire at the showing in a mall in the suburb of aurora and set off a smoke or tear gas bomb. we know people are being taken to three local hospitals. and as we continue to get more details on this unfortunate story, we will bring them to you. and we'll be right back after this break.

welcome back to the program. well, japan's top ship builders are planning to cut back capacity for the first time in a decade. the nation's ship building industry has been hampered by falling new orders, a strong yen and tough competition from china and korea. the nikkei reports japan's mitsui will shrink by 40% while kawasaki will rein in by roughly the same amount. you see shares of big companies

down anywhere between 1.5% to almost 4% this morning. talking about boats, cnbc has a yacht now. >> do we get to go on the yacht? >> it's not quite -- i know it's not the sort of yacht you're thinking about. it's a big deal in monaco. it's a sailing yacht which we have sponsored for the commodores cup. that's about as much as i know. here's pictures of the crew. paul woolswick is the skipper of cnbc. he joins us on the telephone. this is the commodores cup. it's an international competition. how does it work? thanks for being with us. >> thanks for having me. yes, it's a biannual event for international teams. this year we have teams from britain. we have teams from france and they're even coming as far as hong kong to come and race with us. >> and it's a week of sailing. you start on sunday and then finish on saturday. there's a lot of crews here. it's a 35-foot book, eight crew.

why do you need so many people? >> there's a couple of reasons. there's lots of crew maneuvers. we've got lots of different sails we put up. the weight of the crew makes difference to sort of balance out the wind. some of the bigger boats will have 14 crew on board. >> are they, then, purely built for speed and therefore very unstable? >> they're not very unstable, but they're primarily built to go as fast as they can. it's not the sort of thing that you would perhaps think to take on a sailing holiday. >> so if kelly and i were thinking of a glass of champagne, probably not the ideal. >> you might spill some. >> that would be fair. are you going to win? >> we're really hoping to. we've been working really hard for the last six months on our campaign, getting ready, getting the crew sorted and everything just tip top. we're pretty optimistic, yes. >> paul, we wish you all the best. we like the cnbc brand out there, especially ahead of kaw, so good luck. >> thank you very much. >> there we go. f1, sailing, you name it.

the final thought from song. look, here's my analogy. how choppy are the waters going to be for investors in the global economy for the rest of this year? >> extremely, i think. basically, we'll still be watching unfolding drama from the european shores hit us. the u.s., obviously, still about jobs and more jobs and whether it's on a sustainable basis. and as all the worries around the world ripple down to singapore and the region here, its impact on business confidence which is why going forward the key thing we are watching out for over the next couple of weeks will be those pmi numbers, new order flows and those job numbers when they come through. if they don't start to come through, the orders itself, we could have a terrible second half as far as the factories here are concerned. >> do you think treasury yields can go a lot lower from here? >> well, it certainly looked

like as far as the european economy, they're really just flying with monetary policy really just putting more money into the economy one way or another which basically means interest rate cuts. room on the fiscal policy side which is what i think many here in asia can do in that we are doing both fiscal and monetary easing to cope with the uncertainty. so in essence, if it continues to be flying on the monetary wing, we might find that it's still going to be difficult to get that boat on even keel coming back to the boat analogy. >> you did very well with the boat analogies. song, thanks so much for joining us. regional economist, have a good weekend there. we want to show you some images of this tragic shooting in the denver suburb of aurora which happened in the early hours of the u.s. this morning. a masked gunman, all of this according to reuters which has

also sent us pictures. a masked gunman has shot dead ten people and wounded 30 to 40 others at a showing of the new "batman" movie, "the dark knight rises." local radio stations reporting a figure in a gas mask had opened fire at the showing in a mall in the suburb of aurora and set off smoke or tear gas bomb. those injured are being taken to three local hospitals. and we will continue to follow this story throughout the morning. >> awful news on what is a big opening, of course. still to come on the show, two years on from the signing of dodd/frank and several bankers continue to reject the bill, but is reform the only thing keeping wall street from the next financial panic? more when we come back. ddd#1

welcome back to "worldwide exchange" this morning. i'm kelly evans. >> these are your headlines from around the world. >> microsoft and google report better than expected results, boosting confidence in the tech sector at the end of a positive week for stocks. avoiding a barclays stock backlash, reuters suggest banks are looking to negotiate a group settlement with regulators. no deal. the singapore exchange denies it's in talks with the london stock exchange on a potential merger. and eurozone finance ministers set to approve the terms of the bailout for spanish banks, but the deal is overshadowed as the country is rocked by violent protests.

