hello and welcome to today's edition of worldwide exchange." i'm ross westgate. >> i'm kelly evans. these are your headlines from around the world. . stocks fall across the globe as fears weigh on spanish yields, second region set to ask for aid. >> shares in several italian banks are suspended from trade after falling sharp lui. >> the only green spot on the map, phillips confirmed its target for next year. ceo less optimistic. >> i continue to caution about the general economic outlook. that, of course affects philips but at the same time i said philips is a case of quote

unquote self-help. so philips one of the 17 stocks today, one hour trade here in europe that's in positive trade. the rest heavily weighted to the down side. this follows heavy losses on friday whene started to get worried about what was going on in spain. one hour into the trading session this is what we've got. there are no sectors in positive territory. as far as the stoxx europe 600 is concerned. let's bring it up to speed with these indices. ftse 100 down 1.2. cac down 1.2. cac down 1.5. we'll show you the major banks around europe.

thank you very much. deutsche down 3.3. bank of santana down 2.6. 600 basis points is the spread. we have been below the 1.14%. ten year spanish yields up. ten year are rising again. they are both higher than ten year irish debt. what's happening is we see these yields rising that's core yields are heading lower, treasury hit a fresh all time low over the course of the session. ten year treasuries 1.42%. we've been lower than that. that's the all time low since about the early 1800s. i'm sure kelly knows because she

likes that sort of stuff. ten erjgb. quick look at where we are with the currency markets. euro/dollar continue to press lower, 1.2096. kelly you got some news? >> even as we're discussing weak market conditions the bank of spain is out saying second quarter gdp was down 0.47% follows 0.3% decline in the first quarter. we're finding out recession is deepening. that puts the spanish economy is now down in terms of total size 1% year on year. quite a sharp decline for any recession and underscores the weakness we're dealing with. tracey chang has more on the global market action out of asia.

tracey? >> that's right. very ugly start to the trading week here too. we're awash in the sea of red. thanks to spanish debt worries but concerns over chinese growth. hong kong stocks suffered deeper losses down 3%, index heavyweight. citi securities, china's largest list of brokerage the umbrellaed. after the company agreed to buy a unit for 1.25 billion. they dropped about 1.3% marking the lowest closing since march of 2009 and extending five week loss. nikkei had a five week low. local exporters with large exposure to europe were hit by a stronger yen. south korea's kospi dropped 1.8%. investors sold banks and energy stocks ahead of a busy week of earnings report.

australia's dropped 1.7%. the biggest single day decline since early june. india sensex is feeling the regional sell off, down 1.3%. shares of maruti suzuki fell 6% in early trade after the carmaker said it has no idea when its factory will reopen. more on that from mumbai a little later. that's where we're at right off the bat. >> not a pretty start to what's actually quite an exciting week here in london. >> we'll come on to that. summer is here. that's the big thing. >> i'm in a sleeveless top for it. exciting times. >> long may the summer last. a couple of days anyway. it's all about spain. half a dozen of explains could turn to government for support. we showed you where it's going

with the ten year. it's worth pointing out the five year 7.36%, that's a fresh year on year high. also the three year has been high. stephane is in madrid with more. stephane, fairly clear from last week, what we've done is the memorandum of understanding, it failed to break the links between the banks and government. the spanish government has to take responsibility for everything. now we have the regions involved as well. how much extra debt might the regions add on to the sovereign? >> reporter: it's really impressive because just for the second half of this year, the regions will have to repay 63 billion euros in debt. if you look at the largest regions, it has a total debt of 42 billion euro.

it's an impressive amount. 18 billion euros because clearly it's unlikely to be enough to bail out all the spanish regions which will need some help in the future. the government will have to bail out six regions in the first term, the first one is the region of valencia. the next one which is not expected, according to a local newspaper will ask for 200 to 300 million euros to help repay its debts in the next couple of weeks. and of course all the focus on the concern is not on the region of catalania needs to repay 750 billion euros. there's two consequences.

first is the emergency fund set for the regions will be enough, obviously not or probably not. 18 billion euros, that's to compare with 36 billion euros repayment just in the second half. the second question is will spain need a food bailout. if you look at the yields and the record level of yields we're seeing this morning it's clearly unsustainable for the spanish government and if we continue at this level of course spain will need probably -- spain will need a full bailout or any urgent action in the foreseeable future. >> all right. stephane, thanks for that. joining us now for the first half of today's program, will oswald. thanks for joining us. how quickly is this unraveling? what's the next stage of this

story? >> one of the things that we've been talking about for really some time now is that globally we're talking about something that looks a bit like a deleveraging black hole. what we mean by that you got across multiple different economies both in the private and public sector you got very large amount of debt levels that you need to bring down but of course over multiple years. this idea that we can get some quick adjustment, we have the process that goes through, everything is moving forward isn't going to happen. so when we look at a country like spain, if we look at it on a standalone basis, what can we do, looking at it in isolationist is the wrong way. spain is not sustainable. this is a workout process on a multiyear horizon. what provides you to step over "from the edge" is support whether it comes from the troika, they are going to greece this week, the ecb stepping in,

multiple forms of support need to be put in place. none of them is going to be a panacea that solves things immediately. this has to play out over a multiyear horizon. that's what we're struggling to deal with whether investors in the market, whether it's demand on the street. that's what we got to deal with, long slow drawn process of adjustment. >> multiyear process. does that mean asset classes will be, therefore, hampered for multiyears and therefore yields, core yields could go even lower? >> certainly on a core yield basis, you can see yields going lower. what i think is really important to identify within europe even with negative nominal bond yields you're still getting demand for that type of paper which tells you something about the issue of quality of paper that people require. that people are looking for on the corporate level as well you look at things like turns

ri-party. i don't want to put money on deposit i want some form of collateral. that's the only way i'll trust my money is safe. they are willing to pay a premium to find the collateral behind that. when that activity takes place as well ever since lehman there's been much stricter requirements how that collateral can get used. we talked about that issue. taking that paper on lending it. nobody wants that to happen between. on that front you're getting yields pushed lower. the other fact you got is you got money moving into emerging markets. you're seeing money coming into bond market out here. this is a process that's going across multiple investors. we see it from global fund. >> talk about collateral, the ecb will stop taking greek debt as collateral this week. we don't know how long that will

last. greek government will announce a lot of budget cuts. it was said yesterday that athens would receive no more cash if it failed to comply and termination of funding would leave greece to be smarter to leave the eurozone. >> the european union has agreed to press sanctions on syria. they tightened the arms embargo on syria with mandatory inspections of suspect cargos. better than expected earnings at philips in the second quarter. the courtroom electronics giant has managed to swing back to black. thanks mainly to an increase in hospital sales. it's on track to maech it's financial and cost-cutting targets. but the ceo did sound a cautious note. >> feasiibility is not very

good. >> will oswald stays with us. it's amazing to me on a day when market action is so ugly phillips manages to come out and buck the trend. can we expect this divergent performance to last? >> yes. first it's undergoing a transformation from a c company to a b company. their forecast is on health care and lighting. so we do expect that the transformation to continue and history will be back to what ibm has done previously by selling its computer business.

what philips has done is sell its tv business. so now 60 almost two-thirds of philips business comes from b 2 b. it's more resilient to the current situation so we expect philips to continue doing well. >> it tells you how the world is shifting, health care remains one of those few industries where there's growth. it's support by governments in much of the world and governments are moving into austerity mode. should we be able to bank on this as a source of future earnings? >> well there's two ways to look at it. number one, health care is important. that's what will cost the government. so yes there will be cuts here and there but phillips is not just purely -- they also have another division, they are doing

well too. so if you compare that to the consumer business much more volatile. you have competition from lg and sony. in a way i think we'll be doing well. >> on that consumer electronics side do you think philips will rely even less on that unit because of the likes of samsung and lg? >> yes. definitely. especially the fact that they have sold their business, even other products related to tv, blu-ray players, sales will be impacted. so we do expect that over time the revenue will be getting better. >> what kind of performance do you expect out of philips for the remainder the year? >> from financial point of view,

the fact they moved away from tv which is the black sheep of the family, effectively it means the company can come back and focus on the b2b business. >> thanks for your thoughts this morning. julius baer seen its profits up. managed to see an upset in revenue. caroline, the sun has come out. >> that's bad. actually the sun has come out here in zurich nice place to be. the sun has come out for julius baer because at this point it's the only gainer on the swiss exchange. it was up by more than 1.5%. numbers were clearly than expected. part of it was down to cost-cutting. goldman sachs notes this is a moderate positive surprise on profits and assets under

management but less so on capital levels. let me just walk you through some of the details. the net new money figure which is the closely watched figure for this asset manager was 5.5 billion swiss francs for the first half the year and that annual growth number is above 6%, above its medium term target as its management came in at a record high. and the adjusted net profit rose by 13% to 221 million swiss franks. in terms of the company's outlook for the second half the year, julius baer was cautious and said the volatility is here to stay and we did also want to get more news on its m and a strategy because it had confirmed a couple of weeks ago it was in talks with bank of america about the sale of merrill lynch wealth management business and could be worth up to $2 billion. this morning when i spoke to the

ceo, look the situation is still wide-open but it would be a good strategic fit. on that note, ross, back over to you. >> we'll take a short breather. we head out the tokyo where the prime minister of bank of japan held their first meeting. we speak to a guest who say german bonds may not be the safe haven you look for. we preview mcdonald's earnings with a san francisco analyst who says he's cautious on the stock. >> cnbc has an exclusive with presidential candidate mitt romney. he'll be on with larry kudlow later tonight. so we want to know what do you want to hear from the former governor and would-be president. scene us an e-mail and leapt us know what you think at

worldwide@cnbc.com. we have some pretty comical suggestions already coming in.

. all right. credits off record high for spain.

630 basis points. cds up across the board floir to 555, france 182. >> that's right. the libor investigation is reportedly set to zero in on individual traders in the u.s. and europe as officials prepare to file criminal charges in the next few weeks. u.s. prosecutors have begun notifying lawyers arresting could be imminent. meanwhile regulators in europe are focusing on a ring of traders at several banks and are probing emails for signs ever collusion. barclays is trying to resolve its leadership crisis. a number of parts in uk press said barclays investment bank has pulled out of the ceo race. the bank's deputy chairman also turned down the chance to become chairman despite shareholder

support. it appears to be the job that no one wants. >> why would you? >> right. >> you won't get thanked for it. >> the uk, public, and, you know -- >> again, you have to take it like rbs, the man has got nothing but opium poured on him. why would anyone want to change the culture. >> that makes you wonder too about governance, the world's biggest financial institutions going forward. are they getting the right person for the job. >> the atmosphere has become so poisonous that actually, you know, i can't see it. you can't get paid for it. you're not going get any credit for it. >> is there any degree where barclays should have had a better succession plan in place or they assumed they had several players and those ears have peeled away.

>> they would have had succession plans. you can't plan for the chairman departing and everyone else beneath him. how do you plan for that. >> fierce fighting continues in syria. violence is said to be particularly severe in the capital damascus. forces loyal to president bashir assad are deploying tanks and helicopter gun ships to regain control over suburbs held by the free syrian army. heavy rain storms hit many areas of china over the weekend. beijing saw its worst flooding in 60 years. rainwater swept across towns and cities killing more than 3,000 people. deluge sparked criticisms over the reliability of beijing's new infrastructure program. hong kong tropical storm has intensifyed into a signal three typhoon. hong kong observatory will issue

a typhoon eight if local winds strengthen further. in that case all markets, schools, offices would close down. >> amazing. president barack obama met victims of a shooting spree that killed 12 people and wounded 58 others during a midnight showing of the movie "the batman rises." he addressed grieving families at the university of colorado hospital. >> although the perpetrator of this evil act has received a lot of attention over the last couple of days, that attention will fade away. at the end after he feels the full force of our justice system what will be remembered are the good people who were impacted by this tragedy. >> it is parliament's elective

former finance chief as the country's new president. more now with hector in mumbai. people are saying this is a good move, they are receiving it well? >> reporter: well, you know, it's actually pretty much factored in terms of him becoming the president of india because there was so much support in terms of the most of the parties working for him beforehand. it was a formality yesterday in terms of him being the president for the country for the next five years. just to put things into perspective it's expected to be a strong move, actually, coming in, in terms of the congress because remember that he was actually one of the most important people within the congress before he actually turned his position into presidency. now just to put things into perspective besides him becoming the president this is an

important within to, apparently, for policy reform. remember the monsoon session in the parliament starts on august 8th which is basically two to three weeks away and this is expected to for the presidential polls and before the monsoon session begins. key amount of time where the government could move on certain amount of policy refund. remember that policy refund we'll be looking for like a price hike which is to reduce the subsidy. >> okay. thanks very much for that. we'll come back to you in just a second. we told our viewers about the shares tumbling. what's with that right now? >> reporter: well, with regards to the plans there was a press conference held by management on saturday. and they had in the press

conference indicated the intentions which they have and currently they will keep an indefinite lock down on the plant which is basically the plant which is affected at this point in time until they ensure that all the health and safety of the workers and management is completely intact. now there's a lot of speculation whether it's a particular problem for the company or whether it is a systemic problem that's emerging in terms of labor issues. what we do under is that maruti will have a lock down, the stock has lost another 5% and been weak on trading sessions since this issue was brought up. >> thank you. >> let's bring you up to date on some comments out of spain this morning. more cuts, more reforms and more mechanisms to strengthen the economy. this is what deputy governor of the bank of spain is saying and

this after the bank of spain reported that the spanish economy sla nk by 0.4% in the first quarter. the spanish economy has now contracted by 1% but the story is doubling down. >> more cuts. what more are they going to cut. >> if you correlate growth prospects i bet it would be higher than knigit has to do with deficit levels or debt to government gdp ratios. if anyone wants to run that for us and send us the results. >> still to come, german bunds has enjoyed a boost. our next guest says don't buy the safe haven myth. that's a big call in this environment. >> we'll be right back.  m

around the globe. stocks fall across the country on concerns about spain, the spanish ten year bond hits a high. the economy has contracted even more in the second quarter. >> financials lead the decliners. philips only green spot on the map after beating expectations after the second quarter. confirmed its target for next

year. feasibility is not very good. i caution about the general outlook. that affects philips. at the same time i said philips is a case of quote-unquote self-help. banks are the biggest losers today. striking down ibex 3.9%. a number of italian banks are down, over 1.5% for the ftse and the cac a little bit less for the xetra dax. >> let's take a quick look what's happening across for recognizes. the euro is at a two year low against the dollar dropping below 1.20. there are strengthening across the board, euro strengthening against sterling there as you can see or weakening that is. the australian dollar is holding above parity against the u.s.