you're watching "worldwide exchange," bringing you business news from around the globe. >> let's take a look now at how u.s. futures are positioned as we get closer to the open there. it's a mixed picture behind me. the dow jones industrial average is pointed lower by about 15 points. the nasdaq, roughly even. and the s&p 500 also struggling to stay in the green. and if we look at what's happened across the market before the open, the ftse cnbc global 300 is down about 0.1%. we've seen a gradual easing throughout the morning. and europe has responded pretty much the same thing with a little bit of a conflicting signal. the ftse 100 down .01%. and the ibex in spain is trying to hold on and be one of the

outperformers. >> key thing, we'll see what happens today, but we are on track for broadly speaking seven weeks of gains here in europe. but of course the key thing to do is keep your eyes on what's going on with the bond yields. ten-year german yields still down at 1.2%. in spain, they're still elevated at 7%. if they stay at those sort of levels and with the kind of auction results we've seen in the last 24 hours, there are many who believe spain will be needing a sovereign -- full sovereign default let alone the injection of banks due to be approved today. ten-year, 1.95%. ten-year treasuries still on this 0.196. ten-year, around 122. dollar/yen down at six-week lows around the 78.60 mark. hung on to the gains of the week at 104.22. euro at 78.07. quick check-in on nymex,

slightly weaker but holding on to the gains of the last few weeks. brent just below 107 and nymex at the moment just below $92. kelly, what's coming up on the slate today? let's take a look at what's happening. it's a quieter day in the u.s. there's no economic data but still a few high-profile earnings reports. numbers from general ee electric, r, baker hughes, cemex, ingersoll rand, suntrust and xerox. inch a local gunman has shot dead one person and wounded 30 to 40 others. these pictures brought to us by reuters. no further detail known at the moment. but of course local media is now on the scene and we're starting to get a better sense, ross, of what's happened and just to what degree this was a premeditated incident. >> we will keep you informed of what's going on.

other news, of course, we're also following. microsoft has posted its first quarterly loss since going public in 1986. the company warned two weeks ago it would take a $6 billion charge in the fourth quarter to write down its struggling online ad and web business. excluding items. microsoft's earnings beat forecasts although revenues came up shy. microsoft is being booing its fortunes in coming months on its new windows 8 software which launches in october. as far as stock is concerned, in frankfurt this morning, it is up 2.3%. you can trust the amount of google's revenue with microsoft, google's second quarter profit up 11% beating forecasts on higher paid clicks for online ads. revenues including motorola were up 35%. the company wouldn't say what its plans are for motorola after completing that acquisition last month. as expected, larry page was not on the conference call as he still recovers from losing his voice. google stock in frankfurt also

up around 2.6%. vodafone shares trading lower after the company announced a steel fall in organic growth in the first quarter due to sluggish trading in italy and spain and worsening conditions in the u.s. service revenue in the first three months of the year stood at just below 10 billion pounds which implies an annual growth rate of 0.6%. and that was well below analysts' estimates. and swedish scania, citing weak demand in its key market. the company there said an expected orders was less than feared. well, a group of large banks implicated in the libor setting scandal are seeking safety in numbers. that's according to the reuters news agency which says the banks are looking to reach a collective settlement to avoid the negative publicity surrounding barclays admission of manipulating the interest rate. however, a deal may be hard to reach considering the different regulators and varying charges potentially associated with each individual bank. well, joining us now on set is

michael barr, professor at the university of michigan law school, a cnbc contributor and a key architect of the dodd/frank reform, the consumer protection act. you've been well involved in policy in many different aspects. and in your view, what does the u.s. do from here? how active is it going to be in this libor probe? >> i think you've seen quite aggressive action on behalf of the united states by the commodities futures trading commission and also by the fed. i think you'll continue to see that kind of engagement. and i think there is going to be a strong push to try and settle this matter as quickly as possible. i do think it will be hard to reach a global settlement, but it may be possible to reach individual settlements at the same moment in time. and i think that would probably be good for the financial sector. they're going to have to pay handsomely, i think, to be able to achieve that in short term. >> kbw came out with an analysis suggesting that their exposure to be in the billions and billions of dollars. now, we know that barclays paid

about half a billion dollars in fines already. do you expect the amount and potentially the severity of the charges -- i mean, do we get into criminal territory? do you expect that to escalate? >> i think it's hard to tell whether there will be criminal charges based on what one reads publicly. i think that will take a lot longer to see. in terms of civil fines, i do expect that the other institutions are going to face significant fines. similar to what we saw with respect to barclays. so i don't think that the financial sector is past this libor scandal. and i think it reinforces the need for strong financial reform globally. you're seeing that in the u.s., in the uk, in europe. >> the trick here is, with whatever piece of regulation we're enacting, whether it's dodd/frank or anything else around the world is how do we make sure that "a," we're not curing yesterday's problem and not addressing the future, and the other thing is, how do we make sure we get the right regulation without actually making the short-term things