1.2078 is the yield there. >> german treasury set to auction up to 3 billion euros in 12 month bills. this is german bond yields hit fresh record lows. we have been below 1.14 this morning as well. italian yields 6.39%. spain 7.53. record low yields on treasuries as well, 1.412%. jgb down, gilt trading on its all time loss as well. but, should investors be placing their money in these historic low yields? joining us is josh rosner. look, the safe-haven trade continues, negative yields and short term paper in german, netherlands, record low yields in many core debt markets now.

what happens next? >> well, i think ultimately people are going to start realizing that first of all money flows to the german banks, to the core bank, through the u.s. money market funds have stopped, most of the u.s. money market fund have ceased their floss into the european banks which impacts short term funding and on the government side it appears that the swiss seem to be allocating away from europe and it seems specifically away from the bunds more recently. the bis is talk about capital flows out of germany slowly. i think that ultimately there's going to be an increase realization in the markets that any solution will increase the cost to germany, the worst case solution is a full breakup but that could come as one of the peripheral members leaving. at the end of the day you have to remember that over 60% of all the euro area bank debt of the

periphery that was held was held by german, french and belgium banks and ultimately those exposures still reside in the core. >> josh, your call is that you short the bund from here, german bunds but we're seeing these yields go to fresh record loss and the scenario you're laying out which is basically one of inflation is not the one here this morning, definitely we're in this sort of debt deflation zone here. what's the time frame on your call and when and why should we expect that markets will pivot in the direction that you're saying? >> right now what i think we're seeing we're seeing reflectionive response largely of retail floss and institutional flows that have yet to get the message. central banks are recognizing the need to diversify away from europe. we're seeing that in the uk and australia, singapore, hong kong, some of the beneficiary countries are seeing that. and i think that over the next six months as we recognize that

any solution, whether it's a breakup or full fiscal union will increase the cost to germany significantly that's going to become more clear. >> question from our guest host will. will? >> hi, josh. so you talk about money coming out of bunds. you're talking about a deterioration effectively in the credit outlook for germany. this is one of the same things we heard for the u.s. last year when we had the s&p downgrade, we had the debt ceiling negotiations. i can under there's concerns. clearly we're seeing money going into other markets. it's a large bond market. where else do you see the capacity to absorb the type of outflows you're talking about? >> first of all significant differences between the u.s. and germany. u.s. obviously has some fiscal difficulties ahead of it it is still the global reserve currency and isolated from the european crisis. there's no asymmetric shock taken by having to recognize a

fiscal union which is different than europe. so i think that's one key difference that needs to be remembered. the end of the day, if germany end up recognizing a full fiscal union that means that you need to see harmonization of yields across germany over time but initially the safe-haven trade end up gone. >> where would those yields go? where would the money outflows go, josh? treasury? >> that's the points. we're seeing them in treasuries. we're seeing them in australia. we're seeing them in the pound or in the gilt market. i continue to expect that we'll see them throughout parts of asia. and i think that that's already begun certainly from a central bank diversification perspective. >> will, back to you. >> hi, josh. when we look at a lot of the investors that you have in europe, let's say we take a lot of the united states companies, we have sovereigncy coming down the pipe in 2014, a lot of types

of these large investors tell what type of currencies they can hold their investments in. we have the fiscal cliff coming at the end the year. i hear you on the risk for germany but there's a lot of constraints on where that money can go to. >> be careful. >> you're talking about germany -- you look at the u.s. we look at the government on a standalone basis. you got some issues there. you won't in the states. you're looking somewhere in the order of $5 trillion pennsylvania deficit. you got a lot of problems in the u.s. as well. this is not just a germany alone issue. >> the u.s. has a central bank that's willing to do what it needs to do. europe as a group has yet to recognize the ecb's abilities and germany has prevented the ecb really from acting in a manner that the u.s. fed can. on top of that it's important to recognize the u.s. fed has

already started to push u.s. banks to reduce their exposures to europe dramatically and as i said we've seen that most recently in the closing of money market funds into europe where those really reflect the core because u.s. money market funds hatch gotten out of the perry ferry. >> that's josh rosner. great discussion this morning. will oswald our guest host will stick around for the rest of the hour. in japan if government sauce its economy faces growing down side risks from problems overseas. we have the story. >> reporter: thank you. the cabinet offices july report points out the economy is moderately recovering, helped by solid consumer spending and post-quake reconstruction demand. what worries the government is the slow down in u.s. and china plus europe's debt crisis code is interrupt financial markets and slow down exports. another concern is strong yen.

present out a fresh warning about the currency as it posted new highs against the euro and the dollar. he warned that he will take decisive the against excess volatility caused by spe speculators. prime minister noda held a two hour meeting behind closed doors. no details were released. but a government official said it would be a frank conversation. analysts speculate that the pair may have discussed ways to bolster growth and counter japan's deflation. >> the power company that operates the disaster hit fukushima nuclear plant is still not fully meeting safety obligations. one finding from a government panel looking into the disaster. the panel said tokyo's electric initial report is false. it raises doubts about the readiness of japan's other atomic plants.

will is still with us. will, give us your view of the japanese economy. over a year now from the nuclear disaster and the floods. where are we? >> i think if you look at the outlook for japan, it's a long term structural difficulty that they got. don't forget as well while they are making this transition away from nuclear power that has meant you got limits on the electricity usage in the household sector. still an economy struggling to find its role in the global economy looking ahead. look at the competition, we were talking earlier to the competition of philips and lg and samsung. why are we not talking about the big japanese companies. they have not figured how they will play a major role in the global economy, where will they invest and grow. you got great companies sitting on large amounts of cash they are not coming to grips how this can become a major driver. >> okay. stick around. more to come from you.