worse? >> i think that's a terrific point. and we do need to get the balance right. i think we need to have short-term efforts to make sure that we're investing in our economies to help them grow. right now globally, the level of austerity involved globally is helping to shrink the economy. so we do need investments now. we need to make sure that our financial sectors can grow. you saw the uk government taking steps to try and increase the flow of credit. the u.s. has done that as well. >> lending scheme. yeah. >> absolutely. we need to get regulation right going forward, and we need to invest in the countries right now, deal with long-term fiscal deficits, reducing those deficits over time, but making sure we invest now so we don't hurt the economy. >> banks on the one hand, you need to hit these targets. even if you put those cap targets way out in the future, banks are going to try and hit them today, right? if they've got more capital on their books, there is less money in the economy. >> i think if they have more capital on their books, they'll be able to lend going forward in the future. they need to be able to raise

capital. to do that, i think there's capital in the market. it's going to be expensive capital, but they can do that now. that will help bring down their debt costs. and going forward that's good to be the economy. i think it will make for a stronger financial system. we' plenty more to discuss on this issue just after the break. coming up, it has been two years since obama signed the dodd/frank bill into law. we want to know if it's been effective. we'll speak with our guest as soon as we're back. stick around. ♪ ♪ ♪ ♪ [ 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.

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welcome back to "worldwide exchange." we'd like to update you on a breaking story out of the u.s. this morning. a tragic one. an unknown number of people have been injured. but reports of at least 30 to 40 and 10 deaths reported in the denver suburb of aurora. you're looking at live images now courtesy of reuters of the shopping mall where the shooting took place. according to "the denver post," sometime after 1:00 a.m., police received reports of gunshots at the century 16 movie theater at the aurora town center. the injured were taken to several hospitals nearby. with regard to who is responsible or to what degree this was a premeditated incident, we're still waiting for more details. just horrible, ross. >> yeah. we'll keep you informed on what's going on there. meanwhile, let's remind you of the business headlines. li microsoft and google reporting better than expected numbers.

banks named in the libor probe are reportedly looking to negotiate a group settlement with regulators. singapore has denied it's in talks with the london stock exchange about a potential merger. the u.s. government is reportedly looking to sell billions of dollars in assets it still holds from the 2008 financial bailout. "the wall street journal" says the assets include bank shares and subprime mortgage securities. the government is expected to sell or be repaid on about $29 billion in investments over the coming months. those sales could generate more than $10 billion for u.s. taxpayers. and tomorrow marks the two-year anniversary of when president obama signed the landmark dodd/frank financial reform bill into law. hard to believe. a new survey by the aarp and center for responsible lending finds that two years on, nearly three quarters of u.s. voters favor stronger oversight of wall street. still with us is michael barr, professor at the university of

michigan law school. and as we mentioned earlier, someone who is involved in drafting dodd/frank. two years on, we have seen the financial industry lobbying for various changes. how would you describe the rules today, the law today, versus where you would want it or would like to see it happen? >> i think the dodd/frank act is helping to make the u.s. financial system more resilient and stronger. there's more capital in the syst system. over $400 billion in new capital, institutions in our economy, an ability for the government to wind down those institutions in the future. new rules for the derivatives framework to help rein in bad practices in the derivatives markets. i think if you look across the financial sectors, the sector is more resilient. there's still a lot of important work to do to filize the rules. but i think the basic picture of how the system will work in the future is now in place. >> including the volcker rule, the sort of whole idea behind separating proprietary trading from the purer vanilla business of banking. there's still some time, still

some wiggle room as this goes into effect. >> that's right. so the federal reserve and the other agencies have proposed the volcker rule, but it hasn't been finalized. i think jpm trading losses helped deepen the sense that that rule had to be tough and strong. it also probably delayed implementation for a few months while regulators make sure they understand exactly what happened to drive those losses. to what extent those losses could have been mitigated if the volcker rule had been in place. >> it's ironic because the libor focus right now reminds you to the point ross was making earlier, you're almost always fighting the last battle. and are there still key areas, key vulnerabilities in the financial system that this bill doesn't address? >> i think it's always important to be humble about understanding what the cause of the next financial crisis will be. i think that dodd/frank puts in place tools that will help regulators better get ahead of the game. there's a new office of financial research with the ability to gather information across the financial market, to