>> let's get a look on what's on the agenda in asia. hsbc releases its preliminary reading on china pmi data. that kicks off a full day of flash pmi. glenn stevens gives his thought on expectations. and india will report first quarter earnings. >> shell is revolutionizing energy landscape. will it be enough to grant u.s. full energy independence? trade links coming up next. #a#a#a#a#a#a'9#a+=#a#a#a#a#am#aa +g#a

the look for the summer, i haven't got them on, the look for the summer is big choppy, muttton chop side burns. >> you should grow them in honor of bradley wiggins. >> "the cycle"ist wiggins made history. he had a winning margin of 3:21. historic victory. >> britain took second place as

well. very strong there. >> wiggins teammate helped him win. in golf britain may have won tour but the winner of the tour was els. he won by one stroke. tiger woods finished third in the tournament. it was more of a collapse from adam scott. and, of course, olympics. they will be dominating from the end of this week and the olympics, how big of a home team advantage will team have. britain one only one gold medal. our next guest has written about the money and time invested since then to make sure that the national embarrassment won't happen again. john, thanks for joining us. in some ways the historic victory of bradley wiggins is related to britain's olympic development because cycling was one of those sports that britain said we can do this and invested

time and money into that and actually in that tour, victory has come out of the olympic success. >> that's right. britain's turn around as an olympic power has been specifically about targeting sports where britain is most likely to medal. throwing money at those sports where british athletes elite world class and most likely to -- >> many of those sports, the ones you sit down on. cycling, rowing, sailing, riding, i mean these are all our biggest medals and involve sitting down. >> makes it sound easy. but it's not all that easy. yeah. essentially they divert ad lot of money -- >> we've lost your mic for just a second. try to pick it up. if you can pick it up. makes it very difficult. i want to hear what you have to say. >> you mentioned the sports that britain is naturally good but there's also the sports where it seems a much easier path to

gold. because the depth tore experience isn't quite there and that's what we saw china do. try to identify sports where there was less competition they could get in right away. >> exactly. that's right. britain has been sort of fairly ruthless in that. agency they established in 1987, uk sports that divert lottery money into elite sports. it's orwellian in its outlook, ruthlessly targets these sports. >> if you don't perform you lose your funding. >> absolutely. >> crucial about identifying success or failure. >> yeah. they even targeted these athletes they refer to as system blockers, athletes who are past their prime on the down side of their career who are capable of competing at world level but not likely to medal. they targeted their funding at young, upcoming athletes. >> post-london, does the system stay in place? will they keep trying to up the

medals going into rio and beyond? >> that's the big question. the big fall off you see in olympic teams is four years after they host games. china, for instance, not expected to do as well as it did in beijing where it obviously won the gold medal count, more gold medals than the u.s. unlikely to do sign london. >> if you shave the mustache, you're there. >> i'm halfway. >> now, just shave the rest off and you got it. >> yeah. >> thanks very much for coming by. the development of shale resources is set to revolutionize global energy trade. our next guest says there's a lot of work to to be done before america can achieve energy

independence. we're seeing already this new found energy availability in the u.s. transforming sort of the way that energy moves around the world. what are some of the most immediate impacts that we're witnessing? >> most immediate impact has really been on the u.s.'s need to import light sweet crude. you can see that the u.s. only imports 1 million barrels a day of that. all the rest is medium to heavy. as a result of that you are starting to see lighter crudes trading less electronically compared to some of the more heavier barrels. very strong impact on west african groups like nigeria that aren't doing particularly well because most of those exports go to the u.s.. >> it's interesting because people are getting pretty excited about u.s. energy independence but you're saying not so fast. >> absolutely. it's quite important to make the distinction that this is light

sweet. all the refineries in the u.s. have upgraded. basically that means that they want to process from heavier crude coming down from canada because two years ago canadian oil sands was the big thing and not shale. that's been a very, very big difference in terms of the quality of the crude coming out versus the demand that's there. that's a very big role in making u.s. not self-sufficient in our view in the near future. >> what about the shale gas revolution. how much will that contribute to energy independence given so much the u.s. run is still on oil. >> that's the longer term question that needs to be addressed and arguably that's where the big things can change. the first thing is that when the u.s. allows exports or not and in our view we still don't think the u.s. allowing big scale exports. if that's the case then yes maybe in the future we can see some more substitution taking place between gas and oil.

but the hinge for that to happen the infrastructure, the domestic infrastructure needs to change and that's hundreds of billions of dollars. we're still not looking at anything overnight more like a ten year, 15 years. arguably if the gas to oil price stays this high yes maybe we can get some substitution come through. >> will? >> hi. i have a question here. this is will oswald. one of i had colleaguean in depth report on the shale oil sector in the u.s. and what we found from that was the type of transformation that you need in the u.s. to move to energy independence, especially in the transport sector. that's the biggest consumer of oil that you have to move that on to a natural gas type of infrastructure. we're looking at a very long way off even on a ten year horizon that's very optimistic. legal impediments of the u.s. exporting. it's an exciting prospect but a lot of the hope putting on this

sector is transforming the u.s. is getting -- we're getting too far ahead of the curve here. would you agree with that? >> absolutely. that's exactly spot on and that's what we've been saying, like you said, first investment required is absolutely massive. a lot of people tend to get confused between the gas shale and shale oil. one of the most interesting things that's come up in the last month with fall in oil prices at $80, $80 is still a very high price. $80 wti a lot of the companies are saying at these prices we are starting to see a slow down in drilling. this is expensive stuff. not cheap. not your conventional stuff that gets out at $30, $40, $50. that is something to keep in mind. >> thank you for joining us. for more on our trade links series just a reminder you can check out the rest of the series on our website. every week we look at how the financial crisis is affecting

the global trade and the impact on how you do business around the world. watch it every monday at 10:50 central european time and plenty more on the website tradelinks.cnbc.com. >> ibex down on its session low, 4.3%. final thought from you here. what struck me is we got no major policy events in august really for the eurozone and no big sort of meetings planned. you know, the esm isn't going to get approved by the german constitution courts until september. we're going to be left to our own device. does that start you worrying? >> i think if you look at the way that investors have been behaving over the past month or so it's almost a case that no news is good news. it's the absence of bad news

that's been supporting the market. you had a lot of money parked on the sidelines. the fact we didn't have a deter rigs still further means you had money coming in to risky assets. i remember being at a meeting. public debt managers about a year or so ago and the hopes was that the finance ministers would stop talking. a lot of comments coming out were not helpful in this process of adjustment. you want those discussions behind closed doors. no comments coming out. makes it easier to get to grip of thing. ybe good thing to have a little bit of a break from a lot of the policy talk coming out. >> will, i also wonder, you know, we see these comments this morning from germany that almost seem to indicate like look they are not terrified about greece leaving the eurozone any more. is that just pose during or are investors right to be spooked about the implications that could have? >> there are negative implications of greece leaving the eurozone. i think we need to be clear

about that. the whole intense about the eurozone in its first place in its design the office make it hard to leave the eurozone in order to get that credibility in place. if we show a way a country can leave the eurozone that's a risk for the markets. you think about it from your own perspective you got your money in let's say a spanish bank, greece laembgs your deposits go, you keep your money in that bank that's a big problem. >> we got to go. thank you for all of your thoughts this morning on a troubling morning. >> still to come, no one is safe even the home of the big mac. >> that's coming up. stay with us.