have transparency in the derivatives market. >> it's about regulatory flexibility here. part of the problem we had in the uk with the fsa is it was ticking boxes. if you do that, you're not actually looking at what is going on. how do you get a regulatory system that is flexible in terms of will what we look at, where we look at it, when we look, that seems to me, instead of having a lot of onerrous rules, it's about flexibility being able to see what is going on. >> i think it's a mix. you need good strong rules of the game and you also need flexibility for regulators to step in when they see problems. the u.s. framework does that, gives regulators the tools to do that. we'll see whether they're successful at getting that job done. but the legal infrastructure is there for them to be able to act when they see problems in the market. >> if we get a changed presidency, how much of dodd/frank will get repealed? are you worried? >> i am worried. mitt romney has said that he's for repealing the dodd/frank act. he's for getting rid of the

consumer protections that were put in place, getting rid of the capital and margin rules and derivatives, getting rid of oversight of the investment banking sector. so i think that's a real problem. now, the democrats in the senate, if the senate is still in democratic hands will be able to block a number of those bills. but i think it's a real risk if the whole country is in republican hands that the major reforms that i think are going to make the system safer in the future could be on the chopping block. >> michael barr will stay with us. we'll have a little bit more coming up. >> we'll get his views on europe and how the u.s. is prepared for that as well. just talking about that. we're getting notes out of greece that suggest tourism receipts were down in may nearly 14% from the same month last year. i've got a number of people going to greece. all they keep saying is is how expensive greece is. >> it still is. >> it's still very expensive despite the fact they've got enormous problems. after the break, we will also talk to the european ceo of

imax. this in light of the deadly shooting at a denver theater during the premiere of the new "batman" movie. we'll also keep you up to date on the latest developments out of that story. stay with us. >

welcome back. we are following a tragic story out of the u.s. this morning. you're looking at live pictures via nbc of aurora, colorado. this is outside denver where a shooter or perhaps more than one, but we don't know at this point. all we know is that there was a shooting at a mall showing "the

dark knight" movevy premiere that's resulted in at least 12 dead and upwards of two or three dozen injured. the injured were taken to several local hospitals at the time. there were reports of tear gas being set off as well. details are still coming in. it's possible that the aurora police chief will be speaking with reporters shortly. if or when that happens, we will do our best to bring you that live as it happens. again, this at town center in aurora just outside denver, colorado, after the premiere about 1:00 a.m. local time of "the dark knight" movie. we'll follow the story for you. let's see how u.s. futures are trading now as we get closer to the open of markets in the u.s. the dow jones is implied to open lower by about 23 points. the s&p 500, a couple of points lower. the nasdaq, though, ross, is fighting to stay in the green. yeah, european stocks are looking to have their best week -- well, seven weeks of gains is actually at the moment. just down cautious here ahead of

the u.s. open, down about a quarter percent across the board. let's just show you where we are with bond markets. spanish yields very much in the danger zone as well. let's go back to aurora, though, in kl kcolorado. the police chief is about to give a press conference. >> -- children's hospital, aurora south, university hospital, denver general. i'm saying approximately 50 were injured, which we can't get a firm count right now. there may be some double counts, a victim was taken to one hospital and then transported to another. the suspect was in custody, made statements about possible explosives in possession in his residence. at this time there is a residence in an apartment building that we have evacuated, and we are dealing with potential explosives inside there.

we also are concerned about explosives in the parking lot. hence the parking lot is completely sealed off. we have all the area bomb squad teams. we've had wonderful support from all our law enforcement friends. and we are just as a precaution checking all the cars in the parking lot for explosives. that will go on for quite some time. the theater is secured. and i imagine the forensic work and the handling will go on for some time. on behalf of all of aurora and this is a horrific event, our hearts go out to the families. we have mobilized the witnesses that we could get our hands on to an area high school where debriefings are under way. i'm not sure what else there is to cover. jim will make a brief statement as well. >> morning.

again, i'm the agent in charge of the fbi for colorado and wyoming. again, we are working this jointly with aurora, and we have many other local and state agencies participating. our sincere condolences to the families and the victims of the family members who were harmed. we have a significant amount of investigators that have responded and are working shoulder to shoulder with the aurora police department at this time. i have no additional information on wounded victims. the chief covered that. and what we're doing is we're really asking for the assistance, obviously, of the public at this time. we need to talk to any potential witnesses. again, media, we're asking for discipline as well. so if you can -- if you come across people that have not been interviewed, we need to know about that. all further statements at this time i turn over to chief oates.

>> jim is exactly right. we're still getting witness information coming into us. obviously, anyone who's seen anything, we really want their assistance, to notify us. all right. i will take a handful of questions. in terms of a more thorough brief, we're shooting for 11:00 a.m. this morning. i don't know where we'll do that. probably in aurora facility. so we'll give a more thorough update around 11:00 this morning. we will not do anything between now and then. >> okay. you've just been hearing there from the police chief and the agent in charge of the fbi investigation. they're still talking about the potential of more explosives in the parking lots and in the residence of the suspect that they have in custody. we'll continue to keep you updated as we get more information out of that. other stories, though, we are following today. that's right. eurozone finance ministers are expected to give the green light to a bailout of spanish banks on

a conference call today. the euro group will approve a detailed memorandum of understanding that will determine conditions attached to the disbursement of aid. the exact size of the package, though, is unlikely to be finalized until september. now, this is social tensions keep growing in spain. mass demonstrations took place last night across major towns and cities in protest to the government's latest round of austerity measures. michael barr is still with us. michael, it looks to me, if spanish bond costs stay at 7%, that they're heading for a full sovereign bailout, let alone a bank bailout here. you know, one of the implications still for the united states financial system. >> i think there's still serious risks in the u.s. economy from exposure to europe. there's risks in the fall, particularly if greece pulls out of the euro in the fall. there's risks if spain and italy continue to suffer this kind p. i think there are steps the u.s. can take to reduce exposure. you've seen some drawdown in the money market mutual fund

industry. but the risks are still there, and they're not going to go away. and that's the dominant risk to the u.s. economy this fall is that the slowdown and potential implosion in europe then spills over and crushes the nation's growth in the u.s. economy. >> we'll leave it there for the time being. coming up after the break, we'll bring you more details as we continue to get a fuller idea of just what happened in aurora, colorado, last night. reports now of at least 14 killed in that shooting. we'll be right back. [ male announcer ] it's a golden opportunity... to experience the ultimate expression of power -- control. ♪ during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection.

welcome back to the program. we're following some tragic news out of denver, colorado, this morning. in the suburb of aurora, there are reports that at least 14 people were killed and up to 50 or more injured after a shooter opened fire in a theater during the premiere of "the dark knight rises," showing in the local area mall. now, at least ten of those people according to the police chief who we just heard from were killed in the theater. another four died in the hospitals. at least three local hospitals have been receiving patients. and we're still waiting to hear just how many of those were injured and, of course, further detail details on the shooter, we don't necessarily think there was more than one person involved at this time. the police chief said they were not chasing a second suspect. so details continue to come in on that this morning. but in the meantime, we're also going to check on our other headlines, ross. >> and there are those as well.

microsoft and google have reported better than expected results, boosting confidence in the tech sector. avoiding a barclays-style backlash. reuters reports that banks named in the libor probe are looking to negotiate a group settlement with regulators. eurozone finance ministers set to approve the terms of the bailout for spanish banks, but the deal has been overshadowed as the country has been rocked by violent protests. you're watching "worldwide exchange," bringing you business news from around the globe. >> u.s. futures haven't shown too much action this morning, but the dow jones is pointed lower by about 20 points there for the open. the s&p 500 by a couple of points as well. the nasdaq is trying to buck that, showing gains. and ross, that might have something to do with the little better message we saw in tech he

werings earnings. >> european stocks cautious. we are looking for seven weeks of gains, broadly speaking. the ftse 100 down, dax up, cac down, ibex in spain is absolutely flat. plenty of commentators already on cnbc today talking about what investors are supposed to do. here's a wrap of some of those thoughts. >> personally, i've had a bit more of a deeper aaa bond market and it might also benefit from stronger than expected u.s. growth, for example, but aussie is still the best payout. >> during the day, you know, if you haven't been able to catch the aussie move, perhaps looking at the kiwi is the way to go on this trade. on a relative value play, we think it should be catching up on the aussie relatively soon. as from an agro commodities standpoi standpoint, the kiwi dollar is

the way to go. >> we think that the focus should be away from euro/dollar and sterling/dollar and dollar/yen and to the dollar emerging markets, the dollar against the aussie and commodities. frito-lay wants to hear your idea and maybe make you rich in the process. the world's biggest snackmaker is launching a contest in the u.s. today to cook one person's flavor recipe into a potato chip and pay them $1 million or 1% of the chip's net sales in 2013. the winner will be chosen by a vote on facebook. and chief marketing officer at frito-lay joins us now. ann, why go about raising awareness about the campaign on facebook? >> well, i'll tell you. when it comes to social media, no one is more innovative than facebook in terms of creating that buzz that really gets consumers to participate with