welcome back to "worldwide exchange". i'm kelly evans. >> i'm ross westgate. these are your headlines from around the world. . stocks fall across the globe as fears weigh on spanish yields credit defaults reaching all time high and spanish ten year hitting a record. >> bank of spain feels the economy contracted more in the second quarter plus another troubled spanish region applies for aid. >> financials lead the decliners across europe. shares in italy's biggest banks are the biggest losers. >> philips beating expectations for the second quarter, confirmed its target for next year. the ceo is less optimistic about the operating environment. >> feasibility is not very good and i caution about the general

economic outlook. that of course also affects philips but at the same time i said philips is a case of quote-unquote self-help. good morning to our u.s. viewers who may just be tuning in. i'm afraid i don't have better news for you. been a while since we've seen triple digit decline in terms of dow future. currently positioned to open lower by about 104 points, taking fair value in account on the dow jones industrials average. the nasdaq is pointed lower by 23 points. the s&p 500 by almost 11. now let's take a look at what's happening across the globe. the weakness started in asia and quickly spread across the open in europe. the ftse 300 is down but not a disaster.

the weakness has been broad based as opposed to being all that sharp. i'll show you where it has been sharp as we take a closer look. the ftse 100 is down 1.5%. dax down by the same amount. cac down 1.7%. this is the one to watch, ross, the ibex 35 in spain is down 4.35%. 5975 that's the level on the index this morning. >> many banks have been limit down, italy again they restarted, banks worst performers. we'll show you what the banks are doing ahead of the u.s. open. all very much under pressure. the german banks, french banks down. the pressure very much of course is on the peripheral bond yields in spain.

they rose to fresh record highs. ten year spanish yields 7.25%. italian rising 6.3. both of those are higher than italian than irish debt yields at 6 biopsy 25%. they are in a program. ten year german bund yields record loss at 1.13. the spread between these is well over 600 basis points. we heard from the finance minister out of spain saying he's ruling out a full bailout for spain but if yields stay at these high levels and the auction results we saw last thursday many investors believe they don't have any option but to go down that route. we'll see how long indeed they can indeed last. let's compare those with what's happening with some of the core bond yields. we've seen fresh loss in the u.s. today. 1.4145. appreciate low since somewhere in the 1800s. unless you remember that particular, nine year loss for jjb yielding 7.26%.

gilt hitting fresh, low 1.43%. the euro is down. euro dollar 1.2104. dollar/yen weaker at 7. yen super. aussie dollar pulled back as well, sterling against dollar 1.5542. that's where we stand right now in europe. let's get tracey to remind us what happened in the asian session earlier. she's in singapore. hi, tracey. >> well we're not escaping from the selloff. asian markets in the red thanks to spanish debt worries and concerns over china's growth. hong kong stocks suffered deeper losses than it appears down nearly 3%. index heavyweight. citi securities, china's largest

listed brokerage tumbled nearly 7.3%. the shang kay composite dropped marking the lowest closing since march of 2009 and extending five straight weeks much loss. japan's nikkei 125 tanked to a six week low as local exporters with large exposure to europe were hit hard by the strong yen. south korea's kospi dropped 1.1%. sold banks and energy stocks ahead of a busy weeks of earnings report. t lastly india sensex is feeling regional selloff down almost 1.5%. take a look at shares of maruti suzuki is tanking 6% after the company said it has no idea when

this factory will reopen. ross, back to you. >> tracey, thanks very much indeed for that. that's sort of the back top as we get ready for the u.s. session today. >> you know what's interesting? just this weekend i was talking with friend how this august, because in my working life august is the month of global meltdown and panic. will this august finally be a quiet one. you look at the trading action as we turn out or finish july and you wonder maybe it won't be quite so quiet. >> that phase, global debt crisis always seem to explode in august. there's a long history of that. it's worth pointing out there aren't any big eu summit, plans. >> shouldn't that be a good thing? don't these things set us up. >> what that means there's no one out there who thinks anybody will come to the rescue for anything. >> we're getting reports again that for example spain will meet germany on tuesday. so there's some ad hoc policy make being going on in the

background. >> spain is ruling out a full scale country bailout. okay. >> how often have we heard this in the history of the eurozone. >> stephane is in madrid. it's a bit like if you're in football and you're the chairman of the football club the manager has my fullback being isn't it? >> reporter: yes. kind of. especially for the first time that we do say spain will not need a full bailout. if you look at the yields on the spanish ten year we have hit a new record high. we're over 7.5%. clearly it's unsustainable for the government. now the good point is that there's no bond auction in august site will give the spanish government a bit of time but it's quite limited, and these increasing yields is fueling expectation of spain needing a bailout especially as spanish newspapers are reporting

that finance minister will meet tomorrow with the german finance minister. are they going to talk about the full bailout? we don't know. but unlikely. but very likely the situation on the bund market and stock market because if you look at the board behind me there's a heavy selloff. they will speak about the currency situation. meanwhile the deputy governor of the bank of spain is saying this morning that europe would need mechanism to strengthen its monetary union and also say spain needs make more adjustment to calm down the markets so these are the two main announcements that we have this morning out of spain. >> we also of course have reports about how much the-runs of spain are struggling and we should remind people this morning it isn't about the federal government's indebtedness, a lot of spanish regions need significant help themselves. >> reporter: absolutely. the regions in spain spend more than the central government, roughly 30, 33% of the spanish

spending every year. so in terms of public spending, the regions are more important than the spanish government. what we've heard this weekend is that the central government would have to bailout at least or bailout in the short term six spanish regions. the first announcement was made on friday the region of valencia requested financial aid from the central government. it can't say how much money it would need but what we know is that the region of valencia would have to repay 2.8 billion euros of debt and it's around 10 billion why are yous. next is another region much smaller than valencia. the most significant one comes from catalania.

it has 42 billion euros in debt. i want need to repay 5.7 billion euros just in the second half of this year. the region hasn't decided yet if it's going to request support from the central government but that would be a major announcement if the region makes this decision very shortly. on top of that i want to mention the political aspect in spain because the regions if they request some help from the central government probably will have to give up a bit of sovereignty and that's something extremely delicate politically in spain. >> stephane is doing an extremely good job of following this fast-moving story. joining us now is our guest host for the next hour, michael croftton. michael you just heard stephane's report. plenty of concern in spain this morning. just how significant an impact, how bad do you think it could be across the u.s. open today?