your brand. >> what have you seen so far? >> i'm sorry, say that again? >> what participation -- what activity, what level of interest have you seen so far? >> well, actually, today is the kickoff of the program here in new york, in times square. and people will actually be able to go onto facebook/lays and be able to submit their flavor ideas. >> what's interesting is that you've talked a little bit about the kind of flavor ideas that we typically see and what they tell us about different parts of the world. what are some of the more unique or unexpected flavor combinations that have come out of your global presence? >> well, i'll tell you, you know, lays is the largest global food brand in the world. and we have now had 30 different countries around the globe create ideas from our consumers. and some of the flavor ideas have been fantastic. everything from caesar salad to builders breakfast, which is kind of your breakfast flavors

on a potato chip. we've even had a flavor called cajun squirrel. so there's been quite a wide array of flavors. and i'll tell you, when it comes to lays, when i meet someone, the first thing they say is, i've got a flavor idea. >> cajun squirrel, what on earth does that taste like, ann? i can't imagine. >> it was actually a flavor from the united kingdom. and it was actually made out of cajun spices. >> okay. >> and this person just was inspired by seeing a squirrel and naming it a cajun squirrel. >> just looking at other things here, we've obviously got a drought at the moment affecting corn and wheat crops as well. when is that going to feed into your margins, in your costs? >> you know, i'll tell you, we're in a quiet period, but one thing i will tell you is we're very lucky to have some amazing growers as a part of our business. they've been with us for a very long time. we continue to monitor the situation. and i'll tell you, you know,

we'll stay close to the situation. >> okay. i appreciate you're limited in what you can say on that. how important is what you're doing with this brand differentiation in the snack market is all-important. how important is social media now, using social media, to keep the brand in front of the consumer? >> i'll tell you, it's the way to build consumer loyalty. we are seeing more and more that consumers really want to have a hand and be a participant in the brands they love. and social media is the conduit to make that happen. >> what are you going to do on, like, twitter and other platforms besides facebook? >> well, i'll tell you, i think, you know, as people get into this contest, and we've seen it now globally, it just explodes. and as people start creating these flavors, you can actually go online, people can actually vote for your flavor. there can be competitions. that kind of engagement is what

really gets the social media space going. and having people talk across multiple platforms, whether that be twitter or whatever your social engagement platform may be. and that's what's so fun about a contest like this because everyone has their own personal vested interest. and it's something that they want to promote for themselves because they love their flavor of lay's. >> okay. i've been going for cucumber sandwiches flavor. >> there you go. >> i just hope you win and you share the prize with me. ann mukherjee, thanks very much for your time this morning. we're now going to update you on the story of the morning coming out of the u.s. a shooter has opened fire during a premiere of "the dark knight" movie in a suburb of denver, colorado. 14 killed. at least 50 wounded. this according to the police chief who we heard from just a little while ago. he will be updating people again at 11:00 a.m. local denver time.

that's, ross, i want to say something like eight hours behind where we are right now. >> six. >> six hours behind. the shooting took place just after 1:00 a.m. local time in denver. reports are still coming in. an apartment building connected to the suspect. there is one suspect at this point, according to police. an apartment building connected with him was also being evacuated and searched for possible explosives. ten people died at the theater. four others died at hospitals. meanwhile, still to come on the show, another winning quarter for google thanks to higher paid clicks for online ads. we'll break down those figures. >

welcome back to the program. microsoft has posted its first quarterly loss since going public in 1986. the company did warn two weeks ago it would take a $6 billion charge in its fourth quarter to write down its struggling online ad and web business. excluding items microsoft earnings did beat forecasts although revenues came up a bit shy. the company is booking fortunes in coming months on its new windows 8 software which will launch in october. and shares up about 2.4%, ross. investors not punishing them too much for that writedown. >> google's second quarter

profits are up 11%, beating forecasts on high paid clicks for online ads. revenues including motorola rose 35%. the company wouldn't say what its plans are for motorola after completing that acquisition last month. as expected, ceo larry page was not on the conference call. he's still recovering from losing his voice. google after hours in the frankfurt trade this morning up 2.8%. joining us on the telephone is christopher hickey, partner atlantic equities. also still with us, michael barr, professor at the university of michigan law school and a cnbc contributor as well. chris, let's kick off with you first of all. let's talk about microsoft. they had that writedown on their own online ad operations. but you're fairly positive on the stock. how much are you expecting them to deliver from windows 8? >> well, i think as you say in terms of the writedown, that's been fairly well flat. and i think what's interesting, if you look at expectations for windows 8 and the comments the company made around its windows business over the next 12 months, there really doesn't

seem to be much in expectations for windows driving any kind of significant pc refresh or indeed having any success at all on tablets. so frankly, we see the upside, and with the stock on just ten times, what should be fairly or very beatable estimates. we think the stock can work from here. so it's a little early to say just how much success they're going to have on tablets. we have microsoft holding just low single-digit percentage share for the tablet market over the next 12 months. but based on what we've seen of windows 8 so far, we very much hope that's beatable. >> chris, i'm curious if you can help us get the signal from the noise this tech season -- this tech earnings season, that is. seems like for every spate of weak earnings, we've had then a set of stronger figures. what impression are you getting overall at this point? >> it's interesting. we think microsoft kind of epitomizes what we're seeing from most of the tech bellwethers. if you go back two or three

weeks ago, there were concerns about the overall tech environment. you had a couple of fairly nasty preannouncements particularly in the software space. it actually seems as if demand is holding up pretty well. and we heard from ibm the day before last that demand in the last week of the quarter was pretty darn good, as they said. and we saw in microsoft results that enterprise looks reasonably stable given the macro environment. and plus it seems that pc shipments for the quarter weren't quite as bad as expected. that's obviously helping intel and microsoft basically report results for the better. against the background of low expectations, it seems to us that tech spending is actually holding up pretty well. >> and chris, just going back to your microsoft call, is that just, then, because of the new products coming out with windows 8 and the launch of the tablets? i mean, there's a lot riding on that. >> there is a lot riding on that, but our call isn't just the product cycle call.

we've covered microsoft for 12 years. it's the first time in around a decade we've actually had a positive recommendation on the stock. and what's interesting this time is there is a very strong product cycle coming. it should deliver gross and operating margin expansion which has been in focus for microsoft investors for many years. but interestingly going on at the same time, it seems to us that microsoft's positioning in cloud computing is really improving. and it's basically been concerns over cloud computing that have weighed on this stock and its multiple for the last five years. and we think with office 365 and several other cloud products starting to gain some traction, we think that the multiple compression could start to reverse and, of course, the products cycle should only help that, too. >> that's christopher hickey, partner at atlantic equities. chris, thanks for your thoughts this morning. other news in syria this morning, now getting reports that up to 30,000 syrians have fled to lebanon in the last 48 hours alone.

reporting the u.n. is coming up with those statistics. 14 people have been killed. upwards of 50 injured in a shooting at a must havevy theater during the premiere of "the dark knight" outside of denver, colorado. that was in the early hours of the morning just after 1:00 a.m. local time. absolutely tragic story. one gunman in particular is being pursued at the moment by police. there are only reports that he is a youngish adult male. there will be another update by the police at about 11:00 a.m. denver time. they're seven hours behind us here in london. the police had also evacuated an apartment building connected with the suspect who is reportedly in custody. the toll of injuries is still coming in. ten people were killed inside the theater, ross. four people were killed after being taken to the hospital. it's just unspeakable. it's horrible. it's horrible. we'll continue to follow this

story as we get more reports in throughout the morning. our headlines, microsoft and google report better than expected figures, boosting confidence in the tech sector. banks named in the libor probe are looking to negotiate a group settlement with regulators. and the singapore exchange denies it's in talks with the london stock exchange on a potential merger. also still to come, we'll look to aide had results from the likes of ge and xerox when we come back. ♪ ♪ ♪ ♪ [ male announcer ] what's the point

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a group of large banks implicated in the libor-setting scandal are seeking safety in numbers. this according to reuters which says the banks are looking to reach a collective settlement to

avoid the negative publicity that surrounded barclays' admission of manipulating the interest rate. still a deal may be hard to reach considering the different regulators and varying charges potentially associated with each individual bank. still on set with us is michael barr, professor at university of michigan law school. we were talking a little bit about financial reform. you had a lot to do with dodd/frank. when we talk about libor, though, how concerned are you about potential changes to this rate, the impact that could have? should the average, you know, american tuning in be really concerned about this? >> i think they should be concerned because it's indicative of a larger problem in the financial sector which has been a trend towards pushing the edge of the rules. i think we need to have strong rules of the game and strong enforcement across the financial sector including on problems like rate fixing which is quite undermining trust and confidence in the financial system and may have seriously misled investors in the financial institutions involved in terms of their financial health at the time of

the rate fixing. >> it's the sort of thing we dent really need, or investors didn't need it, but we don't need it on top of other things at the moment, spanish bond yields above 7%, the fiscal cliff as well at the moment. you were talking about, you know, we're going to get very worried about europe and whether the u.s. is prepared in the fall. what about this fiscal cliff at the end of the year? is that going to be resolved or not? >> i think it's a real risk. the fiscal cliff is quite serious. it will mean a significant contraction in the u.s. economy, according to estimates from all parties. so really everybody has to come together either in the lame-duck period in november or in early january and reach agreement on a long-term path for fiscal deficit reduction at the same time that invests in our country right now because the u.s. is not growing strongly enough, and we need to make the investments now in infrastructure, in jobs, in teachers, in firefighters, in police officers to keep our economy growing and keep it strong.