>> i think it could be fairly bad. it's not unexpected because the bond markets have been signalling there have been significant problems in europe and the stock market took a path different than the bond market. so i think if you look back to the monday market negative yields in some of the european countries and now germany, saber rattling in a financial sense difficult for the u.s. market. also it's august, slow here. the markets are not very liquid. they haven't been liquid for a long time. lot leslie quid in august. we have our own problems coming to a head here at the end the year. fiscal cliff is one of them. election is another. the caution will be extremely high this morning and probably moving through the month. i would expect some significant volatility although earnings have been good 70% of companies have reported have beaten -- reduced expectations. i'll give you that. beaten anyway. corporate balance sheets are in great shape, but this is a big problem. >> so, michael, how do you talk

clients off the leverage then? -- ledge then. >> you talk them back to maybe a 10%, 12% cash a location. move into mr. defensive sectors. we fortress our balance sheet by eliminating as much as asian and chinese exposure. they will have some exposure through their operations. then you basically go to cash for a while in a wait it out. there are compelling values in the market. you also have to expand your return expectations. you can't be looking for a three or five year return. you need to be focused on where do you want to be ten years from now? the situation in europe will take a long time to work itself out. i believe we're still in the early innings. you could see a break up of the euro or could see the germans walking away. the germans have a domestic political problem where the people are getting tired of bailing out the rest of europe.

>> all right. mike, good to have you on today. also a programming note. mitt romney meets with larry kudlow tonight. turn in for that interview 6:00 p.m. eastern time, midnight cet. >> what do you want larry to ask the former governor and would be president of the united states. if you want to join the conversation here on "worldwide exchange" get in touch with us. e-mail us at worldwide@cnbc.com or tweet us at cnbcwex. >> still to come, someone think the fed needs to let rates go up a little bit. more on that when we come back. [ female announcer ] e-trade was founded on the simple belief that bringing you better technology helps make you a better investor. with our revolutionary e-trade 360 dashboard

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welcome back to the program. this morning these are your headlines. stocks falling across the globe as fears about skpint to weigh. financials leading the decline. >> another region to request state aid while bank of spain sees gdp contracting. >> philips only green spot on the map. beating expectations for its

second quarter. okay. better than expected earnings at philips. going back to black. seeing its revenue rise 5% thanks to an increase in hospital equipment sales. it's is on track to meet its financial and cost-cutting targets. speaking earlier today the ceo sound ad cautious note. >> feasibility is not very good and i continue to caution about the general economic outlook. that, of course, also affects philips but at the same time i said phillips is a case of quote unquote self-help. >> one of the few stocks that are up. julius baer has profit, cost-cutting drive that offseat drop in revenue. caroline has gone back to zurich. caroline, how are t markets reacting. this is a big down day. what's the reception for julius

baer? >> reporter: well actually shares in julius baer are the only ones in green territory or in positive territory rather on the sm imi. last i checked this were up by 1%. partly a cost-cutting but still pretty good as goldman sachs point out this was a positive surprise of profits and assets. not so good in terms of the capital levels but let me walk you through some of the details. assets under management rose to a record high at 179 billion swiss franks. net new money came in at 5.5 billion swiss franks. annualized growth rate is at 6.4%. well above the company's medium target and that was mainly because of strong inflows coming from emerging markets but onshore floss coming from switzerland and germany. were there any progress in talks with bank of america and sale of

merrill lynch wealth management business. they put the price target around $1 million. ceo said talks are still wide-open but it would be a strategic fit. kelly. >> thanks for that. let's take a quick look at what numbers we can expect in the u.s. today. before the bell we'll get earnings from mcdonald's and texas instruments is the one to watch. coming up later this week a busy week, apple and netflix will report quarterly earnings. tomorrow facebook takes the spotlight. it will report earnings for the first time as a public company. still with us is michael crofton. let's talk about earnings. they have not been a disaster p.m. weaker than what we've seen in the last couple of quarters. what are we learning about are corporate profitability. >> well, i think earnings have been better than expected in many instances. i think i mentioned earlier about 70% of companies that reported have beaten reduced

expectations but they've beaten. shown that management is focused on these economic difficulties. they got -- they have done a good job of fortressing their balance sheets, reducing redunncies in their models. i think if we can get through these problems in a couple of quarters it's a good opportunity to buy some of these stocks. however, if the problems persist for more than another quarter or two and we get into a real problem in this country come the end the year, then you better watch out below corporate earnings aren't going to support anything. stocks are cheap based on a pe-bay sis. >> are there se-- pe basis. >> absolutely. i think we should do both. you should have almost a bar

bell portfolio in equities. you have the safe stocks on one end, some stocks that are consumer nondurables, food companies, telephones, maybe tobacco stocks if you can tolerate those. on the other end some higher growth opportunities, some technology stocks, some biotech, perhaps, more speculative stocks. you are going well rewarded but it may take a little longer than normal. it may take five to ten year cycle than three to five year cycle. >> michael thanks. good to have you on. still to come how much is the global slow down been eating away at mcdonald sales. we'll preview the company's second quarter right after this. [ man ] ever year, sophia and i use the points we earn with our citi thankyou card for a relaxing vacation. ♪ sometimes, we go for a ride in the park.

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with the idea of hybrid technology... it's already ingrained in our dna. 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 this morning. well mcdonald's will serve up earnings ahead of the u.s. open alongside comparable sales growth figures for june. investors are looking for signs of recovery amid fears the global slow down is eating away at the company's profits. joining us on the phone from san francisco is managing direct josh at jeffries and cohen. thanks so much for getting up early for us this morning.

we did see some slowing in mcdonald's figures the last time around. how much weakness will we see in their earnings report? >> this is a tough quarter for mcdonald's. we're looking for relative flattish earnings on same store sales lift. >> why is that? people love to talk about how mcdonald's and other fast food restaurants benefit when the economy is getting weak. that appears not to be the case? >> they've just been so successful for so long. they continue to post positive same store sales obviously in most parts of the world, you know, the business is just slowing down a little bit. i think the strength in the u.s., qsr market, quick service market continues to be there. it's just broadening to other players. you know as mcdonald's may be is running out of steam a little bit and obviously the european business is a big part of the

company's profit streams. so we've seen obviously slower results coming out of european sales. >> yeah. how much will that weigh? also what's happening on the cost side of the business, andy? >> sure. in terms of, you know, on the european side of things it will be a challenging quarter for them. and then you throw on top of that foreign currency has turned into a significant head wind. you know which will make, again, that reported results, earnings results in our view relatively flattish as they are facing probably an eight or nine cent head wind from foreign currency translation. on the cost side of the equation we still are facing food cost pressures, that's even before the big spikes we've seen obviously over the last month or so in terms of the grain complexes and what that will mean for inflation, probably continuing here in the back half of 2012 and into 2013 in terms of most food related

commodities. >> andy, real quickly i'm curious what message we're getting from the restaurant sector broadly. chipotle came out and reported lower results than expected. their shares got hammered. what are we learning about the health of the global consumer and do you think that there potentially is more weakness across the sector to come? >> sure. you know, it's a mixed bag, i would say. things are definitely, have slowed in the last several months. clear lui we're seeing that. i think the numbers earlier this year across, you know, at least most of the u.s. companies were propelled by the fact we didn't have much of a winter over here. so that made the numbers maybe a little bit artificially strong and then here over the last three or four months we've definitely seen a slow down in the top line numbers and unfortunately a lot of companies were looking for some -- and the

grain complexes and the proteins here in the u.s. it's a mixed bag out there. going to be a tough earnings season. you know here at the front end with big companies as you mentioned like chipotle last week and mcdonald's later this morning. >> andy barish, thank you very much. mcdonald's is expected to report earnings of $1.38. revenues of just shy of 7.649. those are the figures to watch. >> spanish finance minute stare may have ruled out a full sovereign bailout for spain today but investors will be looking at these current yields, all record high yields. particularly the flattening, we got the ten year just below 7.5%. the two year 6.78%. risen 80 basis points literally in the first two hours of trade

today of spanish debt. those are unsustainable levels. spain has already raised nearly 70% of the money i want needs this year but a lot of the dynamics of that fund have been much more towards the shorter earned and the shorter end is going up signifying real stress. >> you can see the impact that's having because we'll give you a look how futures are trading ahead of the open on wall street this morning and we'll be right back after this. 