>> okay. michael, a final thought in just a second. three guns have been found at the site of the shootings in colorado at a movie theater where people were watching the premiere of "the dark knight." again, three guns were found on location here. this according to a police official quoted by dow jones. the same official also saying the suspect for these shootings which have killed 14 and injured upwards of 50 is a younger adult male. >> yeah, this was supposed to be the biggest opening ever for a movie as well, "the dark knight." we'll keep our eyes on that. at the same time, european stocks today ahead of the u.s. open are now down on the session lows. the cac about 0.6%. very little on the u.s. economic agenda, but still many high-profile earnings reports. just before the bell, we'll hear from ge, schulberger, et cetera.

u.s. futures are still at levels we saw earlier. the dow jones industrial average pointed lower by almost 30 points. the nasdaq is trying to fight to stay in positive territory. the s&p, though, is pointed a couple of points lower. so ben liechtenstein, president of autotraders.com joins us now for a preview. ben, a quieter day here potentially in markets. what are you going to be keeping an eye on? >> well, i'm going to be expecting the unexpected. everybody's looking for a very quiet trading day, as you mentioned, with no data scheduled for release. u.s., again, potential for basically a friday summer-type trade. again, considering some of the activity we've been seeing over the last couple days, there is the potential for a lot of activity or energy in the mark as you mentioned. a lot of major markets, some critical levels. i was really fooled this week because i thought it was going to be all eyes on the fed and it turned out to be all eyes on earnings. there were a lot of traders out

there that were disappointed this week coming out of such a dismal retail sales number. a lot of traders thought the fed was going to act. i think there was some shorts in the market that actually thought if we were to get some sort of qe3, then we would see a little bit of a selloff because the market's been anticipating that so much. and so there's probably been short covering recently which has brought the market a bit higher. key levels yesterday were breached but without a lot of energy, without a lot of conviction, without a lot of follow-through. i'm talking about the s&p at 1375 level, that was the high from the beginning of july. >> and ben -- >> but we're still short of 1400. yes. >> i'm just wondering, isn't this how all rallies start? no one really believes it. no one buys into it. and then in retrospect, it seems so obvious. >> no question. no question. this is a very low volatility, look at the vix going below 16 yesterday. this is a slow grind higher right now, and it could be a sleeper grind higher because again we're doing it in the summer months. it's basically -- it's a frog broil, if you will. but again, there's a lot of concerns out there.

crude's inching above $90 a barrel, sustained trade up there. and amidst all this activity, you have to focus on the divergence we've been watching, strength in the nasdaq over the last couple days. both days it was up over 1%. but look at yesterday. the russell was actually in negative territory most of the day. again, there's a lot of activity happening right now. and so i'm -- anything could happen today, basically. i say expect the unexpected. >> michael, let's just bring you in on that. what investors seemed to have done, and ben talked about we concentrate on earnings. what they've done, they decided to put growth in the eurozone and the financial crisis to bed for a few weeks. they've decided things aren't going to be implemented until the autumn. do you think it can stay that way? you know, we can sort of just get through august without anything happening with yields where they are? >> i'm quite worried about it. i think that it would be a mistake to think that the european crisis is in a quiet phase. i think there are lots of things that can go wrong between now and the fall. and in the fall we're facing

potential review by greece that it will have a hard time meeting. so i think -- i would expect the next five or six weeks to be a period to watch quite carefully to be worried about what's going on in spain, in particular, but also in italy and certainly in greece. and i think that in the leadup to the u.s. election, there's going to be a lot of concern about whether europe can continue to grow or whether europe will be a drag on the u.s. economy. >> michael, great to have you on this morning. thanks very much for joining us. michael barr, professor at university of michigan law school, cnbc contributor as well. ben, we wish you a good day and the weekend had it starts for you. >> thank you very much. >> jo one suspect is in custody, ross, in that shooting at the denver movie theater has killed 14 people, upwards of 50 injured. you're looking at live pictures there. the police chief just updated people on the situation. the shooting occurred just after 1:00 a.m. local time. and he will be back with more details at 11:00 a.m. local

time. we'll be following, of course, the latest. >> more on "squawk box" which takes over right now.

good morning. today's top stories, the libor scandal unfolds. banks in the interest rate rigging probe reportedly are considering a group settlement. shares of microsoft and google getting a boost following better than expected quarterly results. up next, general electric, the dow component headlining earnings central this morning. it's friday, july 20th, 2012. "squawk box" begins right now. good morning, everyone. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and steve liesman who is in for andrew ross sorkin