welcome back to "worldwide exchange". if you're just tuning in i'm kelly evans. >> i'm ross westgate. these are your headlines from around the world. . >> stocks are falling across the globe as fears on spain. spanish ten year yield hitting a euro record. >> financials leading the decliners across europe. shares in italy's biggest banks are among the worst losers. >> one bright spot for stocks, philips. confirmed its target for next year but the ceo is less

optimistic about the operating just. >> feasibility is not very good and i continue to caution about the general economic outlook. that, of course, also affects philips but at the same time i said philips is a case of quote-unquote self-help. all right. let's check in again on u.s. futures as we head towards the open. starting the week off on a bleak note we have to say. dow jones industrials average adding to its losses since the last time we checked in. futures implied to open lower by 125 points. really haven't seen a triple-digit day up or down in quite some time. the nasdaq is pointed lower by about 29 points for its part. the s&p 500 lower by about 14. if you want to know why take a look at the action we've seen across the globe overnight. footprint so 100 is down 1.72%.

the dax 1.6. cac is down almost 2%. remarkable. we don't usually see big moves from the cac in paris. and this of course the one to watch the ibex 35 in spain is trading down 4.3%, ross. >> we'll just show you what's going on with the yields. more comments out from the spanish finance minister. says the spanish aid for banks doesn't know clued bond buying facility and the problem is that it doesn't because we had the statement last week saying the spanish government would take full responsibility for the money lent to it. that's also clear in the memorandum of understanding that we're getting out as well. the regions are asking for aid. rise of 80 basis points on the two years. these are record euro era record

high yields for spain, ten year around 7.5%. we have government 12 month t-bill auction. next to me average yield is negative. >> exactly. 12 month, negative yields just as we're talking about the record highs we're seeing in the struggling peripheral countries as a result germany just auctioned 12 month debt with a negative yield. >> had to make a deal on two year. >> i'm sure it's not the last of negative signs we'll see across that curve. nevertheless the lie gore investigation is set to zero in on individual traders in the u.s. and europe np as officials prepare to file criminal charges in the next few weeks. reuters reports u.s. federal prosecutors have become notifying lawyers arrests could be imminent. barclays is struggling to resolve its leadership crisis. uk press supports barclays banking chip rich ritchey, chief

rich ritchey has withdrawn from the race to success seed bob diamond. joining us on set is christopher whalen and michael crofton is still with us. i'm excited about these yields and what's happening across markets. >> you like zero yields? >> it's remarkable. but speaking of libor for just a second here we've heard a lot of the financials already report earnings. what's the broad takeaway you think in terms of performance? how are we setting up for the rest the year? >> for u.s. financials we're looking for down revenues and flat to down earning. part of this is lack of asset, most banks are running off of that. her not making enough loans to keep up with loans that are being redeemed. also as you've been talking about all morning investors are fleeing for sovereign assets and

sovereign assets have zero yield or negative yield. not a very good environment for banks. i was at a jpmorgan analyst meeting and i asked jamie dimon will you see market compress and he says no. most banks are still seeing old assets being repriced. when they have a market, they buy a three year 2% yielding asset if they are lucky. you can see this across the board. look at all the preferred securities that have been coming to market. they have been bought up almost immediately. >> do the banks still need bailing out in terms of different monetary policy? >> i think at some point "the economist"s who run the fed have to realize the supply of money is not the only factor. you have to give people reason to lend. if you're a lender right now, kelly would you take first loss risk on a 30 year mortgage of 3%? of course not. if you look at where jumbo

mortgages are being price where an investor takes first loss risk you're talking 6%, 7%. that's the economic rate. because the u.s. government subsidizes the mortgage sector so heavily we don't have a good view of what the price of that risk is. >> going from your point ever raising interest rates but it cut i want deposit rates it caught the market by surprise. >> think they should. >> you think they should. you said they should raise interest rates. it to push those funds out of fed and back into the markets. >> you're pushing them into yields on safe-haven assets that are already at extraordinary lows. >> all i can tell you this. until the fed starts to repair the private market and stop intervening through this massive intervention we're not going to see a recovery. it was written about this, the great editor of the economyist wrote this. you can't keep rates at 0% for too long. we have to get these markets

back to the point where they will operate without government support. i'm not saying the fed shouldn't be supporting the market with volume. sure. if they have to buy securities that's fine. let's let yields go up. let's get people to make loans. >> michael? >> yes. you know, what's going on in the market is, i think, you got two sides of the problem here in the u.s. banking market. a, you got an inability of banks to make money because of low interest rates on sovereigns and on their investment vehicles but b, the regulatory problem where the smaller banks and mid-size regional banks will survive? >> i think they can do quite well. look how they are performing. the money centers are the one, especially bank of america still have legacy problems. citi is the best of the bunch. wells fargo and jpmorgan still have enormous issues things like second lens. imagine if a city out in

california takes over a loan usi using imminent domain. do we write it off? >> that have they accounted for that? >> no. wells fargo has got over $150 billion worth of second lens that they barely reserve against. they take the position they are being paid. if the mortgage is under water 10%, 20%. >> say for a regional or small bank is banking profitable any more? >> look at the fdic data. it's not great. equity returns is half of what they were during the boom. that's not normal. not normal for a bank to make 20% return on equity opinion we were pretending they were tech stocks. your normal bank equity used to be bond. people kept it for the cash flow. >> bottom line who do you buy? >> like anything from u.s. bank on down dpourp homework. quality in terms of risk adjusted returns is in the smaller and medium size banks.

>> christopher whalen, thank you so much for stopping by. >> my pleasure. >> german finance minister a spokesman saying this morning they received no signalling they would take any further cut. angela merkel said there's no chance she would go before german parliament and ask for a third batch of greek aid. they must await the troika report on greece. no discussion on third greek aid. that troika report will come in early september. we'll be waiting until early september for a lot of thing. german constitution approve the esm. troika report on greece. >> investors may feel like wake me up when september end. >> what happens to spanish yields while nothing else happens. >> still to come on the show, be live main drid as another region looks on course to ask for state aid. more details on that after the break. don't go anywhere. > welcome back to the program

this morning and as expected the hong kong observatory just raised a signal eighty phone warning. we've been waiting for this all

morning. typhoon of course actropical storm, but posing over time significant risk to hong kong. in the meantime heavy rain storms hit many areas of china over the weekend. capital of beijing saw its worst flooding in 60 years. rainwaters swept across towns and cities killing more than three dozen people and stranding over 80,000. deluging sparked criticism over reliability of beijing's infrastructure program. >> we'll keep our eyes on that. global investors are really just keeping their eyes on this. the spanish yield curve this morning sharply higher yields across the board. two year up 80 basis points this morning, 6.8%. the yield curve has flattened. five year 7.453%. ten year spanish below 7.5%.

spanish finance minister saying this morning not ruling out any idea of a full sovereign bailout but these yields are unsustainable in the immediate term or spoenlly short term. at the same time he's also saying the bank aid deal breaks the link between the state and the banking sector. i'm not sure that's clear either. stephane has more for yours out of madrid. the spanish government has to take full responsibility for the bank aid deal. that's part of the problem, isn't it? >> reporter: yes, because it will increase the debt bailout of the spanish state from the beginning of the negotiations the prime minister wanted the money to be injected straight into the banks to avoid increasing the debt burden of the spanish government but it looks like the country will have to take full responsibility for this long for the banking sector.

in other words, responsible for this huge amount of company. the finance minister complained this morning the conditions of the banking bailout before a commission of the spanish congress but to be honest, ross, the markets attention is not there any more it clearly shifted over the weekend from the banks to the autonomic regions. the story is they have a huge level of debt is not new. it seems to have been open over the weekend after valencia, third largest region in spain requested a bailout from the central government. we're not expecting another region, mostly according to local newspaper to request between 200 and 300 million euros to cope with its debt repayment and all eyes are now on the catalania region, the region of barcelona which has a massive debt level and has significant repayment, 5.7

billion euros just in the second half of this year. officially catalania has not decided if it will request financial support from the central government but of course the market expectation is that it will have to request some support because there's no other option. so they say spain will not need a full bailout. not the first time they say so. secondly, if you look at the yields on the spanish ten year record high 7.5%, highest level since the creation of the euro. how can the state don't finance itself at 7.5% inclearly it's unsustainable. you can't ask every person here, you can ask everyone from the financial sect jobs it's unsustainable unless there's strong action to lower the yield on the market. it looks like spain has no other issue even if it has define because of its new bond auction during the month of august.

>> stephane, thanks for that. we're just seeing as you were doing that report the ibex is now down 5% on the session. >> when is the last time you saw a major stock index go down 5% in a day. even spain throughout this debt crisis wouldn't have been necessarily that large. in any case you're watching "worldwide exchange". we'll take a quick break. first a recap of today's headlines. stocks falling across the globe as fears about spain continue to weigh with financials leading the declines. bank of spain sees gdp contracting further in the second quarter. and philips is the only green spot on the map after beating expectations in second quarter results. we'll be right back. 

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ahead of the u.s. open if you just joined us it's a pretty much a sea of red. only about 17 stocks in the dow jones industrials that are up, led the way by philips which beat earnings. we have here another session low, this is the ibex market down. banks are the biggest sector losers. the cac is down over 2%. we're just getting understanding that the spanish and german finance ministers will be holding a meeting this morning. spanish finance ministers will be coming out with lots of statements with spanish bond yields hitting fresh record highs. >> let's take a look on what's the i agaagenda in the u.s. before the bell earnings from mcdonald's. look for some weakness there. after the bell texas instruments is due to report. coming up later this week apple

and netflix will report their quarterly earnings on the data front we'll get the latest home front price figures. on thursday facebook takes the spotlight reporting earnings for the first time as a public company and we're expecting further data on u.s. home sales and this is the one to watch durable goods on thursday. friday we'll get the update on the u.s. economy we've been waiting for or dreading. first second quarter gdp estimate. ross these get revised but first estimate of gdp we'll get. futures this morning anticipating a weak stretch. triple-digit decline for the dow implied to open lower by almost 150 points now and for more, president of traders audio.com joins us. ben we're looking at spain's ibex 35 down more than 5%. triple down for the dow. what's the trading session looking like? >> we'll see a continuation of the energy that we have been seeing already, the down side assuming we don't see any major

selloff in the dollar. right now we're seeing a lot of strengthen in the dollar weakness in the euro currencies. we've seen a new record low of yearly low in that euro currency getting below that 1.22 handle in the futures contract with conviction. last week there was a bit of a rally but unable to get above any major levels of resistance and the spanish bonds working their way up above 7% last week that was a major tell tale sign. in addition to the weakness and continuation of that rejection from the upper levels we've seen in the s&ps we rejected that 1375 level, the dow fell short of that infamous 1,000 level last week that everybody was looking for. so, again, just lot of weakness, a lot of uncertainty and major concern across the board it will weigh on the market today. >> ben, when there's condition this weak isn't that when you're supposed to swoop in and buy. >> no question. i'm not certain that this time is necessarily the point to step in front of this freight train

if you will. there's a lot of similarities right now with the domestic economic situation and what's happening abroad and so i think again there's some major concern out there. i think this is a falling knife, if you will, at least at this point. certainly these do the end to be the better buy opportunities in terms of a longer term time frame. for the short term you have to be careful. areas of value clearly have been establishing themselves to the down side and right pow the major level that we're looking at in the s&p is 1325. below that some good energy build to the down side. >> ben talks about the time frame. what's the time frame necessary? >> i think you can't be anything shorter than five years particularly if you're talking strictly about europe. there's another global macro issue that's lurking out there and that's the middle east. still a lot of uncertainty in the middle east. the syrian situation could deter

rate. egypt's military could lose control in egypt. the middle east is something we got to keep a big focus on. if the middle east goes then this market has a much more serious problem than europe. >> that's for sure. michael crofton joining us there. thank you both very much. >> let's just remind you where we stand as we go towards the u.s. open today. the iran bex down 5.4%. italy is down over 5%. banks are taking it on the chin as we have fresh record highs on yields across the curve for spain in the euro area. fresh record loss on treasury. >> exactly. i want all sets up for an interesting backdrop in which larry kudlow will be discussing politics, the economy and much more with mitt romney exclusively on cnbc later. you won't want to miss any of that. thank for tuning in. >> "squawk box" up next. p

good morning. today's top story euro crisis, european stocks falling sharply on the spanish bailout fears. libor scandal, prosecutors and regulators close to making arrests in the rate fixing probe. mcdonald's set to kick off another busy week of corporate reports. it's monday, july 23rd, 2012 and "squawk" begins right now. good morning everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with andrew ross sorkin. joe is off this week. our guest host is andy. let's get up to speed on the top headlines. we begin this morning with the markets because u.s. equity futures are under